Updated With tax rebates unlikely, bill would give 200 N.J. companies tax credits instead

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A bill introduced this week would give tax credits to some 200 companies — instead of tax rebates they’re owed under a former state incentive program — a remedy that insiders say is at least practical given the state’s fiscal woes, if not totally palatable.

The legislation, introduced Wednesday with bipartisan support, would allow the state to issue the 10-year credits in place of rebate checks promised under the former Business Employment Incentive Program. The state reportedly owes at least $650 million in such rebate checks, but has failed to pay them in recent years because the money appropriated for the program has been diverted to help plug other budget gaps.

State Sen. Raymond Lesniak (D-Union), who sponsored the bill with Sen. Joseph Kyrillos (R-Middletown), said the solution beats the alternative for companies that were getting nothing in return for pledging to create jobs and grow in the state.

“I would hope so, because there’s certainly not any money in the budget to make the payments that are due now,” Lesniak said. “There’s no ability to do that and there’s no foreseeable ability to do that. It’s almost like restructuring your debt.”

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The unpaid BEIP rebates have been a badly kept secret in the state’s business community in recent years, but word spread last week after The Record reported that the state had gone back on its pledge to some 200 companies, ranging from mom-and-pops to the likes of Union-based retail chain Bed Bath & Beyond. Under the fine print of the BEIP program, recipients are told the rebates are contingent on annual budget appropriations.

To make matters worse for those businesses, Gov. Chris Christie’s latest budget proposal unveiled Tuesday included no new funding for BEIP, which was discontinued under the state’s 2013 overhaul of the state’s incentive programs.

So the legislation proposed Wednesday was welcome news to business leaders, even if it wasn’t ideal.

“A revamp of the program to make sure people get their incentives is important,” said Michele Siekerka, CEO and president of the New Jersey Business & Industry Association. “Because it was subject to appropriations, each year it becomes part of the budget process. And each year, when you say, ‘What are you going to cut?’ it comes up.

“We need to move it away from appropriations,” she said. “It’s a commitment we already made, we need to keep it to businesses.”

Ted Zangari, a real estate attorney who has helped craft the state’s incentives laws over the past decade, said “no businessperson imagines that a state would renege on its obligation to a company which it just induced with money” — notwithstanding the fine print — after the business just agreed to stay and grow in the state. That’s not to mention the laundry list of requirements that come with qualifying for state incentive programs.

“Whether it’s a large or small financial incentive amount, the optics of the state of New Jersey dishonoring its financial obligations  have spooked businesses,” said Zangari, a member of Newark-based Sills Cummis & Gross. “I think the business community and economic development professionals are gratified that the governor and legislators are paying heed — and quickly — to this issue.”

Bed Bath & Beyond spokeswoman Jessica Joyce said the company was optimistic about the steps taken in Trenton this week.

“We have shared our concerns about the BEIP program and our grants with members of the Legislature and the administration, and we are eager to discuss a way to move forward that will work for us, for the program and for our state,” she said. “We were encouraged by Gov. Christie’s proposal this week to permit grantees to voluntarily convert BEIP grants to tax credits, and we would be open to such a solution.”

State Treasurer Andrew P. Sidamon-Eristoff said Tuesday that he planned to work with the Legislature on such a proposal, which would provide more certainty to businesses than they would get under the rebate program.

“I should note that, in conjunction with his budget, the governor is recommending the adoption of legislation to permit the voluntary conversion of outstanding BEIP grant commitments into refundable tax credits,” he told reporters during a briefing. “This will insulate the state’s timely fulfillment of its important commitments to job-creating businesses from the annual appropriations process.”

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