Gov. Phil Murphy on Jan. 7 signed a $14.5 billion economic incentive package after it was rushed through the state Legislature in less than a week last month, marking the potential start of New Jersey’s sluggish economic recovery from the COVID-19 pandemic.
The measure includes $11.5 billion for a variety of corporate and business incentive programs over a seven-year period, meant to lure businesses, developers and investment dollars into the state.
And it includes $2.5 billion toward an expanded film and television tax credit program over a 13-year period, and over $200 million toward a 2013 program meant to entice residential redevelopment.
Business executives and industry heads, lawmakers and top administration officials argue that the incentive package, known as the New Jersey Economic Recovery Act of 2020, is vital to dragging the state’s economy from some of the worst economic conditions since the Great Depression.
Mass business closures meant to halt the spread of the virus have cratered state tax revenue and triggered soaring unemployment. Coupled with mounting costs of state and local health officials to react to the pandemic, the cash-strapped state government relied on borrowing over $4 billion to keep its finances afloat for the near future.
Critics argue that New Jersey’s dire financial situation means it is in no position to take on such a massive financial undertaking.
During a December committee hearing, Sheila Reynertson, an analyst with the progressive advocacy group New Jersey Policy Perspective, questioned whether the state would have the money over the next decade to pay down both the $4 billion in state borrowing, and “dole out tax subsidies by the billions,” calling it “the height of irresponsibility.”
And opponents – such as progressive groups typically allied with Murphy – have been critical of the breakneck speed at which it moved through the state Legislature, moving ahead in a matter of days.
Sen. Troy Singleton, D-7th District, ultimately supported the bill, but complained that lawmakers and the public had little time to digest the 249-page legislation.
The package, as a result, “frankly will be met with cynicism and mistrust if we do not take the time to allow the public a fuller view into this transformative proposal,” he said last month.
Murphy was highly critical of this new program’s predecessor – the Grow New Jersey corporate tax breaks, and the Economic Redevelopment and Growth gap financing program – under which the state awarded a combined $8.6 billion between 2013 and 2019.
ERG, used for residential projects, is getting the $220 million infusion under the bill Murphy signed on Thursday. Grow NJ was used to attract employers to New Jersey, or entice them to expand their current footprint rather than move to another state.
A task force he put together in 2019 investigated allegations of unethical and improper political influence over how the program was crafted and how tax breaks were awarded, with the focus on businesses with close ties to George Norcross, a South Jersey political powerbroker.
And an audit that came out in January that year alleged lax state oversight to ensure businesses were actually complying with the tax break agreements.
Tim Sullivan, head of the New Jersey Economic Development Authority, which will oversee the programs, pointed to a “robust” public comment and rulemaking period, which means that many of the programs can take up to a year to be rolled out.
Murphy, during the Thursday-morning bill-signing ceremony in the parking lot of Carella’s Chocolates & Gifts in Hamilton Township, emphasized a host of small business relief, and aid to help lift up some of the state’s poorest communities.
“Incentives are set aside only for big corporations, right?” the governor said. “Well starting today, that could not be more wrong. That’s the old way of thinking…but the days when it only applied to big ones are over. This is how we propel our economy moving forward to be a strong and resilient post-COVID reality and future.”
NJ Emerge supplants Grow NJ, capped at $1.1 billion a year. Awards for individual companies are capped at $8,000 per job over seven years, compared to Grow NJ’s $15,000 per job over 10 years. There’s a stricter net benefits test – a complex formula used to ensure the economic benefit is more than the tax break amounts awarded.
But there are lower job-creation requirements than what Murphy sought, and individual awards to companies are not capped.
NJ Aspire would replace ERG, and also to be capped at $1.1 billion a year, with a focus on urban redevelopment, affordable housing and transit-oriented development.
Both run six years, but can run for a seventh year to award any unused tax credits.
The bill creates a combined $400 million a year for incentives to cover some of the costs of redeveloping historic buildings; to clean up and develop polluted properties; support for “anchor institutions” such as hospitals, universities and non-profits; support for grocery stores in food deserts where residents do not have access to fresh food; and an “Innovation Evergreen Fund,” under which state and private venture capital firms would jointly finance startups
There is also $2.5 billion for major “transformative projects,” such as mixed-use developments, that could generate revenue. Projects are capped at $250 million, and unused tax credits cannot carry over to other projects. And the bill includes $50 million towards a Main Street assistance program.i