N.J. Economic Development Authority CEO Evan Weiss said the EDA plans to reopen its paused Aspire tax credit program this fall — and will do so without asking lawmakers to change the law.
The reason: A new law isn’t necessary.
Weiss during a fireside chat last week with BINJE Editor Tom Bergeron at a ULI Northern New Jersey event at Montclair State University, said the program needed to put on pause to address a growing concern: That the program, due to higher interest rates, was no longer as beneficial as it was designed to be back in 2020. (The program was first implemented in 2021.)
Weiss said interest rates were near zero when Aspire was drafted. Today’s much higher rates mean most deals need bridge financing, usually over 10 years, and that takes value out of the project.
“The average amount that a project is getting back is 50 cents on the dollar,” he said. “Bad for us, bad for you.”
With this in mind, Weiss said deciding who goes to the front of the line for a limited pot of credits is the biggest concern.
Weiss told the group that the authority will weigh two things as it prioritizes: how much of each credit gets back into the project, and which sectors go first.
On the first, he said counties have stepped in with guarantees, and some larger entities, such as hospitals or Netflix, have financed deals off their own balance sheets. On the second, he said Aspire has become a tool for film studios, hospitals, 100% affordable housing and mixed-income multifamily projects, and the authority is working out how to rank them.
Weiss said the authority has done more 100% affordable housing than it expected, and those deals tend to be more efficient. He said he could not say more because the discussions are active, and that some of it depends on sister agencies such as the Housing and Mortgage Finance Agency and the Department of Community Affairs.
The biggest projects fall under the transformative category.
Weiss said the authority had about $190 million in credits left there when it paused, against about $3 billion in applications. One transformative project can take up to $400 million in credits. Some credit capacity will shift toward those big projects, he said.
“There’s not a universe in which we won’t move some credit capacity over into the transformative category,” he said.
Weiss said the authority is aiming to reopen this fall and asked to be held to it. He said the last time the state went through such a working-out period, it took years, and he does not want to repeat that.
“It’s too important to have this stop for any period of time,” he said.
Asked whether the authority would claw back awards from projects that have not closed financing or started construction, Weiss said that is unlikely. He said the authority will likely prioritize projects that show they can close, and it will look harder at extensions.
“So clawback, no,” he said. “But continued extensions is something we’ll look at.”
An audience member who has financed Aspire deals said only the largest, wealthiest investors can take part. Weiss said the authority is working with the Department of the Treasury on how credits are certified and delivered, planning roadshows for more lenders and guarantors and looking at syndicates of smaller credit buyers.
Asked whether the law’s targeted cities could change, Weiss said they are set in law now. He said geographic prioritization is a policy question and did not rule it out for the future.
Asked by a municipal official how public servants balance what is best for the public with what is best for the economy, Weiss said that is the central tension of the work, and he offered the Aspire pause as an example. It is easy, he said, to get caught up in the logic of a program.
“Why are we doing this in the first place? Who is it for?” he said.
