A report issued by a task force the Murphy administration convened to investigate New Jersey’s multibillion-dollar tax incentive regime leveled new allegations against George Norcross and outlined how businesses and individuals with close ties to the South Jersey powerbroker benefited from the programs.
The 84-page report suggests that Norcross provided “inaccurate” testimony to lawmakers at a Senate committee hearing in November 2019. The task force and media reports highlighted the fact that of the $1.6 billion in tax breaks awarded to companies moving to Camden, $1.1 billion went to businesses with ties to Norcross.
Cooper University Health Care and insurance firm Conner Strong and Buckelew – where Norcross is an executive chairman – allegedly misled state officials about plans to move out in order to gain incentives, according to the report.
In addition, the New Jersey Economic Development Authority, which oversees the incentive program, allegedly maintained a culture “of getting to yes” for companies seeking awards, even if the agency could not determine whether those companies were “at risk” for leaving the state without the tax breaks.
None of what the EDA did was a willful violation of the law, but it raised “questions concerning the extent to which the state body carried out its role as a steward of public funds,” according to the report.
The task force alleges that nuclear energy company Holtec International, which received one of the state’s largest tax breaks at $260 million, had a “phantom tax provision” put into the 2013 tax break legislation by law firm Parker McCay, where George Norcross’s brother Philip is a partner.
Phantom tax provisions allowed applicants to include taxes in their applications that they wouldn’t have to pay in order to win much larger awards.
That year, Holtec turned to Philip for help after company executives were unhappy with the tax breaks they would have won under a draft form of the Economic Opportunity Act. And so over the course of a day, Philip pressed the EDA to include a “phantom” tax provision, had that signed off by Gov. Chris Christie’s office and then approved by the Senate Budget and Appropriations Committee.
Holtec ended up qualifying for the $260 million award rather than the initial $50 million, in part because it could factor the “phantom” taxes into the calculation.
“By allowing companies to characterize illusory taxes as state benefits, the provisions have both limited the real benefits to the State and contributed to public confusion concerning the relative costs and benefits of the Grow NJ program,” says the report.
Gov. Phil Murphy convened the task force in January 2019 to examine two incentive programs: the Grow New Jersey corporate tax breaks and the Economic Redevelopment and Growth gap financing program.
Both were enacted in their most recent form via the 2013 Economic Opportunity Act. They expired on July 1 2019, and the state has lacked any incentives for nearly seven months. Murphy has been critical of the programs and questioned whether they yielded any economic benefit to the state.
The task force released a preliminary report in June, which delved into many allegations about how Norcross and those with close ties to him benefited from the incentive program,
“The EDA’s institutional approach, set by senior management, is generally pre-disposed towards approving projects and granting relatively higher awards, an attitude that trickles down through the organizational structure within the EDA,” the task force said in that report.
In addition, “underwriters were warned against or even criticized for asking ‘too many questions’ of an applicant.”
The task force alleges in its most recent report that officials at both Cooper and Conner Strong & Buckelew went out of their way to mislead EDA staff and provide bogus plans about moving out of state if they did not receive those incentives.
Cooper – where Norcross chairs the board – won a $39 million tax break, but according to the task force qualified for only about $7.15 million.
The task force also faults the EDA for having “such inadequate processes and procedures for evaluating applications that it overlooked open and obvious red flags.”
Norcross told lawmakers in November that Cooper had been “clear” with the EDA “from the state” that none of the jobs were moving out of state.
But the Jan. 16 report cites a proposal letter Cooper included in its application to lease real estate in Philadelphia and said that Norcross was “incorrect” in his testimony.
“I toured [the Philadelphia building] today and believe that I will have a [proposal letter] in hand by the end of tomorrow that provides our ‘credible threat to move’ to satisfy the EDA,” Andrew Bush, Cooper Health’s vice president of real estate and facilities, wrote in a December 2014 email, according to the report.
In a statement issued the day the task force released its findings, Norcross disputed its conclusions. “This final report reads as a justification by someone who has billed state taxpayers in excess of $11M and is defensive about being sued by the same companies he’s smearing,” he said. “This report proves what I said in testimony before the Senate Committee in November: [task force Special Counsel James] Walden has made a series of selective, misleading, and too often outright incorrect statements.”
Options ‘never seriously considered’
Conner Strong and Cooper are not the only entities criticized by the task force. The report alleges that logistics company NFI and homebuilder The Michaels Organization – which won a combined $245 million tax break to move to a Camden office tower overlooking the Delaware River – “never seriously considered their claimed alternative sites outside New Jersey,” according to the report.
Daniel Fee, an spokesperson for Norcross, wrote in a September 2015 memo to Conner Strong President and Chief Executive Officer Michael Tiagwad that “it will be difficult to walk the line that needs to be walked – highlighting the development and involvement of you and George without crossing any line to confirm that Conner Strong is likely to move its headquarters.”
The task force concludes: “[t]he evidence shows that by September 2015, more than a year before the companies applied to the EDA for tax incentives, they were already formulating plans to relocate to Camden.”
Fee told NJBIZ that “[Connor Strong and Buckelew] hadn’t committed to Camden,” therefore “it was important to ensure that no one believed it had.”
Cooper Health spokesperson Thomas Rubino maintained that “Camden applicants, such as Cooper, did not have to demonstrate that jobs were at risk of leaving the state to be eligible for tax credits.”
“The Tax Incentive Task Force’s Final Report rehashes the same flawed legal arguments. Today’s report reads more as an advocacy piece,” Rubino told NJBIZ. “To be clear, Cooper did nothing wrong in its application for tax credits.”
Rubino continued that Cooper only sought an out of state “comp” because they were requested to do so by the EDA. But the EDA, according to the task force, denies this.
In a statement, EDA CEO Tim Sullivan said the task force’s findings would help improve the agency’s operations. “With Governor Murphy’s strong support, we have taken a number of important steps to address issues identified by this report (as well as the first report from June 2019), and we appreciate the Task Force’s recognition of the steps that have already been taken,” Sullivan said. “We will review today’s report in detail to identify further opportunities for improvement.”
Holtec did not respond to a request for comment.