After more than a year and a half of political posturing over economic incentives, the state Legislature is set to deliver a new set of proposals to Gov. Phil Murphy within a week. The governor is then likely to sign the measure.
The proposed “New Jersey Economic Recovery Act of 2020” is scheduled for an 11 a.m. vote on Dec. 18 by both the Assembly Appropriations Committee and the Senate Budget and Appropriations Committee. Full floor sessions in both chambers are scheduled for Dec. 21.
Proponents argue that the measure would be the shot in the arm that the state needs as it begins to get a handle on the COVID-19 pandemic amid the vaccination rollout, and attention shifts to an economic recovery. “It does a lot for communities that have been hit hard by COVID,” Murphy said at an unrelated news conference on Dec. 16. “This is going to transform our state, particularly as we recover from this pandemic.”
Open government advocates, like the left-leaning think tank New Jersey Policy Perspective and progressive advocacy group New Jersey Working Families, questioned whether state officials and lawmakers should push through what could amount to one of the biggest spending items in recent history outside of the budget process and in a matter of days.
Murphy argued that many of the proposals that will ultimately be included in the bill have been debated for years. “This is overwhelmingly what we proposed — about a year ago — so the elements of this incentive package are overwhelmingly the elements that have been out there for a year,” he said. “When you look at the principals and the bedrock elements of this, they’re broadly speaking what’s been out there for a year.”
The program is capped at roughly $11.5 billion over a six-year period, according to Tim Sullivan, chief executive officer of the New Jersey Economic Development Authority, which oversees many of the state’s economic growth and tax incentive programs.
Of that, $2.5 billion is geared toward 10 so-called “transformative projects” that would be capped at $250 million of incentives each, Sullivan said in an interview. He added that such projects would likely include large-scale mixed-use or affordable housing developments. If a project uses only $100 million, the remaining $150 million would not roll over into another project.
In place of the Grow New Jersey corporate tax breaks — used to attract commercial projects — will be a program known as NJ Emerge. A proposed NJ Aspire program will replace the Economic Redevelopment and Growth gap financing program, which was used to finance residential projects.
Projects valued at more than $10 million would have to include a community benefits agreement between the developer, state and local officials. The agreements would encompass factors such hiring local residents, creating permanent construction jobs, improving surrounding neighborhoods, and a development’s effect the quality of life.
Both are capped at $1.1 billion a year. Awards will be much closer to between $5 million and $10 million, Sullivan said, rather than projects which under Grow NJ could earn tax breaks totaling between $30 million and $40 million. Per job credits are scaled-down, from a maximum of $15,000 per job over a decade to $8,000 over seven years.
“It’s got a lot that we should feel good about,” Murphy said. “It’s got caps — the last program did not have caps. The point was they could have spent anything.”
Senate President Stephen Sweeney, D-3rd agreed to an overall program cap backed by the governor, after resisting such a proposal for over a year. Murphy has argued a cap is necessary to rein in out-of-control spending. Critics like Sweeney – until recently – have argued that businesses would be put off if they were not certain state aid would be available to them.
Compliance and oversight
Murphy on Wednesday touted what he said were “strong compliance standards” with the new incentive package.
In 2019, New Jersey’s Grow NJ tax break program became one of the most politically divisive topics in Trenton. Murphy convened a task force that focused in on how the program was crafted and how the state awarded tax breaks under his Republican predecessor, former Gov. Chris Christie.
The NJEDA would create its own inspector general to make sure applicants are actually following the rules. Applicants would have to swear under penalty of perjury that everything they are saying is true, meaning that violations could carry much stiffer penalties.
Sullivan said the inspector general investigate allegations about companies following the rules, and refer those cases to the NJEDA, where officials might remove miscreants from the program and demand the return of incentive awards. Or alleged wrongdoers could be referred to the state attorney general.
Expanding existing programs
The package calls for another $400 million a year for a set of five incentives:
- Support for anchor institutions such as higher education, hospitals, and arts and culture;
- A Brownfields tax credit program to encourage the clean-up and redevelopment of vacant, polluted properties;
- A historic preservation tax credit program to encourage the redevelopment of vacant, historic properties across the state into money-making projects;
- Murphy’s proposed “Innovation Evergreen Fund” would be included in the package, and would come out to the roughly half a billion dollars the state envisioned. The state and private venture capital firms would jointly finance startups looking to set up shop in the state, with a dollar for dollar match; and
- Support to build or expand grocery stores in lower-income, typically minority communities with no access to food stores.
While none of the programs are specific to COVID-19, Sullivan said he anticipates some of them would be used primarily for mom and pop shops to hold over for the remainder of the pandemic.
A $50 million Main Street assistance program would call for grants, loans and other technical assistance to businesses. Similar programs have been run out of the NJEDA since the spring to help keep businesses afloat.
Other programs are simply expanded or enacted into law. The state’s popular film and television tax incentive program would be geared more toward attracting film studios into New Jersey to provide long-term economic benefits rather than the short-term effects of specific projects.
NJ Ignite, which provides rent assistance to startups, would be written into law. The Angel Investor Tax Credit program for financing startups would be expanded from $25 million to $35 million, after it maxed out last month for the first time ever. And the Net Operating Loss credit program, meant to help companies offset the financial losses that come with research and development, is being expanded from $60 million to $75 million. Under the NOL program, technology and life sciences businesses can acquire tax breaks for research and development that can be sold for at least 80% of their value.