By: Michael J. Lipari, Esq.

Today, Acting Governor Kim Guadagno signed a bill into law that extends a prior moratorium on the 2.5 percent non-residential development fee. This law (Legislative Bill S-2974) extends the moratorium for an additional two years, which should provide relief to commercial real estate developers.

Background on the 2.5 Percent Fee
On July 17, 2008 legislation known as “A-500” (otherwise referred to as the “Roberts Bill”) was signed into law, creating the “Statewide Non-residential Development Fee Act,” (the “Fee Act”), which set a statewide affordable housing development fee of 2.5 percent for non-residential development. The fee was calculated on the basis of the equalized assessed value of the project. As of July 17, 2008, municipalities were permitted to retain such fees in their own housing trust funds, and spend them, provided that they were before a court or under the jurisdiction of the Council on Affordable Housing (“COAH”) seeking approval of a fair share plan and a spending plan for affordable housing development fees.

As a result of the ongoing economic crisis and collapse of the real estate market, the New Jersey Legislature passed the New Jersey Economic Stimulus Act of 2009, which was signed into law on July 28, 2009. The Stimulus Act amended the Fee Act to suspend the 2.5 percent non-residential development fee until July 1, 2010, provided that non-residential developers obtain preliminary site plan or subdivision approval by that date, and subsequently obtain building permits by no later than January 1, 2013.

Extension of the Moratorium
Since July 1, 2010, qualifying projects have been subject to the 2.5 percent fee. The signing of S-2974 amends the Stimulus Act and extends the moratorium to July 1, 2013. Thus, projects which have or receive preliminary or final site plan approval prior to July 1, 2013 are again exempt from the 2.5 percent fee provided that building permits are obtained by December 31, 2015.

This law also extends the moratorium back to July 1, 2010, allowing for the reimbursement of fees paid in the interim, unless the fees have already been spent on an affordable housing project. If the 2.5 percent fee has already been paid, the developer has 120 days to claim a refund from the municipality, provided that the money has not been spent. If the money has already been spent, the developer is not entitled to any refund.

By: Michael J. Lipari, Esq.

In an effort to provide certainty to development projects in the urban and more developed areas of the State, legislation has been adopted that extends general development plan (GDP) protection to large development projects situated on smaller sites.

Since 1987, developers have had the option under the Municipal Land Use Law (MLUL) to seek GDP approval for developments on sites of 100 acres or more. Now, the same protections are afforded, though the adoption of what is being called “vertical GDP,” to projects with a nonresidential floor area of 150,000 square feet or more, or with 100 residential dwelling units or more, on sites of 100 acres or less. Mixed use projects may also qualify if the project consists of a combination of square feet of nonresidential floor area and residential dwelling units, which when proportionately aggregated at a rate of 1,500 square feet of nonresidential floor area to one residential dwelling unit, are equivalent to at least 150,000 square feet of nonresidential floor area or 100 residential dwelling units. This extends the vesting provisions to the more practical regions of our State such as urban enterprise zones, areas in need of redevelopment and transit hubs.

GDP approval is based upon submission of conceptual plans to the municipal planning board prior to any application for site plan or subdivision approval. Once GDP approval is granted the developer has the right to develop the property in accordance with the GDP regardless of any subsequent changes in local ordinances or other local requirements. This right can extend for as long as 20 years.

The Legislature provided for vertical GDP approvals recognizing the costly and time consuming process to engage in urban area development projects due to challenges such as land assemblage, environmental clean up, slower absorption rates and the difficulty to obtain project financing. Additionally, since the typical application process may extend over many years, it is possible that the views of elected officials or the planning board might change. The implementation of vertical GDP legislation now offers the additional protections to smaller sited projects. In this difficult economic climate, a GDP may be the key to demonstrating stability in the local market and could assist developers with obtaining project financing.

By: Henry T. Chou, Esq.

On June 23, 2011, Governor Christie conditionally vetoed S-2006/A-3125, which would have amended the Municipal Land Use Law (“MLUL”) to generally prohibit municipalities from regulating the installation of solar panels on residential properties and to limit the amount of fees municipalities may charge for applications pertaining to solar panel installations. The bill was business-friendly insofar it would have made it easier and cheaper for homeowners to install solar panels.

Governor Christie’s conditional veto message recommended the full preservation of a municipality’s zoning powers, while seeking to strike a balance between it and the State’s policy of promoting renewable energy sources. Specifically, the Governor recommended the removal of Section 1 of the bill, which would have restricted municipal zoning powers pertaining to solar panel installations, and proposed new language to clarify that municipalities may charge reasonable fees consistent with the MLUL and to clarify the definition of a “photovoltaic solar panel.”

By way of the conditional veto, the bill is now returned to the Legislature for consideration of the Governor’s recommendations.

By: Michael J. Lipari, Esq.

Princeton Borough, Princeton Township and Princeton Regional Schools have contracted with the New Jersey consulting firm Gabel Associates to provide a feasibility study to explore the potential for solar installations throughout the municipalities. If all goes well, the entities will enter into a power purchase agreement (“PPA”) with a solar developer to implement the plan.

According to the Princeton Packet, the study will focus on ground and roof mounted solar systems at several locations throughout the municipalities including the Sewer Operating Committee landfill site on River Road. The current proposal provides that, “a solar developer would finance, own, design, install, commission, operate and maintain the solar facilities.” The municipalities and School District would benefit from reduced energy costs through a long-term PPA with the solar developer.

A PPA is a contract between an electricity generator/provider and a power purchaser for the purchase of electricity generated from a facility. PPAs are most commonly used in the generation and sale of solar and wind energy. These agreements typically range from 15 to 25 years, at which time the project may be renewed, modified or abandoned. The PPA is critical to a solar project because it secures a long-term revenue stream to the seller through the sale of energy to the purchaser, which is often the host of the facility. The PPA sets forth the terms of the electricity rates to be paid to the seller, which may be flat or escalate over time.

Once the seller can determine its revenue stream, it can obtain the necessary financing to move forward with construction of the infrastructure. Currently, there are federal tax credits available that will make the investment worthwhile for the seller. Qualifying tax credits obtained as a result of the Emergency Economic Stabilization Act of 2008 and the American Recovery and Reinvestment Act of 2009 can be combined with certain tax exempt financing to reduce the investment required to develop the project.

This exciting news for the Princeton community comes just one month after Princeton University announced its plan to develop a 27-acre solar installation system that could produce 8 million kilowatt-hours per year.

By: Michael J. Lipari, Esq.

Renewable energy projects continue their emergence throughout New Jersey as the beneficial aspects of these projects are being realized by property owners. New Jersey is currently ranked second in the United States for solar installations largely in part to the emergence of solar fields being constructed on farms and otherwise vacant land. Recent state and federal legislative initiatives have made these types of projects economically feasible.

This week, Princeton University announced that it will be developing a solar collector field on 27-acres of land in West Windsor, New Jersey. The project is expected to be one of the largest at any U.S. college or university. The photovoltaic (“PV”) system will consist of 16,500 PV panels and should generate 8 million kilowatt-hours per year. This installment will be enough energy to meet 5.5 percent of the total annual electric needs for the University.

The system, which will be owned by Key Equipment Finance, will be partially funded with the use of grants available through the American Recovery and Reinvestment Act. Sun Power Corp. is responsible for the design and construction of the project. Princeton University will host the system and finance the lease from revenue realized through New Jersey’s Solar Renewable Energy Certificate program (“SREC”).

New Jersey’s SREC program awards managers of solar energy installations with one credit per 1,000 kilowatt hours of solar electricity generated. Princeton University will sell these credits to utility or energy companies to help those companies offset statutory requirements for renewable energy production. At the expiration of the lease term, the University plans to retire the credits and prevent the emission of approximately 3,090 metric tons of carbon dioxide per year.

By: Henry T. Chou, Esq.

The Pinelands Commission has approved a solar farm project on top of a closed landfill in Stafford Township. Recognizing the benefits of the solar farm and its consistency with the goals of the Pinelands Master Plan, the Commission granted a waiver from the conservation easement requiring the former landfill to be maintained as open space.

The solar farm, which will consist of 24,624 solar panels to be set in 1,026 arrays on top of the 1.6-acre capped landfill, will generate approximately six megawatts of DC power.

Like other solar farm developers, the Walters Group was attracted to New Jersey’s innovative solar-renewable energy certificate program, where energy companies generating power from non-renewable energy sources purchase certificates from producers of renewable energy to offset carbon emissions and avoid fines associated with carbon emissions.

The certificates, which are traded on the open market, currently sell for $400-$500. It is estimated that the solar farm will generate approximately 5,000-6,000 certificates per year, which means that in addition to the energy it sells, the developer can make up to an additional $3 million in certificate sales.