Philadelphia 76ers told to pay back $400K in tax break money to New Jersey

The New Jersey Economic Development Authority is probing nearly 20 recipients of corporate tax breaks, pressing for the National Basketball Association’s Philadelphia 76ers to pay back money to the state.

The Philadelphia 76ers’ $82 million tax break – awarded in 2014 for moving a 125,000-square-foot training center to Camden – was overpaid by $400,000 and must be returned to the state. The professional basketball team took advantage of the “Camden alternatives” feature, which allowed companies eyeing a move to the city to win tax breaks equaling the total “capital investment” they would make in the new location, resulting in $400,000 more in incentives for the team.

According to a January report by a task force Gov. Phil Murphy convened to scrutinize the Grow New Jersey program, the 76ers were able to factor in $400,000 of tax-break application fees as “capital investment costs.”

“We look forward to continuing dialogue with the EDA on this issue in the future,” a 76ers spokesperson told NJBIZ.

Meanwhile, according to an administration official, the state is looking for more information from 15 companies that all used the same “consultant” – commercial real estate firm CBRE – in their bids for tax incentives.

Consulting concerns

EDA officials said they are pressing three companies for information: Rainforest Distribution, Elwyn and Amerinox Processing Inc., all of which have been implicated by the task force over whether the information they provided to the EDA was knowingly inaccurate.

The EDA would not disclose the names of the companies that allegedly used CBRE as a consultant. But, the task force’s January report did hone in on a former employee of the firm: consultant Susan Harte, who was dismissed from her position the day before the group’s October hearing.

Harte allegedly misled the EDA about Rainforest Distribution’s plans to move to a cheaper New York location rather than one in New Jersey, according to the task force.

Rainforest, with the help of CBRE, submitted a $2.4 million Grow NJ tax break application for plans to move from Long Island City, N.Y. to a larger space in Bayonne, according to the task force, and also submitted plans for an alternative location in Orangeburg, N.Y.

Hart, while at CBRE, worked to mislead the EDA about plans to move to the cheaper Orangeburg alternative location, despite no plans to do so, according to the task force.

At the October hearing, the task force scrutinized the EDA’s February 2019 approval of a $39 million tax break for human services nonprofit Elwyn to move to Camden, and now the agency is probing the company for “clarification of information” included in the application.

The company left out several pending and prior legal matters from its application, including worker protection violations, such as wage theft and discrimination, and legal violations in Pennsylvania pertaining to how it performed services for children.

“Elwyn remains committed to transparency and furnishing additional information to the EDA as appropriate to address the issues raised by the Task Force,” the company said in a statement. “Elwyn has diligently worked with and will continue to work with the EDA and its counsel to supply information to supplement its initial blanket disclosure and additional disclosures relating to specific litigation matters.”

Amerinox, another company implicated at the October hearing, received a $7.9 million tax break for moving to Camden.

When applying for incentives in 2016, Amerinox declared that it had no legal proceedings to disclose, even though its affiliate company Jermax Inc. was involved in a Chapter 11 bankruptcy action, according to the January report.

Rainforest Distribution and Amerinoxdid not immediately return requests for comment.

On the waterfront

Also in South Jersey, CBRE real estate broker Ken Zirk “facilitated” the search for Philadelphia offices for insurance firm Conner Strong and Buckelew, logistics company NFI and homebuilding company The Michael’s Organization, according to the task force.

The three companies, all tied to South Jersey political powerbroker George Norcross, won a combined $244 million tax break for moving to an office tower on the Camden waterfront. Kevin Sheehan, a partner at the law firm Parker McCay – where George’s brother Philip is also a partner – represented the three companies in saying they would move into the Philadelphia location without the tax breaks, despite no actual plans to do so, according to the task force.

Representatives for TMO, Conner Strong and NFI said that they had not received any inquiries from the EDA. Cooper University Health Care, which also used CBRE to scout out potential Philadelphia offices, said that they had not received a letter from the EDA either.

“CBRE’s commitment to upholding the highest ethical standards is unwavering and that’s why we continue to cooperate fully with the investigation into the Grow New Jersey program,” the firm said in a statement.