Coalition makes a push for (smaller) incentives

File photo Ted Zangari of Sills Cummis & Gross.

When it comes to discussing factors involved in retaining and attracting companies to a region, Ted Zangari likes to quote the famous New York City businessman who made a fortune before making a surprising entry into politics.

No, not that one.

Zangari, a member at Sills Cummis & Gross P.C. and the leader of the Smart Growth Economic Development Coalition, is a big fan of former New York City Mayor Michael Bloomberg.

Bloomberg, Zangari said, didn’t run from the fact his city was expensive. In fact, Zangari said, he embraced it.

“Bloomberg said, ‘Stop complaining about the high cost of living in New York City,’” Zangari said. “‘Consider yourselves fortunate to live in one of the world’s greatest cities, and you’re paying a premium for that.’”

Zangari feels the sentiment carries weight in New Jersey, too.

“We live in one of the greatest metropolitan areas on the planet,” he said. “People are willing to pay a premium; just ask all the empty nesters who prematurely left for Florida, only to return somewhere where there actually were signs of life.

“The thing is to not have a super-premium.”

The subject came up during a NAIOP New Jersey event Tuesday in Newark, when the Smart Growth Coalition spelled out the proposals and suggestions it was giving Gov.-elect Phil Murphy.

The proposals, featured extensively in ROI-NJ after the election, discussed public incentives, regulations, local land-use laws and shortage of space.

The issue of incentives, as it always does, took center stage at the event.

The state Economic Development Authority‘s Economic Redevelopment & Growth and Grow New Jersey incentive programs, which came out of the Smart Growth Coalition’s efforts eight years ago, need to be adjusted.

But by how much?

“The incentives we crafted, ERG and Grow New Jersey, were crafted out of the great recession of 2008,” Zangari said. “And, candidly, we’ll be the first to recognize and acknowledge that the economy is much improved. So, it’s easy to say, ‘Let’s start dialing back these incentives. We don’t have to be as generous as we were previously.’

“(Eight years ago), we had to try harder to get everyone’s attention. Retained companies were OK at generally being kept at par with the costs they would incur or the savings they would realize, if they moved out of state. But for a company not already here, putting them at par with Pennsylvania and points south, west and north wouldn’t have been good enough. We needed to give them a premium.

“Under today’s circumstances, with vacancy rates much improved, we can’t be as generous. And if we’re going to lose some companies in the years ahead because we can’t afford a premium, so be it.”

The state, however, cannot afford to do away with incentives altogether, as some have suggested, Zangari said.

“We can’t unilaterally disarm,” he said. “We’re trying to be respectful of the budgetary situation (in) which the new governor finds himself. It’s going to be dire. We are trying to find a balance between ending a program and delivering the kinds of premium numbers and the complete closure of cost gaps that we were able to afford existing companies and new companies in years past.

“So, we’re trying to calibrate somewhere in-between that retains New Jersey businesses, that narrowly closes the cost gap instead of completely closing the cost gap. And we’re trying to tempt new businesses to New Jersey, not by delivering a huge premium to them, but by delivering a more modest premium to them than what they would realize by moving just a few miles away to Pennsylvania or Orange or Rockland counties.

“That’s the delicate balance that we’ve been dealing with. But to say it’s either incentives or no incentives, that’s a false choice we can’t afford.”

The state budget is just one issue impacting the state’s future ability to offer premium discounts. Potential tax changes in Washington are an issue, too. And a reminder that things have changed.

“It was nice under Grow New Jersey,” Zangari said. “Thanks to its generosity, we were able to compete with the Sun Belt like never before. Look at the UPS deal. That was between Alpharetta, Georgia, and Parsippany. The incentive made all the difference.

“But if the federal tax changes take effect, then we’re back to not being able to compete with that. We’d have to double or triple Grow New Jersey, which we can’t afford. We need to go in the other direction.”

Or take a blast from the past.

Zangari points to another political favorite of his from years gone by: former New Jersey Gov. Tom Kean.

“He had a fixation that all of our rates: income tax, sales tax, use tax, gas tax,” Zangari said. “He said if all of our rates stayed at least or below the states around us … we’ll be OK. He just looked at us regionally. For businesses that want to be in this region, as long as we stay within that limit of what other states are, we’ll be OK.”

In the end, Zangari thinks New Jersey will be OK. And that Murphy will keep incentives in some form.

The Smart Growth Coalition’s theme is “Mend it, don’t end it.” Zangari thinks Murphy eventually will do just that.

“Every governor comes in with a jaundice eye toward incentives, and, as a taxpayer here, I’m glad they do,” he said. “But I’ve been doing this for three decades, and I’ve seen they quickly become a convert.

“The only way to grow your top line is to attract businesses. And, the only way to attract businesses, when other states are gunning for them, is to level the cost differential — and that means incentives. We have seen this movie many times. They learn very quickly that, as long as we have 49 other competing jurisdictions, it would be folly to think we can lay down our arms.”