LEGISLATIVE FISCAL ESTIMATE
[Second Reprint]
ASSEMBLY, No. 4700
STATE OF NEW JERSEY
218th LEGISLATURE
DATED: DECEMBER 20, 2018
SUMMARY
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Synopsis: |
“Food Desert Elimination Act”; provides incentives to supermarkets and grocery stores that locate in “food deserts.” |
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Type of Impact: |
State revenue loss and gain; local revenue gain. |
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Agencies Affected: |
New Jersey Economic Development Authority, Department of Agriculture, Department of Law and Public Safety, and Municipalities. |
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Office of Legislative Services Estimate |
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Fiscal Impact |
Year 1 |
Year 2 |
Year 3 |
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State Cost |
Indeterminate |
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State Revenue |
Indeterminate |
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Local Revenue |
Indeterminate |
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· The provision of tax credits to a new grocery store in each of 75 food deserts will result in an indeterminate decrease in State revenue over the four years in which the tax credits are granted and up to 10 additional years in which the tax credits may be carried forward. This revenue loss will be offset to some degree by the economic activity from the creation of new grocery stores and the increased employment associated with those grocery stores. The magnitude of resulting revenue impacts will be determined by the size of the grocery stores, the property valuations and local property tax rates, and the degree to which these businesses generate new economic activity in the State as opposed to displacing retail activity among other existing grocery store establishments.
· There will be an indeterminate State cost increase to administer the tax credit program, define food desert communities, and issue new special alcohol retail distribution permits.
· The State will realize indeterminate increases in revenue from the sale of newly created special alcohol retail distribution permits to grocery stores under the bill, if the grocery stores decide to exercise their right to purchase the permits. The amount of revenue will be determined by the number of grocery stores that purchase the permits, as well as the prevailing market price of permits in the municipalities in which the grocery stores are located, less whatever discount is applied based on the lack of transferability of these permits.
· Local revenues will increase based on local taxes paid by grocery stores that likely would not have located in these communities if not for the incentives provided by the bill.
BILL DESCRIPTION
This bill, the “Food Desert Elimination Act,” establishes the Food Desert Elimination Program (program) and requires the New Jersey Economic Development Authority (authority) to administer the program. The bill further requires the authority, in consultation with the Department of Agriculture, to initially designate no more than 75 physical boundaries of food desert communities in the State.
The program provides tax credits to certain supermarkets and grocery stores that newly open in food desert communities. Under the program, a taxpayer that opens the first supermarket or grocery store in each designated food desert community after the bill’s effective date will be allowed a credit against certain taxes due, in an amount equal to the total amount the taxpayer is assessed in property taxes by the municipality in which the supermarket or grocery store is located, during the full tax year for the property where the supermarket or grocery store is open for business to the public, and for the three subsequent tax years after opening.
Under the program, the authority will also be required to direct the Director of the Division of Alcoholic Beverage Control in the Department of Law and Public Safety to issue a special retail distribution permit to the first supermarket or grocery store that is established in each food desert community after the bill’s effective date. The permit holder would be entitled to sell alcoholic beverages in original containers for consumption off the premises of the supermarket or grocery store. The permit would be restricted to the premises of the supermarket or grocery store for which the permit was issued, and will not be transferrable for use in connection with another premises. The bill provides that the special retail distribution permit is to be used in a manner consistent with a plenary retail distribution license issued pursuant to current law, and is to be subject to any other fees and regulations promulgated by the director.
Under current law, a municipality may only issue one plenary retail distribution license for every 7,500 persons residing in that municipality. This limitation on the number of plenary retail distribution licenses would not apply to the issuance of a special retail distribution permit under the program. In addition, current law prohibits a person from holding an interest in more than two retail licenses unless that person held more than two retail licenses prior to August 3, 1962. This limitation also would not apply to the issuance of a special retail distribution permit.
The special retail distribution permit’s initial issuance fee is based upon the average sales price of plenary retail distribution licenses during the five years preceding the bill’s enactment in the municipality in which the supermarket or grocery store is located. If fewer than three licenses have been sold in the municipality within the previous five years, the municipality is required to obtain an appraisal, at the applicant’s expense, to determine the appropriate fair market value of the permit. The initial issuance fee is to be reduced by the fair market value of the limitation on the permit’s transferability.
The bill takes effect on the first day of the seventh
month after enactment, but the authority and the Division of Alcoholic Beverage
Control are permitted to take administrative action in advance of the effective
date, as necessary to effectuate the bill.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The bill will have an indeterminate impact on State revenues, increase State costs, and increase local revenues.
The bill provides four years of tax credits equal to the property taxes paid over that period, to the first new grocery store in each of 75 food deserts, with geographies that have yet to be determined and are not required to be coterminous with any existing municipal or county boundaries. These tax credits will result in an indeterminate decrease in revenues over the four years in which the tax credits are granted and up to 10 additional years in which the tax credits may be carried forward. The amount of revenue lost from these tax credits will depend in large part upon the size of the grocery stores that claim these tax credits, and the property tax rates in the municipalities in which the grocery stores are located. It is not possible to determine the magnitude of these impacts until the boundaries of the food deserts are determined and new grocery stores are developed to take advantage of those credits. The bill does not provide a deadline by which a new grocery store has to be established in order to claim the credits, so there is no way to know when the credits in each food desert will begin to be claimed.
This revenue loss will be offset to some degree by the economic activity incentivized by the bill, e.g., capital investment in the development of new grocery stores and the increased employment associated with those grocery stores. The magnitude of increased revenue cannot be known, and will be impacted by the size of the grocery stores, the amount of investment in each store, and the degree to which these grocery stores generate new economic activity in the State as opposed to displacing activity among other existing grocery store establishments. If the bulk of the grocery purchases would have been made at other grocery stores in the State, then the net economic impact on the State will be minimal.
If the purchases at these grocery stores include more healthy foods than would have otherwise been purchased by the customers of the store, it is possible that these customers will realize improved lifetime health outcomes that could indirectly reduce State costs on the provision of health care services to those individuals. The long term economic consequences of those impacts are not readily quantifiable.
There will be increased State costs for administering the tax credit program, defining food desert communities, and administering new special alcohol retail distribution permits. These costs will depend upon the manner in which the impacted departments choose to implement the program, and will largely comprise salary and benefit costs for any added staff who will be responsible for the programs established under the bill.
The State will realize indeterminate increases in revenue from the sale of newly created special retail distribution permits to grocery stores under the bill, if the grocery stores decide to exercise their right to purchase the permits. The amount of revenue will be determined by the number of grocery stores that purchase the permits, as well as the prevailing market price of permits in the municipalities in which the grocery stores are located. The market price of a new special retail distribution permit varies from municipality to municipality. The bill also provides for that cost to be discounted based on the lack of transferability of these permits. It is not clear to what degree the creation of new alcohol sales permits will increase the sales of alcoholic beverages in the State; however, such an increase in sales will increase State revenue further from the taxation of alcoholic beverage sales.
Local revenues will increase based on local taxes paid by grocery stores that likely would not have located in these communities if not for the incentives provided by the bill.
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Section: |
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Analyst: |
Lead Fiscal Analyst |
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Approved: |
Frank W. Haines III 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.).