A proposed 150-page tax incentive bill dubbed Grow 3.0 that two former lawmakers sent to the state Legislature and Murphy administration this week has been met with a thumb’s down from the governor’s office.
“Our goal is to present an incentives package that safeguards taxpayer dollars at all costs while providing for strong economic development,” said the governor’s spokesperson Darryl Isherwood. “We don’t believe this bill draft will accomplish those goals and negotiations with the Legislature remain ongoing.”
The proposal from former state Sens. Ray Lesniak, a Democrat, and Joe Kyrillos, a Republican, includes many changes sought by Gov. Phil Murphy, such as the “innovation evergreen fund” under which the state and venture capitalists would split the costs of financing start-ups.
It would also preserve several major facets of the now-expired Grow New Jersey corporate tax break program and the Economic Redevelopment and Growth gap financing program for residential projects, which the state employed in an effort to attract business. Murphy allowed both programs to expire on July 1 without any replacements.
But the Grow 3.0 plan would not cap the program as a whole – a feature sought by Murphy – instead, capping awards on specific projects as well as certain bonuses. Lesniak called overall caps “really stupid.”
Lesniak’s and Kyrillos’ proposal marks an effort to bridge the gap between Murphy, who has been largely critical of Grow NJ, and Senate President Stephen Sweeney, D-3rd District, an ardent supporter of the tax breaks and political adversary of the governor.
“On first read there appear to be some substantive differences between the bill we received from Sen. Lesniak and our proposal,” Isherwood added, “including the removal of numerous important and substantial anti-corruption, compliance, and labor protection measures.”
Lesniak did not indicate whether Sweeney and Assembly Speaker Craig Coughlin, D-19th District, have given the thumbs up for the proposal. Neither office commented.
Grow through what you go through
Grow 3.0 includes a modified version of Murphy’s evergreen fund to “make sure investments are safe investments” for the state, “because they can be risky,” Lesniak said. “And we certainly both agree on greater oversight… and more robust requirements on businesses to prove that the tax incentives” are necessary, he added.
Sweeney has been frosty at best about the evergreen fund, and the proposal has been a hard sell to lawmakers.
Under Grow NJ, many businesses took advantage of lucrative tax break bonuses for moving to Camden, especially those with ties to South Jersey power broker George Norcross, according to a task force Murphy put together to scrutinize the incentives.
But Grow 3.0 scales down the emphasis on Camden, and removes it as a distressed city — meaning that far fewer bonuses would go to businesses for moving there. Only businesses moving to Atlantic City, Passaic, Paterson and Trenton could still qualify.
The proposal calls for incentives to help alleviate social issues affecting the state by offering bonuses for supermarkets in food deserts and for transforming abandoned, foreclosed homes into affordable housing – all of which would be capped.
Grow 3.0 also calls for removing the cap on the film and television tax credit program. Murphy has called for increasing the limit as revelations surface that demand among media producers for tax credit dollars under the program is outstripping supply.
“That’s a good example why an overall program cap makes no sense,” Lesniak said.
Another incentive, capped at $600 million, would go toward residential projects in the state’s 169 federal opportunity zones and distressed municipalities, providing gap financing for those developments.
The incentive proposal also calls for tweaking the net benefits test – a formula used to calculate how the tax breaks awarded are exceeded by the economic benefit to the state. The payback period would be cut from 20 to 15 years, and the required return on investment would be raised from 110 percent to between 120 and 130 percent of the tax break. Business owners would also have to submit more in-depth documents on where out of New Jersey they are considering if they do not win the tax breaks. Various media reports, and the Governor’s task force have unveiled numerous instances of businesses providing incomplete and shoddy information about their potential out of state locations in order to win the incentives.