S2458 3r aap statement 6/22/2015

ASSEMBLY APPROPRIATIONS COMMITTEE
STATEMENT TO
[Third Reprint]

SENATE, No. 2458
STATE OF NEW JERSEY
DATED: JUNE 22, 2015
The Assembly Appropriations Committee reports favorably Senate Bill No. 2458 (3R).

This bill amends the law governing the Economic Redevelopment and Growth Grant (ERG) program to encourage the development of mixed use parking projects by allowing municipal parking authorities and certain private developers to apply for tax credits under the ERG program when they develop mixed use parking projects.

The bill defines a "mixed use parking project" to mean a redevelopment project undertaken by a municipal redeveloper, the parking component of which constitutes 51 percent of the entire project, based upon the total square footage, the estimated revenues, or the total construction cost. The bill amends the ERG law’s definition of “municipal redeveloper,” which currently applies to a municipal government or a redevelopment agency created pursuant to the "Local Redevelopment and Housing Law," to include a municipal parking authority, and also a developer of a mixed use parking project, provided that the parking component of the mixed use parking project is operated and maintained by a municipal parking authority for the term of any ERG financial incentives.

The bill provides that the amount of ERG tax credits available for mixed use parking projects are within the $600 million cap currently applicable to ERG tax credits for qualified residential projects. The bill restricts $25 million of the $250 million of credits reserved for northern counties for mixed use parking projects in Garden State Growth Zones which have a population in excess of 125,000. The bill authorizes the Economic Development Authority to grant tax credits for mixed use parking projects which include a vacant commercial building located wholly or partially within a distressed municipality, and which are used by an independent institution of higher education, a school of medicine, a nonprofit hospital system, or any combination thereof, out of the $75 million currently restricted for qualified residential projects in distressed municipalities, deep poverty pockets, highlands development credit receiving areas or redevelopment areas.

As reported, this bill is identical to Assembly Bill No. 4332 (1R), as also reported by the committee.

FISCAL IMPACT:

The Office of Legislative Services (OLS) finds the bill is likely to produce a negative fiscal net impact of indeterminate magnitude on the State. The inability to quantify the net impact is rooted in imperfect information on:

-- the number and attributes of mixed use parking projects that would newly earn Economic Redevelopment and Growth (ERG) tax credits,

-- the extent to which, absent this bill, the $600 million cap on total ERG tax credit awards would be reached, and

-- the number and attributes of residential redevelopment projects whose tax credits may be crowded out by tax credit awards to mixed use parking projects.

In general, the State fiscal net impact is calculated by adding the indeterminate direct revenue loss from awarding ERG tax credits to mixed use parking projects and their indeterminate opportunity costs (the fiscal benefits the State forgoes as spending is redirected from one economic activity to another) and subtracting from that sum the indeterminate indirect revenue gain that will accrue from additional economic activity that the additional incentive awards will catalyze.

The OLS expects the bill’s indirect State revenue gain to fall below its direct State cost because the ERG tax credit program does not require tax credit-receiving projects to yield a net fiscal benefit to the State. Moreover, if tax credit awards to mixed use parking projects under this bill displace tax credit awards to other redevelopment projects, then the excess of the direct State revenue loss from awarding the credits over the indirect State revenue gain is likely to be greater with mixed use parking projects than with residential redevelopment projects. This is so because the maximum credit amount for mixed use parking projects (up to 100 percent of a project’s parking component cost and up to 40 percent of its non-parking component cost) exceeds the maximum credit amount for residential redevelopment projects (20 percent to 40 percent of the capital cost depending on a project’s specific location).

The bill may accrue an indeterminate revenue gain to affected local governments in the form of an indirect revenue gain.