Gov. Phil Murphy vows that he will not let the state go without any kind of corporate tax break program, even as he reiterates that he would be fine with letting the state’s existing incentive regime expire on June 30 without a replacement ready.
On June 5, Murphy unveiled an 83-page bill that would enact five new incentive schemes capped at a total of $400 million a year. “Yes, business tax incentives must be a part of a smartly designed and strategically deployed economic program. But the operative word in that sentence is, ‘part,’” Murphy said in prepared remarks.
“Instead of a toolbox of various and complementary programs, we had consistently pulled out only one blunt object,” he added.
Murphy said the five incentives should replace the controversial, multibillion-dollar Grow New Jersey tax breaks, despite opposition from lawmakers who argue the incentives have benefited such cities as Camden and Newark. The legislation does not have a sponsor in the Assembly, and it is not clear whether it has a sponsor in the state Senate, as the Senate Democrats Office declined to comment.
The governor’s package includes a circumscribed version of Grow NJ called NJ Forward – capped at $200 million a year – and a so-called Innovation Evergreen Fund, under which the state and private venture capital funds would finance start-ups considering a move to the state and split the investments 50/50. Any excess returns on investment will go into the state’s general fund.
NJ Aspire, which would replace the Economic Redevelopment and Growth gap financing program, would be capped at $100 million annually, with most projects limited to $20 million.
Murphy also proposed an expanded Brownfields Redevelopment program, aimed at financing the remediation of contaminated urban sites, and a historic preservation tax credit program to help offset the costs of redeveloping historic buildings into “income-producing” sites. Both would be capped at $20 million a year and $4 million per project.
All of the programs would be administered by the Economic Development Authority, which already administers both ERG and Grow NJ.
The legislation for the different incentives includes bonuses aimed at attracting certain industries, or attracting business to certain geographic regions.
For example, NJ Aspire includes a bonus to entice large-scale developments called “transformative projects” to the state’s 169 federal Opportunity Zones.
Created by the 2017 federal tax law, Opportunity Zones provide tax benefits to investors who put money into certain, generally lower-income and under-developed federal census tracts.
Another NJ Aspire bonus involves “qualified wind projects” and would cover the entire cost of a single offshore wind project, capped at $250 million, if the business owners show how it would economically boost a nearby “port facility” such as Atlantic City.
NJ Aspire would also provide bonuses for redevelopment projects focused on research and development. The projects would have to be located near and collaborate with a research institution, teaching hospital, college or university.
The NJ Aspire program would require tax break applicants to pursue “community-oriented development.” So bonuses would provide incentives for businesses setting up shop in so-called food deserts; for developers that build health care centers, for transit-oriented development centered on train, ferry or bus stations, and for the creation of incubators and shared workspaces.
Applications would be accepted in two rounds and applicants would have to show how their project would benefit the surrounding community.
NJ Forward would provide bonuses for business that hire local residents and purchase from local businesses, businesses that hire union labor and those that pay their workers at least $15 an hour.
The base amount for tax breaks under NJ Forward would be $2,400 per year per job for each new or retained full-time job, versus the scale of $500 to $5,000 per job under Grow NJ.
NJ Forward would allow businesses to sell their tax breaks for at least 85 percent of the value of the credit, as does Grow NJ.
Grow NJ expires on July 1 and Murphy has said he would be perfectly fine with letting the program expire, even if it means there is nothing in its place. The state budget also must be signed by that date, boosting the likelihood that budget and tax incentive talks will become intertwined.
“I will not unilaterally disarm our economic development while our competitor states are luring businesses, in part, through incentives,” Murphy assured.
“However, I will not simply renew a set of incentive programs when serious questions exist about whether they have been successful in spurring broad-based economic activity in our communities, or even if their most basic promises have been met,” he continued.
Assemblywoman Eliana Pintor-Marin, D-29th District, unveiled a measure last month that would extend Grow NJ and ERG for a year, which she argued would allow lawmakers and the administration separate talks on the budget and tax incentives.
More to come
A task force Murphy convened in January unearthed allegations that businesses with close ties to political powerbroker George Norcross wrote the program to benefit themselves, their allies and clients, or provided allegedly false and misleading information to win incentives.
The task force is scheduled to hold a hearing June 11 at which it will unveil several of its findings.
Murphy formed the task force in January after an audit that found the EDA conducted inadequate oversight of businesses that received incentives. The audit also suggested that the EDA did not thoroughly monitor compliance with tax break requirements.
On June 2, Politico reported that a grand jury is investigating the incentives program and had issued a subpoena to the EDA seeking information about several companies that have received tax breaks.
Those businesses affiliated with Norcross have also come under scrutiny, including law firm Parker McKay, which George’s brother Philip runs; insurance firm Conner, Strong & Buckelew, which George runs; Cooper University Health Care, where George is a director; NFI and The Michaels Organization.
Parker McCay partner Kevin Sheehan allegedly wrote several provisions of the Grow NJ 2013 legislation to benefit those businesses, according to documents revealed at the task force meeting.
Camden city and county officials have accused Murphy of going after the South Jersey locale in an effort to hurt Norcross, an ally of the governor’s political rival, Senate President Stephen Sweeney, D-3rd District. Camden officials have launched a media campaign in opposition to Murphy.
The governor downplays the rift. “This is not about one city, one company, or one person,” Murphy said, though he also said that “economic growth can’t just be about helping a select few and the politically connected.”
“We must prove to our business community that we won’t hold them hostage to Trenton’s political battles,” Murphy added.