Trenton – In an effort to improve economic growth and development in distressed communities and neighborhoods, the Senate Community and Urban Affairs Committee passed legislation today sponsored by Senator Troy Singleton, which would require a cost-benefit analysis for any long-term tax exemptions. The analysis would provide information on the net impact on local revenue if tax breaks were granted for new development projects.
“These tax abatements are intended to provide incentives for new projects that will create jobs and generate economic opportunities in our communities, and the cost-benefit analysis will show the long-term impact of the potential abatements,” said Senator Singleton (D-Burlington), Chair of the Senate Community and Urban Affairs Committee. “There should be an immediate or long-term financial gain for the municipality and its residents.”
The bill, S-2546, would require the Department of Community Affairs (DCA) to create a database of any long-term tax exemptions. Additionally, the bill would also require that five-year tax exemption and abatement agreements be filed with certain county officials.
The bill would require an abatement applicant to include a cost-benefit analysis. The mayor would also be required to produce an independent analysis to be submitted to the municipal governing body, along with the application, before it could be decided upon. The analysis would have to include the financial impact on the county, the local schools district and any other affected local government. The analysis would also include the impact of the exemption on school funding, and in particular, its impact on the equalization aid component of the current school funding formula.
Currently, municipalities are the main entities that negotiate the terms of long and/or short-term tax abatements directly with developers. In New Jersey, municipalities grant tax abatements to enhance employment opportunities, attract residents, and lure commercial establishments, while developing vacant or underutilized property.
The bill was released from committee by a vote of 5-0.