Both the state comptroller and the chief executive of the Economic Development Authority declined at a Monday legislative hearing to disclose the names of 48 companies scrutinized in a scathing January audit of $11 billion the state awarded between 2005 and 2017, saying the companies were not even aware they were being audited.
State Comptroller Philip Degnan and EDA CEO Tim Sullivan, both at a joint session of the Assembly Commerce and Economic Development, and the Senate Economic Growth Committees, said
the names had been shared between both agencies, but to release those names to the public would violate their due process.
“Again, the audit is focused on the EDA, it did not engage the individual awardees in this program,” Degnan said. “If I were to disclose that group publicly today this would be the first time that they were aware that this was going on with respect to their business.”
The auditors began with roughly 1,000 awardees, down to 401 that received at least one tax break payment, and then 48 of those companies.
The report, released on Jan. 9, suggests that the EDA had little oversight and accountability over the tax breaks it awarded, making it difficult to determine if companies actually delivered on the agreed-upon economic activity.
Gov. Phil Murphy, who ordered the audit soon after taking office in January 2018, has used the results to urge an end and replacement to the two largest programs once they expire on July 1 – the Grow New Jersey tax breaks and the Economic Redevelopment and Growth gap financing program. His recommendations call for heavily capping the new programs, an outlook which Sullivan has shared.
The audit examined Grow NJ and ERG in addition to three other programs, but only seven audited companies were ERG awardees and 12 were Grow NJ awardees.
The remaining companies were the recipients of incentive programs that are no longer accepting applications: Business Retention and Relocation Assistance Grant Program, the Business Employment Incentive Program and the Urban Transit Hub Tax Credit Program.
Critics of both the audit and Murphy’s portrayal of the results suggest the freshman governor has over-emphasized the $11 billion figure, since credits are awarded annually over a period of 10 to 20 years.
In reality, the state has only been on the hook for a much lower amount — $1 billion for all five programs, according to Senate President Stephen Sweeney, D-3rd District, or roughly $700 million between Grow NJ, ERG and the Urban Transit Hub program, according to Sullivan.
“As of today, only a small percentage has actually been realized in the form of issued tax incentives,” EDA Board Chairman Laurence Downes said in written testimony submitted to the committee. “As the [2018 Rutgers] Bloustein Report observed, we cannot fairly judge the success of the program as a whole at this early stage.”
The hearing is one of three probes into the state’s tax credit programs — another is an independent commission, convened by Murphy and armed with subpoena power, and the third is a probe by Attorney General Gurbir Grewal’s office to see whether any tax credits were improperly awarded to businesses and if any laws or rules were violated by companies that were receiving the breaks. If so, Grewal said he would “seek the recovery of those funds.”
The audit shed little light on whether the state actually had 2,993 jobs unaccounted for in the report.
Degnan said that those jobs were not necessarily non-existent, just that the comptroller’s office could not match the data from both the EDA and the Department of Labor and Workforce Development.
“We don’t make an allegation that a job was not created,” Degnan said.
Downes heavily criticized the methodology of the audit, saying that it “lacked statistical significance” and focused too heavily on legacy programs, rather than the programs vastly expanded under the New Jersey Economic Opportunity Act of 2013, signed into law by then-Gov. Chris Christie.
“Each tax incentive should be viewed as an investment in the state’s future that is expected to lead to higher employment and an overall enhanced level of economic activity,” Downes said. “These investments, through tax credits, will only be realized by the grantees after they demonstrate those benefits through performance.”
Downes and Sullivan pointed to an array of measures the EDA plans to make in response to the audit, such as more substantive data-sharing with the labor department, an independent division dedicated solely to “monitoring project compliance with award agreements.”
On Tuesday, the EDA board is scheduled to hold its first public meeting of 2019 and the first since the audit. On the agenda is the application by human services company Elwyn for a $39.6 million tax break, which is considering a move into Camden.