The Assembly Environment Committee passed the proposed New Jersey historic rehabilitation tax incentive bill, the Historic Property Reinvestment Act (A791) this afternoon. The vote was unanimous; many thanks to prime sponsor and committee vice-chair Asm. Reed Gusciora.
Compelling testimony and/or support from PNJ president and preservation architect John Hatch, Trenton developer and Trenton Downtown Association president David Henderson, Joe Simonetta representing NJ-AIA and City Scape Capital Group CEO Bill Hoffman outlined the importance of the tax credit to the stimulation of NJ’s nearly dormant development market.
Philip Fierro, Executive Vice President of Manhattan developer Metrovest Equities, the firm currently developing the nation’s largest federal tax credit-driven paroject, The Beacon (former Jersey City Medical Center), also provided persuasive testimony about the value of the proposed historic preservation stimulus bill. We thank him for his remarks, herewith in full:
“The benefits to commercial redevelopment in this current economic climate are in line with the stated governmental role to stimulate the economy, with the desired effect of creating job opportunities, both permanent and construction. One of the key benefits to this legislation would be to create revenue streams to the state and local bodies through employment and future tax revenues.
The current turmoil in the capital markets, specifically the Bank Credit and Mezzanine tranches, make the capitalization of large commercial developments very challenging, if possibleat all. The scarcity of money in the subordinate tranches is causing market participants to charge higher rates of interest in order to fund. This has the effect of making the underwriting of these projects marginal at best.
New Jersey’s enactment of a tax credit, which could be syndicated for purposes of raising additional equity to replace the mezzanine tranche, would enable projects that are currently not moving ahead to come online quicker and generate much needed construction jobs, permanent jobs and local recurring property tax revenue. Numerous projects that are not being done would become viable.
By the restoration of historic structures that would be kick started by a 25% state historic tax credit the state would recapture the credit cost in numerous ways:
1) Construction Jobs – Approximately 60% of all construction hard costs are labor related and the labor payroll generates approximately 6%, to be returned to the state in the form of employer contributions to unemployment insurance and disability as well as the workers payments to state withholding, unemployment and disability.
2) Permanent Jobs – At the completion of the project permanent jobs will generate 6% recurring revenue to the state as outlined above.
3) The local municipality will generate reoccurring real estate tax revenue significantly higher than in a non-commercial or unimproved property.
4) Multiplier effects based upon the revenue streams and construction spending to other areas of the local economy.
5) State corporate and sales tax revenue from corporations and retail establishments that occupy the renovated spaces.
The economic benefits to the state of New Jersey would be numerous as discussed. It is also important to note that typically, tax credits are not able to be claimed until the project has been put into service, thus achieving the upfront construction job and service multipliers benefits and ensuring that the permanent job and real estate tax revenues are in place.”
Next steps: advocacy to encouage hearings at Assembly Appropriations Committee (Aswm Nellie Pou, D- Paterson, chair) and Senate Wagering, Tourism & Historic Preservation Committee (Sen. Jim Whelan, D-Atlantic City, chair).
