With Gov. Christopher Christie unlikely to fully restore a program that channels money to urban business districts, cities enrolled in the program are trying to find other ways to fund initiatives that have benefitted from it for decades.
In Jersey City, the program – known as the Urban Enterprise Zone Program – has helped small businesses get started and has supported street fairs and farmers markets, in addition to business improvement measures and safety initiatives.
Statewide, the UEZ Program has been credited with funding start-up loans to micro-businesses, improving commercial districts, and offering new job skills to unemployed workers since the 1980s. But cuts to the program during the Christie administration have meant the loss of millions of dollars to UEZs and have jeopardized these initiatives throughout New Jersey’s 32 enterprise zones, including Jersey City.
The JCEDC recently completed loans to three restaurants – VB3, the Light Rail Café, and GPs – which have opened recently in the city.
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This week the JCEDC will apply to be recognized as a CDFI. If the application is approved, the JCEDC hopes to be able to restore as much as $2 million in lost UEZ funding by mid-2013.
“When it comes to UEZ funding, we’re hoping for the best, but planning for the worst,” said JCEDC Executive Director Steve Lipski. “This is a unique approach. I don’t know of any other UEZ programs in our area that are going this route.”
Millions lost
Launched in 1983, the UEZ Program was started to stimulate the local economies of the state’s once-blighted urban areas. Businesses located in a designated Urban Enterprise Zone could charge a sales tax that is half of the usual state sales. (At present, businesses in Urban Enterprise Zone can charge a sales tax of 3.5 percent.) A portion of this tax money was then returned to the city for local economic development, including capital improvements, and salaries for public safety workers. Through loans, grants, and other resources, Jersey City, like other enterprise zones, used its UEZ money to attract small businesses, help small businesses get started, assist businesses make improvements, and train residents for jobs.
Between June and November of last year, however, Gov. Christie began to close out the funding portion of the UEZ program. Christie and his allies in Trenton have maintained that some of the efforts supported by UEZ money did not specifically meet the stated goals of the UEZ Program.
From $15.1M to $2.9M
Since the 2008-2009 fiscal year, which ended on June 30, 2009, Jersey City has seen its UEZ funding drop from $15.1 million to $2.9 million, according to Cliff Adams, CFO of the JCEDC. In fiscal year 2009-2010 the city received $7.4 million in UEZ funding. That same year, the state held back about $13.1 million in anticipated UEZ funding to the city.
UEZ money that was funneled back to Jersey City has in the past enabled the city to make significant financial contributions to each of its Special Improvement Districts (SIDs). The SIDs have in turn used this money to finance farmers’ markets, street fairs like the annual Everything Jersey City Street Festival, outdoor theater events, and other community initiatives that proponents say attract customers and improve business in the city’s commercial districts.
“The Journal Square Restoration Corporation [in the past] relied on $678,000 in UEZ funding. We lost that money, which was half of our budget. As a result, we’ve had to rethink what we can do and how we can do it,” said Don Smartt, executive director of the Journal Square Restoration Corporation.
The city also used its UEZ money for job training programs, loans and grants to small businesses, and closed circuit security cameras in commercial areas.
The JCEDC recently completed loans to three restaurants – VB3, the Light Rail Café, and GPs – which have opened recently in the city.
The JCEDC has about $1.9 million remaining in UEZ money that is designated for small business loans. A separate UEZ account that has been used to support the SIDs has a balance of $800,000.
Possible solution?
If the JCEDC were to become a community development financial institution, the city could continue to fund at least some of these initiatives in the future.
Run by the U.S. Department of Treasury, the CDFI Fund allows designated local agencies to use federal money to give loans and other financial support to small businesses that may have difficulty getting loans from conventional banks.
“The program allows organizations that have a history of doing loans in underserved communities to provide money for economic revitalization,” Lipski said.
To participate in the program, the JCEDC will first have to be recognized as a CDFI. The JCEDC is in the process of seeking CDFI classification.
The Department of Treasury will solicit funding applications from designated CDFI’s in August. Applications will be due early next year. Applicants will be notified of their status next summer. If recognized as a CDFI, Lipski said the JCEDC plans to request $2 million in funding, which is the maximum amount of money the Treasury Department gives under this program.
Access to the CDFI Fund is competitive, however.
“Do I think they’ll get the designation? Yes. But getting that designation is going to be really hard. It will be hard fought and hard won,” said Elizabeth Spinelli, executive director of the Hudson County Economic Development Corporation. “I think it’s wise move. I think it’s a strategic move. It’s great that they came up with a way to maybe save businesses and programs that serve the second largest city in the state.”
Impact on community
It remains to be seen what impact this shifting funding picture will have on residents and businesses in Jersey City. At present, the governor’s plans for the UEZ Program are unclear, and the JCEDC is still in the very early stages of seeking its CDFI designation.
Already, some of the city’s SIDs have said that without continued funding they will be unable to continue programs that have been popular with residents in the past.
“We’ve stopped the noontime entertainment series on Wednesdays and Fridays, which brought entertainment to people who work and shop in the Square,” Smartt noted. “And we’ve lost the ability to provide security and additional entertainment for the Journal Square Farmers Market.”
The Central Avenue Special Improvement District warned recently that the popular Everything Jersey City Festival might not be able to continue next year.
This year, the JCEDC was able to allocate just $50,000 to each of the city’s special improvement districts.
“Without having the full strength of the government behind [the program] the UEZs will not get the funding they deserve,” said Spinelli.
The JCEDC is looking at other pools of money that it can access to keep some UEZ-supported initiatives alive. If the corporation gets designated as a DCFI, Lipski said the JCEDC might try to partner with banks and access money through the federal Community Reinvestment Act.
“We don’t look at the CDFI [money] as supplanting the UEZ. We see it as a supplement to the UEZ, and vice versa,” Lipski said. “We never looked at the UEZ as being the only hub from which this corporation would get resources. So, if we get money from both the UEZ and the CDFI Fund, they could be perfect partners. If we get UEZ [money] and no CDFI, then life goes on. If we get neither, then that’s a problem.”
E-mail E. Assata Wright at awright@hudsonreporter.com.