The State Comptroller’s Office, in a Jan. 5 report, faulted the New Jersey Economic Development Authority for not clawing back $200 million in overpayments and “improper awards” an earlier audit had identified. In addition, the office found that NJEDA officials relied heavily on the projected economic benefits for state incentives, rather than “actual economic benefit data.”
“It’s easy for a business looking for tax credits to promise results but harder to deliver,” acting State Comptroller Kevin Walsh said in a statement. “New Jerseyans are entitled to a return on their investment with these incentive programs.”
The comptroller audited the programs in 2019, concluding that New Jersey businesses were poised to get a combined $11 billion of state incentives despite not having created the agreed-upon jobs or produced other economic benefits.
NJEDA officials, including Chief Executive Officer Tim Sullivan, maintained that the agency has made numerous strides on oversight, including a “rigorous review” of incentive awards combined with the creation of 400,000 jobs across the state. The agency also said the state clawed back $350 million in Grow NJ awards from 82 companies “after they did not create or retain the number of jobs they committed to.”
The largest figure was from EMR Eastern, which saw its 2015 $252.7 million tax break for moving to Camden trimmed by nearly $122 million.
“Since the OSC’s initial report, the NJEDA has worked hard to resolve the issues raised in the report and has reinforced its commitment to being a best-in-class steward in taxpayer resources to ensure the programs we administer benefit New Jerseyans and our communities,” Sullivan added.
Of the $200 million identified by the comptroller, the office said that $179 million was improperly awarded through the now-expired Urban Transit Hub Tax Credit program, while $20 million was from “inaccurate and overstated” economic benefits and $4.4 million was from “errors in counting jobs and awarding tax credits.”
It’s not clear whether any of the $200 million is included in the $350 million the state says it has recovered. Sullivan maintained that the agency had indeed recaptured state funds, but noted that it was not addressed in the report.
Officials from the state comptroller’s office said the report examined Grow NJ and its sister program, the Economic Redevelopment and Growth gap financing program, both enacted in 2013. The office was not able to review the new $14.5 billion incentive package enacted under the New Jersey Economic Recovery Act of 2020.
Under Grow NJ, ERG and the NJERA, the authority uses state incentives to entice businesses to move to New Jersey or expand their existing operations in the Garden State.
During several hearings in 2019 and 2020, the task force shed light on several companies which they said knowingly provided faulty data and phantom out-of-state locations where they would move if they were not approved for state incentives – including many of those businesses which relocated to Camden.
NJEDA officials promised annual reports on the incentive programs and they say they are more closely studying whether any of the promised jobs were created or retained. The NJEDA is also re-evaluating its existing net benefits test meant to gauge whether the economic benefit to the state is greater than the dollar amount of the tax credits awarded to a business.
But the two agencies disagreed over whether the NJEDA should rely on its own projected economic benefits rather than actual data when approving tax breaks, “even if data showed those benefits had not been realized,” the report said.
The NJEDA’s reliance on its own economic benefit simulation and “actual, infrequent reassessments using its own model” could in fact “be causing the state to award many millions of dollars’ worth of unearned tax credits.”
One business had to pay back $56,000 in overpayments, while another has been notified that it was overpaid by $606,000 and another was overcertified and had its annual tax credit payments slashed by nearly $670,000, Sullivan noted.
But the state suffered a setback when a Mercer County judge sided with Holtec International, which sued the state for holding back $26 million in annual tax credit payments.
The nuclear energy company may be owed the $26 million, plus about another $52 million, the court ruled.[/vc_column_text][/vc_column][/vc_row]