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Accessing State Funding Programs through Municipal Improvement Districts
By George M. Morris, Parthiv M. Patel on April 8, 2019

Local businesses within a commercial corridor looking to revitalize the economic, physical, and social value of its business should encourage their respective municipality to form Improvement Districts (“ID”). Similar to businesses within a mall, an ID provides a mechanism for local businesses, operating with a funded budget, to organize and pursue a strategy to grow business by managing the appearance, marketing and events of the commercial corridor. In addition, the formation of an ID also provides a municipality with access to state funding programs and would grant funding award priority to business located within an ID for grants related to economic development. Through the efforts made by an ID and available funding programs, an ID’s economic, physical, and social value could increase over time. This, in turn, would attract more patrons and increase the revenue of local businesses. 

What is an ID?

An ID is a defined area, generally in the central business district of a downtown or a mixed-use corridor in a larger city, controlled by a District Management Corporation (“DMC”). A DMC is a group of stakeholders from the community who function as a board of directors for an ID and supervises downline teams or committees that implement projects for the ID’s benefit.

How is an ID funded?

A DMC can be funded in a variety of ways. One method is through assessment on commercial properties within the ID. Another method is for a municipality to fund their ID through an appropriation from the municipal budget, without creating a separate assessment. State law broadly allows for local self-determination regarding the funding mechanisms, provided that those who are assessed receive direct benefits for those assessments. The New Jersey Department Community Affairs recommends a multi-tiered combination of funds to ensure the success and sustainability of the DMC:

  • An assessment on the properties within the ID (as commercial property owners and the businesses who lease from them will derive a direct benefit);
  • Sponsorships, Memberships (voluntary), and other private sector methods from other stakeholders who care about the district (in effect, a voluntary assessment or earned income);
  • An appropriation from the municipal budget and or in-kind municipal investment (as all residents of the community will see an improvement to their quality of life with a revitalized business district); and
  • For some projects, State, County and other grants may be able to supplement the DMC funding.

Access to Funding Programs

An ID also allows for local businesses to access funding programs such as the Downtown Business Improvement Zone Loan Fund (“DBIZ Loan Fund”) and Main Street New Jersey (“MSNJ”).The DBIZ Loan Fund is a long-term zero (0%) percent loan program with awards up to $600,000 that funds DMCs in partnership with their respective municipalities to aid with the cost of physical improvements. MSNJ is a comprehensive revitalization program that promotes the historic and economic redevelopment of traditional business districts in New Jersey. The Fiscal Year 2019 State Budget authorized $500,000 to restart and enhance this program.

For further information the benefits and process of forming an ID and accessing state-funding programs, please contact Parker McCay’s Corporate and Municipal Law departments. 

The content of this post is for informational purposes only and should not be construed as legal advice or legal opinion. You should consult a lawyer concerning your specific situation and any specific legal question you may have.

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