Just last summer, the statewide Nonresidential Development Fee Act was enacted on July 17, 2008. The Act pre-empted any municipal affordable housing or “COAH” fee ordinance and mandated that any nonresidential development be assessed a fee equaling 2.5% of the equalized assessed value of the improvements and land of the new development (the “2.5% Fee”). The timing could not have been worse, considering the direction of the overall economy and development in particular.
Recognizing the chilling effect this 2.5% Fee had on development, on July 27, 2009 Governor Corzine signed the “New Jersey Stimulus Act of 2009” (the “Stimulus Act”). Although the Stimulus Act has several components, this memorandum only speaks to the proposed amendments to the Act applicable to the 2.5% Fee.
The Stimulus Act seeks to fuel nonresidential development by exempting such development from the 2.5% Fee. The following developments are now exempt from the 2.5% Fee:
- Nonresidential property in which a site plan has received preliminary approval or final approval prior to July 10, 2010, as long as a permit for the construction is issued from the local enforcing agency prior to January 1, 2013.
- Nonresidential project that prior to July 10, 2010 has been referred to a planning board by a governmental body pursuant to N.J.S.A. 40:55D-31 (capital projects by public entities) as long as a permit for the construction is issued from the local enforcing agency prior to January 1, 2013.
- Nonresidential property in which a site plan has received approval from the New Jersey Meadowlands Commission prior to July 10, 2010 as long as a permit for the construction is issued from the local enforcing agency prior to January 1, 2013.
- Individual buildings within a nonresidential phased development that received preliminary or final approval prior to July 1, 2010, as long as a permit for the construction is issued from the local enforcing agency prior to January 1, 2013.
Paragraph 1 above will certainly have the greatest impact on our development clients. Hopefully, it will also renew interest in nonresidential development in the State and, ultimately be a key to the success of the Stimulus Act. By expanding the exemption to development approved prior to July 10, 2010, the State is hoping that an influx of development will occur immediately and developers will seek to begin construction instead of delaying projects due to the economic climate. But, the Stimulus Act states exemptions do not apply to a COAH contribution that a developer “made or committed itself to make prior to the July 17, 2008”.
The other key component of the Stimulus Act is to provide for the reimbursement of the 2.5% Fee, or a portion thereof, to any developer who has previously paid, or committed to pay, a financial contribution to a municipality. The key date in the manner of which the Stimulus Act calculates the reimbursement is July 17, 2008. The reimbursement of the COAH Fees will be calculated as follows:
- Any nonresidential property in which a site plan has received preliminary or final approval prior to July 17, 2008 and was subject to a COAH fee will be entitled to a reimbursement of the difference between monies committed prior to July 17, 2008 and the 2.5% Fee.
- A developer of a nonresidential project that paid the 2.5% Fee, subsequent to July 17, 2008 will be entitled to a full refund of those monies, with very limited exceptions.
To be clear, understand that this new law does not include a full reimbursement of the 2.5% fee unless the entire 2.5% Fee was paid after July 17, 2008. If, for example, the developer paid, or committed to pay (either through a Resolution of Approval or more likely an executed Developer’s Agreement), a 2.0% fee prior to July 17, 2008 and subsequently paid an additional 0.5% in accordance with the 2.5% Fee law, only a reimbursement of that subsequent 0.5% would be in order. Furthermore, the language of the Stimulus Act seems to imply that a developer is still responsible to make a payment committed to prior to July 17, 2008 even if that payment has not been made yet. A client who committed to pay the 2.5% Fee after July 17, 2008, but has not made a payment, will not be responsible for that payment if the proposed development is completed in accordance with the Stimulus Act.
In order to receive a reimbursement of this fee, a written claim must be filed with the entity that received the fee with a copy to the New Jersey Division of Revenue within 120 days of the effective date of this Act. We understand the last date to file such a claim will be November 30, 2009. The municipality must repay the fee within 30 days of receipt of the request under the Stimulus Act. Municipalities may be reimbursed through the New Jersey Affordable Housing Trust Fund (the “Trust Fund”).
The Stimulus Act also calls for $15 million to be appropriated into the Trust Fund to replace the suspended nonresidential development fees. Municipalities are entitled to petition the commissioner for a grant or loan from the Trust Fund to recover fees lost as a result of the Stimulus Act. The Commissioner will have the responsibility of properly allocating any appropriation deposited in the Trust Fund.
Lastly, the Stimulus Act could also affect the affordable housing obligations of municipalities. The affordable housing obligation of a municipality attributed to a particular nonresidential development may be reduced or eliminated in certain specific circumstances.
We will keep you apprised of any further developments in this regard. Feel free to call with specific inquiries.