Unlike New Jersey Gov. Phil Murphy, who has called our tax incentive programs a “national embarrassment,” I’m proud of what tax incentives have meant for our state.
The New York Times, in an article recently published, “exposed” potential abuses by New Jersey companies that were considering moving out of the state that is rated near or at the bottom in numerous studies of states being business-friendly.
Quite likely, these companies chose New Jersey because our legislation, Grow New Jersey, did what it was intended to do: The incentive award amount was a deal closer, or at least narrowed the gap enough so that companies would not take the leap across the border. So, is it really “news” that none of the 12 companies threatening to leave New Jersey followed through on the threat? No. The headline on the story should have been that, before Grow NJ, the win-loss record would have likely been reversed: New York 12, New Jersey 0.
The allegations of wrongdoing in the article were a one-sided presentation that ignored facts critical to explain its narrative, that a dozen companies over a span of five years considered a single location —Blue Hill Plaza — as an alternative to New Jersey, but none ultimately moved there and, as a result, the reporters contend, their investigation “suggests that nearly all of the 12 companies never seriously considered moving to New York.” By the way, the New York Times reporters got it wrong — at least two of the 12 companies were located in New York, not New Jersey.
Blue Hill Plaza is comprised of a 21-story tower and an eight-story building, so their narrative begins with the premise that it is somehow suspicious for 12 out of hundreds of Grow NJ applicants, over five years, did not choose a space on one of the 29 floors at a complex where there are likely many suites per floor.
Why didn’t any of these 12 companies move to this location, which the reporters called “ideal” when pointing out its proximity to New York City and said, “offers leases at a lower rate than many similar high-end buildings in New Jersey”? The savings for a company that leaves New York City or New Jersey for such less-expensive locales, over the typical five- or 10-year lease, is usually in the hundreds of thousands of dollars for small businesses and in the millions for larger ones. And, as if that’s not alarming enough for New Jersey’s economic prospects, consider that our neighboring states offer their own incentives, as the reporters noted, which only serve to make the difference in costs even wider in favor of the competitor states. The companies choose New Jersey because of our tax incentives program.
Another question raised by the investigative reporter: Why didn’t some of these companies obtain a competing incentive offer from New York? One likely explanation is that the projected Grow NJ award was a “game-over” moment for many, if not most companies — meaning that, if New Jersey would come through with an incentive package that effectively dealt with the cost-difference with New York, there would be no compelling reason to do more than what was required by the Grow NJ program to qualify. The New Jersey Economic Development Authority does not require an applicant for Grow NJ to obtain an incentives offer from an out-of-state economic development agency. Why, when a neighboring state is already substantially less expensive, would New Jersey require an interested company to contact a recruiting agency in a competing state? A company’s failure to pursue an out-of-state incentives package is not odd, nor is the NJEDA’s failure to require one.
Lastly, how can the reporters state so confidently that “nearly all of the 12 companies never seriously considered moving to New York”? The Grow NJ application process, thanks to a requirement I added by law, requires a CEO to certify under oath, with penalty of perjury, that existing jobs are “at risk” of leaving New Jersey and the incentive is a “material consideration” in the final location decision, and that jobs would not be created or retained in the state “but for” the incentive. NJEDA requires a company to back up that certification with words (explaining why the company is portable, or “at risk”) and numbers (a spreadsheet demonstrating the cost difference between the New Jersey location under consideration and a possible out-of-state location). Nowhere does the Grow NJ program mandate, nor should it, that the out-of-state location be the absolute alternative site to the New Jersey location. The state rated the most business unfriendly cannot require that certitude.
So, does all of this mean Grow NJ is fine as it is and nothing needs to be changed? Absolutely not. Former Sen. Joe Kyrillos and I have formulated a Grow NJ 3.0 that will better address the incentives process going forward by strengthening program governance and oversight, increasing the documentation required on the amount of incentives needed to be successful in getting an incentive, requiring annual CEO certification of compliance and strengthening and expanding on the information required in the incentive agreement to facilitate compliance oversight by NJEDA and authorizing it to require a top management official to appear before its board in executive session to answer questions.
Without tax incentives, Panasonic’s Americas headquarters would not be in Newark, but would be in Atlanta.
A tax incentive completed the construction of Revel, now doing business as Ocean Casino Resort. That would still be a white elephant casting a blight on Atlantic City, but, instead, put Building Trades workers to work completing the building and now employs hundreds of workers who would otherwise be unemployed.
Without tax incentives, Teachers Village in Newark would still be a five-block collection of old rundown buildings that tax incentives transformed into moderately-priced apartments, which have stimulated other new construction in the neighborhood with new restaurants, shops and cultural amenities for Newark’s residents.
New Jersey’s tax incentives have created 252 economic development projects, $4.5 billion of private capital investment, attracted 30,000 new jobs, retained 30,000 jobs, created tens of thousands of Building Trades jobs and brought huge revenue growth for the state that is at the bottom of being business friendly.
Hopefully, Gov. Murphy and the Legislature will quickly come to an agreement that will mend our tax incentives and not end them. Otherwise, other states will literally eat our lunch.
Former New Jersey state Sen. Raymond Lesniak sponsored all of New Jersey’s tax incentives legislation. He retired from the state Senate in 2018 after serving 40 years in the Legislature.