The state’s corporate tax break regime is a “rigged system” and must come to an end on June 30, Gov. Phil Murphy said June 18 after a task force he appointed issued a report detailing how politically connected figures helped shape an incentives program that lacks oversight.
“We’re not just dealing with a broken system, we’re dealing with a rigged system,” Murphy told reporters at a news conference in Trenton.
“I’m horrified by what I read, this is worse than what we thought,” Murphy added, contending that the tax breaks were “riddled with unfairness and bad behavior.”
The task force he convened in January to scrutinize the Grow New Jersey tax breaks unveiled a 75-page report on June 17 after a judge turned aside an effort to end the panel’s work.
According to the report, the Economic Development Authority – tasked with overseeing Grow NJ – failed to conduct even the most basic background checks and research to make sure businesses should receive tax breaks for which they were applying.
“The EDA did not have any protocol or written standards for conducting research in connection with companies’ applications with program benefits, as a result … some EDA employees conducted independent research to verify aspects of applicants’ factual assertions and others failed to do so, even when relevant information was readily available,” the report reads.
One example cited was Holtec International, which won a $260 million tax break to move to Camden and claimed that it was never barred from any federal contracts. In reality, the Tennessee Valley Authority had sanctioned Holtec.
Following the report’s release, Murphy doubled down on his vow to veto a proposed seven-month extension of Grow New Jersey and its companion program, the Economic and Redevelopment Growth gap financing program, if they do not contain “necessary reforms” such as caps on the amounts awarded.
Both programs expire on June 30, and Murphy has said he would be fine with the two programs drying up with nothing in their place.
“I was not elected governor to continue business as usual, Trenton insider politics, but rather to bring change that benefits the 9 million people who call this great state home,” Murphy said. “The task force report overflows with the definition of what business as usual means.”
Yesterday’s report also highlighted how Kevin Sheehan, an attorney at Parker McCay – which is run by George Norcross’s brother Philip – directly crafted many provisions of the 2013 Grow NJ legislation that benefited many of George’s businesses.
Sheehan, for example wrote a provision requiring companies seeking breaks to move into Camden to show that the credits would be a “material factor” in their decision to relocate, rather than demonstrating that they would leave the state without the awards, according to the task force.
The report also described how Cooper Health executive Andrew Bush was seeking information about a location in Philadelphia to which the company said it would move without the incentives, even though it had no intention of doing so.
The EDA ignored an array of “red flags,” according to the report, including a September 2015 news conference held by George Norcross’ insurance brokerage Conner Strong & Buckelew, NFI and The Michaels Organization to announce that they would move to Camden, a year before the three submitted their applications.
The tax breaks for the three companies could have been reduced by $70 million if the EDA properly considered the applications, while the award for Cooper would have been just $7 million, according to the report.
“Our litigation has never been about blocking an investigation, but rather to ensure that the Governor’s Task Force gave each firm basic due process rights, including the opportunity to present fully the facts about their companies, their applications, and their decisions to move to Camden,” Norcross spokesperson Daniel Fee said.
“There is a great story to tell about Camden, why these firms are moving or expanding there, and the process each followed to be approved for tax incentives. Beginning with the Legislative hearings, we will tell it,” Fee added.