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September 19, 2013

Governor Signs NJ Economic Opportunity Act of 2013

On September 18, Governor Chris Christie signed the New Jersey Economic Opportunity Act of 2013 into law, ending a nearly year-long revision and consolidation of the State’s economic incentive programs. With a stroke of the pen, the Governor consolidated five existing programs into just two and eliminated many of the geographical and financial impediments that precluded New Jersey businesses from participating in the programs. The two revised programs, GROW NJ and the Economic Redevelopment & Growth Program, remain as the centerpieces of the Governor’s economic development portfolio. As before, the programs will be administered by the New Jersey Economic Development Authority (“NJEDA”).

With this new law, the GROW NJ program promises tax credit relief for businesses that agree to preserve full-time jobs in-state and/or increase their headcount for a time frame that is equal to 1 1/2 times the life of the grant (10 years). The new program specifically addressed the onerous capital investment threshold of the previous program, which required capital investments of $20 million dollars in the subject business. This threshold made many NJ businesses ineligible for the program and left the businesses, by default, to consider some of the significantly less lucrative programs administered by the NJEDA.

In lieu of a lump sum, capital investment requirement, the new program will analyze build-out expenses by the square foot, crediting projects in the industrial and office sectors and honoring both new construction and rehabilitation projects. Additionally, the program reduces the employee headcount criteria, formerly set at 100 jobs, to jobs that are characterized as either ‘new’ or ‘at-risk’ jobs, with thresholds beginning as low as 10 and 25 in each category. Businesses operating in certain desirable industries such as technology start-ups, manufacturing and targeted industries have their own head-count obligations.

The Grow NJ program also recognizes the importance of geography in our state, providing benefits linked to the location of the business and focusing on some of the state’s most challenged communities. Now, businesses locating or agreeing to remain in Passaic, Paterson, Trenton or Camden, known as the Garden State Growth Zone (“GSGZ”) cities, will receive enhanced tax credit benefits of up to $50,000 per new employee or $25,000 per retained employee per year, multiplied by the term of the grant, up to 10 years, resulting in potential awards of $150,000/$75,000 per employee per year. The former Urban Hub Tax Credit program is consolidated into the new law and cities such as Newark, Elizabeth, East Orange, Hoboken, Jersey City and New Brunswick also are eligible for similar tax credit benefits per employee. The Grow NJ program adds a category for Distressed Municipalities, thus including 51 additional communities in the tax credit eligibility pool.

Applicants for the new and improved Grow NJ program must submit their applications by 2019.

The new law also addresses and revises the Economic Redevelopment & Growth Program, known as the ERG. The ERG has been and remains a program designed to bridge construction project financing gaps. The underlying objective of the program is to create jobs through the construction of capital improvements (perhaps the best known ERG recipient was the Revel casino in Atlantic City).