Angry Murphy says EDA rules must change. Legislative, business leaders agree. Just how is question

By Anjalee Khemlani
Trenton | Jan 9, 2019 at 2:33 pm
Updated

A scathing audit of the New Jersey Economic Development Authorityone that said it paid loose attention to rules and had a lack of accountability in dispersing a potential $11 billion in tax credits to companies over a span of more than a decade — didn’t shock many top political and business officials Wednesday.

Rather, it reinforced what many already felt about the current tax incentives in the state: They need to change.

How the incentives are changed is a work in progress between Gov. Phil Murphy and the Legislature, but it appears certain that any proposal will be reworked to include more oversight and monitoring controls.

At a news conference Wednesday afternoon, Murphy highlighted the magnitude of the potential loss of tax dollars to the state.

“I think and dream of what we could have done with $11 billion,” Murphy said. “(That is) money we are begging the (President Donald) Trump administration for. It makes me incredibly angry. I am the chief executive officer of the state and my job is to protect every penny of taxpayer money.”

Of the potential $11 billion since 2005, $8 billion would have been approved (but not necessarily awarded) under Gov. Chris Christie, according to Murphy.

Murphy said the EDA can continue to approve Grow New Jersey and other current incentives until the new package of incentives are in place because the EDA has more oversight and accountability since a new CEO, Tim Sullivan, has taken over.

One of the biggest problems the audit found was that rules were being bent or there were no independent verifications of information that applicants provided.

This, according to Senate President Stephen Sweeney (D-West Deptford), was not how the incentives were crafted.

“When we passed the legislation for these tax incentive programs, we included standards for oversight and we expected them to be followed. As this report clearly states, the oversight requirements were not followed,” he said in a statement.

“That has to be rectified with any new incentive programs. We will work with the administration to create replacement programs that address the same priorities of generating economic growth, creating and retaining jobs and expanding long-term opportunities. The new incentives must include significant oversight and accountability so that the programs maximize their effectiveness and do not squander resources. Recommendations from the comptroller’s report should be used to make the current programs function more efficiently and should be considered to ensure the new programs are well implemented.”

Assembly Speaker Craig Coughlin (D-Woodbridge) agreed.

“The Legislature created many of the programs mentioned in the comptroller’s audit report with the goal of spurring economic development, and creating and retaining jobs,” he said in a statement. “Wasting taxpayer money is unacceptable and cannot be tolerated. The recommendations included in the report today regarding the EDA’s lack of oversight and poor management of state tax incentive programs points out the need for action and demands that any future programs include the oversight necessary to ensure that taxpayer dollars are being used wisely for the intended purpose. As we move through the process of considering tax incentive programs, the recommendations included in the report will merit serious consideration.”

The audit was based off approximately 10 percent of total awarded projects.

Murphy repeatedly has said tax incentives should play a role in making the state competitive and attractive for growth opportunities. He did again Wednesday.

“Let me be very clear on this: The tax incentives play a role in smart economic development,” he said. “But they are but one element of a broader strategy.”

Murphy said he was upset by the results of the audit.

“That money just flowed from taxpayer pockets into a black hole,” he said, adding that the total potential amount, if all applicants did in fact receive approved tax credits, could have rebuilt the entire Portal Bridge seven times or the entire length of the Gateway Tunnel.

Murphy and his staff have worked on a proposal for legislation to define the new tax incentives as outlined in his economic vision — a copy of which was published by Politico.

“The next generation of tax incentives are quite precise,” Murphy said.

But the proposal includes annual caps that the business community already is uneasy with.

“State tax incentive programs for businesses of all sizes should be an important part of our overall economic strategy to make New Jersey competitive and affordable,” New Jersey Business & Industry Association CEO Michele Siekerka said.

“That said, NJBIA has always supported transparency and sufficient monitoring of these programs to ensure that the state is getting the most back for its investments. We believe that responsible tax incentives still play a key role in our economic development strategy and to attract and retain both our large and Main Street businesses, which need to contend with our extremely challenging business climate, high taxes and costly mandates in New Jersey.

“We do have concerns that imposing a cap for a jobs-based incentive program will strike at our regional competitiveness. We hope the state will reconsider these limitations moving forward, while administering its tax incentive programs with the appropriate and effective monitoring and oversight.”

Siekerka said the caps would hinder the state’s ability to compete regionally.

New Jersey Chamber of Commerce CEO and President Tom Bracken agreed.

Bracken added that it is clear the proposal from Murphy only targets certain industries, rather than the overall business community — repeating the problem that created the original criticisms.

Instead, Bracken said, the proposal should look at a broader scope.

“By doing that, you’re going to get these incentives into a greater geography,” he said. “The old incentive program was really just North Jersey, except for Camden.”

In response to questions about the state’s ability to pursue legal action and recoup lost taxes from companies that were not eligible, Bracken says the state should just move on.

“Let’s move on, it’s over,” he said. “The audit results showed what happened. We don’t need to beat a dead horse.”

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Anjalee Khemlani | akhemlani@roi-nj.com | AnjKhem