How to Qualify for the New Jersey Aspire Program
October 25, 2022
By Christopher Stoop
The New Jersey Economic Recovery Act of 2020 (“ERA”) is a seven-year, $14 billion package of incentive programs which is intended to encourage both New Jersey job growth as well as property development and improvements, community partnerships, and foster economic development initiatives. One of the focal points of the ERA act is the New Jersey Aspire Program, which is designed to provide tax credit incentives to developers to assist with project financing gap costs associated with commercial, mixed use, and residential development projects. The Aspire Program also includes transformative projects, which is a special designation for projects of significant economic importance (see further details below).
The program encourages place-based economic development throughout New Jersey by providing tax credits to the developer, with the credit generally being based on a percentage of the project’s costs, subject to statutory cap based on the location of the project as well as the specific aspects of the projects.
To qualify for the New Jersey Aspire Program, the development (or redevelopment) project must meet certain criteria based on the scope of the overall development project.
- Demonstrate through New Jersey Economic Development Authority (“NJEDA”) analysis that without the award the redevelopment project is not economically feasible
- Demonstrate a project financing gap (including review of reasonable and appropriate rate of return) exists and a redevelopment project will generate a below market rate of return
- Project must be in a designated incentive area (excludes film production)
- Include development equity participation of at least 20% of total development costs or 10% in a government restricted municipality (“GRM”)
- Commercial projects must result in a net positive economic benefit to the State of New Jersey
- Must apply prior to March 1, 2027
The developer and any co-applicants must be in good standing with NJ Depart of Labor and Workforce Development, NJ Department of Environmental Protection, and Department of Treasury, and if not in compliance, a corrective action plan must be resolved with the respective departments prior to approval. Finally, prior to the grant agreement is finalized, a valid tax clearance certificate from New Jersey Division of Taxation with the NJ Department of Treasury is needed.
Other requirements to qualify include:
- Complying with all environmental laws and regulations
- Maintain minimum environmental and sustainability standards (learn more about green building requirements)
- Pay prevailing wages to construction and building service workers
- The project must be in eligible incentive area which may include aviation, port districts or within half of a mile of mass transit location (bus, rail, ferry stations)
- Commercial projects must be a minimum of 100,000 square feet of retail or commercial space excluding parking
- Developer must contribute minimum equity contribution of 20% of total project cost (or 10% if located in a GRM area)
- Must have letter of support from governing body of municipality and if project costs are greater than $10 million must also enter into Community Benefits Agreement with the NJEDA
- Project located in GRM must have a minimum of $5 million in project costs
- Project in municipality with population less than 200,000 must have a minimum of $10 million in project costs
- Project in municipality with population of greater than 200,000 must have a minimum of $17.5 million in project costs
- All newly constructed residential projects must have a minimum of 20% of the total units reserved for low- and moderate-income housing
Transformative projects are projects that are above those considered in scope for the Aspire Program and of special significance to the state of New Jersey. Program requirements include the following:
- The project must be in an eligible incentive area which may include aviation, port districts or within half of a mile of mass transit location (bus, rail, ferry stations)
- Project costs are expected to exceed $100 million
- Must be above 500,000 square feet excluding parking or 250,000 square feet for film studio
- For commercial projects (with the exception of film studios), create at least 500 new full-time jobs in high priority targeted industry
- For residential projects,
- Must be in a GRM or distressed area
- A reservation of an additional 20% of new residential units for low- and moderate-income households on top of the standard 20%
- At least 1,000 newly constructed residential units
- Mixed-use residential projects, must provide at least 100,000 square feet of commercial space (excluding parking) and minimum residential units are as follows:
- In a GRM, at least 250 or more of newly constructed residential units
- In an enhanced area, at least 350 or more of newly constructed residential units
- In a non-restricted area, at least 600 or more of newly constructed residential units
The tax credits will vary by size and scope of the overall project and will be based on the project financing gap. Tax credits will be issued to satisfy a project financing gap of up to 45% of the total project costs for majority of projects, however, if the project is a commercial project located in a GRM, the tax credits could be award for up to 50% of total project cost. For transformative projects, 40% of total project cost up to $350 million would be granted.
Reporting Requirements for the New Jersey Aspire Program
There are reporting requirements associated with the program. Once approved, the developer will be required to sign an approval letter and incentive award agreement which would lay out the defined terms for the tax credit. Upon completion of the project, the developer will be required to submit the total capital investment and other eligibility requirements as well as certify project is still operating in the manner that was consistent with the application process.
Developers interested in participating in the New Jersey Aspire Program should closely follow the statute rules of the program as laid out in N.J.A.C. 19:31-23. More information and specific details can also be found at the NJEDA website.