In a letter, the head of the state’s Economic Development Authority lashed out at a public watchdog over a report Caren S. Franzini said is “founded on fundamentally faulty research.”
In the letter, obtained by NJBIZ, Franzini, the agency’s CEO, said the New Jersey Public Interest Research Group’s report relied on data from the state’s now-dormant tax-increment financing program, which was eliminated in 2009 in favor of the Economic Redevelopment and Growth grant program.
NJPIRG’s report, released Wednesday, said New Jersey is at “high risk” for abusing tax incentive programs used to promote commercial development in the state.
Franzini wrote to NJPIRG program associate Gideon Weissman that she “applauds your efforts to bring accountability and transparency to the administration of other state’s tax-increment financing programs.” However, “I find troubling the insinuation that New Jersey’s redevelopment program, as administered by the NJ Economic Development Authority, does not meet the high standards that the report calls for.”
The NJPIRG report, released Wednesday, cites the “high risk” of abuse present in tax-increment financing, or TIF, programs. EDA spokeswoman Erin Gold said earlier Thursday the newer ERG program “provides grants to redevelopment projects in order to bring unfinished, yet important projects to completion,” and has robust safeguards in place to prevent abuse.
Gold said the agency “is required to undertake a rigorous due diligence to determine eligibility” once an application is received, including a test to ensure the project will benefit the state. She also noted no funding is given to the project up front, only after it generates revenue that the state collects.
Those safeguards and others are outlined in Franzini’s letter to NJPIRG.
The NJPIRG report said municipalities have strayed from the original purpose of tax-increment financing — to revitalize struggling neighborhoods — and now use the tool as an “all-purpose subsidy for developers.” Weissman said the state is ripe for abuse, because it has 19 sources of incremental local and state revenue for use in financing deals.
Ted Zangari, a real estate attorney with Newark-based Sills, Cummis & Gross and chair of its redevelopment law practice group, called the findings of the report “outrageous.” He said the review process for the agency’s incentive programs is among the most stringent in the country.
“I just think it was really reckless fact-finding on the part of PIRG,” Zangari said. “If they’re to be taken seriously, they really have to do a more thorough vetting of these programs — and they haven’t.”
An NJPIRG news release pointed out tax breaks that could be made available to Triple Five Group, the Canadian firm that plans to develop the Xanadu site at the Meadowlands into American Dream. The firm could be eligible for hundreds of millions of dollars in tax-increment financing incentives, the report said.
A bill signed into law in July allows Triple Five to qualify for an ERG grant, but Gold said the EDA has yet to receive an application for the project. A Triple Five spokesman did not respond to a request for comment.
A representative from NJPIRG was not immediately available for comment.