New Jersey Economic Development Authority Chief Executive Officer Tim Sullivan and legislative and municipal leaders shared successes and discussed challenges facing programs ranging from Grow New Jersey and Economic Redevelopment and Growth to PILOTs during NAIOP New Jersey’s Next Generation Incentives: Building on Success program, at the Carpenters Apprentice Training Center in Edison on April 30.
During his keynote remarks, Sullivan outlined the context in which the Murphy administration has been thinking about economic growth. He cited New Jersey’s assets – including education, technology and a diverse workforce – as well as challenges such as stagnant market sectors, slow employment growth, stagnant wage growth, and a significant decline in venture capital investment in the state’s economy.
“In October the governor rolled out an economic development strategy focused on building a stronger and fairer economy and reclaiming our position as a state known for innovation,” said Sullivan. “Incentives have to be a tool in the toolkit in service of this strategy.”
Sullivan addressed the plan’s strategic priorities, which focus on investing in infrastructure and workforce development, including closing the state’s racial and gender wage and employment gaps, as well as supporting innovation and improving New Jersey’s competitiveness and business climate. “We need to make a commitment to industries where we can grow our competitive advantage, not just on the incentive side but in providing an ecosystem of support to innovative sectors of our economy.”
Maintaining New Jersey’s competitive edge is a key issue for NAIOP NJ and the commercial real estate sector, which has relied on incentive programs to help fuel growth since the economic downturn. Gov. Phil Murphy has proposed revamping the state’s incentive programs “to be targeted, strategic and part of a broader strategy to produce widespread benefits and growth for the people who live here,” said Sullivan.
Of the five new programs in the governor’s economic development plan, the Brownfield and Historic Preservation Tax Credit Programs have been positively received by the commercial real estate community. According to Sullivan, the venture capital community has responded positively to the proposed New Jersey Evergreen Innovation Fund, which is focused exclusively on “super-charging” investment in young and innovative businesses.
However, the state’s two primary incentive programs – Grow New Jersey and Economic Redevelopment and Growth (ERG) – have come under scrutiny in recent months, and there has been considerable controversy surrounding proposed replacements for the programs, which are set to expire June 30.
During a panel discussion of state incentives and Opportunity Zones, led by Anthony Pizzutillo of Pizzutillo Public Affairs, Assemblywoman Eliana Pintor Marin, D-29th District, who chairs the budget committee, said, “There are good opportunities in the new programs, but to allow Grow NJ and ERG to expire would be a mistake.”
Pintor Marin has proposed extending the deadline by a year in order to allow time for the governor and lawmakers to find common ground on updated programs.
Sills Cummis & Gross’ Ted Zangari, who spoke on behalf of the Smart Growth Economic Development Coalition, emphasized the fact that while policymakers in Trenton disagree on the specifics of financial incentives, they all agree incentives are important. He also noted there is a general consensus that the Grow NJ award formula is “more generous” than the current economic climate requires.
Zangari said one of the key challenges the state faces is competition from neighboring states that currently meet the needs of businesses looking to relocate and are less expensive than New Jersey. “Grow NJ has provided the ‘premium’ companies often need to close or narrow the long-term cost gap.”
A second panel discussed the power of New Jersey’s tax abatement programs, particularly Payments in Lieu of Taxes (PILOTs), to help spur the redevelopment necessary for community growth.
“Municipalities don’t have a big toolbox in terms of what they have to offer to investors,” said discussion leader Steve Santola of Woodmont Properties. “The reason PILOTs have been so successful, especially over the past five years, is that they are simple to negotiate and self-policing.”
Mayors Derek Armstead and Jim Maley, of Linden and Collingswood respectively, shared examples of how PILOTs have been used to attract developers to invest in their towns.
Maley spoke about the recent shift from long-term tax abatements that can last up to 30 years to using short-term PILOTs for smaller projects.“From duplex conversions and new condominium projects to infrastructure improvements, there are 100 different ways to make a five-year tax abatement work depending on the specifics of a project,” he said.