Several dozen activist groups on Tuesday called for the board of the Economic Development Authority to resign. The act follows recent allegations that the agency severely lacked oversight of the state’s multi-billion-dollar tax break program it was tasked with administering. Due to the manner the program was run, fraud and abuse allegedly ran rampant.
The Tuesday letter, delivered by a group of activist organizations collectively titled “Better Choices for New Jersey,” said that the agency “rushed through billions in corporate subsidies to profitable and politically connected corporations without adequate oversight or accountability, and may even have turned a blind eye to fraudulent tax incentive applications.”
The Grow New Jersey tax break program, which is scheduled to expire in July, has fallen under intense scrutiny following a January audit from the state comptroller’s office finding that the agency lacked any oversight of $11 billion of incentives, making it difficult to determine whether companies delivered upon promised economic activity.
Gov. Phil Murphy wants the program to expire come July, and replace it with a set of five incentives capped at $400 million a year.
“The EDA has failed to protect taxpayers from corruption and fraud, and the buck stops with the board,” Rob Duffey, interim director of New Jersey Working Families, said Tuesday. “Board members should resign immediately so that the EDA can begin to rebuild its credibility and regain the public trust.”
Most of the voting members were appointed to the board under the tenure of former-Gov. Chris Christie, who vastly expanded Grow NJ to the current program of which Murphy has been highly critical.
The exception is board vice chair Charles Sarlo, vice president and general counsel of DMR Architects, who sat on the board starting in February 2005 under then-Gov. Richard Codey, a Democrat.
Board chair and New Jersey Resources Chairman and Chief Executive Officer Laurence Downes was appointed in April 2010. Essex County Chief of Staff Philip Alagia was appointed in July 2014. Heat & Frost Insulators and Asbestos Workers Local 89 Business Manager Fred Dumont was appointed in January 2014.
O’Toole Scrivo Fernandez Weiner Van Lieu LLC Managing Partner Thomas Scrivo was appointed in March 2017.
Several activists took to the board meeting’s public comment session to read out the resignation letter or accompanying statements that its members should resign.
“You all at the board were asleep at the switch or active participants in this corruption,” said David Pringle, a volunteer at Clean Water Action.
“Thank you for being here,” Downes said when pressed by one member of the public. “Thank you all for joining us, we appreciate you sharing your views.”
A spokesperson for the EDA declined to comment.
“Where was the oversight, where were the processes, where were the controls? It’s clear from the comptroller’s report, the WNYC report, the lawsuits, that didn’t happen,” said Sally Avelenda, executive director of NJ 11th for Change.
Proponents of the program, such as Senate President Stephen Sweeney, D-3rd District, who crafted much of the legislation when it was expanded under Christie in 2013, tout the many economic benefits that Grow NJ brought to cities such as Camden and Newark.
Also, most of the $11 billion has only been awarded with the actual amount of money already given to companies much closer to $700 million. Sweeney said that Murphy’s depiction of $11 billion that the state lost has been a misleading figure.
EDA CEO Tim Sullivan reiterated that fact in a January letter responding to the audit, and added that much of the money awarded was done under programs that have since expired.
The activists said they are not asking Sullivan and other staff to resign, just the board members.
Even still, Duffy pointed to recent budget documents showing that state must begin spending roughly $1 billion annually starting with the 2020 fiscal year to finance nine different incentive programs – over $400 million of that for Grow NJ.
In addition, a WNYC report last month shed light on a whistleblower suit alleging that the Christie administration pressured the agency to churn out hundreds of approvals for tax break applications to ineligible businesses.
Later in March, Murphy’s EDA task force brought out allegations by a former Jackson-Hewitt staffer that the company defrauded the state for over $2 million of tax breaks it never should have received.
Daryl Isherwood, a spokesperson for the governor told NJBIZ that the report from Office of the Comptroller, “identified weaknesses in our current system for awarding tax incentives.”
“Whistleblower suits have shed light on further issues related to our past incentive programs,” Isherwood said. “As a state it is imperative that we ensure our economic development programs and specifically tax incentive awards are targeted, transparent, and monitored to guarantee taxpayer money is being well-spent and that these programs are accomplishing their intended goal. The task force appointed by the governor to look into our past incentive programs is continuing its work and we look forward to their final recommendations.”