While the Urban Transit Hub Tax Credit promised to “catalyze economic development” in “New Jersey’s urban centers” when it was signed into law in 2008, a lack of safeguards in the original legislation, loose awarding practices, and significant legislative weakening of eligibility rules have resulted in little change in land use and transportation patterns or economic development location decisions.
This is the key finding of a new report from Good Jobs First, a national policy resource center that focuses on economic development accountability and smart growth for working families. “Breaking Down Silos Between Economic Development and Public Transportation” looks at efforts in New Jersey and three other states to tie job subsidies to smart growth practices. Unfortunately, it finds that promising initiatives like the Hub credit have largely failed to promote both smart economic development policy and spur transit-oriented development. Its findings echo the work we’ve done at New Jersey Policy Perspective in documenting that the Hub program has increasingly departed from its initial goals.
Hub tax credits were enacted, and have been promoted, with bipartisan support. Initially, Hub-eligible areas were limited to Camden, East Orange, Elizabeth, Hoboken, Jersey City, Newark, New Brunswick, Paterson and Trenton. In order to be eligible for credits, businesses or developers were required to build within a half-mile of a transit hub and employ 250 people. To date, $977.1 million worth of incentives have been awarded to 18 commercial and residential projects under this program.
The Hub credits have been repeatedly amended since 2008, so much so that some recent deals under the program have absolutely no connection to transit-oriented development in urban areas.
Just a year after the Hub legislation was signed, the program’s eligibility standards were significantly lowered under the New Jersey Economic Stimulus Act of 2009. This law expanded geographic requirements to include locations served by freight rail, the first big step in decoupling the Hub program from mass transit. It also lowered the capital investment threshold for commercial projects from $75 million to $50 million for businesses and developers and from $50 million to $17.5 million for occupants.
In 2011, the program’s requirement that 20 percent of residential units subsidized by the tax credit be set aside for low- and moderate-income residents was completely dropped, while the amount residential developments could recoup from the program was upped from 20 percent of capital costs to 35 percent.
And it’s not just revisions to the Hub credits that have diluted the program’s initial intent. In fact, an entire new subsidy program – the GrowNJ program – was created in 2012 to explicitly redirect money already allocated for transit-oriented development to development in suburban areas of New Jersey. This bill shuffled up to $200 million in tax credits from Hub to GrowNJ, which has no transit requirements, and made bonus credits available for businesses relocating to a “project site that is or has been negatively impacted by the approval of a qualified business facility” under the Hub program.
The case of Goya Foods is a telling example of how the Hub credits have evolved. The Secaucus-based food company was awarded an $81.9 million tax credit under the Hub program in October 2011. The subsidy is being given to Goya because the company is building a new headquarters and distribution facility in Jersey City, a hop-skip-and-a-jump from its existing headquarters in Secaucus. The Jersey City facility, which Goya broke ground on this month, is technically within a half-mile of both the Secaucus NJ Transit station and the Journal Square PATH station, but this swath of industrial Meadowlands could hardly be considered an urban area. Perhaps that’s why Goya plans to include a surface parking lot for nearly 500 cars.
So how can lawmakers strengthen the Hub program and ensure it serves its initial purpose as a driver of key investment in New Jersey’s urban engines of opportunity? Here are a few ideas:
• The Hub program’s expansion to include sites in proximity to freight rail and its expansion to include sites within a mile (instead of a half-mile) radius of a transit center should be reversed.
• Funds explicitly dedicated for the Hub program should not be redirected to other economic development programs.
• Companies receiving Hub credits, particularly for commercial developments, should be allowed to build a limited amount of parking to help promote transit use. Surface parking lots should be prohibited; parking should be contained in or under the building in line with Smart Growth and New Urbanism development concepts.
• Commercial facilities receiving Hub credits should be required to incentivize employee transit use by participating in transportation demand management (TDM) programs that include transit pass benefits.
• The state should collect, analyze and make public information on transit use at sites that have received Hub credits.
Help us help New Jersey's working families. Make a tax-deductible donation today.