The state’s Economic Development Authority has come out against a new report that raises alarm about potential abuses of tax incentives used to spur development in New Jersey.
The report, released Wednesday by the New Jersey Public Interest Group, cites the “high risk” of abuse of tax-increment financing, or TIF, programs. But EDA spokeswoman Erin Gold said Thursday that New Jersey’s TIF program was replaced in 2009 by the Economic Redevelopment and Growth grant program, which “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, but only after it generates revenue that the state collects.
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.” NJPIRG program associate Gideon Weissman said the state is ripe for abuse, because it has 19 sources of incremental local and state revenue for use in financing deals.
Gold also said Thursday the ERG program is a “performance-based” grant, further separating it from TIF. State law requires the annual percentage amount of the reimbursement cannot exceed 75 percent of the annual incremental state revenues generated, and that the combined amount of reimbursement cannot exceed 20 percent of the total project cost. And the statute also requires the developer seeking the ERG grant makes an equity participation of at least 20 percent of the project’s total cost, Gold said.
“We want the developers to have significant skin in the game in order to get the project done,” she said.
An NJPIRG news release points to the tax breaks that could be made available to Triple Five Group, the Canadian firm that plans to develop American Dream, the former Xanadu project, at the Meadowlands. 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 American Dream. A spokesman for Triple Five did not immediately respond to a request for comment.