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Economic Recovery, Infrastructure and Clean Energy Among Critical Issues Explored during NAIOP NJ’s Public Policy Symposium
NEW BRUNSWICK, N.J., March 25, 2021 — The November elections brought big changes to Washington, and potentially much greater political clout for New Jersey and the region. During its recent Public Policy Symposium, NAIOP New Jersey invited national and state leaders, including Governor Phil Murphy and U.S. Senator Bob Menendez (D-N.J.), to discuss what these changes mean for the state and the commercial real estate industry.
In New Jersey, a Focus on Reopening the Economy, Long-Term Investment
In his keynote remarks, Gov. Murphy spoke about the impact of COVID-19 restrictions on the state’s economy and his administration’s strategy for reopening. “With three highly effective vaccines in our toolkit, we are pushing back against COVID-19 as never before. Each day, we take another step forward to when our economy can be fully reopened.”
In terms of the state budget, Murphy said, “We are leaning into the long-term investments that will pay dividends into our economy for years and years to come: education, healthcare, childcare, workforce development, hundreds of millions of dollars in support of our Main Street businesses. That last one will dovetail with our new economic incentives program to make it even more powerful.”
Noting that he is especially proud of the way the new incentives program will revolutionize how places for work and community are created, Murphy said the importance of the federal American Rescue Plan Act to the state’s economic recovery could not be overstated. “The billions of dollars flowing into New Jersey – whether it be direct assistance to our families and businesses or the supports for state and local governments, is exactly the stimulus we need to charge forward with purpose. And the potential for the full Gateway project to get underway will be wholly transformative for our economy.”
NAIOP NJ CEO Mike McGuinness led the discussion with Deputy Chief of Staff for Economic Growth, Joe Kelley, who addressed how the Economic Recovery Act could help the state take advantage of the immediate opportunity, given the decentralized work environment, to attract businesses looking for satellite offices in suburban corridors. “The fact that the bill does a lot for Main Street means it does a lot for repositioning assets and new construction, and that’s what companies want to see. If JP Morgan is going to pull employees out of Manhattan, they aren’t just going to Jersey City. They want to see that a downtown is thriving or new construction is possible. Whether they go into new or old assets, we want to make sure the incentives are there.”
Asked about the administration’s support for pending legislation seeking to codify an alternative private sector site inspection program for construction and real estate development projects, Kelley said, “We agree with the spirit of the bill. The governor is looking to streamline the arcane regulatory and permitting processing we have, and there is money in this budget for permitting improvements. The good news is, bill aside, this is already happening. The question becomes how we do it in an equitable way.”
Federal Legislative Priorities Include COVID-19 Relief, Infrastructure
U.S. Senator Robert Menendez (D-NJ), a staunch advocate in Washington for the commercial real estate industry, reinforced the importance of ramping up vaccination efforts as a critical first step towards getting the economy back on track. “By providing $20 billion to get every eligible adult vaccinated by May 1, the American Rescue Plan puts us on a path to end the pandemic and begin to turn our economy around.”
He also emphasized the legislation’s importance to the recovery of the commercial real estate industry. “Commercial real estate was among the industries hardest hit by the pandemic, and it stands to gain from the emergency assistance provided to renters and landlords, as well as billions of dollars in additional help for small businesses. We also invested more in the EIDL (Economic Injury Disaster Loan) grants, which will help minority-owned businesses in communities disproportionately impacted by the crisis.”
Noting that infrastructure is the Biden administration’s next legislative priority, Menendez said, “Infrastructure can spur new opportunities for businesses and investment. I think we need less catchy slogans like Infrastructure Week – what we really need is action.”
Menendez hopes a new highway bill will be passed by the end of May, and said he is “focused like a laser beam” on advancing the Gateway project. “A shutdown of either tunnel would be a transportation Armageddon. I’m hopeful that Republicans and Democrats will work together alongside President Biden to make some bold new investments in our nation’s shamefully outdated infrastructure.” He added, “We prefer to get a bipartisan bill, but if we can’t, we will get this done, one way or another.”
Offshore Wind, Community Solar Among NJ’s Clean Energy Initiatives
From the Murphy administration’s aggressive pursuit of offshore wind to its community solar program, New Jersey is leading the charge in clean energy. “Clean energy is good for the environment and the economy,” said Joseph Fiordaliso, president of the NJ Board of Public Utilities. “By investing now, we can create thousands of jobs and infuse our economy to recover from the devastation caused by the pandemic.”
The state’s 130-mile coastline supports development of offshore wind, and New Jersey is the first state to take a collaborative, regional approach to the offshore wind transmission process. “We’re working on innovative ways to bring this energy to shore. The planned Wind Port in Salem County will generate $500 million in economic activity, and will establish New Jersey as the east coast hub of the country’s offshore wind energy industry.”
Electric vehicles and community solar are also key initiatives that will require increased public awareness of the benefits of clean energy as well as the need to create supportive infrastructure. “To achieve our goal of 100% clean energy by 2050, every segment of the population has to be involved. New Jersey is the number one state for installed solar per square mile, but this opens it up so everyone who wants to participate can do so.”
Impact of State and Federal Priorities on Commercial Real Estate
Michael Seeve, president of Mountain Development Corp. and NAIOP NJ Public Affairs Chair, was joined by Aquiles Suarez, NAIOP Sr. Vice President for Government Affairs, and NAIOP NJ Public Affairs Consultant Anthony Pizzutillo, for a discussion focused on how some of these federal and state priorities – from clean energy and infrastructure improvements to tax changes – could impact commercial real estate.
On the question of a proposed phase-out of the 1031 tax-deferred exchange that allows real estate property owners to trade one asset for another without paying federal or state tax on the sale, Suarez said, “During his campaign, President Biden unveiled a child care initiative and said he’d pay for it in part by closing loopholes for real estate developers. He didn’t say the word 1031, but that’s what he was talking about.”
Noting that phasing out 1031s would be extremely damaging for commercial real estate, Suarez said NAIOP has been fighting this issue for years and has had to prove that it is not just a way to avoid paying taxes. “A 1031 is generally followed by appreciation in value of a property and subsequently taxes paid at a higher level. We have had to show it is an important part of commercial marketing, and we’re going to do the same thing again.”
Regarding energy conservation from the perspective of building owners and managers, Pizzutillo addressed the mood in the state regarding any legislative undertaking that would mandate updates for energy efficiency in buildings. “If it can be done correctly so that it’s not a mandate that adds an additional cost to redeveloping and developing commercial real estate, then it can be extremely successful. There are different ways of doing this, such as creating an incentive for companies to provide those kinds of upgrades to buildings with the state participating in a tax credit program.”
Pizzutillo was optimistic about the chances of passing new legislation allowing for third party review to expedite construction inspections. “We were able to create a new program that is sailing through the legislature, and we hope that the administration sees it as an equitable way of proceeding and that it provides options for the developer. We find it to be a priority and it is our intent to see this on the governor’s desk before budget break.”
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