The New Jersey Economic Development Authority is cutting $12 million from a nearly $40 million tax break awarded to a global drugmaker.
According to state officials, the $39.9 million tax break awarded to Sanofi in August 2017 was made on two primary conditions: first, for major expansions at its Bridgewater corporate campus, and second, that it would retain 2,099 job positions.
Both of those circumstances have changed, the NJEDA contends, following a “corporate leadership change,” that led to Sanofi scrutinizing its various real estate holdings and ultimately curtailing how much physical office space it intends to occupy in the state.
The pharmaceutical giant had initially planned to renovate three buildings on its Bridgewater campus, totaling 674,325 square feet with a $39.9 million price tag.
Sanofi said it completed renovations on all three buildings, but because the company retained just 1,774 of the 2,099 job positions promised that kicked down the total tax break award.
Under the new agreement, Sanofi is claiming tax credits for $27.1 million of renovation work to the first building and the first floor of the second building–a project that spanned 321,180 square feet, according to July 14 board records from when the tax break reduction was approved.
Since Sanofi’s 2017 approval and “given the strategic realignment of our overall portfolio,” the drugmaker has had to adapt to “natural attrition and the fact that contractors no longer work on-site at the Bridgewater offices,” said a Sanofi spokesperson.
The Grow New Jersey program, under which the tax subsidies were awarded, has fallen under intense scrutiny in recent years.
A state audit released in January 2019 found that the NJEDA had little oversight of upwards of $11 billion of tax breaks awarded between 2005 and 2017, meaning the state was not ensuring that companies were delivering on their promised jobs and economic activity.
In the year that followed, a task force Gov. Phil Murphy commissioned honed in on allegations that the Grow NJ tax break program was improperly orchestrated and monitored, meaning lucrative tax breaks were awarded to companies with no need for those incentives.
Grow NJ’s successor – the New Jersey Economic Recovery Act of 2020 – includes a litany of oversight mechanisms meant to ensure compliance and ramp up penalties for bad actors.
Under that program, the NJEDA would create its own inspector general to make sure applicants are actually following the rules. Applicants would have to swear under penalty of perjury that everything they are saying is true, meaning that violations could carry much stiffer penalties.
There are two main incentive programs under the ERA and 213 clean-up bill. The first is called NJ Emerge, which is capped at $1.1 billion a year for six years, with a seventh potential year for any unused tax credits. It’s meant to incentivize employers to remain in the state, and to attract new businesses into New Jersey. Applications opened in May, but so far the NJEDA has not voted on any bids.
An accompanying program is being finalized by the NJEDA called NJ Aspire, also capped at $1.1 billion a year and geared toward real estate and redevelopment.
Editor’s note: This story was updated at 1:52 p.m. EST on July 19, 2021, to include remarks from Sanofi.
A previous version of this story indicated that Sanofi planned to construct three buildings on its Bridgewater campus and only completed work on the first building and part of the second, it has been updated to relfect that the company intended to renovate the property and that the company said those renovations were completed on all three buildings. According to Sanofi, its award was lowered because it did not retain the 2,099 job positions as promised under the incentive. It was updated at 3:34 p.m. EST on July 20, 2021.