One thing is certain about the COVID-19 outbreak: When it recovers – and not for a long time – the state’s economy will not quite be what it was going into the global pandemic in February.
That’s according to Tim Sullivan, head of the New Jersey Economic Development Authority, an agency that oversees billions of dollars in tax incentives, and more recently $41 million of state assistance for businesses hit economically by the outbreak.
“I don’t think anyone should be under any illusions that this snaps back in the same shape,” Sullivan said in a Wednesday editorial interview with NJBIZ. “This is not going to be a V-shape.”
Over the past month, Gov. Phil Murphy ordered the closure of a myriad of “non-essential” retail and business activities, grinding commerce to a halt and leading to soaring joblessness, all part of an effort to reduce in-person contact that could give the virus the opportunity to spread to new hosts.
As of Wednesday afternoon, COVID-19 infected 47,347 New Jerseyans and claimed 1,504 lives.
“My guess is that in the short term the minuses will outweigh the pluses, but that will turn over time,” he added.
Those sectors “that rely on density,” according to Sullivan, are going to continue taking a hit as long as these orders are in effect including bars, restaurants and theaters.
“Some of New Jersey’s strongest industries are going to be critical to winning the war,” Sullivan countered—pharmaceuticals, life sciences and biotechnology. “There’s going to be opportunities in a crisis.”
Remote-learning technology – think Zoom – has boomed in recent months. Other cybersecurity and financial technology products can also see a large chance to grow in the coming year, as millions of people self-isolate for the indefinite future.
Murphy warned on Tuesday that hammering down the projected peak of COVID-19 cases is “going to require many more weeks – at least – of our being smart and staying at least at all times 6 feet apart.”
“This challenge does not end when the stay-at-home order ends,” Sullivan also cautioned. “We’re going to have to continue to be creative, stretch resources, give small businesses the resources they need.”
“I don’t think we’d consider anything off the table.”
Grow – or shrink – NJ
The controversies and political scandals surrounding New Jersey’s multibillion-dollar tax incentive programs seem like an eternity ago, but nonetheless still play out in the halls of the EDA in some form.
“There’s no recession clause,” Sullivan said. “These legacy approvals are still valid.”
“While we’re running these crisis programs, we’re still processing, reviewing and administering tax credits from the legacy, and still managing through that backlog.”
That being said, compliance was loosened in recent weeks for businesses taking part in several incentive programs: Grow New Jersey, under which the state awarded at least $4.5 billion; the Business Employment Incentive Program, under which the state awarded $1.52 billion; the Business Retention and Relocation Assistance Program, under which the state awarded $125 million; and the Urban Transit Hub Tax Credit Program, under which the state awarded more than $1 billion.
These temporary rules revolve around how much time workers spend in the office, an impossible feat with the stay-at-home order which finds a vast majority of employees telecommuting.
The EDA now calculates how many hours a person does work for a company in order to be counted as a full-time employee under the eyes of the program, rather than how long they spend on the worksite.
The latest count of incentive payments totals $318 million for taxes that 158 companies paid in 2018, the EDA said in early February.
Combined with a host of other incentive programs, under which the state awarded tax credits in the past two decades, New Jersey will be on the hook for roughly $1 billion annually starting next year, according to the Murphy administration.
Last month, the state treasury – facing a budget shortfall upward of $20 billion – announced it would freeze $920 million in spending through June 30.
That includes $28.5 million from the EDA’s Economic Redevelopment and Growth program, an incentive that provides gap-financing for businesses looking to build residential – and in some cases commercial – projects in New Jersey.
“ERG regulations stipulate that incentive grant agreements provide that grant payments are subject to appropriation and the availability of funds,” said Jennifer Sciortino, a spokesperson for the treasury.
But tax credits and moving into New Jersey might be the last thing on any company’s mind at the moment, Sullivan said.
“Companies that are here are probably going to be focused on what they’re doing day-to-day,” he said. “Companies that aren’t here are probably going to be a little less exploratory at least in the next six to 13 months.”
Editor’s note: This story was updated at 11:43 a.m. EST to udate a quote from NJEDA Tim Sullivan that said “There’s no rescission clause;” the correct quote is “There is no recession clause.”