The UEZ was a program was created in 1984 with the purpose of revitalizing the state's most distressed urban communities. In UEZs, businesses can charge 3 percent sales tax, and the money goes back to loans and grants to fix up the communities.
Certain economic criteria, such as unemployment, property values and cost of living, are used to see if a municipality qualifies for UEZ status. As the law is written now, neither Hoboken nor Weehawken would qualify. But Sen. Kenny is looking into sponsoring legislation that would change the criteria.
While both Hoboken and Weehawken are more affluent neighborhoods than many other UEZs, such as those in Jersey City and Union City, Sen. Kenny contends that because the two towns are completely boxed in by UEZs, they are at a disadvantage.
"It is something that both mayors have asked me to look into," said Kenny Wednesday. "Both Hoboken and Weehawken are completely surrounded by UEZs and that puts then a disadvantage. There's an adverse impact upon competition when customers can literally walk across the street to a neighboring community and receive significant discounts on merchandise. I'm sure that Weehawken and Hoboken are being adversely affected by the preponderance of UEZs in the county."
Weehawken, Hoboken and Secaucus are the only remaining municipalities in the county that do not have UEZ status. It is important to note that the legislation that Kenny is investigating would only change the criteria for qualifying for UEZ status. If it were passed, it would then be up to the individual municipality to submit an application to the state applying to become a UEZ.
There are many incentives for a community to become a UEZ. The most prominent to store patrons is that qualified retail businesses may charge 50 percent of the mandated six percent NJ sales tax on certain "in person" retail purchases. There is also a 100 percent tax exemption for materials and tangible personal property, such as rugs, building materials and computers.
Also, the tax that is collected in a UEZ does not go directly to the state. "The sales tax that is collected goes back the municipality," said Hoboken Director of Community Development Fred Bado Wednesday. "It goes to making improvements and to provide assistance in the terms of loans to businesses."
Businesses and municipalities labeled UEZs are eligible for low- and no-interest loans, loan guarantees, equity investments, and technical assistance. The state will also subsidize unemployment insurance costs for certain new employees with gross salaries less that $4,500 per quarter and offer a one-time corporation tax credit of $1,500 for each full-time permanent employee who is a resident of a municipality in which the zone is located and who had been unemployed for at least 90 days.
According to Bado, the purpose of creating a UEZ in Hoboken is not to take shoppers away from neighboring communities, but to spur growth.
"We wouldn't be taking shoppers away from Union City or other surrounding UEZs," he said. "Making Hoboken a UEZ won't in any way damage the regional economy. What we want to do is support our merchants and make sure our downtown is viable and thriving."
Hoboken Chamber of Commerce President John Parchinsky said Wednesday that he supports the idea of Hoboken becoming a UEZ. "The Chamber certainly supports being put on equal footing with our neighbors," said Parchinsky. "We have a great shopping district and encourage any legislation that will clear the way for lower sales taxes which will attract shoppers."
Weehawken Mayor Richard Turner said Wednesday that being made UEZ would help attract new businesses to that city in the future. "In the past it really hasn't been much of an issue because most of the stores [in Weehawken] are food stores or other shops that aren't affected," said Turner. "But the problem is that in the future we are going to want to attract new businesses that can take advantage of low-interest loans and the decreased sales tax. It's going to be hard to compete in the future with a neighbor who can offer those incentives to new businesses. I think it's a question of fairness and I believe that that the whole county should be looked at as a UEZ."
Although hopeful, Kenny he did say that there might be several roadblocks to passing legislation that will allow Weehawken and Hoboken to become UEZs. The biggest he said could be the state's reluctance to turn away funds while facing a dire budget deficit. "Given its fiscal situation, the state is going to want to save every cent possible for its budget," said Kenny. "So the though of diverting sales tax back to the local communities might not seem that palatable under the current conditions."