A proposal by two former state senators selected by legislative leadership to craft New Jersey’s new flagship economic incentive program would revamp but mirror several main parts of the controversial, now-expired Grow New Jersey corporate tax breaks.
Senate President Stephen Sweeney, D-3rd District, told reporters following a voting session on Monday he was enlisting the aid of former state senators Democrat Ray Lesniak and Republican Joe Kyrillos, who both played a hand in crafting the original incentive bill, on Grow New Jersey 3.0.
“If we can find a solution, that’s more important than anything else, because not having an incentive program is hurting the state,” the senate president said.
Gov. Phil Murphy let Grow NJ expire on July 1 after he declined to sign a bill that would extend the program until January. He vetoed the measure last week, sending it back to lawmakers with a 143-page message saying he would only approve the bill if it included the five tax incentives he proposed in October, which would be capped at $400 million a year.
Murphy called the program “severely flawed” and argued it only worked for a select few, politically connected businesses and individuals, while yielding little if any benefit to the communities the program was initially tasked with helping, such as Camden.
“Grow New Jersey 3.0 builds on the success of our previous tax incentives to attract and retain jobs and private investment in New Jersey which continuously is rated near or at the bottom of studies that rank states as business-friendly,” Lesniak told NJBIZ.
The tax breaks are actually given to the company annually over a decade, and only if businesses meet certain agreed-upon job-creation and economic activity generation benchmarks.
Under Grow NJ 3.0, the state would award corporate tax credits to businesses considering moving into New Jersey or leaving that state, as was the case with original Grow NJ.
The new incentive program would tweak the net benefits test – a formula used to calculate how the tax breaks awarded are exceeded by the economic benefit to the state – by reducing the payback period from 20 to 15 years, and increasing the return on investment from 110 percent to between 120 and 130 percent of the tax break.
“The state must… not just break even but get 120 percent of what the tax incentive was,” Lesniak said. “It also shortens the period which the state has to recover the money back.”
The Economic Development Authority, which oversees Grow NJ and the other state’s incentives, would be in charge of this proposed incentive program and would annually review all businesses receiving incentives.
Businesses will have to hand over any information that the EDA requests, and would forfeit any tax credits that the “documentation of compliance is not certificated” by the agency, Lesniak said. The chief executive officer will have to certify to the EDA that the business met the obligations laid out in the tax credit agreement.
Businesses will have to submit detailed economic analysis of the different sites they are considering moving to – a point of concern brought up by a task force Murphy convened to scrutinize Grow NJ. According to the task force, several businesses with close ties to South Jersey powerbroker George Norcross submitted bogus plans about where out of state they would move if they did not win the tax breaks, despite no actual plans to do so.
The CEO would have to issue annual certification and compliance reports to the EDA, Lesniak said, and appear before the EDA board of directors to answer questions.
Individual projects would be capped under Grow NJ 3.0, Lesniak said, but the program as a whole would not. Murphy has sought hard caps on tax incentive proposals, something legislative leadership has not supported.
The governor’s proposals also call for project caps.
Grow NJ 3.0 would provide bonuses for projects that deal with affordable and workforce housing; apprenticeship and training programs with high school and county colleges; infrastructure development; public transportation and transit-oriented development; and targeted industries such as “transportation, manufacturing, defense, energy, logistics, life sciences, technology, health and finance,” Lesniak said.
The program would remove Camden as a distressed city, meaning distress city bonuses would only go to businesses for moving to Atlantic City, Passaic, Paterson and Trenton.
“Camden doesn’t need that any longer because they benefited from the previous Grow [NJ] program and are reaping the benefits now,” Lesniak said.
Applicants would have to provide health benefits to their employees. There would be incentives for businesses that take part in collaborative research with a doctoral university.
The program would also include specific incentives for grocery stores in food deserts, something Lesniak said is “very difficult and requires significant incentives.”
Lesniak told NJBIZ that he sent the proposals to the governor’s office on Aug. 15, and that he and Kryisollos sat down for a preliminary meeting with the administration.
He said he was taken aback by the governor’s conditional veto last week.
“We got slapped in the face with a very politically motivated CV,” Lesniak said.
But “the ball’s in the court,” Lesniak added.
A person close to the discussions who requested anonymity acknowledged that the meetings were brief and “just the beginning” of “long-standing” negotiations.”
“Everyone wants to get to a point that they could feel good about [this],” said the person. “It’s all a work in progress.”
The governor’s office did not immediately return a request for comment.n