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The state’s Urban Transit Hub tax credit program has reached a crossroads, and in September, the Economic Development Authority will decide whether to shift more of its credits to a swelling pipeline of residential projects that for now have been sidelined.
Until then, the agency says it will be gauging the demand from commercial builders and developers of offshore wind power, who each have until January to apply for the lucrative incentive program. Such planning efforts could be made irrelevant, though, by a bill that would add another $1 billion to the program’s bank.
Industry insiders and state officials say demand in the commercial and wind areas is high: Large companies continue to show interest in credits for commercial projects, while the developers of offshore wind projects — which are eligible for these tax credits under a 2010 law — are eager to apply, but are confronting uncertainties in the renewable energy industry, according to a state official involved with the program.
At the EDA’s monthly board meeting last week, CEO Caren Franzini said the agency expects to approve about $50 million in tax credits for upcoming commercial projects, bringing the EDA’s bank of commercial tax credits down to around $203 million. Franzini recommended the agency continue to accept commercial applications through September, then evaluate its commercial pipeline for shovel-ready projects.
Meanwhile, several large New York companies are still interested in building in New Jersey using Urban Transit Hub and other incentive programs, said Ted Zangari, a real estate attorney with Newark-based Sills, Cummis & Gross and chair of its redevelopment law practice group. Given that demand, he said, the agency “is right, at the moment, to be judicious” about the remaining tax credits.
“The EDA is dealing with what it’s been dealt, and has to make some tough fiscal choices. And it’s choosing the right course,” Zangari said, because commercial projects ultimately generate permanent jobs, in addition to construction jobs.
Meanwhile, companies in the offshore wind space have been interested in applying for credits, said Wayne Staub, director of the Office of Sustainability and Green Energy, part of the Department of Environmental Protection. But those firms have found it difficult to apply because of “stumbling blocks” in other areas — namely, uncertainty as to when they can sign offshore leases with the federal government, and when it can apply for the state’s offshore renewable energy certificate, or OREC, incentive program.
The 2010 Offshore Wind Economic Development Act required the EDA to set aside $100 million in tax credits under Urban Transit Hub, but no projects have yet applied, according to the DEP.
“It’s hard to put a business plan together with a lot of the uncertainty that’s out there, but there’s definitely interest,” Staub said. “And we’re hopeful that there are companies that are going to be applying for it because it ties into the manufacturing component of the offshore wind industry.”
With the clock ticking toward the January deadline, Staub said the DEP is “encouraging them to apply based on the information that they have on hand.”
Franzini’s recommendation to focus on the EDA’s pipeline of commercial and offshore wind projects means that for now, 16 applications for residential projects were returned to their developers. She said last week that the demand for residential tax credits had outpaced the agency’s supply — of the $1.5 billion Urban Transit Hub tax credit bank, $250 million was set aside for residential projects.
But in September, the EDA will review the progress of any previously approved projects in reaching financing and land-related milestones. At last week’s meeting, board Chairman Alfred C. Koeppe said the panel will be in a good position in September to decide whether it can reallocate tax credits to residential projects.
“The worst thing we can do with these programs is either to ignore trend lines or to make promises that we can’t keep,” Koeppe said.
But all that planning could be a moot point if the billion-dollar extension passes the Legislature and gets the governor’s signature. It’s unclear, however, how much of that total would go to residential projects.
In the meantime, residential developers whose projects are now on hold said they’re hopeful of getting another bite at the apple. Among them was the New Brunswick Development Corp., which sought a tax credit for a $250 million, 800,000-square-foot redevelopment project around the New Brunswick Theological Seminary.
Devco President Christopher J. Paladino said the project, which includes housing, academic space, retail, parking and green spaces, was scheduled to begin in September, but “I’m optimistic that, given the pipeline of important projects at a pivotal time in this economic turnaround, that the (EDA) will create ways to resolve this backlog, push these projects through the pipeline and get people back to work.”
E-mail to: jburd@njbiz.com
On Twitter: @JoshBurdNJ
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