On October 1, 2018 Governor Murphy announced his signature economic development programs. After a thorough economic study, the State released a 60-page report describing the Governor’s vision for the path toward a stronger and fairer economy. The Governor proposes two tax credit programs and a $500 Million venture capital fund leveraging tax credit sale proceeds to make investments in NJ start-ups. These programs require legislation, so today is the first step in what could be a long and uncertain process.
NJ Aspire Tax Credit Program
The immediate good news is that the Murphy administration proposes to continue to utilize a gap financing tool – known as the NJ Aspire Tax Credit Program.
The program will be open to commercial, residential and mixed-use projects (including parking projects), with a focus on cities, downtowns, and suburban neighborhoods with mass transit. The State will focus on several types of development opportunities:
- conversion of abandoned lots, surface parking lots and other underutilized properties to tax-generating developments
- development of market rate housing in distressed municipalities
- mixed-income and affordable housing near transit in suburban communities
- catalytic tourism, arts and culture-related projects
NJ Aspire will be a competitive based program. NJEDA will compare development-ready projects to determine which would be the most impactful and provide the greatest return on investment measured by union construction jobs, high-wage permanent jobs, and new residential, commercial and parking assets in the communities that NJEDA has identified as in greatest need. There will be an overall program cap and per-project caps, and funding to support public infrastructure investments.
Other parts of the State’s development-oriented plans will include revamping the Brownfields tax credit program, a new Historic Preservation Tax Credit program, establishment of a digital marketplace for Opportunity Zone investments, and major infrastructure investments.
The Governor also proposes several new platforms to grow the innovation economy and to create high-paying jobs. The cornerstone is a $500 million venture capital program. Using competitive auctions of tax credits, the State would invest proceeds through the Innovation Evergreen Fund into start-ups that maintain operations in NJ. Venture capital firms would match the Evergreen Fund investments. As start-ups exit the program, proceeds are reinvested in the Fund, with potential excess returns paid to the State General Fund.
The NJ Forward Tax Credit Program will become the State’s primary job growth incentive plan. The plan will prioritize new job creation in high-wage, high-growth sectors such as life sciences, IT, clean energy, advanced manufacturing, advanced transportation and logistics, finance and insurance, and food and beverage. Growth in urban centers and distressed communities with public transit will be the focus.
In the coming weeks, we will be communicating with NJEDA to understand how the NJ Aspire Program will be implemented, assuming that Legislation is enacted. We anticipate that this may come in the form of rounds of competitive solicitations, similar to how the final tranche of Urban Transit Hub Tax Credits were granted. We’ll also study the Innovation Evergreen Fund and NJ Forward programs, as we expect these could be impactful in key sectors of the economy.