Complete Redesign of Pennsylvania's Redevelopment Assistance Capital Program

The Pennsylvania Governor's Budget Office announced yesterday that the Redevelopment Assistance Capital Program (RACP) will be completely redesigned. 

According to the Governor's Budget Office, the goals of the redesign are to:

  • To define the application process with published guidelines and procedures.
  • To implement merit-based evaluation and selection.
  • To promote transparency.
  • To maintain rigorous monitoring, measurement and reporting.

Semi-annual funding rounds will be held for the program and funding is approximated at $125 million each year, with funding awards made in April and October of each year.  Projects that are not "shovel-ready" within 365 days will be deferred to a later round.  Business plans for the first funding round of the new program must be submitted by June 29, 2012. 

Project selection will be through a scoring matrix based upon the following criteria:

  • jobs created or retained;
  • community impact;
  • strategic cluster for development;
  • financial impact / long-term sustainability; and
  • construction shovel readiness.

Further information on the redesign can be found on the Governor's Office of the Budget website, including copies of the new Application Handbook.

HUD Section 108 Loan Guarantee Program

Putting together funding sources for a redevelopment project can often be a daunting task.  One potentially  valuable funding source which is the Section 108 loan guarantee program.

Section 108 is the loan guarantee provision of the Community Development Block Grant (CDBG) programSee 24 C.F.R. §§ 570.1 et seq. Section 108 provides communities with a source of financing for economic development, housing rehabilitation, public facilities, and large-scale physical development projects. It is a public investment tool offered by the U.S. Department of Housing and Urban Development (HUD) to local governments, which allows the local governments to transform a portion of their CDBG funds into federally guaranteed loans. However, local governments borrowing funds guaranteed by Section 108 must pledge their current and future CDBG allocations to cover the loan amount as security for the loan. Additional security, which is determined on a case-by-case basis, will also be required to assure repayment of guaranteed obligations.

Activities eligible for Section 108 financing include:

  • Economic development activities eligible under CDBG;
  • Acquisition of real property;
  • Rehabilitation of publicly owned property;
  • Housing rehabilitation eligible under CDBG;
  • Construction, reconstruction, or installation of public facilities (including street, sidewalk, and other site improvements);
  • Related relocation, clearance, and site improvements;
  • Payment of interest on the guaranteed loan and issuance costs of public offerings; and
  • Debt service reserves.

All projects and activities must either principally benefit low and moderate income persons, aid in the elimination and prevention of slums and blight, or meet urgent needs of the community. 

Section 108 offerings are financed through underwritten public offerings.  Financing between public offerings is provided through an interim lending facility established by HUD. Interest rates on interim borrowing are priced at the 3 month LIBO rate plus 20 basis points (0.2%). Permanent financing is pegged to yields on U.S. Treasury obligations of similar maturity to the principal amount. A small additional basis point spread, depending on maturity, will be added to the Treasury yield to determine the actual rate. 

For an example of Section 108 funds at work, see my post on February 7, 2012

Updates on NJ Tax Credit Legislation

In the past we have written and presented on various tax credit programs. One of the most successful has been the program created pursuant to the Urban Transit Hub Tax Credit Act, signed into law as N.J.S.A. 34:1B-207 et seq. Its success has led to the subsequent passage of the Grow New Jersey Assistance Act earlier this year. That Act has been codified under N.J.S.A. 34:1B-242 et seq. Their success has significantly reduced the availability of credits which, arguably, deprives worthy projects of much needed capital.

To remedy this shortage, lawmakers have introduced A2442 and S1562 in the current legislative session. These bills propose to expand the allowable tax credits under the Urban Transit Hub Tax Credit Program from $1.5 Billion to $2.5 Billion and also to expand the allowable tax credits under the Grow New Jersey Assistance Program from $200 Million to $400 Million. 

Despite the success of the Urban Transit Hub Tax Credit program, the extent of the legislation’s fiscal impact is unclear and that may be a deterrent to passage. The Office of Legislative Services (OLS) has calculated a potential loss of revenue to the state equaling $1,000,000,000 through fiscal year 2027 on both that program’s and Grow New Jersey tax credits. There is also the potential for lost opportunity costs as the State’s funding is directed from one economic activity to another. These losses are potentially offset by the realization of capital projects in eligible areas which will benefit both the State and local governments.

Notwithstanding the uncertainty of projected fiscal impacts, the senate bill (S1562) extending the amount of allowable tax credits has been reported favorably by two committees—the Senate Economic Growth Committee and more recently the Senate Budget and Appropriations Committee. A2442 has been referred to the Assembly Commerce and Economic Development Committee. For further information regarding the Grow New Jersey Assistance Act, please refer “New Jersey’s Latest Tool for Economic Growth”, Real Estate Department Alert (January 2012). Please contact us for information on our webinar on the Urban Transit Hub Tax Credit program presented in December 2011.

In the February 2012 issue of “In The Zone”, we reported on pending legislation, A1450 and S141, commonly referred to as the Historic Property Reinvestment Act. This Act seeks to establish a New Jersey historic tax credit which can potentially be twinned with the Federal Historic Tax Credit administered by the National Parks Service. The State proposal targets both homeowners and businesses. While it caps a homeowner’s historic tax credit at $25,000, there is no cap for businesses. Further, the incentives differ, providing more flexibility with the tax credit program for businesses. Last year, nearly identical legislation, A1851, made its way through both legislative houses only to be vetoed by Governor Christie.

These bills are moving at a disappointing pace since their introduction earlier this year. As of this writing, only one legislative committee, the Senate State Government, Wagering, Tourism & Historic Preservation Committee, has conducted hearings on S141 and filed a favorable report with amendments to that legislation. The amendments are technical in nature and do not substantially change the bill as S141 was pre-filed for introduction in the 2012-2013 session pending technical review. In March, the committee performed its review and amended S141 to extend the deadlines by one fiscal year.

For further information, please refer to our article entitled The New Jersey Historic Tax Credit – Is Now The Right Time? published in the February 2012 edition of In The Zone or contact Jeffrey N. Hall or Daniel V. Madrid.

New Lehigh Valley Office for Governor's Action Team

The Pennsylvania Department of Community and Economic Development announced last week the opening of a new office for the Governor's Action Team (GAT) in the Lehigh Valley.  The office will serve Berks, Lehigh, Monroe and Northampton counties.  A map of all of the GAT regions and a list of the regional directors can be found here

In a recent article,  Department of Community and Economic Development Secretary C. Alan Walker was quoted as saying the following with regard to the new office:

  • "This new office will give us the ability to respond more effectively to the job-creating opportunities presented by an increased level of business expansion and attraction activity in the region" 
  •  "We look forward to working with our local economic development partners and elected officials in the region to continue bringing economic investment and new jobs to Pennsylvania."

The Governor's Action Team is a group of economic development professionals who work with businesses that are looking to expand, locate or relocate in Pennsylvania, with a special emphasis on job creation in Pennsylvania. 

Team PA Foundation's website provides one example of how Team PA Foundation and GAT assisted a Spanish wind energy company that was looking to expand its operations in the United States and expressed an interest in coming to Pennsylvania.

 

Are you looking to expand or locate your business in Pennsylvania?  GAT may be able to provide you with assistance in site selection as well as provide forms of funding opportunities related to job creation. 

HUD Approves Loan Guarantee to City for Redevelopment Project

In a recent press release, the U.S. Department of Housing and Urban Development (HUD) announced its approval of an $8.8 million Section 108 loan guarantee to the City of Durham for the Southside/Rolling Hills Neighborhood Redevelopment Project, which is located within a HUD-approved Neighborhood Revitalization Strategy Area.  The City Council approved funding for the project back in September 2011.  The project will consist of three phases of rental development and three phases of home ownership development.

HUD's Section 108 Loan Guarantee Program is part of the Community Development Block Grant (CDBG) program.  The Section 108 loan guarantee program provides communities with a source of financing for economic development, housing rehabilitation, public facilities, and large-scale physical development projects.  It can be a useful tool in attracting private developers to distressed areas.  Under this program, there is risk to the local government, as it must pledge its current and future CDBG allocations as security for the loan. 

Do you have an economic development project worthy of pitching to a local government for funding under the Section 108 loan guarantee program?  

Notice of Funding Availability - Rural Energy for America Program

This image is credited to dan on freedigitalphotos.net.

The United States Department of Agriculture recently issued a Notice of Funding Availability for the acceptance of applications under the Rural Energy for America Program (REAP) for fiscal year 2012.  The program will make available $12.5 million in grant funds and $48.5 million in guaranteed loan funds in order to provide financial assistance as follows:

  • grants, guaranteed loans and combined grants and guaranteed loans for the development and construction of renewable energy systems and for energy efficiency improvement projects;
  • grants for conducting energy audits;
  • grants for conducting renewable energy development assistance; and
  • grants for conducting renewable energy system feasibility studies.

Depending on the project, applications are due as early as February 21, 2012.  Are you an agricultural producer or rural small business that is eligible for financing under this program?

Now That You Can Find Brownfields - Where Can You Find the Funding to Remediate and Develop?

Team Pennsylvania Foundation and the Department of Environmental Protection recently announced a collaboration to create a searchable inventory of Brownfields properties across Pennsylvania.  There are currently 133 properties listed on the site.

Brownfield Site awaiting development in Dragon Lane                     

© Copyright Roger Smith and licensed for reuse under this Creative Commons Licence.

Obviously, the goal here is to redevelop these abandoned sites.  But with what money in this economy?  DEP's website contains a list of support and funding programs.  For example, the Department of Community and Economic Development offers the Industrial Site Reuse Program provides environmental site assessment and remediation funding in the form of low interest loans to private developers and businesses.  DEP also offers a Brownfield Assessment/Remediation Grant, which, not surprisingly, is dependent upon available funding. 

There are sources of funding out there.  It may not be easy to find, but you won't know if it is available until you ask. 

Federal Rehabilitation Investment Tax Credits (RITCs)

Under the RITC program, certain expenses incurred in connection with rehabilitating an old building, which is income-producing, are eligible for a tax credit.  There are two rates - 20% for a historic building and 10% for a non-historic building, with different qualifying criteria for each rate.

 

 

 

 

 

 

 

 

This photo belongs to dok1's photostream and is licensed for reuse under this Creative Commons License.

Twenty Percent (20%) Tax Credit:  

  • Building must be listed on the National Register or be a contributing building to a Certified Local District (a locally designated historic district that has been certified by the National Park Service).
  • Building must be used for income producing purposes.
  • Rehabilitation work must be in accordance with the Secretary of the Interior's Standards for Rehabilitation.
  • Project must meet “substantial rehabilitation test” –amount spent on rehabilitation must exceed the adjusted basis of the building or $5,000, whichever is greater.  
  • Post-rehabilitation building to be owned by same owner and operated as income-producing property for 5 years.

Ten Percent (10%) Tax Credit:

  • Building must be built before 1936 and be non-historic.
  • Building cannot be used for rental residential purposes.
  • Building must meet Wall Retention Requirement:  (i)50% or more of the building’s external walls remaining as exterior walls; (ii) 75% or more of the building’s external walls retained as exterior or interior walls; and (iii) 75% or more of the building’s internal structural framework remaining in place.
  • Project must meet “substantial rehabilitation test” - amount spent on rehabilitation is greater than adjusted basis of the building and is at least $5,000.
  • Post-rehabilitation building to be owned by same owner and operated as income-producing property for 5 years.

The Pennsylvania Historical and Museum Commission serves as the State Historic Preservation Office and administers the RITC program in partnership with the National Park Service and the Internal Revenue Service. 

Is your rehabilitation project eligible for RITCs? 

 

 

 

 

 

 

Enterprise Zone Tax Credit Program

 

Company Tax ID

This photo belongs to IRS EIN's photostream and is licensed for reuse under this Creative Commons License.

Did you know that you may be eligible to apply for tax credits under the Enterprise Zone Tax Credit Program administered by the Pennsylvania Department of Community and Economic Development?  Tax credits are available to private companies which make qualified investments to rehabilitate, expand and/or improve buildings or land which promote community economic development and which occur in areas designated as a state Enterprise Zone.  Per DCED's guidelines for the Enterprise Zone Tax Credit program, tax credits are authorized in the amount of 25% of funds invested, up to a maximum of $500,000.

The deadline for submitting an application is August 15, 2011.  Do you intend to rehabilitate, expand or improve a building or land located in a designated Enterprise Zone?  Will the rehabilitation or improvement create or retain jobs?  If so, now is the time to find out whether your project is eligible for these tax credits.

BEDI Grant Funding Available!

Hockwold Fens

© Copyright Bob Jones and licensed for reuse under this Creative Commons Licence

The U.S. Department of Housing and Urban Development (HUD) just announced a round of funding for its Brownfields Economic Development Initiative (BEDI) program.  These grant funds, however, must be used in conjunction with a new HUD Section 108 guaranteed loan commitment. 

BEDI grants are meant to encourage brownfields economic development projects that will result in new business or job creation, increase the local tax base or create other economic benefits.  For more information on brownfields and the grant requirements for the BEDI program, see HUD's Notice of Funding Availability

If you think your brownfields redevelopment project might be eligible, hurry, because the deadline for submission of a BEDI grant application is July 14, 2011.