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ORDINANCE AUTHORIZING NEGOTIATED REDUCTIONS IN THE ANNUAL SERVICE CHARGE PURSUANT TO THE NEW JERSEY LONG TERM TAX EXEMPTION LAW, FOR REDEVELOPMENT PROJECTS PROVIDING AFFORDABLE GROUND-FLOOR RETAIL SPACE IN ADDITION TO ENHANCED AFFORDABLE HOUSING.
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WHEREAS, the City of Newark (the “City”) is authorized pursuant to the New Jersey Long Term Tax Exemption Law, N.J.S.A. 40A:20-1 et seq. (the “Long Term Tax Exemption Law”), to enter into financial agreements for development projects and to establish annual service charges in connection therewith; and
WHEREAS, the City, pursuant to the Long Term Tax Exemption Law has adopted Title 10, Finance and Taxation, Chapter 24, Procedures for Application, Approval and Administration of Long Term Tax Exemptions to govern the procedures for Long Term Tax Exemptions including the approval of PILOT applications and financial agreements governing same; and
WHEREAS, the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1. et. seq., as amended and supplemented, authorizes municipalities to undertake redevelopment activities and to encourage the redevelopment of property within designated redevelopment areas; and
WHEREAS, the Municipal Council, pursuant to Ordinance 6PSFE-e adopted on November 1, 2023, implemented affordable housing regulations including Title 41, Zoning and Land Use Regulations, Chapter 21, Inclusionary Zoning for Affordable Housing, (the “City’s IZO”), requiring all new residential, mixed-use developments, and substantial rehabilitations with 15 or more residential units to set aside twenty (20%) of the total residential units as income restricted units, of which five percent (5%) shall be income restricted units not exceeding forty percent (40%) of Area Median Income (AMI), five percent (5%) shall be income restricted units not exceeding sixty percent (60%) of AMI, and ten percent (10%) shall be income restricted units not exceeding eighty percent (80%) of AMI; and
WHEREAS, the City recognizes that the construction of affordable housing units in excess of those otherwise required by the City’s IZO provides substantial benefits by increasing housing opportunities for low- and moderate-income households and furthering the City’ affordable housing objectives; and
WHEREAS, the City also finds that redevelopment projects providing below-market retail space, serving neighborhood businesses, confers substantial public benefits by expanding housing opportunities, promoting economic development, and enhancing neighborhood vitality; and
WHEREAS, the City finds that providing a limited reduction in the Annual Service Charge within a Financial Agreement, entered into pursuant to the Long Term Tax Exemption Law, may encourage redevelopers to voluntarily construct additional affordable housing units, beyond the minimum amount required by the City’s IZO, and provide commercial retail space at below market rental rates, and desires to establish a framework under which such additional public benefits may be recognized in the negotiation of such Financial Agreements entered into pursuant to the Long Term Tax Exemption Law.
NOW, THEREFORE, BE IT ORDAINED BY THE MUNICIPAL COUNCIL OF THE CITY OF NEWARK, NEW JERSEY, THAT:
Section 1. Purpose. The purpose of this Ordinance is to encourage redevelopment projects that provide affordable housing units in excess of the amount of affordable housing obligations otherwise required by applicable City law, redevelopment plans, redevelopment agreements, zoning regulations, or other governmental approvals, and to also provide affordable ground-floor commercial retail space that supports local businesses and neighborhood-serving commercial uses. To further this purpose, the Department of Economic and Housing Development is authorized, in its discretion, to negotiate a reduction in the Annual Service Charge under a Financial Agreement entered into pursuant to the New Jersey Long Term Tax Exemption Law.
Section 2. Definitions.
For purposes of this Ordinance:
Annual Service Charge shall have the meaning set forth in the Long Term Tax Exemption Law and the applicable Financial Agreement.
Affordable Housing Units shall mean dwelling units subject to recorded affordability controls and restricted in accordance with applicable federal, state, and local affordable housing requirements and Municipal regulations.
Excess Affordable Retail Space means ground-floor commercial retail space leased at rents not exceeding fifty percent (50%) of prevailing fair market rental rates for substantially similar commercial space within the Municipality for the duration required by the applicable Financial Agreement, as determined by the City based upon an appraisal or market analysis prepared by a qualified commercial real estate professional acceptable to the City.
Project means the redevelopment project that is the subject of a Financial Agreement entered into pursuant to the Long Term Tax Exemption Law.
Section 3. Eligibility.
A redeveloper may be considered for an incentive authorized by this Ordinance where the Department of Economic and Housing Development determines, when negotiating a Financial Agreement pursuant to the Long Term Tax Exemption Law, that the redevelopment project satisfies all the following criteria:
1. The Project provides Affordable Housing Units in excess of the affordable housing obligations otherwise applicable to the Project and, in no event, less than thirty-one percent (31%) of the total residential dwelling units shall be deed-restricted affordable housing units available to tenants at 100% of Newark income.
2. The Affordable Housing Units are subject to legally enforceable affordability controls as required by applicable law.
3. The Project includes ground-floor commercial retail space, and such space is leased at rents not exceeding fifty percent (50%) of prevailing market rental rates.
4. The redeveloper remains in compliance with all obligations contained in the applicable redevelopment agreement, Financial Agreement and applicable government approvals.
5. The Department of Economic and Housing Development determines that the additional Affordable Retail Space provides a substantial public benefit warranting consideration of the incentive authorized herein.
Section 4. Affordable Retail Incentive.
A. In negotiating a Financial Agreement pursuant to the Long Term Tax Exemption Law, the City’s Department of Economic and Housing Development may consider negotiating a reduction of not more than one percentage point (1%) from the otherwise negotiated Annual Service Charge in recognition of Projects that provide Affordable Housing Units in excess of applicable requirements and Excess Affordable Retail Space.
B. The amount of any reduction shall be determined by the Department of Economic and Housing Development during the negotiations of a Financial Agreement on a case-by-case basis after considering the amount of Excess Affordable Retail Space provided, including the square footage of such space, the level of rent affordability, the duration of the affordability restrictions, the public benefits, the project feasibility, the neighborhood needs, the financial necessity, and such other factors as the Department of Economic and Housing Development deems relevant.
C. Under no circumstances shall any reduction authorized pursuant to this Ordinance result in an Annual Service Charge that is less than the minimum Annual Service Charge permitted by the Long Term Tax Exemption Law.
D. Nothing contained herein shall entitle any applicant to a reduction in the Annual Service Charge. Any reduction shall remain solely within the discretion of the Department of Economic and Housing Development and shall be expressly set forth in the applicable Financial Agreement approved by the Municipal Council.
Section 5. Continuing Compliance.
A. Any Financial Agreement providing for the incentive established herein shall require annual certification demonstrating continued compliance with the Affordable Housing Units and Excess Affordable Retail Space requirements
B. The City may require such reports, certifications, occupancy information, affordability monitoring reports, leases, rent rolls, and other documentation as it deems reasonably necessary to verify compliance.
C. Failure to maintain compliance with the affordable housing and/or affordable retail requirements that formed the basis for the incentive shall constitute a default under the Financial Agreement. Following written notice from the City and the expiration of any applicable cure period provided in the Financial Agreement, the City may terminate the incentive in accordance with the terms of the Financial Agreement.
D. Upon termination of the incentive, the Annual Service Charge shall revert to the rate that would have otherwise applied under the Financial Agreement without the incentive.
Section 6. Administrative Guidelines.
The Deputy Mayor/Director of the Department of Economic and Housing Development, or such other City official designated by the Municipal Council, may promulgate written administrative rules, policies and procedures consistent with this Ordinance.
Section 7. No Entitlement to Financial Incentive
Nothing contained herein shall be construed to limit the authority of the Municipal Council to approve, reject, or modify the terms of any Financial Agreement pursuant to N.J.S.A. 40A:20-1 et seq. The incentive authorized herein shall not become effective unless expressly incorporated into a Financial Agreement approved by ordinance of the Municipal Council.
Section 8. Severability.
If any section, subsection, paragraph, sentence, or provision of this Ordinance shall be adjudged invalid by a court of competent jurisdiction, such judgment shall not affect, impair, or invalidate the remainder of this Ordinance.
Section 9. Repealer.
All ordinances or parts of ordinances inconsistent with this Ordinance are hereby repealed to the extent of such inconsistency.
Section 10. Effective Date.
This Ordinance shall take effect upon final passage and publication in accordance with the law.
Statement
This Ordinance authorizes negotiated reductions in the Annual Service Charge pursuant to the New Jersey Long Term Tax Exemption Law for redevelopment projects providing affordable ground-floor retail space in addition to enhanced Affordable Housing.