UEZ signing

Revitalized UEZ Program Back to Full Operations After 10+ Years Without Funding

Acting Governor Sheila Oliver signed into law the Urban Enterprise Zone (UEZ) Reform Bill (A5580/S3600). The legislation restores and revises the UEZ Program and appropriates $42.5 million in Zone Assistance Funds (ZAF) for FY22, bringing the program back to full operation after having been without a funding source for more than 10 years.

“The UEZ Program helps support the local economy, particularly in our urban centers,” said Acting Governor Sheila Oliver, who also serves as Commissioner of the Department of Community Affairs (DCA) and will now be the Chair of the UEZ Authority. “I am excited to sign this legislation today restoring UEZ funding, especially as many of these cities and businesses located in the designated communities continue to recover from the pandemic. Starting today, the UEZ Program will be an essential part of the state’s economic recovery strategy.”

Created in 1983, the UEZ Program Authority, an affiliate agency of the Department of Community Affairs, was created to foster an economic climate that revitalizes designated urban communities and stimulates their growth by encouraging businesses to develop and create private-sector jobs through public and private investment. In a previous iteration of the program, UEZ provided a dedicated funding source for local economic development in the form of a reduced state sales tax. Those state sales tax funds were then deployed in UEZ communities to promote economic development. A dedicated funding source, which ended in 2011, is being restored under the law signed today.

Currently, there are 32 zones, which are spread across 37 municipalities and home to approximately 7,267 UEZ-certified businesses. The first five municipalities joined the program in 1986, with the most recent joining in 2002. The original UEZ designations granted to municipalities were set to expire after 20 years. 16-year extensions were granted in 2001. The Legislature and Gov. Phil Murphy recognized the value of the program, signing legislation restoring expired UEZ’s in five cities while also extending the program an additional five years. All UEZs are currently set to expire between 2023 and 2025.

In 2018, the New Jersey Legislature directed DCA to study the Urban Enterprise Zone program and submit recommendations as to whether the program should be continued as is, be amended, or expire. The outcome was the 2019 New Jersey Urban Enterprise Zone Program Assessment, an economic study, which forecasted the economic impact of the UEZ  program, determined whether it should be continued, and provided recommendations on how the program should be structured in the future.

The analysis of the qualitative and quantitative data compiled determined that the UEZ program is a valuable tool in New Jersey’s economic toolbox and should remain available to designated municipalities.

Highlights of the new legislation:

  • Creates a new process for developing a zone development plan, which would have a five-year life. Requirement for an updated preliminary zone development plan for municipalities with plans that are five years old or older.
  • When creating a zone development plan, each UEZ must consult with representatives of diverse statewide or regional business organizations that represent the interests of minority businesses.
  • Currently designated UEZs can retain UEZ designation for 10 years.
  • Business to business sales tax exemption capped at the first $100,000 of purchases.
  • 10-year limit on UEZ business certification. Businesses certified prior to effective date of the bill will lose certification at the end of the tenth state fiscal year following the effective date of the bill.
  • New Zone Assistance Fund (ZAF) allocation formula – 50% weight to MRI Distress Score, the average number of unemployed persons in each UEZ municipality, and the number of commercial and industrial parcels and 50% weight to gross taxable sales subject to reduced UEZ sales tax.
  • 25% cap on Zone Assistance Fund (ZAF) use for public safety expenses.
  • 10% cap on ZAF Fund use to cover administrative expenses.
  • Initial $42.5 million ZAF appropriation from the General Fund.
  • Total ZAF funding capped at $82.5 million (increases annually in line with the CPI).

Under the new law, the UEZ Authority Board at DCA will take on the following responsibilities:

  • Conduct an annual review at the end of the state fiscal year of each local UEZ’s use of ZAF funds.
  • Prepare an annual report that must include the number of participating businesses, unemployment rate, median household income, and number of jobs in each UEZ.
  • Enter into an MOU with the New Jersey Department of Labor and Workforce Development to assist in data gathering and information sharing to further the UEZ Authority’s ability to evaluate UEZ performance, compliance, and initiate enforcement actions.
  • Work with the Division of Local Government Services in DCA to prepare regulations, policies, or procedures to implement requirements for municipalities to place their Zone Assistance Fund allocations in segregated UEZ trusts.

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