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Urban Transit Hub credit gets another revise

EDA gives incentive teeth

New Jersey businesses deciding whether to locate or invest in the state now have additional factors to consider, as the state’s Economic Development Authority made changes to two highly sought-after incentive programs last week.

New Jersey businesses deciding whether to locate or invest in the state now have additional factors to consider, as the state’s Economic Development Authority made changes to two highly sought-after incentive programs last week.

The EDA changed its lucrative Urban Transit Hub tax credit to emphasize its job-creation component, and it expanded the range of companies that could receive incentives for creating jobs in the state if they work with research universities.

EDA officials said the changes would bring practical benefits to businesses and are an appropriate response to provisions of state law, though a critic said it’s getting difficult to keep pace with all the rewrites of the Urban Transit Hub award, which is only a few years old.

“What we want to have is consistency when you look at each project,” said agency CEO Caren S. Franzini.

Businesses that receive Urban Transit Hub credits must create 200 jobs to receive the full amount of the tax credit, which covers 100 percent of the capital investment in large-scale developments. But in addition to the jobs test, projects undergo a net benefits analysis by the EDA that can lower the amount of the credit. The change would require the reduction for projects that don’t create 200 jobs to be applied to an amount that was already reduced by the net benefits test.

As an example, before the change was made, a company making $100 million in capital investments would receive a 20 percent reduction if it didn’t create 200 jobs, so its credit eligibility would be cut to $80 million. If that same company brought in only $75 million in net benefits, such as additional tax revenue, the credit eligibility would also be reduced, from $100 million to $75 million. However, until the policy change, the EDA wouldn’t combine both reductions. Under the change, this company would receive a 20 percent reduction on the reduced $75 million eligibility, cutting it to $60 million.

This became an issue earlier this year, when Goya Foods received an $82 million credit despite its projects both failing to create 200 jobs and having its eligibility reduced by the net benefits test. EDA board member Marjorie Perry questioned the lack of a combined penalty.

After consulting with the attorney general’s office, the EDA’s officials concluded it can combine the two reductions on future awards.

“It’s just a question that had not been raised” previously, Franzini said.

The first time the new standard was applied was to Prudential Financial, which wasn’t affected, as its plan would create more than 200 jobs.

In addition, the EDA expanded the eligibility for a bonus to companies that are receiving Business Employment Incentive Program grants. All businesses that work with research universities in the state will be eligible for expanded grants, which previously had been limited to businesses within five miles of the universities.

“We found that very limiting, for companies to physically be within five miles,” Franzini said.

But Deborah Howlett, president of the nonprofit New Jersey Policy Perspective, questioned the policy changes, saying that they raise questions about the effectiveness of the programs.

“They shouldn’t be changed and amended and rewritten to fit every deal as they come along,” said Howlett, whose organization is critical of targeted incentives.

Howlett said the transit hub program in particular has been changed repeatedly, leaving earlier applicants in a position where they had to meet different standards than current applicants.

“You can’t change the rules in the middle of the game,” Howlett said.

E-mail to:  akitchenman@njbiz.com