The Murphy administration is delaying the award of tax breaks to some companies as it intensifies scrutiny of how well businesses are complying with the terms of the state’s multi-billion dollar Grow New Jersey economic incentive program.
Business advocates and executives criticized the move, complaining the payments of the tax credits have been held up or stalled entirely.
Under Grow NJ, tax break recipients receive annual payments over the course of 10 to 20 years, provided they certify their compliance by meeting job-creation and economic activity goals.
“The [Economic Development Authority] is continuing to process annual certifications for Grow New Jersey recipients and there is no freeze of any kind in place,” said Darryl Isherwood, a spokesman for the governor’s office.
“Both EDA and Treasury, however, have instituted a more thorough vetting process and as a result, some of the certifications have taken longer than they have in the past,” Isherwood added.
Gov. Phil Murphy has criticized Grow NJ, suggesting that the program is mismanaged and that it has awarded hundreds of millions of dollars in tax breaks that should not have been approved. The governor wants to let Grow NJ expire in July and replace it with five new economic incentive programs.
Michele Siekerka, president and chief executive officer of the New Jersey Business and Industry Association, said the payments have been delayed to companies that sell their tax credits.
“We have businesses … who use the tax credit as collateral in order to be able to fund their ability to start up a company or to continue to grow their company,” Siekerka said. “When they get the credits they have actually sold those credits to someone else, who has business losses, who can use those credits. Because you use a tax credit against your business loss in order to equalize your bottom line.”
Siekerka said the delays of the tax break payments – in some cases months for certain customers – has disrupted that process for businesses and put them in a “very precarious situation” because obligations are attached to those credits.
It is not clear whether the more rigorous vetting process the administration instituted applies solely to companies that sell their tax breaks.
But word of delays had been circulating throughout the business community in recent weeks, and complaints have ramped up among business advocates.
“These are contractual agreements they have with businesses [and] companies to stay here and there are certain payments that have to be made,” said Mike Egenton, vice president of government affairs at the New Jersey Chamber of Commerce.
Siekerka first mentioned the payment delays at an April 16 government affairs discussion hosted by the NJBIA, which featured Senate President Stephen Sweeney, D-3rd District, touting the so-called Path to Progress proposals to lower the state’s pension and health care obligations.
“First time I heard about it, but we’re going to get into it, we have to,” Sweeney said of the delays. “If people are fulfilling their obligations, you can’t hold their funding.”
Along with many Democrats in the state Legislature, Sweeney has been a supporter of Grow NJ, saying it has helped ushered in economic prosperity for such cities as Jersey City, Camden and Newark.