NJ Bans Additional Loans for Companies in Default Status
February 1, 2016
NJ Bans Additional Loans for Companies in Default Status
Recently, Gov. Chris Christie announced that he signed a new bill into law that would prohibit the state of New Jersey from subsidizing low-income property developers who defaulted on state loans. According to a report by the Washington Times, the bill was initially proposed after a company received several millions of dollars from New Jersey while in default status for previously secured loans.
The details of the new law
The governor signed the bill because he was adamant that the state should no longer be responsible for subsidizing these low-income property development companies that are either delinquent or late with loan repayments. According to a statement cited by NJ.com, Democratic Sen. Nicholas Scutari co-sponsored the bill because it was clear that a solution needed to be found.
“We cannot reward companies that are behind on payments to the state, especially when it is coming at the taxpayers’ expense,” Scutari explained. “Just like any financial institution would evaluate its risk when considering loan applications, the state must do the same.”
The rationale behind the new law
There are several companies in the state that are currently receiving loans from other agencies around New Jersey, despite owing the state government millions in loan debt. One prime example listed by the Washington Times was Roizman Development Inc., which is a Pennsylvania company that has received millions from two agencies in New Jersey while it owed over $6 million in state government loan repayments. Roizman Development Inc. was the first property developer in New Jersey to secure state loans as part of the governor’s incentive programs for low-income housing. The company then developed low-income housing in Camden, New Jersey as part of the 2013 Economic Opportunity Act. It secured a $57 million loan to rebuild 175 homes through several federal tax credits, a federal loan and $26 million in additional state construction loans from New Jersey. In turn, the project was approved for up to $23.4 million in loans and tax credits for Roizman Development Inc. over the course of the next 10 years. However, the company has been slow in its debt repayments, which spurred the state into action.
How it will impact companies in default status
Following the law’s enactment, all repayment on state government loans will be from rent for the properties. These funds will be secured from guaranteed rent payments from the federal government’s Section 8 housing program.
