Tax Breaks for Rescuing The Neighborhood

NJBIZ, Apr 11, 2005

A state program draws corporate dollars into redevelopment projects

New Jersey and Pennsylvania battle over business investments and job creation-and they don't hesitate to steal each other's good ideas. case in point: New Jersey's Neighborhood Revitalization Tax Credit (NRTC) program is modeled after Pennsylvania's Neighborhood Assistance Program. Two years after its enactment, NRTC has begun generating interest among corporate sponsors, neighborhood non-profits and municipalities.

Under the program, private-sector companies investing in neighborhood revitalization projects receive state tax credits equal to 50% of their stake. PNC Bank of Pittsburgh, the first corporate sponsor, has committed itself to investing $1.5 million over three years in Garden State projects. If PNC meets that target, it will end up with tax credit certificates for $750,000 that it can deduct from its state tax obligations.

PNC has already disbursed $500,000. Half of that has gone to projects promoted by Housing and Neighborhood Development Services (HANDS), a nonprofit community development group in Orange that builds and rehabilitates homes for first-time buyers. HANDS will use the money to fund part of ValleyArts, a community arts program, and to convert two abandoned industrial buildings into residential units and space for startup businesses. The other half of PNC's $500,000 check has gone into a pool at the state Department of Community Affairs (DCA), the agency that oversees the NRTC program. The money will be available for other such projects.

Two other nonprofit community development organizations have submitted plans to the DCA seeking investments for their projects. One is La Casa de Don Pedro in Newark's North Ward, which wants to rebuild the Lower Broadway area, restoring its commercial corridor and rehabilitating dilapidated buildings. The other is Elizabeth Development, an economic-development center in Elizabeth, which has partnered with Brand New Day, an affordable housing nonprofit in the same city. Their plan is to develop the town's Elizabeth-port section.

The tax credit program has also galvanized a host of nonprofits in Camden, Trenton, Jersey City and Plainfield to work on proposals that will seek support from both potential corporate sponsors and the DCA pool.

The NRTC came about after a three-year campaign by the Trentonbased Housing and Community Development Network of New Jersey, an association of more than 250 affordable-housing and community development organizations and interested individuals. Michael Powell, the group's community planning specialist, says that although the NRTC was first signed into law in January 2002 by then-acting Governor Donald DiFrancesco, it subsequently went through several modifications. The original cap on state tax credits-$500,000 per neighborhood-was doubled, and new provisions allowed corporations and the DCA greater flexibility in using the program. Changes were made allowing corporate sponsors to invest in projects directly or by contributing to a pool of redevelopment funds maintained by the DCA.

Powell says New Jersey's program is an improvement over its Pennsylvania counterpart, which deals with specific, one-off projects. New Jersey's program requires that each project be part of an overall neighborhood redevelopment plan that has been filed with the state and discussed in community meetings.

"The NRTC is visionary in that it rewards solid, comprehensive planning," says Patrick Morrissy, executive director at HANDS. "It also draws fresh money and engages corporations in New Jersey in the rebuilding of neighborhoods in a way that hasn't been done before."

William Best, senior vice president of PNC Bank in East Brunswick who oversees the bank's state community development activities, says the NRTC offers his bank benefits beyond the tax credits. "We obviously want to focus on revitalizing neighborhoods where we have our markets," he says. PNC Bank has 289 branches in the state, with deposits of $15.2 billion. Best is already evaluating proposals from nonprofits in Trenton, Newark and Paterson, among other cities.

PNC is the only corporation to have publicly embraced the Neighborhood Revitalization Tax Credit program since it went into effect eight months ago. Powell says that's not surprising. "One thing we learned from our Pennsylvania colleagues," he says, "is it takes time to get corporate champions for these revitalization projects." Over time, he expects "a lot more corporations to step into the play."

At the DCA, Commissioner Susan Bass Levin is working on marketing plans for the program that include presentations at Merrill Lynch and some thrift institutions. Her agency has set up a task force that targets specific industries such as banking, insurance and utilities to market projects in the 62 municipalities identified in the NRTC legislation.

"Invitations will be sent to the banks in the regions that have organizations with neighborhood plans and projects in development," says Levin.