Ted Zangari, an attorney with Sills Cummis & Gross in Newark, is one of the state’s top experts in the use of government grants and awards to companies. In fact, he helped craft many of the programs.Zangari has counseled many companies that have moved into and out of the state, including NY Life’s 600-employee back office operation and UPS’s 700-person technology department.
Earlier this week, Carrier announced it was going to keep over 1,000 jobs in Indianapolis (instead of moving to Mexico) after receiving incentives from its state government.
We asked Zangari if Carrier could have received the same type of incentives if it were headquartered in New Jersey.
Here’s a summary of what he said:
1. Carrier would be out of luck in New Jersey. While Carrier reportedly will keep 1,069 jobs in Indiana, it is still sending 1,400 to Mexico, meaning fewer than 50 percent of the company’s total employment in the state is going to remain. According to Zangari, the NJEDA’s “statewide employment” test requires a company receiving incentives to maintain at least 80 percent of the workforce that was in place throughout the state in the year before the threatened move out of state (or country, for that matter).
2. If Carrier was able to overcome the 80 percent test, Zangari said our state’s “GrowNJ” and workforce training grant programs would give the company more financial reasons to “stay and expand” than under the Indiana incentive programs because of the availability of unique bonuses for super jobs and higher-salary skilled positions that don’t often go overseas. And, Zangari noted, Carrier would be inclined to invest more than the $16 Million it is reportedly spending in Indianapolis if the plant was located in our state because GrowNJ also features a bonus exclusively for manufacturers that invest heavily in new plant and equipment.
3. As for the national media scrutiny surrounding business incentives sparked by the Carrier deal, Zangari contrasted the Indiana and New Jersey incentive programs, noting the several financial “caps” and “institutional controls” embedded in the GrowNJ program, including:
- A “net benefits test” which ensures that the state will receive at least 110 percent in projected new revenue over 20 years in return for every dollar awarded over the usual 10-year payout.
- A limit on the on the annual award payable under the formula on existing, retained jobs that’s pegged to the amount of new capital investment in the facility being made by the company.
- An overall limit on the annual award payable under the formula equal to 90 percent of the actual employer withholding taxes paid to the state.
One last thing: When asked whether state incentives will ever fade away, Zangari said yes, but with a note. “Only if our national economy ever reaches full employment,” he said. “Until then, it is naïve to think that states will unilaterally disarm completely from incentives and let jobs and ratables walk out the door to the other 49 states that are desperate to grow their top line and avoid tax hikes or budget cuts.”