New NJEDA to Provide Funding for Brownfield Redevelopment Projects
The New Jersey Economic Development Authority (NJEDA) recently announced the creation of the Brownfields Loan Program...
New NJEDA to Provide Funding for Brownfield Redevelopment Projects
<strong>The New Jersey Economic Development Authority (NJEDA) recently announced the creation of the Brownfields Loan Program...</strong>
The New Jersey Economic Development Authority (NJEDA) recently announced the creation of the Brownfields Loan Program. The new program will make low-interest loans of up to $5 million available to brownfield redevelopment projects for all aspects of brownfield revitalization, including assessment, investigation, and demolition.
As highlighted by the NJEDA, funding gaps often make the remediation phase of redevelopment projects financially unviable. The goal of the program is to reactivate long-stalled projects and create new opportunities for commercial, retail, and mixed-use developments.
“Revitalizing contaminated sites and putting them back to productive, locally-appropriate use is an essential component of Governor Murphy’s commitment to building stronger, more vibrant communities across New Jersey,” NJEDA Chief Executive Officer Tim Sullivan said in a press statement. “The Brownfields Loan Program and the NJEDA’s other collaborations with NJDEP Commissioner McCabe and other partners to support brownfields redevelopment will play a crucial role in building a greener, fairer New Jersey by incentivizing investors to consider brownfields remediation and making resources available to get these projects off the ground.”
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 maximum loan amount is $5,000,000, while the minimum loan amount is $100,000. Below are several key components of the program:
Eligible Applicants: Applicants must be able to demonstrate site control or a path to site control. 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). Municipalities applying for a Brownfields loan require Local Finance Board approval. Applicant must provide owner equity equal to a minimum of 10% of the appraised value of the property in a remediated state. Parties responsible for contamination of brownfield site, related to party responsible for contamination of brownfield site, or parties that have indemnified a responsible party or a party related to a responsible party are not eligible for the Brownfields Loan Program.
Eligible Uses: Eligible uses include 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).
Eligible Sites: Loan proceeds may be used for costs associated with the investigation, assessment, and remediation of a brownfield, including but not limited to: soil, groundwater and infrastructure investigation; assessment; remediation; abatement; hazardous materials or waste disposal; long-term groundwater or natural attenuation; other forms of institutional controls; attorney fees; planning, engineering and environmental consulting; and building and structural issues (including demolition, asbestos abatement, PCB removal, contaminated wood or paint removal or other infrastructure remedial activities). Use of the loan funds can’t be duplicative of other approved State or Federal grants previously awarded that would pay for the proposed use of funds.
Scoring Criteria: Projects seeking financing will be required to submit an application during competitive application rounds that will be established by NJEDA. Applications that meet the base eligibility requirements will be further reviewed and scored by NJEDA across a publicly available scoring criteria, which are still in development and will be made available when completed. However, the scoring criteria will be based upon the local or economic impact of the brownfields site/proposed project. This will 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.
Terms/Rates: Principal and interest payments will be deferred for the first two years; however, interest will accrue and be capitalized onto the principal balance of the loan. Thereafter, interest-only payments will be made for years three and four, followed by full amortization of the principal balance for the remaining term. Full amortization is based on principal and interest payments with no penalty for prepayment. A lien will be placed on the property, subordinated to purchase mortgage, and removed upon repayment.
Interest Rate: Loans will have a base rate of 3% with opportunity for rate reductions to a floor of 2% based on the redevelopment project design.
Rate Reduction: A project may be eligible for interest rate reductions based on the redevelopment project design. Interest rate reductions of 20 basis points per applicable criteria may be available for the following criteria:
- Mixed-use residential project consisting of newly-constructed residential units where the developer will reserve at least 20 percent, but not more than 50 percent, of the residential units constructed for occupancy by low- and moderate-income households with affordability controls as required under the rules of the Council on Affordable Housing.
- The project is in an urban food desert community and the redevelopment project includes a food delivery source. “Food delivery source” means access to nutritious foods, such as fresh fruits and vegetables, through grocery operators, including, but not limited to a full-service supermarket or grocery store, and other healthy food retailers of at least 10,000 square feet, including, but not limited to, a prepared food establishment selling primarily nutritious ready-to-serve meals.
- A health care or health services center with a minimum of 10,000 square feet of space devoted to primary health care or health services and is located in a distressed municipality with a Municipal Revitalization Index score of 50 or lower.
- The project qualifies as a tourism destination project, which means a non-gaming business facility that will be among the most visited privately owned or operated tourism or recreation sites in the State, and which has been determined by the Authority to be in an area appropriate for development and in need of economic development incentive assistance, including a non-gaming business within an established tourism district with a significant impact on the economic viability of that district.
- The project includes an electric vehicle charging station installation in at least 25 percent of the parking spaces located at the redevelopment project
- The project demonstrates that the parking area at the redevelopment project is capable of conversion to commercial space if there a decrease in demand for parking
- The project includes development of an incubator facility or collaborative workspaces.
- Project includes the revitalization of historic sites and structures, defined as an income-producing structure or a site associated with the history of New Jersey that is on the State or National Register of Historic Places or is eligible for placement on the State or national register.
According to the NJEDA, applications for the Brownfields Loan Program are still in development. For businesses and municipalities that are interested in the program, we recommend checking the NJEDA website regularly.
If you have questions, please contact us
If you have any questions or if you would like to discuss the matter further, please contact me, Todd Terhune, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
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About Author Todd Terhune
Todd Terhune is an experienced environmental attorney with particular emphasis on environmental due diligence, ISRA compliance, water and wetlands, worker health and safety, environmental insurance, site remediation, environmental permitting, and environmental cost recovery.
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