Lesniak: After Stimulus Bill Passage, COAH Reform

MONROE TOWNSHIP, NJ-Following the passage of the Economic Stimulus Act of 2009, the bill’s senate sponsor, State Sen. Raymond J. Lesniak (D-Union), told a gathering of the New Jersey Business & Industry Assoc. Tuesday that reform of the state’s COAH regulations is on the way.

“We have not seen the last of COAH reform,” he said. COAH, or the Council on Affordable Housing, regulates and monitors municipal affordable housing obligations throughout the state.

Lesniak said that he is circulating a COAH reform package currently and hopes by the end of the year to do away with what he termed its “Dr. Strangelove philosophy that if you create more jobs, it costs you more. It’s a disincentive for job growth.” Included in the Stimulus Bill was an exemption for certain non-residential projects from the 2.5% COAH fee, a measure many industry groups supported.

Lesniak, who chairs the Senate’s Economic Growth Committee, also spoke of the need to bolster the state’s under-funded pension system. “We could be the next GM,” he said. “Our pension system is going to go bankrupt. We cannot afford to pump billions of dollars into it every year. We are going to have to change the pension benefit system for new employees so that it is a defined contribution system.”

Timothy Touhey, EVP/CEO of the New Jersey Builders Assoc., said that property tax revisions and pension fund reform go hand in hand. “We cannot restructure the pension system without looking at property or income taxes,” he stated.

The Stimulus Bill, which has yet to be signed by the Governor, establishes an Economic Redevelopment and Growth Grant Program (ERG), which permits the state and towns to reimburse a developer up to 20% of the project’s cost in certain redevelopment areas outlined in the state‘s master plan. Caren Franzini, COO of the New Jersey Economic Development Authority, said that a developer is expected to put in 20% of its own equity and obtain other financing for the project’s construction cost. The state or town would only allocate their portion of the funds when the project is completed.

Also, a project would undergo a financial review to make sure “every penny is justified,” Franzini stated, adding that any development proposed under ERG would be reviewed by the town to see if it fits into their local master plan.

ERG is a revision of the state’s Revenue Allocation District (RAD) legislation. RAD was supposed to be New Jersey’s version of Tax Increment Financing (TIF), which has been successful in other states but has not been widely used here. “It wasn’t working in New Jersey,” Franzini said. “There was too much bureaucracy.” NJEDA is currently devising a set of regulations for ERG “to make it a workable program,” she said.

State Sen. Lesniak added that ERG “has the potential to get New Jersey out of its economic slump. We have to be aggressive in implementing it.” He recalled that a TIF he supported in the early ’90s led to the development of the Jersey Gardens mall in Elizabeth on an abandoned dumpsite. The project now employs 1,200 and provides the city and state with “millions in revenue,” he said.

Other elements in the Stimulus Bill include revisions to the Urban Transit Hub Tax Credit Act, which reduce the investment threshold from $75 million to $50 million for the developer of a qualified building. For a tenant making improvements to a facility, the limit is lowered from $50 million to $17.5 million. The bill also permits the transfer of credits.

In addition, the bill features several programs that promote green energy solutions as well as a clause that permits partnerships between public colleges and private developers to construct facilities on campuses.

The Stimulus Bill it did have its critics. Some public advocacy groups said it amounted to a giveaway to developers. During the meeting on Tuesday, State Sen. Lesniak said he received a message that several environmental groups planned to hold a news conference objecting to the bill.

Many of the provisions in the Stimulus Bill came from the New Jersey Smart Growth Economic Development Coalition, a group of real estate executives headed by Ted Zangari, a Newark-based redevelopment law attorney with Sills Cummis & Gross PC. The coalition has supported the ERG changes and revisions to the UTHTC. Previously, the group had been successful in getting the Permit Extension Act and the Licensed Site Remediation Professional bills passed and signed into law.

Other bills championed by the Coalition and being mulled in the legislature include revisions to the Business Employment Incentive Program and the Business Relocation & Retention Assistance Grant initiative intended to make New Jersey more attractive to businesses. Another idea is to create a “closing fund,” according to Zangari. “Many times, this state’s economic incentive packages do not come close to matching others, at least not before the new incentives,” Zangari said. “A CEO may say, ‘You are $2 million shy of what [Pennsylvania Gov.] Ed Rendell is offering. What are you going to do about it? ‘[Chief of the Office of Economic Growth] Jerry Zaro’s or Caren Franzini’s hands are tied. We can cobble together different programs, but we don’t have any discretionary funds.”