REDEVELOPMENT LAW TAX ABATEMENTS & REDEVELOPMENT AREA BONDS DAVID A. WEINSTEIN, ESQ. ARCHER & GREINER, P.C. ONE CENTENNIAL SQUARE HADDONFIELD, NEW JERSEY 08031 DIRECT: 856-857-2787 │ FIRM: 856-795-2121

LOCAL REDEVELOPMENT AND HOUSING LAW 40A:12A-1 ET SEQ. "REDEVELOPMENT" MEANS CLEARANCE, REPLANNING, DEVELOPMENT AND REDEVELOPMENT; THE CONSERVATION AND REHABILITATION OF ANY STRUCTURE OR IMPROVEMENT, THE CONSTRUCTION AND PROVISION FOR CONSTRUCTION OF RESIDENTIAL, COMMERCIAL, INDUSTRIAL, PUBLIC OR OTHER STRUCTURES AND THE GRANT OR DEDICATION OF SPACES AS MAY BE APPROPRIATE OR NECESSARY IN THE INTEREST OF THE GENERAL WELFARE FOR STREETS, PARKS, PLAYGROUNDS, OR OTHER PUBLIC PURPOSES, INCLUDING RECREATIONAL AND OTHER FACILITIES INCIDENTAL OR APPURTENANT THERETO, IN ACCORDANCE WITH ARE DEVELOPMENT PLAN.

LOCAL REDEVELOPMENT AND HOUSING LAW Delineated area may be determined to be in need of redevelopment if, after investigation, notice and hearing as provided in section 6 of P.L.1992, c.79 (C.40A:12A-6), the governing body of the municipality by resolution concludes that within the delineated area any of the following conditions is found: a. The generality of buildings are substandard, unsafe, unsanitary, dilapidated, or obsolescent, or possess any of such characteristics, or are so lacking in light, air, or space, as to be conducive to unwholesome living or working conditions. b. The discontinuance of the use of buildings previously used for commercial, manufacturing, or industrial purposes; the abandonment of such buildings; or the same being allowed to fall into so great a state of disrepair as to be untenantable. c. Land that is owned by the municipality, the county, a local housing authority, redevelopment agency or redevelopment entity, or unimproved vacant land that has remained so for a period of ten years prior to adoption of the resolution, and that by reason of its location, remoteness, lack of means of access to developed sections or portions of the municipality, or topography, or nature of the soil, is not likely to be developed through the instrumentality of private capital.

LOCAL REDEVELOPMENT AND HOUSING LAW d. Areas with buildings or improvements which, by reason of dilapidation, obsolescence, overcrowding, faulty arrangement or design, lack of ventilation, light and sanitary facilities, excessive land coverage, deleterious land use or obsolete layout, or any combination of these or other factors, are detrimental to the safety, health, morals, or welfare of the community. e. A growing lack or total lack of proper utilization of areas caused by the condition of the title, diverse ownership of the real property therein or other conditions, resulting in a stagnant or not fully productive condition of land potentially useful and valuable for contributing to and serving the public health, safety and welfare. f. Areas, in excess of five contiguous acres, whereon buildings or improvements have been destroyed, consumed by fire, demolished or altered by the action of storm, fire, cyclone, tornado, earthquake or other casualty in such a way that the aggregate assessed value of the area has been materially depreciated. g. In any municipality in which an enterprise zone has been designated pursuant to the "New Jersey Urban Enterprise Zones Act," P.L.1983, c.303 (C.52:27H-60 et seq.) the execution of the actions prescribed in that act for the adoption by the municipality and approval by the New Jersey Urban Enterprise Zone Authority of the zone development plan for the area of the enterprise zone shall be considered sufficient for the determination that the area is in need of redevelopment pursuant to sections 5 and 6 of P.L.1992, c.79 (C.40A:12A-5 and 40A:12A-6) h. The designation of the delineated area is consistent with smart growth planning principles adopted pursuant to law or regulation.

LOCAL REDEVELOPMENT AND HOUSING LAW 2013 LAW CHANGES PROVIDED FOR TWO TYPES OF REDEVELOPMENT AREAS NON-CONDEMNATION AREA - NOTICE STATES NO CONDEMNATION TO BE AUTHORIZED CONDEMNATION AREA - NOTICE STATES DESIGNATION WILL AUTHORIZE CONDEMNATION FOR AREA • REQUIRED NOTICE OF THE DETERMINATION WITHIN 10 DAYS TO ALL RECORD OWNERS OF PROPERTY LOCATED WITHIN THE DELINEATED AREA ADDRESSED TO THOSE LISTED ON THE TAX ASSESSOR'S RECORDS IN CONDEMNATION AREAS THE NOTICE MUST STATE: THE DETERMINATION AUTHORIZES THE MUNICIPALITY TO EXERCISE THE POWER OF EMINENT DOMAIN TO ACQUIRE PROPERTY IN THE REDEVELOPMENT AREA; AND LEGAL ACTION TO CHALLENGE THE DETERMINATION MUST BE COMMENCED WITHIN 45 DAYS OF RECEIPT OF NOTICE AND THAT FAILURE TO DO SO SHALL PRECLUDE AN OWNER FROM LATER RAISING SUCH CHALLENGE.

LOCAL REDEVELOPMENT AND HOUSING LAW REDEVELOPMENT PLAN No redevelopment project shall be undertaken or carried out except in accordance with a redevelopment plan adopted by ordinance of the municipal governing body. The redevelopment plan shall include an outline for the planning, development, redevelopment, or rehabilitation of the project area sufficient to indicate: (1) Its relationship to definite local objectives as to appropriate land uses, density of population, and improved traffic and public transportation, public utilities, recreational and community facilities and other public improvements. (2) Proposed land uses and building requirements in the project area. (3) Adequate provision for the temporary and permanent relocation, of residents in the project area. (4) Identification of any property within the redevelopment area which is proposed to be acquired in accordance with the redevelopment plan. (5) Any significant relationship of the redevelopment plan to (a) the master plans of contiguous municipalities, (b) the master plan of the county in which the municipality is located, and (c) the State Development and Redevelopment Plan adopted pursuant to the "State Planning Act," P.L.1985, c.398 (C.52:18A-196 et al.). (6) As of the date of the adoption of the resolution finding the area to be in need of redevelopment, an inventory of all housing units affordable to low and moderate income households, that are to be removed as a result of implementation of the redevelopment plan, and a plan for replacement.

LOCAL REDEVELOPMENT AND HOUSING LAW The redevelopment plan shall describe its relationship to pertinent municipal development regulations as defined in the "Municipal Land Use Law," P.L.1975, c.291 (C.40:55D-1 et seq.) and shall supersede applicable provisions of the development regulations of the municipality or constitute an overlay zoning district within the redevelopment area. All provisions of the redevelopment plan shall be either substantially consistent with the municipal master plan or designed to effectuate the master plan; but the municipal governing body may adopt a redevelopment plan which is inconsistent with or not designed to effectuate the master plan by affirmative vote of a majority of its full authorized membership with the reasons for so acting set forth in the redevelopment plan. Once the Plan is adopted, the municipality or redevelopment entity can enter into an agreement with a Redeveloper.

AREAS IN NEED OF REHABILITATION N.J.S.A. 40A:12A-14 Rehabilitation is used to: – Prevent further deterioration; and – Promote the overall development of the community when: A significant portion of the structures are deteriorated or substandard condition; 50% + of housing stock is at least 50 years old; Pattern of vacancy, abandonment or underutilization is evident; Persistent arrearage of property tax payments has occurred; Environmental contamination is discouraging improvements; or Majority of the water and sewer infrastructure are at least 50 years old and is in need of repair or substantial maintenance.

AREA IN NEED OF REDEVELOPMENT v. AREA IN NEED OF REHABILITATION Key Difference are: No power of eminent domain available for Rehabilitation Criteria for designation is different N.J.S.A. 40A:12A-5 v. N.J.S.A. 40A:12A-14 Only Five Year Tax Abatement available for Rehabilitation.

TAX EXEMPTIONS/TAX ABATEMENTS FIVE YEAR EXEMPTION AND ABATEMENT LAW N.J.S.A. 40A:21-1 ET SEQ. LONG TERM TAX EXEMPTION LAW N.J.S.A. 40A:20-1 ET SEQ.

FIVE YEAR EXEMPTION AND ABATEMENT LAW N.J.S.A. 40A:21-1 ET SEQ. THE FIVE YEAR ABATEMENT GENERALLY CONCERNS AREAS IN NEED OF REHABILITATION - 5 YEAR LIMIT (“SHORT TERM ABATEMENT”) MUNICIPALITIES MUST HAVE ADOPTED AN ORDINANCE INVOKING ITS FIVE-YEAR ABATEMENT AUTHORITY AND SETTING OUT THE APPLICATION CRITERIA AND GUIDELINES. REDUCE PROPERTY TAX BILLS TO EXCLUDE ALL OR PART OF THE IMPROVEMENT VALUE APPLICATION MUST BE FILED 30 DAYS AFTER COMPLETION OF PROJECT WITH TAX ASSESSOR ABATEMENT –SCHEDULE 5 YEAR DECLINING

FIVE YEAR EXEMPTION AND ABATEMENT LAW APPLICANTS FOR TAX EXEMPTION AND ABATEMENT FOR NEW CONSTRUCTION OF COMMERCIAL OR INDUSTRIAL STRUCTURES OR MULTIPLE DWELLINGS SHALL PROVIDE THE MUNICIPAL GOVERNING BODY WITH AN APPLICATION SETTING FORTH: A GENERAL DESCRIPTION OF A PROJECT FOR WHICH EXEMPTION AND ABATEMENT IS SOUGHT; A LEGAL DESCRIPTION OF ALL REAL ESTATE NECESSARY FOR THE PROJECT; PLANS, DRAWINGS AND OTHER DOCUMENTS AS MAY BE REQUIRED BY THE GOVERNING BODY TO DEMONSTRATE THE STRUCTURE AND DESIGN OF THE PROJECT; A DESCRIPTION OF THE NUMBER, CLASSES AND TYPE OF EMPLOYEES TO BE EMPLOYED AT THE PROJECT SITE WITHIN TWO YEARS OF COMPLETION OF THE PROJECT; A STATEMENT OF THE REASONS FOR SEEKING TAX EXEMPTION AND ABATEMENT ON THE PROJECT, AND A DESCRIPTION OF THE BENEFITS TO BE REALIZED BY THE APPLICANT IF A TAX AGREEMENT IS GRANTED; ESTIMATES FO THE COST OF COMPLETING SUCH PROJECT; A STATEMENT SHOWING (1) THE REAL PROEPRTY TAXES CURRENTLY BEING ASSESSED AT THE PROJECT SITE; (2) ESTIMATED TAX PAYMENTS THAT WOULD BE MADE ANNUALLY BY THE APPLICANT ON THE PROJECT DURING THE PERIOD OF THE AGREEMENT, AND (3) ESTIMATED TAX PAYMENTS THAT WOULD BE MADE BY THE APPLICANT ON THE PROJECT DURING THE FIRST FULL YEAR FOLLOWING THE TERMINATION OF THE TAX AGREEMENT; IF THE PROJECT IS A COMMERCIAL OR INDUSTRIAL STRUCTURE, A DESCRIPTION OF ANY LEASE AGREEMENTS BETWEEN THE APPLICANT AND PROPOSED USERS OF THE PROJECT, AND A HISTORY AND DESCRIPTION OF THE USER’S BUSINESSES; IF THE PROJECT IS A MULTIPLE DWELLING, A DESCRIPTION OF THE NUMBER AND TYPES OF DWELLING UNITS TO BE PROVIDED, A DESCRIPTION OF THE COMMON ELEMENTS OR GENERAL COMMON ELEMENTS, AND A STATEMENT OF THE PROPOSED INITIAL RENTALS OR SALES PRICES OF THE DWELLING UNITS ACCORDING TO TYPE AND OF ANY RENTAL LEASE OR RESALE RESTRICTIONS TO APPLY TO THE DWELLINGS’ UNITS RESPECTING LOW OR MODERATE INCOME HOUSING; SUCH OTHER PERTINENT INFORMATION AS THE GOVERNING BODY MAY REQUIRE.

LONG TERM TAX EXEMPTION LAW N.J.S.A. 40A:20-1 ET SEQ. THE NEW JERSEY CONSTITUTION PERMIT MUNICIPALITIES TO ADOPT ENABLINAND STATUTES G LEGISLATION (BY ORDINANCE) TO IMPLEMENT A PAYMENTS IN LIEU OF TAXES PROGRAM (“PILOTS”) VIA A FINANCIAL AGREEMENT. MUNICIPALITIES MUST HAVE ADOPTED AN ORDINANCE INVOKING ITS AUTHORITY AND SETTING OUT THE APPLICATION CRITERIA AND GUIDELINES. PROPERTY MUST BE LOCATED IN AN AREA IN NEED OF REDEVELOPMENT/URBAN ENTERPRISE ZONE PROJECT MUST BE CONSISTENT WITH THE REDEVELOPMENT PLAN OWNER/APPLICANT MUST BE A QUALIFIED URBAN RENEWAL ENTITY (BY COMMISSIONER OF COMMUNITY AFFAIRS)

LONG TERM TAX EXEMPTION LAW URBAN RENEWAL ENTITY APPROVAL FROM THE COMMISSIONER OF COMMUNITY AFFAIRS CERTIFICATE OF INCORPORATION OR FORMATION FOR AN URE MUST PROVIDE SPECIFIC STATUTORY LANGUAGE, INCLUDING (BY NOT LIMITED TO): PURPOSE OF THE ENTITY MUST BE TO INITIATE AND CONDUCT PROJECTS FOR REDEVELOPMENT AND TO OPERATE AND MAINTAIN THEM. SO LONG AS THE ENTITY IS BOUND BY A FINANCIAL AGREEMENT, IT SHALL NOT ENGAGE IN ANY OTHER BUSINESS. A DECLARATION THAT THE ENTITY HAS BEEN ORGANIZED TO SERVE A PUBLIC PUROPSE. ENTITY SHALL NOT TRANSFER (VOLUNTARILY) MORE THAN 10% OF OWNERSHIP OF THE PROJECT, EXEMPT TO ANOTHER URE. MUST BE EITHER A NON-PROFIT OR LIMITED DIVIDEND ENTITY A “LIMITED DIVIDEND ENTITY” IS DEFINED AS AN ENTITY INCORPORATED UNDER TITLE 14A OF THE NEW JERSEY STATUTES, OR A PARTNERSHIP, LIMITED PARTNERSHIP, LIMITED PARTNERSHIP ASSOCIATION OR OTHER UNINCORPORATED ENTITY IN WHICH ITS “ALLOWABLE PROFIT RATE” IS LIMITED TO THE “TOTAL PROJECT COST” MULTIPLIED BY 12% (OR 1 ¼% OVER THE ENTITY’S INITIAL PERMANENT FINANCING, WHICHEVER IS GREATER). N.J.S.A. 40A:20-3(B). IF, IN ANY YEAR, THE “NET PROFIT” OF THE URBAN RENEWAL ENTITY EXCEEDS ITS ALLOWABLE NET PROFIT, THEN THE URBAN RENEWAL ENTITY MUST PAY SUCH EXCESS PROFITS TO THE MUNICIPALITY.

LONG TERM TAX EXEMPTION LAW LTTE APPLICATION - N.J.S.A. 40A:20-8 A GENERAL STATEMENT OF THE NATURE OF THE PROPOSED PROJECT, THAT THE UNDERTAKING CONFORMS TO ALL APPLICABLE MUNICIPAL ORDINANCES, AND THAT THE PROJECT ACCORDS WITH THE REDEVELOPMENT PLAN AND MASTER PLAN OF THE MUNICIPALITY, OR, IN THE CASE OF A REDEVELOPMENT RELOCATION HOUSING PROJECT, PROVIDES FOR THE RELOCATION OF RESIDENTS DISPLACED OR TO BE DISPLACED FROM A REDEVELOPMENT AREAR, OR, IN THE CASE OF A LOW AND MODERATE INCOME HOUSING PROJECT, THE HOUSING UNITS ARE RESTRICTED TO OCCUPATION BY LOW AND MODERATE INCOME HOUSEHOLDS. A DESCRIPTION OF THE PROPOSED PROJECT OUTLINING THE AREA INCLUDED AND A DESCRIPTION OF EACH UNIT THEREOF IF THE PROJECT IS TO BE UNDERTAKEN IN UNITS AND SETTING FORTH ARCHITECTURAL AND SITE PLANS AS REQUIRED. A STATEMENT PREPARED BY A QUALIFIED ARCHITECT OR ENGINEER OF THE ESTIMATED COST OF THE PROPOSED PROJECT IN THE DETAIL REQUIRED, INCLUDING THE ESTIMATED COST OF EACH UNIT TO BE UNDERTAKEN. THE SOURCE, METHOD AND AMOUNT OF MONEY TO BE SUBSCRIBED THROUGH THE INVESTMENT OF PRIVATE CAPITAL, SETTING FORTH THE AMOUNT OF STOCK OR OTHER SECURITIES TO BE ISSUED THEREFOR OR THE EXTENT OF CAPITAL INVESTED AND THE PROPRIETARY OR OWNERSHIP INTEREST OBTAINED IN CONSIDERATION THEREFOR. A FISCAL PLAN FOR THE PROJECT OUTLINING A SCHEDULE OF ANNUAL GROSS REVENUE, THE ESTIMATED EXPENDITURES FOR OPERATION AND MAINTENNACE, PAYMENTS FOR INTEREST, AMORTIZATION OF DEBT AND RESERVES, AND PAYMENTS TO THE MUNICIPALITY TO BE MADE PURSUANT TO A FINANCIAL AGREEMENT TO BE ENTERED INTO WITH THE MUNICIPALITY. A PROPOSED FINANCIAL AGREEMENT. THE APPLICATION SHALL BE ADDRESSED AND SUBMITTED TO THE MAYOR OR OTHER CHIEF EXECUTIVE OFFICER OF THE MUNICIPALITY.

LONG TERM TAX EXEMPTION LAW FINANCIAL AGREEMENT MUST INCLUDE THE FOLLOWING: FULL PERFORMANCE WITHIN 30 YEARS FROM THE DATE OF COMPLETION OF THE PROJECT. THAT THE PROFITS OF OR DIVIDENDS PAYABLE BY THE URBAN RENEWAL ENTITY SHALL BE LIMITED ACCORDING TO TERMS APPROPRIATE FOR THE TYPE OF ENTITY IN CONFORMANCE WITH THE PROVISIONS OF THE LTTE. THAT ALL IMPROVEMENTS IN THE PROJECT TO BE CONSTRUCTED OR ACQUIRED BY THE URBAN RENEWAL ENTITY SHALL BE EXEMPT FROM TAXATION AS PROVIDED IN THE LTTE. THAT THE URBAN RENEWAL ENTITY SHALL MAKE PAYMENTS FOR MUNICIPAL SERVICES AS PROVIDED IN THE LTTE. THAT THE URBAN RENEWAL ENTITY SHALL SUBMIT ANNUALLY, WITHIN 90 DAYS AFTER THE CLOSE OF ITS FISCAL YEAR, ITS AUDITOR’S REPORTS TO THE MAYOR AND GOVERNING BODY OF THE MUNICIPALITY AN D TO THE DIRECTOR OF LOCAL GOVERNMENT SERVICES IN THE DEPARTMENT OF COMMUNITY AFFAIRS. THAT THE URBAN RENEWAL ENTITY SHALL, UPON REQUEST, PERMIT INSPECTION OF PROPERTY, EQUIPMENT, BUILDINGS AND OTHER FACILITIES OF THE ENEITY, AND ALSO PERMIT EXAMINATION AND AUDIT OF ITS BOOKS, CONTRACTS, RECORDS, DOCUMENTS AND PAPERS BY AUTHORIZED REPRESENTATIVES OF THE MUNICIPALITY OR THE STATE. THAT IN THE EVENT OF ANY DISPUTE BETWEEN THE PARTIES MATTERS IN CONTROVERSY SHALL BE RESOLVED BY ARBITRATION IN THE MANNER PROVIDED IN THE FINANCIAL AGREEMENT. THAT OPERATION UNDER THE FINANCIAL AGREEMENT SHALL BE TERMINABLE BY THE URBAN RENEWAL ENEITY IN THE MANNER PROVIDED BY THE LTTE. THAT THE URBAN RENEWAL ENTITY SHALL AT ALL TIMES PRIOR TO THE EXPIRATION OR OTHER TERMINATION OF THE FINANCIAL AGREEMENT REMAIN BOUND BY THE PROVISIONS OF THE LTTE.

LONG TERM TAX EXEMPTION LAW ANNUAL SERVICE CHARGE IN LIEU OF ANY TAXES TO BE PAID ON THE IMPROVEMENTS OF THE PROJECT, PAYMENTS AREMADE TO THE MUNICIPALITY OF AN ANNUAL SERVICE CHARGEDETERMINED AS FOLLOWS: ANNUAL GROSS REVENUE; LOW AND MODERATE INCOME HOUSING: NOT MORE THAN 15% NOT LESS THAN 10% IN THE CSE OF ALL OTHER PROJECTS. OR PERCENTAGE OF PROJECT COSTS LOW AND MODERATE INCOME HOUSING: NOT MORE THAN 2% 2% IN THE CASE OF ALL OTHER PROJECTS ALL SUBJECT TO % OF AD VALOREM OVER 5 STAGES LAND TAX CREDIT

REDEVELOPMENT AREA BONDS Issued pursuant to the Redevelopment Area Bond Financing Law, N.J.S.A. 40A:12A-64 et seq. Provides mechanism to finance certain costs of redevelopment Provides potential gap funding when equity and conventional debt may not suffice RABs are secured by payments in lieu of real estate taxes (PILOTs) and/or special assessments Allows for the pledge of PILOTs and/or special assessments from redeveloper as repayment of the RABs Bonds are non-recourse, unless the municipality guarantees

REDEVELOPMENT AREA BONDS Municipality and redeveloper, enter into a Financial Agreement (LTTE) Municipality is able to negotiate PILOT payments outside formulas established by the LTTE Payments are made over time coinciding with debt service payments

SPECIAL ASSESSMENTS Municipality, by ordinance, may provide for a special assessment against the affected property When provided in conjunction with a PILOT, backs up the PILOT Special assessment may be specific amount, not to exceed the cost of the improvements, which shall be considered to be the “actual benefit conferred” upon the property Payments can be made in quarterly, semi-annually or yearly installments for term of bond or period of 30 years, whichever is less Constitutes municipal lien

ISSUANCE OF REDEVELOPMENT AREA BONDS Municipality issues bonds pursuant to RAB Law or the LRHL; or may apply to NJEDA, NJRA or other authority with power to incur debt and issue bonds Once assigned for benefit of bondholders, PILOTs and/or special assessments are not included in a municipality’s general funds RABs are non-recourse obligations, unless municipality determines by ordinance to pledge additional security in from of municipal credit. Bonds not necessarily tax-exempt – must meet specific source of tax exemption under the Internal Revenue Code, depends on improvements and deduction to municipality