The Murphy administration is proposing a plan for the state Economic Development Authority to purchase $100 million of NJ Transit’s valuable property around rail — parking lots or awkward, underused parcels — and generate development, more ridership and revenue for NJ Transit.
The idea, according to an announcement from Economic Development Authority CEO Tim Sullivan and NJ Transit President and CEO Kevin Corbett, is to foster transit-oriented development and smart growth, develop under-utilized properties, create a tax base for municipalities and contribute to the fiscal stability of NJ Transit, Sullivan said during a briefing with reporters.
Sullivan said the EDA would enter into a real estate transaction, use the proceeds to purchase properties at fair market value from NJ Transit, then seek development partners for those sites.
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NJ Transit would also benefit if the EDA sells or leases the properties for more than they purchased them from NJ Transit, Sullivan said. “Transit gets in on the upside here as well,” he said.
The program was lauded as a “win-win” by Gov. Phil Murphy and his senior leadership team, but requires tricky pieces to fall into place in the remaining few weeks of the budget season before the state’s 2025 fiscal year begins July 1.
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The $100 million EDA would need to purchase the properties from NJ Transit would come from the first year of collections from a proposed corporate transit fee that Murphy introduced this year to address NJ Transit’s fiscal woes.
That proposed transit fee, which would levy a 2.5% tax on corporations that earn more than $10 million in profit, has faced controversy. And the mechanics of that fee, and what programs or agencies would receive the revenue, are being debated by legislative leaders as the June 30 budget deadline looms.
Fiscal cliff for NJ Transit
Also looming are fiscal cliffs at NJ Transit. For Corbett this deal could help the agency’s long-term financial situation by providing $100 million in the near term and potentially revenue through lease deals brokered by the EDA in the long term. The transit agency predicts a nearly $1 billion deficit in 2026.
“It’s no secret we have a fiscal cliff coming up,” Corbett said. “This part really allows us to be able to monetize assets.”
Questions about the politics of the corporate transit fee deal and if other money from it would still go to NJ Transit were not answered by Sullivan or Jennifer Sciortino, a Murphy spokeswoman.
NJ Transit leans into leveraging its real estate assets
NJ Transit had already dipped its toe into leveraging its valuable real estate into potentially lucrative development deals.
In the last few years, the agency signed lease agreements with developers in Woodbridge at its Metropark Station and LCOR, which is leading a rehabilitation of Hoboken Terminal and building on a parcel next to the station. The agency has similar deals in the works in Jersey City and Matawan.
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Asked why NJ Transit needs the EDA to advance the kind of work they’re already doing, Corbett said it relieves the agency of real estate work, which is outside the scope of its core mission of transit operations.
Working with the EDA can also add value to NJ Transit property the agency wouldn’t otherwise have because the EDA can enhance the value by selling or leasing a portfolio of properties, including those purchased from NJ Transit, as part of a larger development and vision.
“If Tim and his team is able to leverage our parcels to get greater value, it’s one plus one equaling three,” Corbett said. “These are parcels where they’re really looking to enhance and we’ll get a share of that upside that we would not get if we did it by ourselves.”
NJ Transit, which owns dozens of parcels, would still negotiate land lease deals on its own, Corbett said.
Neither agency identified which of NJ Transit’s parcels would be eyed for selling to the EDA. “We’re still working with Kevin and his team about the ones that make the most sense here,” Sullivan said. Those near rail lines make the most sense, he said.
