LEGISLATIVE FISCAL ESTIMATE
SENATE COMMITTEE SUBSTITUTE FOR
SENATE, Nos. 4071 and 3155
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: JULY 3, 2025
SUMMARY
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Synopsis: |
Authorizes HMFA to use certain tax credits; directs HMFA to conduct tax credit auctions to provide financial assistance for certain housing purposes. |
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Type of Impact: |
Multi-year State revenue decrease and State expenditure increase. |
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Agencies Affected: |
New Jersey Housing and Mortgage Finance Agency; Economic Development Authority. |
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Office of Legislative Services Estimate |
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Annual Fiscal Impact |
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Multi-Year State Revenue Decrease |
Indeterminate |
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Multi-Year State Expenditure Increase |
Indeterminate |
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· The Office of Legislative Services (OLS) concludes that the bill would result in indeterminate multi-year State revenue decreases associated with the establishment of a new tax credit auction program administered by the Housing and Mortgage Finance Agency (HMFA) and the reallocation of existing tax credits from the Brownfields Redevelopment Incentive Program. This impact is expected to begin in CY 2025 and continue through the conclusion of the nine-year authorization period established under the Economic Recovery Act of 2020.
· The requirement that auction proceeds be used specifically for housing development programs would increase housing program expenditures by the HMFA and would also have ongoing administrative costs to the agency, though the bill permits the HMFA to use up to five percent of proceeds for administrative expenses.
BILL DESCRIPTION
The bill authorizes the HMFA to conduct competitive tax credit auctions and use the proceeds to provide financial assistance for housing development. The bill reallocates $200.0 million in tax credits from the Brownfields Redevelopment Incentive Program to the HMFA for auction purposes, with the proceeds dedicated to supporting middle-income workforce housing and low- and moderate-income housing projects that have received four percent federal Low Income Housing Tax Credits.
The bill establishes that the HMFA may sell up to $500.0 million in tax credits over no more than six years through competitive auctions, with annual sales limited to $100.0 million and a minimum sale price of 80 percent of the tax credit value. The proceeds are to be divided equally between middle-income workforce housing development and low- and moderate-income housing that fulfills municipal fair share obligations under the Fair Housing Act, with priority given to distressed older suburban municipalities for the affordable housing component.
Additionally, the bill provides that once the initial $200.0 million allocation is exhausted, an additional $300.0 million in tax credits may be reallocated from the Aspire and Emerge Programs to continue the auction program. The bill also establishes specific requirements for tax credit purchasers, including restrictions on resale of credits, mandatory remittance of ten percent of any transfer proceeds to the State General Fund, and public disclosure requirements for all tax credit transfers. The bill requires the HMFA to actively promote the middle-income workforce housing component and establishes that eligible projects must have received four-percent Low Income Housing Tax Credits from the agency.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that the bill would result in indeterminate multi-year State revenue decreases associated with the establishment of a new tax credit auction program and the modification of existing tax credit allocation mechanisms. This impact is expected for a period of six years beginning in CY 2025.
The bill reallocates $200.0 million in tax credits originally designated for the Brownfields Redevelopment Incentive Program to the HMFA for competitive auctions. Under current law, these tax credits would be awarded directly to qualifying brownfields projects, providing dollar-for-dollar reductions in State tax liability. Under the bill, these same credits would be sold through auctions at no less than 80 percent of face value, with proceeds used for housing programs rather than direct tax relief.
While the auction mechanism may generate some revenue for the State through the 10 percent transfer fee imposed on subsequent sales of tax credit certificates, the overall impact on State revenues remains indeterminate. The auction process introduces market dynamics that could result in tax credits being sold at varying prices between 80 and 100 percent of face value, making the precise revenue impact difficult to predict.
The bill also authorizes the reallocation of an additional $300.0 million in tax credits from the Aspire and Emerge Programs once the initial Brownfields allocation is exhausted. This reallocation would similarly convert direct tax credits into auction-based credits, potentially affecting the timing and magnitude of State revenue losses associated with these programs.
The requirement that auction proceeds be used specifically for housing development programs would increase housing program expenditures by the HMFA and would also have ongoing administrative costs to the agency, though the bill permits the HMFA to use up to five percent of proceeds for administrative expenses.
The OLS notes that the actual fiscal impact will depend on several factors, including the demand for tax credits in the auction market, the prices achieved in competitive bidding, the pace at which auctions are conducted, and the effectiveness of the resulting housing programs in generating economic activity that might offset some revenue losses through increased economic development and property tax generation. The 10 percent transfer fee on secondary sales of tax credit certificates may provide some offsetting revenue to the State General Fund, though the magnitude of such revenue will depend on market activity and transfer patterns.
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Section: |
Revenue, Finance, and Appropriations |
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Analyst: |
Associate Fiscal Analyst |
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Approved: |
Thomas Koenig Legislative Budget and Finance Officer |
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).