Sean Ryan is associate editor of Real Estate New Jersey, from which this article is excerpted.

The good news: Gov. Corzine's new transit legislation will give the state $8 billion over the next five years, through the nearly-bankrupt Transportation Trust Fund. The bad news: it'll cost $30 billion to get that $8 billion.

The $30 billion is over the next 30 years, so there's time to figure out a way to scrounge up an extra $30 billion without anyone feeling a pinch. Plus, if Corzine hadn't found a way to pony up the state's requirement to the TTF, New Jersey could have lost its access to that $8 billion.

"Most people are interested in the state establishing a stable, long-term source of funding for the Transportation Trust Fund," says Richard Johnson, chairman of the Northern New Jersey district council of the Urban Land Institute. "We've seen various ways of how not to treat it, where it gets so burdened with debt that it doesn't have any capital to do current projects."

The first step to paying that debt has come, as many feared, with a proposed tax increase. "Gov. Corzine wants to increase the sales tax to 7%," says George Molloy, senior managing director for Studley's Iselin office. "It'll take people that formerly would have come from New York for savings, and they won't come to New Jersey to shop. It'll be the same thing for Pennsylvania. I think it'll drive more people to Internet shopping."

Alternates to tax increases, however, are hard to find. "I don't really know what the best alternative is," Molloy admits. "Corzine's got to do something. It's incumbent that the transportation fund stays intact. Everybody's got to tighten their belts."

Michael McGuinness, executive director of the New Jersey chapter of Naiop, suggests increased user fees for all forms of mass transit. For more creative ideas, he recommends collecting sales tax for Internet purchases. Johnson suggests congestion pricing for the Turnpike.

"You have to put all these capital expenditure ideas in the context of the overall budget as well," Johnson says. "There are so many other things to focus on in this budget that the refinancing gave them a little legroom."

"We rely here in New Jersey on a property tax as a basis for most of our revenue," Molloy points out. "I would hate to see the property tax higher than it is already, but we're going to have a crisis at our municipal schools because of the cutback of state aid. Right now it's one crazy circle."

What the Transportation Trust Fund will invest in could very well determine how New Jersey's real estate market will look in the future. "If you look at New Jersey, a significant portion of its economic growth happens because of its location and its transportation," Johnson says. "Clearly, people make decisions to live here because of the ability to get to any place on the eastern seaboard in a reasonable amount of time."

One of those most recent investments has been the opening of Exit 15X of the Turnpike, servicing a train station with no parking lot, a few peripheral industrial sites, and not much else.

Johnson calls 15X "a very well-planned transportation project. The logistical complications for bringing together different rail lines, allowing people to get to anywhere in the NJ Transit system is a significant accomplishment. What needs to happen now is a comprehensive real estate project. Sometimes the infrastructure happens before the actual development."

The starting point for most distribution in New Jersey is its ports, of course. "The ports' role in economic development is significant," Johnson says, "by most estimates about $20 billion a year, 250,000 direct jobs and 400,000 indirect jobs. With all the investment on the water side—dredging channels, deepening berths, cranes—to not have a sufficient logistical network on the land side could have a disastrous impact.

"The worst possible scenario is that the product goes on a truck, goes to Pennsylvania for assembly or distribution and then comes back into this market," Johnson says. "We don't get the jobs, but we get the repair bill for I-78."

Johnson expects to see more port-related light manufacturing in New Jersey's future, "last-inch assemblage jobs, similar to what you see at the Port of Long Beach. That will be a great match with the labor available in cities like Newark, Kearney, Paterson."Studley's Molloy doesn't have any doubt about what new industrial construction will look like: colossal. "You're still looking at the bigger is better concept: bulk distribution centers, going from 250,000 sf to 750,000sf +." You're seeing a continued flight to one facility servicing a market like the Northeast."

Another problem for industrial development skipping adjacent port locations is that the municipalities of many sites might want something else there. "Municipalities close to the port region don't necessarily want their land zoned for warehouse or industrial distribution," McGuinness says. "They might want something more glamorous—hotels or condos. It's a huge planning issue, and the solution isn't an easy one."

"You're seeing more interest in transit villages," Johnson says. "When the Midtown Direct and the Montclair connection were brought in, people could have a one-seat ride into New York. Those stations because very hard to find parking spots for, and the real estate values outpaced the values in the rest of the state. There's a direct link there."

There is no shortage of municipalities looking to bring transit villages into their downtowns. They relieve traffic, add to the tax rolls, bring residential and retail back to the center of town and encounter very little resistance for projects of their size.One notable transit village, Westmont Station on Wood-Ridge, isn't planned around a downtown core, however—it's built around an empty stretch of track. A new 67-acre station will be built here, just two stops from Manhattan, with 737 housing units, 100,000 sf of retail and a school around it.

"We've been working on the design for 2 ½ years. Construction is just starting," says Lloyd Rosenberg, president and CEO of DMR Architects of Hasbrouck Heights. "We got our final planning board approval in November. The state's been wonderful. There's been a number of meetings set up with the Smart Start Program and the State of New Jersey, and they've been very cooperative.

"This was unique because there was a vacant site and a rail line next to it and the potential for developing a residential site," Rosenberg says. "This is in southern Bergen County, a pretty dense area, and it'll relieve traffic and congestion. There aren't too many sites like that in New Jersey."

"Development projects that are part of or in proximity to a transit village will score additional points in the criteria used for awarding incentives," McGuinness says. "Transit villages get more streamlined reviews, and you're more likely to get some of these grants."

"We're also involved with the design of a new train station at Giants Stadium," Rosenberg says. "We expect 12,000 people on game days to use that facility. As that gets more attractive, more people will use it, park in remote areas and not have to bring all the cars into the stadium. That's supposed to be out to bid and completed in 2007. The first phase of the rail line construction has started."

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