Tax break task force finds spotty oversight in incentive program

Daniel J. Munoz//January 16, 2020//

Tax break task force finds spotty oversight in incentive program

Daniel J. Munoz//January 16, 2020//

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A task force the governor convened to scrutinize the state’s now-expired, controversial corporate tax break programs released a long-awaited report Thursday, potentially paving the way for the administration and legislative leadership to finally hash out a new set of economic incentives.

The release comes as both sides look to enact a replacement for the two programs – the Grow New Jersey corporate tax breaks, and the Economic Redevelopment and Growth gap financing program for residential projects – which both expired on July 1, 2019.

Gov. Phil Murphy has been highly skeptical of whether the programs were efficient, and over the past year, the task force honed in how the they may have been crafted with political interests in mind, rather than the state’s economic development.

Senate President Stephen Sweeney, D-3rd District – a critic of the task force – said that a similarly-goaled legislative committee he convened will now have to wrap up its own work, and then hopefully progress can begin on negotiations for the next set of incentives.

It is not immediately clear whether this is the final report or hearing of the task force.

‘Getting to yes’

The 84-page report highlights a culture in the New Jersey Economic Development Authority of “getting to yes” with companies seeking awards, even if the agency could not determine whether those companies were “at risk” for leaving the state without the tax breaks.

“Companies applying for tax incentives may easily misrepresent their relocation intentions without fear of likely consequences,” reads a statement on the report from the law firm Walden, Macht & Haran LLP, the counsel for the task force.

According to the task force’s June report, several businesses with close ties to South Jersey political power broker George Norcross, with the advice of law firm Parker McCay where George’s brother Philip is a partner, provided bogus data about plans to move out of state if they did not win those incentives. They included Cooper University Health Care where George is board chair, insurance firm Conner Strong and Buckelew where he is an executive, and home-building company The Michaels Organization.

Daniel Fee, a spokesperson for Norcross, did not immediately return a request for comment, neither did Cooper spokesperson Thomas Rubino.

“There is evidence that certain companies obtained millions of dollars in awards based on assertions that they would move to out-of-state locations that were never genuinely under consideration,” the Walden, Macht & Haran statement reads.

Although the agency did not break any laws when awarding tax breaks, it nonetheless applied regulations “in a way that favored the interests of the applicant.”

According to the task force and media reports, $1.1 billion of the $1.6 billion of tax breaks awarded to companies moving to Camden went to those with ties to Norcross.

Undercutting benefits

Thursday’s report points to unregistered, undisclosed “lobbying efforts” on behalf of clients, and knowingly “exploited deficiencies” in the EDA’s vetting process. As a result, the incentive programs “failed to maximize the intended economic benefits to the state.”

Parker McCay allegedly wrote several provisions that were inserted into 2013 legislation establishing the incentive program, according to the task force.

The EDA lacked a sufficient “post-approval and certification” process and “relied too heavily on data provided by awardees,” resulting in the agency providing excessive awards to companies, according to the task force. Moreover, the agency lacked any process for any disclosures of “criminal, civil and legal proceedings” related to the applicant.

According to the task force, Norcross-tied nuclear parts manufacturer Holtec International, the recipient of a now-suspended $260 million tax break, left out that it was briefly suspended from receiving any federal contracts following a bribery scandal with the Tennessee Valley Authority.

The EDA has since frozen Holtec’s tax break, which they applied for in order to move to Camden.