The state’s Economic Development Authority has held off on paying incentives to 64 separate companies for taxes they paid in 2018 as the agency ramps ups scrutiny of New Jersey’s now-expired, controversial corporate tax break program to make sure businesses are actually complying with tax credit agreements.
It is not clear how much money the EDA delayed paying under the Grow New Jersey program – enacted in 2013 – and the preceding Legacy Grow NJ program.
Under the Grow NJ program, companies had until April 30 to hand in paperwork for taxes paid in 2018 to receive tax-break payments, assuming they met agreed-upon requirements.
Altogether the 64 companies were paid $175.5 million in 2018 for taxes they paid in 2017—$151 million under the Grow NJ program and $24.4 million under the legacy program, according to documents obtained by NJBIZ.
The documents indicate that the EDA is “still reviewing all 2018 annual tax credits” as the reason for the delays in payments.
The EDA has also slowed down payments of six commercial projects under the Economic Redevelopment and Growth gap financing program, and eight residential projects. Last year the EDA paid out $3.8 million and $11.6 million respectively.
EDA Chief Executive Officer Tim Sullivan maintained the slowdown of payments was in response to the state comptroller’s January audit, which found glaring holes in the EDA’s oversight of the incentive program. According to the audit, the EDA over-awarded tax breaks for companies, or awarded incentives to companies which never should have received the incentives in the first place. Moreover, the EDA failed to make sure companies were compliant with the tax break agreement.
The tax breaks are paid out to companies over a 10-year period, and the annual payments are not made until the companies certify to the EDA that they met agreed-upon economic and job creation goals.
“As part of our commitment to ensuring taxpayers get what they were promised, we have made a number of improvements to our tax credit certification review process,” Sullivan said in a Monday statement to NJBIZ.
Sullivan maintained that delays were not a “systematic move” by the agency to “delay tax incentive awards,” and that the payments will be made to companies as soon as the EDA is “comfortable that all obligations have been met and can be documented.”
He met criticism from lawmakers earlier Monday when he testified before the Senate economic incentive task force, which worried the new approach could sow confusion and anxiety among businesses dependent on annual tax credit payments.
“You really need to focus on this,” Sen. Bob Smith, D-17th District, told Sullivan. “Because any other companies that are thinking of coming to New Jersey because of an incentive are saying ‘well sometimes they pay and sometimes they don’t.” Smith chairs the task force.
Pumping the tax brakes
Grow NJ – under which the EDA has awarded $7 billion since it was expanded – expired a month ago after Gov. Phil Murphy declined to sign a bill extending the program for seven months.
Two companies tied to South Jersey political powerbroker George Norcross had their payments delayed, according to the documents: Cooper University Health Care, which won a $40 million tax break, and nuclear parts manufacturer Holtec International, which won a $260 million tax break.
A task force Murphy put together in January to scrutinize the program issued a report in June that found the EDA over-awarded incentives to Cooper – where Norcross is an executive – and suggested that the hospital should have instead received much closer to $7 million. Their payment in 2018 for taxes they paid in 2017 was $4.5 million according to EDA records.
Meanwhile, Holtec had its tax break payments frozen following revelations that the company did not disclose on its application that it was barred from federal contracts following a bribery scandal with the Tennessee Valley Authority. Last year’s payment to Holtec – where Norcross is also a partner – was $26 million.
In June, the EDA said it would probe the two companies for additional information on their tax breaks.
According to the EDA documents dated July 25, payment to JPMorgan Chase Bank – which won a $224.8 million tax break in 2014 to move to Jersey City – was also slowed down. Last year, the banking giant was paid $40.8 million. Representatives for the bank declined to comment.
The Philadelphia 76ers – which won an $82 million tax break in 2014 to move several of their facilities into Camden – received a roughly $8 million payment in 2018 and had this year’s payments delayed. Representatives for the professional basketball team could not be reached for comment.
RBC Capital Markets LLC – which won a $78.8 million tax break in 2014 to move to Jersey City – received a $7.3 million payment last year and had their tax break payments delayed. Officials there declined to comment.
Editor’s note: A previous version of this article stated payments to 68 companies had incentives held for taxes paid in 2018; the number is 64.