Assembly panel votes to extend incentives — but Murphy is all but certain to veto bill

By Anjalee Khemlani
Trenton | Jun 13, 2019 at 1:56 pm

With less than three weeks left until some of the state’s existing tax incentive programs expire, the Assembly Commerce and Economic Development Committee voted unanimously Thursday to extend the programs until 2020.

The bill is not likely to be signed by Gov. Phil Murphy.

The bill, sponsored by Assemblywoman Eliana Pintor Marin (D-Newark), saw heated debate over whether or not to continue existing programs or to let the Grow New Jersey and Economic Redevelopment and Growth grant programs end June 30.

The New Jersey Chamber of Commerce thanked the Assembly committee for advancing the bill, saying the state will not have enough time to implement new incentive programs.

“Recognizing that the current programs took approximately 18 months to effectuate, we cannot create a new, more effective, functioning program within the next two weeks,” Executive Vice President Michael Egenton said.

“Nor can we allow for the current ones to expire. A state that lets its economic growth incentives lapse signals that it is ‘out of business.’”

The governor has a small window to take action, but he has repeatedly said he will not extend the existing programs, noting the state comptroller’s audit, which found weak internal controls at the Economic Development Authority in the assessment and accountability of awards already approved.

“I will not unilaterally disarm our economic development while our competitor states are luring businesses, in part, through incentives,” he said at a recent news conference.

“However, I will not simply renew a set of incentive programs when serious questions exist about whether they have been successful in spurring broad-based economic activity in our communities, or even if their most basic promises have been met.

Murphy has introduced his proposed replacement programs, but no bills have made it through the Legislature yet.

“What this is about is making sure we have policies in place that don’t just allow some to do well, but which allow entire communities to do well,” Murphy said in a statement after the unveiling of the new incentives.

“Our proposed incentives meet this test. Our current program failed this test.”

The governor’s programs include spending caps, which was supported by New Jersey Policy Perspective President Brandon McKoy.

“We discuss the effect these programs have had with national experts … this is a best practice they suggest,” McKoy said, adding that caps essentially act as a budget for the state and will help predictability.

“Other than the findings of multiple reviews and analyses by other independent actors, the Fiscal Impact Statement that accompanied the final version of the 2013 EOA clearly states that the loss of revenue to the state’s Treasury, due to credit redemptions, would be enormous,” he said.

“It also says that the levels of Corporate Business Tax uncertainty and losses, even with implied increased local spending and jobs development, could be substantial and result in a decade of direct business tax revenue reductions and losses. While some would like to deny the reality, those warnings have come to fruition.”

Anthony Pizzutillo, founder and principle of Pizzutillo Public Affairs, said the caps would create more uncertainty for businesses, which can take more than a couple of years to set up in New Jersey and apply for tax incentives.

“Since we have a net benefits test, we don’t need caps,” he said.

Pizzutillo also said that a majority of businesses have moved to distressed areas of the state.

“Seventy-two percent of awards over last five years have been to statutorily-defined distressed areas,” he said.

When legislators brought up that Hudson County created more jobs, but a greater total of tax awards were given to Camden County, Pizzutillo said the idea behind more generous incentives has to do with the idea that Camden was more distressed than Hudson County, so the investment of a business would be more expensive.

Andrew Musick, with the New Jersey Business & Industry Association, said states across the country use incentives, and the programs in New Jersey help the state compete.

The incentives have helped Camden and Newark, he said, but re-evaluating existing programs is necessary.

The Chamber of Commerce Southern New Jersey, which represents 11,000 businesses — and was founded by Campbell Soup Co. and RCA when they were the largest employers in Camden — also supported the incentives.

Christina Renna, vice president of the chamber, said the programs have done what they were supposed to do, and that the Economic Opportunity Act’s inclusion of Camden as a focus was the first time the city saw a real change.

But that could be changing simply by the political climate around tax incentives, she said.

Renna said two companies halted plans to open locations in Camden after the battle over tax incentives started.

“We fear more businesses will be moving out of Camden,” she said.

“Two businesses that had committed to moving into Camden have declined moving into Camden. One is a large employer, one is … a midsize employer. One of the businesses specifically cited the political climate. So, words matter.”

ROI-NJ has learned the companies were Union Packaging of Yeadon, Pennsylvania, and Men of Steel of Bensalem, Pennsylvania.

The committee vote sets the stage for the bill to be heard next week by the full Assembly.

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