Aspire is a state incentive managed by the New Jersey Economic Development Authority (NJEDA) that doles out tax credits for housing, commercial and mixed-use projects the agency believes wouldn’t be possible for financial reasons if not for public assistance. The NJEDA put a temporary stop to accepting new applications for the program after discovering that transaction costs are eating up as much as half of some Aspire tax-credit awards.
Credits aren’t typically a cash upfront award; they’re generally given over a period of years and can be used to reduce state taxes. With state approval, developers that can’t use the credits themselves can sell them to companies that can take advantage of them.
The demand for Aspire credits now exceeds the money available. NJEDA stopped accepting new applications at 5 p.m. on July 23 and plans to reopen the program in the fall with revised criteria. The NJEDA plans to continue reviewing current applications while retooling the program so it’s more competitive. But there are a few unanswered questions.
It’s unclear, from the announcement, what NJEDA considers a “current application,” what makes a project “viable” or whether the statement applies only to complete applications already under formal review.
NJEDA’s updated program page also contains conflicting information. A notice at the top says the Authority stopped accepting new applications at 5 p.m. on July 23, while the application section farther down still says NJEDA is “currently accepting applications” and continues to display an application link.
The pause doesn’t appear to automatically stop projects that have already reached the NJEDA Board.
At its July 22 meeting, the Board was scheduled to consider an Aspire award for a senior housing project in Hainesport. The proposed award would cover up to 60 percent of the project’s eligible costs.
However, NJEDA still hadn’t posted a project memorandum, resolution or meeting minutes, and the agenda alone didn’t confirm whether the award was approved.
The Authority also hasn’t explained whether projects already reviewed by staff will continue under the current rules or be reconsidered under the redesigned program.
NJEDA didn’t define the transaction costs it said ate up half the pie. Some may overlap with what the program calls “soft costs,” including certain legal, accounting, insurance, design and financing expenses. But the two terms can’t be treated as interchangeable without NJEDA’s underlying analysis.
One of the more important categories may be discounts accepted when the credits are sold to another company. Remember, a developer can sell credits it can’t use to a company that can but because the credits are given over time, a company can buy them from that developer at a lower value.
Aspire’s rules generally require the developer to receive at least 85 percent of the credit’s value before additional discounting to present value, although the minimum can fall to 75 percent for certain new residential projects and 65 percent for projects using federal Low-Income Housing Tax Credits.
Awards can also be pledged or used as collateral with state approval, potentially adding interest, legal and closing costs.
It’s not clear from the announcement whether these discounts and financing costs were part of NJEDA’s calculation.
It’s also not clear where the largest costs reside: lenders, attorneys, consultants, accountants etc.
Without NJEDA’s underlying analysis, it’s impossible to determine who is receiving the largest share.
Aspire has been used to support affordable and senior housing developments, and some affordable projects can qualify for larger awards.
However, NJEDA didn’t say whether affordable housing will receive priority or how affordable housing, commercial developments, film studios, health care facilities and other projects will be compared under the new competitive system.
NJEDA said the redesigned program will have clearer standards, a transparent and competitive framework and a stronger emphasis on fiscal discipline and project readiness but hasn’t explained what those changes might look like.
It can go a few directions:
-Caps on legal, consulting or financing expenses
-Capped discounts on sale of credits
-Required disclosure of every intermediary and fee
-Required publication of net amount that reaches a project
-Comparisons of public subsidies against the number of affordable units or jobs created
-Release of internal analysis that led to the pause
NJEDA was already seeking outside consultants to review Aspire applications, project budgets, financing plans and development costs. Proposals are due July 27 and NJEDA anticipates the contracts beginning around October 5, but it’s not clear whether they’ll review projects already in the pipeline or only what’s submitted after the program reopens.
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