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Government Policy Makers, CRE Leaders Discuss State’s Critical Economic, Infrastructure Issues

NEW BRUNSWICK, N.J., July 16, 2020 – During NAIOP New Jersey’s recent annual Public Policy Symposium, government policy makers and commercial real estate leaders discussed steps that are being taken at both the state and federal levels to ensure New Jersey’s sustainable recovery from the COVID-19 pandemic.

In his keynote remarks, Congressman Frank Pallone (D-6), chairman of the House Energy and Commerce Committee, said he is optimistic that the White House and Republican and Democratic congressional leaders will negotiate another federal economic stimulus package once Congress is back in session at the end of the month.

“Unfortunately, in my opinion, we’re one of the only countries where the virus has been politicized, which makes it a difficult environment. It’s not just about the virus, it’s the economy. We need to create jobs long-term and have a revitalized infrastructure initiative.”

Acknowledging the ongoing impact of the virus, Pallone said the House passed the HEROES Act. “Essentially it proposed another round of everything, including checks for individuals, support for businesses, extending federal unemployment benefits until the end of year and providing more money for testing. The Senate flatly rejected the proposal about a month ago.”

House Democrats also have proposed the Moving Forward Act, a $1.5 trillion plan to rebuild not only highways, bridges and mass transit, but also to invest in education, housing, hospitals and internet access, all while moving towards a 100% clean energy economy. “About half of the funds are for roads and transit, and it would provide money for the Gateway program and other projects in the New York metropolitan area,” said Pallone.

Legislative Leaders Address Short- and Long-Term Priorities

Senate President Steve Sweeney and Assembly Speaker Craig Coughlin spoke about the  Legislature’s immediate priorities and responded to questions posed by NAIOP NJ CEO Michael McGuinness and Gus Milano, president and COO of Hartz Mountain Industries, Inc., which zeroed in on critical issues impacting the CRE industry.

“Our biggest focus is to try to get hold of the budget and make sure we don’t make decisions we’ll regret in the future,” said Sweeney. “We will need to borrow funds because the federal government isn’t stepping up and doing what it should, but we can expect there will be shortfalls.”

Asked if fiscal controls would continue to be a focus in Trenton, Sweeney said, “The more we can reduce costs, the more affordable it is to live and work here. We were actually on the cusp of getting some things done, such as school districts pulling together plans to consolidate. As we come out of COVID, I think we’ll see more consolidations and efforts to do more shared services. We can’t tax our way out of this one.”

Sweeney and Coughlin agreed that business incentives and cost-free measures, such as relaxing certain rules and regulations, are all on the table. “While economic incentives have been on the back burner – and rightly so – the truth is they are an important part of moving forward,” said Coughlin. “We have probably been set back two years by virtue of not having a plan in place, and we should make it a goal to have that happen sooner rather than later.”

He added, “The Senator, myself and the governor have been working on an economic incentive bill for quite a while. We recognize we need to get through this year and be poised for when the recovery comes, but it’s a challenge. At a time when we have the greatest need, we have the fewest resources available.”

Both leaders indicated their support for legislation to codify third-party inspections, which helped keep development projects moving during the height of the pandemic. Sweeney said, “I support it one thousand percent. The private sector can do a lot better than the government sector in a whole host of areas.” Coughlin agreed, adding, “I think the LSRP program has been hugely successful, and this is the kind of business-friendly, no-cost initiative I suspect I’ll be able to support going forward.”

While they also support the continued use of PILOTs as incentives to transform municipalities, Coughlin said, “I’ve seen the positive effects, but also the need to constantly ensure that the scope is in the best economic interests of the community.” Sweeney added, “I support PILOTS, but I don’t support towns that starve underfunded school districts.”

Sweeney and Coughlin were also on the same page regarding the hot-button issue of liquor license reform. “I recognize that licenses are necessary for urban redevelopment, but we need to solve the conundrum of compensating current liquor license holders,” Coughlin said.

Recovery Initiatives, Incentives and Finalizing a State Budget for FY 2021

The program concluded with insights from NAIOP Senior VP Government Affairs Aquiles Suarez and Anthony Pizzutillo, NAIOP NJ Public Affairs consultant. The discussion was led by Adam Pasternack, president of property management with Russo Development.

On the national level, Suarez said that while Congress has no appetite to force insurance companies to cover pandemic-related business interruption costs, he believes the issue of business liability will have to be addressed. “We think businesses that are following mandated guidelines should be protected, and are hoping this will be included in the Phase 4 package.”

Suarez also noted that the infrastructure bill “included a variety of things we’d like to see happen, including revisions to the tax on debt income provision and funding for Gateway. However, the project is a lot of money and it appears President Trump is not taking things seriously around infrastructure. We think it will be in the mix, but a lot will depend on the final number they want in this bill.”

On the state and local level, Pizzutillo said New Jersey can take advantage of efforts to streamline processes to get economic development underway. “Putting a new set of incentives in place is fiscally responsible and I believe it’s in the mix. There is also talk of codifying third-party inspections and I’m optimistic we’ll see something in place in the short term.”

Pizzutillo also discussed the challenges of finalizing the fiscal year 2021 budget in the midst of the rolling crises occurring at the state level. “Determining where and how to open businesses or whether to allow infected residents to enter the state are compelling and time-consuming issues. This is compounded by the fact that budgeting is extremely complicated.”

Noting that “New Jersey played it smart in lengthening its fiscal year 2020 by three months to assess where things stand,” he said he expects to see at least a 20% reduction in the new budget. “Medicare/Medicaid would be funded first, then schools, then municipal aid. There will be increased pressures on property taxes, compounded by a tsunami of tax appeals.”

Pizzutillo added, “If there is any silver lining to this crisis, it’s that government will have no choice but to consolidate services and cut non-essential spending. We can’t afford to continue to pay for layer upon layer of government.”

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Photo caption: Craig Coughlin, Assembly Speaker; Stephen Sweeney, Senate President and Hon. Frank Pallone, 6th Congressional District

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