The State of New Jersey continues its support of revitalizing brownfields with the enactment of the New Jersey Economic Recovery Act of 2020, P.L. 2020, c. 156, which was signed into law by Governor Murphy on January 7, 2021 (the “Act”). The Act includes new programs, including a tax credit program entitled the Brownfields Redevelopment Incentive Program Act . On January 12, 2021, the New Jersey Economic Development Authority (“NJEDA”) Board of Directors approved the implementation of the NJEDA Brownfield Loan Program, which is part of the broader NJEDA Community Revitalization initiative. Both programs will cover many types of remediation costs but will entail a demonstration of a project financing gap, as well as compliance with Prevailing Wage and Affirmative Action requirements. Although the Brownfield Redevelopment Incentive Tax Credit program is still being developed, NJEDA is currently accepting loan applications from January 14 through April 13, 2021.
Brownfield Loan Program
The Brownfield Loan Program provides project financing at a base rate of 3% (which may be reduced upon a showing of certain factors) and a 10-year term with no repayment during the first two years of the term. The State has allotted a total of $15 million for the loan pool. NJEDA loans are expected to range from $100,000 to $5 million each. The program will be competitive, with NJEDA currently accepting applications through April 13, 2021. NJEDA charges a $2,500 non-refundable application fee, as well as commitment fees and closing fees, each of which will be 0.875% of the loan amount.
The loan proceeds may fund a plethora of eligible remediation activities, including but not limited to environmental investigation, site remediation, assessment and disposal of hazardous materials, building demolition and infrastructure environmental costs (such as asbestos abatement, PCB cleanup and disposal, lead based paint removal), long-term ground water monitoring, design and implementation of engineering and institutional controls, environmental consulting costs, and certain legal, accounting and financing costs (not to exceed 20% of the loan amount).
The loan program eligibility and performance requirements are set forth by NJEDA and include the following. Approved projects will be required to record a deed restriction. The deed restriction will require for 10 years after completion of the remediation, the redevelopment will be consistent with what was set forth in the loan application. All phases of the project, including remediation and redevelopment, must comply with New Jersey Prevailing Wage and Affirmative Action requirements and will be documented through payroll records and proof of Construction Contractor Registration Certification and participation in Registered Apprenticeship Program when craft workers are engaged. Applicants must demonstrate site control and at least 10% equity in the as-remediated state of the property. The project must obtain support from the local governing body and Local Finance Board, if applicable.
NJEDA will evaluate each application and will score each up to a maximum of 200 points. Achieving a minimum of 75 is required for loan eligibility. A total of eight (8) criteria will be evaluated as follows:
- Criteria 1 – Not-for-Profit Status (5 points);
- Criteria 2 – Economic Distress of the municipality (up to 35 points);
- Criteria 3 – Proximity to Public Transportation (up to 10 points);
- Criteria 4 – Consistency with Local Plans (up to 10 points);
- Criteria 5 – Economic Benefit (up to 35 points);
- Criteria 6 – Project Viability and Need for Financing (up to 45 points);
- Criteria 7 – Public Health and Environmental Benefits (up to 35 points); and
- Criteria 8 – Stakeholder Engagement Process (up to 25 points).
The 3% interest base rate of the Brownfield Loan may be reduced by 20 basis points down to a minimum of 2% if the project includes one or more of the following: a mixed use project where 20 to 50% of the units are affordable housing; food delivery source in an urban food desert; certain health care facilities; revitalization of historic structures; tourism destination; electric vehicle charging installed for 25% of parking at the project; capability of conversion to commercial space if parking demand decreases, and including an incubator facility or collaborative workspace.
Finally, applicants must certify that they have not discharged hazardous substances at the project site and are not “in any way responsible” under environmental laws, other than having the status of owner of the property. Applicants may not have previously obtained brownfields funding through the state’s prior reimbursement programs.
New Jersey’s brownfields incentives are additional arrows in the state’s quiver aimed at redeveloping the numerous brownfields awaiting redevelopment across the state. The Brownfields Tax Incentive and Loan Programs may be attractive for certain projects demonstrated to be economically feasible where the ability to obtain conventional financing is limited.
Click here for an analysis of the Brownfield Redevelopment Incentive Tax Credit program.