Many New Jersey Senators have positively commented on Governor Phil Murphy’s plan to revamp New Jersey’s incentives for businesses and developers. One such newly legislated bill is the Historic Property Reinvestment Act (Senate Bill 2031), which establishes separate tax credits for businesses and homeowners. If enacted, the bill is anticipated to convert opportunity costs into economic benefits for many of our state’s historic landmarks that have been left to fall into disrepair, as stated in an interview of Senator Shirley Turner.
In fact, Senator Nellie Pou said, “New Jersey has very rich history, it is something we take great pride in and it is something we all benefit from in preserving.”
Lastly, Senator Joe Cryan noted that tax credits for historical preservation are a financially responsible means of protecting and preserving historically significant properties in New Jersey.
So what is in it for developers? A post by Preservation New Jersey noted that New Jersey is one of the remaining fifteen states that does not have a tax credit program to compliment the Federal Historic Preservation Tax Incentives Program available to developers. Their research noted that most commercial projects would not be attempted without the equity provided by the combination of state and federal incentive programs of similar requirements for ease of filing with both authorities simultaneously. The Bill will motivate developers to stay in-state with a tax credit of up to twenty-five percent of the cost of rehabilitating New Jersey historic properties and will allow the tax credit to apply against corporate business tax and insurance premium tax liabilities. Other benefits that encourage developers to take on a historic redevelopment project might include shorter vacancy periods because local businesses tend to favor historic buildings for their particularly quaint and attractive appeal, anticipated transferability of the tax credits to third parties for expedited monetization of the tax credits, and possible zoning exemptions due to the historic nature of the properties.
The opposing views of these incentives are focused on the costs associated with the historic tax credits by the developers and the State Treasury, alike. Like other New Jersey incentive programs, this Bill will require developers to engage in regular compliance reporting and documentation, employ prevailing wages, input elevated levels of owner/developer capitalization, obtain qualified construction cost certifications, encounter higher property values and related real estate taxes after renovation, and comply with specific criteria necessary to be eligible. From the perspective of the State Treasury, there is an immediate loss of tax revenue plus the costs of administering the incentive program that have many fighting the new bill.
Governor Murphy’s take on the question as to whether developers will embrace this new incentive was expressed in a recent visit to Paterson, NJ. He exclaimed that there were only seven historic redevelopment projects in New Jersey in 2017 yielding only a little over one million dollars of economic growth compared to Virginia, having their own incentive programs, attracting more than 104 projects yielding greater than $340 million into their economy.
U.S. Representative Bill Pascrell said it best, “A Historic Preservation Tax Credit will help to revitalize our cities and towns through spurred economic development and the creation of local jobs.”