Brownfields Loan Program Now Open – What NJ Developers Need to Know
New Jersey developers, property owners, and potential buyers may be eligible for a new loan program that can help offset the costs of brownfields redevelopment...
Brownfields Loan Program Now Open – What NJ Developers Need to Know
<strong>New Jersey developers, property owners, and potential buyers may be eligible for a new loan program that can help offset the costs of brownfields redevelopment.</strong>..
New Jersey developers, property owners, and potential buyers may be eligible for a new loan program that can help offset the costs of brownfields redevelopment. However, the clock is ticking — applications for the Brownfields Loan Program must be submitted by April 13, 2021.
Key Details About Brownfields Loan Program
The Brownfields Loan Program provides financing to potential brownfield site purchasers and current brownfield site owners (including local government redevelopers) that intend to develop commercial (including but not limited to manufacturing), retail, mixed-use developments, expansions, or reuses. The minimum loan amount is $100,000, while the maximum loan amount is $5 million.
In order to participate in the program, applicants must be able to demonstrate site control or a path to site control. In addition, the applicant must provide owner equity equal to a minimum of 10 percent of the appraised value of the property in a remediated state.
With regard to site eligibility, the program is available to any former or current commercial or industrial site that is currently vacant or underutilized and on which:
- There has been, or there is suspected to have been, a discharge of a contaminant
- There is a structure upon which abatement or removal of asbestos, polychlorinated biphenyls, contaminated wood or paint, and other structural remedial activities is necessary.
- Any site as described above that has been remediated for industrial use but requires further remediation for mixed-use residential redevelopment.
- Project must be economically feasible, meaning there is enough cash flow to repay debt financing, including the brownfields loan, and demonstrate a funding gap or that other financing is not currently available.
- Project must have a plan for reuse of the remediated site.
- Projects previously approved for reimbursement through the Brownfields and Contaminated Site Remediation Reimbursement Program are not eligible.
- The property, in a remediated condition, must have an appraised value equal to or greater than 100 percent of all debt financing, including the requested Brownfields loan amount or applicant must demonstrate other sources of collateral.
- Applicant must provide an LSRP report or other documentation from a qualified professional that demonstrates that the site is a brownfield site (contamination exists on the site).
If approved, Brownfields Loan proceeds may be used for a wide-range of costs associated with the investigation, assessment, and remediation of a brownfield, including but not limited to:
- Soil, groundwater and infrastructure investigation
- Hazardous materials or waste disposal
- Long-term groundwater or natural attenuation
- Other forms of institutional controls
- Attorney fees
- Planning, engineering and environmental consulting
- Building and structural issues (including demolition, asbestos abatement, PCB removal, contaminated wood or paint removal or other infrastructure remedial activities)
Use of funds can’t be duplicative of other approved State or Federal grants previously awarded that would pay for the proposed use of funds.
Applying for the Brownfields Program
Projects seeking financing must submit an application, which will be evaluated during competitive application rounds established by NJEDA. Applications must be accompanied by a letter of support from the mayor of the municipality in which the brownfield site is located (or the governing body if the position of mayor does not exist)
Applications that meet the base eligibility requirements are further reviewed and scored by NJEDA using scoring criteria based upon the local or economic impact of the brownfields site/proposed project. Factors that are taken into consideration include:
- The borrower/developer is a non-profit entity.
- Level of economic/environmental distress in the municipality as determined by the brownfield site being located in one of the 50 most distressed municipality per the NJ Department of Community Affairs' current Municipal Revitalization Index, an eligible Opportunity Zone, or a municipality serviced by NJ Department of Environmental Protection's Community Collaborative Initiative.
- Proximity to public transportation - The project is located in a Planning Area 1 (Metropolitan) and within a one-half mile radius, with bicycle and pedestrian connectivity, to the mid-point of a New Jersey Transit Corporation, Port Authority Transit Corporation, or Port Authority Trans-Hudson Corporation rail, bus, or ferry station, including all light rail stations, or a high-frequency bus stop as certified by the New Jersey Transit Corporation.
- The consistency between the proposed plan for the reuse of the brownfield site and local redevelopment plans.
- The amount of the projected new tax revenues generated from the proposed use of the brownfield site.
- The need of the loan to the viability of the remediation project and the redevelopment project.
- The public health and environmental benefits of the project in addition to the remediation of the brownfield site.
- Length of time the brownfield site has been abandoned or underutilized.
The application fee is $2,500. Additional details regarding the application are available at https://www.njeda.com/bfloans.
Brownfield Tax Incentives Coming Soon
Additional economic assistance for brownfields redevelopment is also coming in the form of tax incentives. The Brownfield Redevelopment Incentive, which was established under the New Jersey Economic Recovery Act of 2020, will provide tax credits to support brownfields remediation projects.
The Brownfield Redevelopment Incentive is a one-time tax credit intended to support costs associated with assessment, investigation, and remediation activities, as well as hazardous materials abatement, waste disposal, and structural remediation. The program is subject to a $50 million annual cap with a maximum $4 million tax credit per project. Tax credits will be awarded through a competitive application process, which the NJEDA is expected to announce later this year.
Next Steps for Loan Program
Given that the Brownfields Loan Program closes on April 13, 2021, time is of the essence. To determine if your business may benefit from the new loan program, we encourage you to contact a member of the Scarinci Hollenbeck Land Use Group at 201-896-4100.
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About Author Junjuan Song
Junjuan Song, Of Counsel, is a member of Scarinci Hollenbeck’s Commercial Real Estate and Corporate Transactions & Business Law practice groups. She focuses her practice on the representation of financial institutions, developers, entrepreneurial and corporate clients, individual and institutional investors in a wide variety of matters including mortgage financing, commercial project acquisitions and sales, commercial leasing and other transactional matters.
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