CARTERET — Mayor Daniel Reiman joined with Middlesex County Freeholder Director Chris Rafano to announce that the borough has received a coveted recovery zone designation from the Middlesex County Board of Chosen Freeholders, and will utilize the United States Internal Revenue Service allocation of $11 million in bond tax credits.
The funds will be in the form of low-interest loans for private sector economic development within the borough’s Urban Enterprise Zone and redevelopment areas. The loans will be made available to development entities for upgrades or construction of new commercial and industrial projects in the borough.
Following a competitive application process, development entities can receive low interest loans through the issuance of private development bonds under the IRS code. The funds must be applied towards “hard” costs associated with capital improvement projects in the borough’s commercial and industrial districts. Planning and other “soft” costs will not be covered by the program. The loan to value ration must be consistent with generally accepted commercial lending practices of 80/20 LTV.
Projects must be “acquisition or construction ready” upon the submission of project proposals. The federal bond tax credits allow for the loans to be issued as bonds for private development under the federal stimulus bill (ARRA) signed into law last year by President Barack Obama. Under the provisions of the American Recovery and Reinvestment Act the funds must be designated and issued by January 1, 2011, although congress is currently working on a bill to extend the issuance deadline to 2012.
Upon the issuance of the IRS tax credits, the Redevelopment Agency or other government entity will take a position as a lien holder on the commercial property, similar to how a private bank might issue a mortgage, guaranteeing its investments while reserving the right to set further parameters for its loans.
“This allocation targets business both large and small who will participate in the redevelopment process in Carteret,” Reiman commented. “The federal stimulus funds will enable well-established private business entities to further enhance their facilities, providing incentives for the establishment of new development along our commercial and industrial thoroughfare, while creating jobs for local residents. These are ‘gap’ financing loans that will allow the Carteret Redevelopment Agency or NJ EDA to fund a part of a project through low interest loans to the developer. These monies are specially designated for commercial and industrial projects and will not be used for residential development.”
“This is a great example of government dollars being put to direct tangible use where it is needed,” Rafano added. “This incentive will prime the pump for continuing economic development in Central New Jersey, paving the way for commercial growth, sustainability, and the establishment of new private sector employment.”
The amount of funding will be based on the Loan to Value Ratio of the property and project. Loans of $1-$4 million will be issued following accepted commercial lending policies.
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