Gov. Phil Murphy signed into law Thursday morning the New Jersey Economic Recovery Act of 2020, a six-year, $14 billion package of incentive programs that he feels will provide economic support for small businesses, while propelling the state’s economic recovery and growth for much of the next decade.
“These programs are the product of nearly three years of hard work, during which we received input from hundreds of voices on how best to structure our state’s recovery and growth,” Murphy said. “I am immensely proud of the result, which will not only provide much-needed relief for our small businesses, but will also fundamentally change economic development in our state while creating thousands of high-paying jobs for our residents.”
The act includes a number of new initiatives, including the Main Street Recovery Finance Program — which will provide a direct $50 million appropriation for grants, loans, loan guarantees and technical assistance to small and microbusinesses — as well as the Innovation Evergreen Fund, a first-of-its-kind program that Murphy has high hopes for. The Evergreen Fund will combine state funds with private capital to support innovative new businesses. (Here’s a deeper look.)
Business groups and elected officials have been in strong support of the bill, which gives the state economic incentives for the first time in more than 18 months. Progressive groups voiced opposition, essentially calling it corporate welfare at a time when so many individuals are hurting.
Murphy has said the programs are the right blend of economic incentives and government oversight — noting the annual caps that come with potential award.
The program was passed by the Legislature last month, but here’s a reminder of its key points:
Caps: The overview
Summary: From the start, Murphy has said it was essential to have a cap for incentive programs. The old program was uncapped; there was no limit on what the state could invest in any given year. State officials said they feel there is a good balance of an appropriate safeguard and appropriate protection for taxpayers, but also said they have some flexibility and resources to make sure they can grow the economy.
Caps, part II: The incentive programs
Summary: There is $9 billion set aside for all the programs ($1.5 billion over each of the next six years). Of the $1.5 billion, $400 million is set aside for the “new” programs (Evergreen, Food Desert, Brownfields, Historic and Community Anchor Development programs). This leaves $1.1 billion for the successor to Grow New Jersey (called EMERGE) and the successor to Economic Redevelopment and Growth (called ASPIRE). But there is not a specific allocation between the two, giving the New Jersey Economic Development Authority the ability to give awards where officials feel it is most appropriate.
State officials feel the caps inside EMERGE and ASPIRE are more reasonable and more in line with the state’s competitors. There are lower per-job awards and lower total awards per company. The awards also are shorter in length, seven years instead of 10.
Caps, part III: Transformative Projects
Summary: There is $2.5 billion set aside as a separate cap for Transformative Projects. This will be part of the ASPIRE program. It will be an authorization of up to $250 million for 10 projects that are considered transformative — a term that still is being defined, but will be based on size (perhaps 500,000 square feet of space, or 1,000 units).
It’s important to note, if a project does not use all $250 million, the remainder of that money goes away — it does not roll into any of the other projects.
Summary: If EMERGE requires a capital investment and someone is moving into a building that does not need extensive renovation, the company/developer could make a contribution to the Infrastructure Fund instead.
This money would allow the state/municipality to do supportive infrastructure projects — which could be adding a bike lane or putting in electric vehicle chargers. There is no way to determine how much will be available in the fund, since it will be determined project by project.
Summary: The state is continuing the existing ERG program through September, to allow for time for projects in the pipeline to be acted upon.
Main Street: $50 million direct appropriation
Summary: The details of how the program will work are still being discussed, but there’s a belief that it will be used to do larger retooling projects and project-oriented supports. It could be loans, it could be grants, but count on there being technical assistance programs for things such as e-commerce.
It should not be viewed as another COVID grant program, where everyone who is eligible gets a check. It should be viewed as something that can be used strategically to rebuild. The EDA will have some degrees of freedom to program this.
And it’s an appropriation, one that EDA officials can only hope will become an annual number, giving them a standing small-business toolkit.
Towns: $5 million for planning
Summary: This is an attempt to give cities funding to write an economic development strategy so they can understand and influence how individual projects will impact what is around them — from traffic to schools to parks to sewers.
The hope is that it will enable cities to think about projects more comprehensively. The belief is, you can do a very good economic development plan in a big city for $500,000, so $5 million could go a long way.
Summary: There were a few loopholes around prevailing wage during the construction period that have been plugged. Previously, developers had the ability to assemble tax credits that didn’t trigger prevailing wage, because they were smaller percentages of a building. That has been fixed. There also is a requirement to pay prevailing wage for building service workers: custodial staff, security, food service, etc.
Community benefit agreement
Summary: There’s a threshold at which this is triggered, but, if you’re building a building, it requires an agreement between the developer/company with the municipality/state to make sure the project benefits the people who live nearby and who should be benefiting from these investments.
This could take different forms depending on the project, but could include local hiring or purchasing, committing to support a park or a school.
Tim Sullivan, the CEO of the EDA, said he was excited about the potential of the programs.
“The New Jersey Economic Recovery Act of 2020 presents a strong recovery and reform package that will position New Jersey to build a stronger and fairer economy that invests in innovation, in our communities, and in our small businesses the right way, with the protections and oversight taxpayers deserve,” he said. “Tax incentives and other investment tools are critical to economic development, and, when used correctly, they can drive transformative change that uplifts communities and creates new opportunities for everyone.”