Jones Lang LaSalle

Urban Enterprise Zones: Pulling Resources To Communities

By George N. Saliba, Deputy Editor

Asbury Park's façade improvement program can provide certified businesses with up to $10,000 in matching grants for façade improvements such as windows, doors and signage.
As the City of Asbury Park continues to undergo a well-known revitalization from its past tough times, its Urban Enterprise Zone (UEZ) has become a "significant tool" for its progress, according to its Director of Commerce Tom Gilmour. Asbury Park's UEZ ultimately provides targeted funding for the city as it improves and creates jobs; approximately 600 jobs have been generated via the UEZ since 1994.

What are Urban Enterprise Zones? In 1983, state-level legislation created the UEZ program, which aimed to assist New Jersey cities with chronic unemployment, low capital investment, commercial blight and deteriorating tax bases. By 1984, physical geographic zones within 10 cities were established and by 1985, the UEZ program was operational. Today, 32 UEZs exist within 37 Garden State municipalities. The Asbury Park/Long Branch zone, for one, was approved in 1994 along with nine other zones.

In all UEZs, qualified zone retailers are permitted to charge just three percent sales tax on in-person purchases, which is half of the state's normal tax rate. Among several other benefits: businesses that buy certain materials and tangible personal property pay reduced sales tax on those purchases; they can receive a one-time tax credit for each new permanent full-time employee who is hired; and they may be eligible for priority financial assistance.

Also, instead of the state holding onto the three percent sales tax, all or some of the money (depending on how long the UEZ has existed) is ultimately funneled back to city's approved programs. For instance, Asbury Park has a foot patrol program that polices the downtown business district. According to the city's Web site, the "project has been instrumental in providing safety, lowering the crime rate and assisting with code enforcement issues."

Among a host of other initiatives, an Asbury Park façade improvement program can provide certified businesses with up to $10,000 in matching grants for façade improvements such as windows, doors and signage.

Relates Gilmour, "When I got down here, the first thing I did was sign up as many businesses as I could [for the UEZ program]. We went from 34 businesses in 2002 to 178 businesses in 2005. It's a numbers game. The more people you have participating in the program, then obviously the more sales tax you collect and the more money you have to utilize for different programs."

Addressing the state's zones in the aggregate, the New Jersey Commerce, Economic Growth & Tourism Commission says there are 8,000 firms in the zones, actively employing more than 157,000 full-time workers.

"I think the state recognized that these areas needed some tender care," says Commerce Secretary/CEO Virginia S. Bauer. "By providing specific sales tax exemptions and benefits, it has enticed businesses that might think of going somewhere else to come to these areas."

She adds, "[Municipalities] are able to take the funds and build their communities as they see fit. So you see a lot of redevelopment projects. Then that trickles. It's a snowball effect because that money is reinvested and you have more construction and jobs. It is pulling the resources back to the community where they are needed the most."

The Millville/Vineland UEZ was among the state's 10 initial UEZs. Vineland Economic Development Director James H. Lelli, Jr. recalls that the local unemployment rate at that time was more than 14 percent. Now, that figure remains close to the state's overall unemployment rate. Lelli believes that UEZ benefits have helped the region, as has the fact that the northern part of the state is "getting very full and very expensive" and the Vineland infrastructure is less expensive and houses a quality workforce.

"Both Millville and Vineland have leveraged their UEZ money and it's done wonders for both cities," says Sandra E. Zapolski, administrator of the Millville/Vineland UEZ.

Each year, more businesses join the UEZ, with Vineland and Millville having a combined total of 926 participating firms - the largest UEZ figure in the state. Lelli adds that as Vineland and Millville's demographics changed over the years, retailers moved to the area and selected the UEZ zone because it provided them with a competitive advantage, via the aforementioned reduced sales tax.

Nonetheless, some businesses do not participate in the Millville/Vineland UEZ and Zapolski says that besides very small businesses not having the ability to file their taxes on a required monthly basis, she doesn't have a good reason for this phenomenon.

"You know the old story," Lelli adds. "You can lead a horse to water, but you can't make it drink."

Meanwhile, Lelli also talks about the success of other UEZs: "Newark is going great guns and Paterson and Camden are also starting to make a real comeback. Whoever believed in the program as a way to use sales tax receipts to stimulate business and then use the proceeds to invest in new industry and jobs, just didn't realize how great it was going to be."

Newark is in fact going "great guns," as the largest private-sector economy of any municipality in the state. It has 109,000 private-sector jobs and 42,000 public sector jobs. The businesses in its UEZ are spread among a variety of sectors, including, for example, those related to airline and shipping, and others in finance, law and retail.

"To sum it up, the Newark UEZ is a catalyst for attracting investment and shoppers to the city," says Joel Freiser, director of the Office of the Newark Urban Enterprise Zone. "It is a very important and valuable resource for enabling Newark to continue its revitalization . . . It costs nothing to get into the program and you just have to add at least one new job at the end of each year."

Newark's zone comprises approximately 10 percent of the city and as of February 15, there were 830 participating businesses. Of course, resulting funds are being reinvested in the city to stimulate further economic private investment. Freiser estimates that more than $10 million is being invested in streetscaping in all the commercial retail districts. Also, the UEZ is funding a pre-development loan to the New Jersey Performing Arts Center (NJPAC), which is investigating the feasibility of a $90-million mixed-use project that would include 250 apartments and 30,000 square feet of retail space. In addition, a 700-car parking garage across from NJPAC is possible.

The city is also investing resources to form four new special improvement districts in the city, outside of the Ironbound and central business district, including one in the West Ward, one in the South Ward, one in the Central Ward, as well as one in the North Ward.

The city is also investing UEZ funds in the development of the Joseph G. Minish Passaic Riverfront Park. In fact, it just secured approval of $2.4 million to invest in the creation of the park, to match the money the federal government has invested thus far, which is approximately $15 million of ultimately a total of $70 million. Further, UEZ money has funded the completion of a $170,000 feasibility study for the creation of the Museum of African-American Music.

"A number of the investments we have made have been in detailed feasibility and planning studies, as well as physical investment infrastructure," Freiser explains.

He adds that Newark offers personal attention to industrial, commercial and retail developers, assisting them in identifying financial incentives to attract investment above and beyond those offered by the UEZ. Newark works closely with: the New Jersey Economic Development Authority and the New Jersey Redevelopment Authority; banks; as well as the city's human resource organizations seeking qualified employees. However, it can also assist with municipal incentives, as well as federal historic preservation tax credits and new markets tax credits.

"We offer a great number of economic development services, in addition to the core UEZ services," Freiser says. "We also help put together financing for industrial/commercial/retail transactions."

UEZ offices are helpful in other ways. Millville/Vineland's Zapolski quips, "Our office will help [businesses] fill-out all their [UEZ] applications. They don't even have to do that by themselves."

Businesses interested in moving to or participating in UEZ programs may want to visit http://www.state.nj.us/commerce/econ_uez_program.shtml. From there, they can contact the state Commerce Department for details, or reach out to individual zones and their coordinators.

Companies should keep in mind that while each zone is expected to sunset after 10 years of existence - once it has its feet on the ground, so to speak - no zones since the program's 1980s inception have been discontinued. Instead, they have been renewed; for example, the Millville/Vineland zone has been extended to 2018.

Says Commerce's Bauer, "I think quite honestly, the state has to be quite prudent in how we designate zones. It is very easy to say the whole state could be a zone, because you are trying to promote the whole state in terms of bringing in jobs and companies, but we really have to be careful because the state does sacrifice sales tax that it doesn't get from a UEZ."

Regardless of how much money the state gets to keep, Urban Enterprise Zones clearly represent an advantage for selected communities and the businesses that choose to participate