The way New Jersey’s Economic Development Authority has awarded incentives over the years has come under fire recently, spurring a call for an audit by Gov. Phil Murphy when he took office in January.
But Rutgers University’s Edward J. Bloustein School of Planning and Public Policy was already tasked with analyzing the incentives in March 2016, and the results are in.
The more-than-100-page report concludes the state has been generous with its incentive and capital funding awards — in part due to the formulas that have been used.
Critics have said the incentives favor certain cities, such as Camden, and do not focus on infrastructure and other elements that contribute to economic growth.
Camden County, the second-highest recipient of incentives, has been subject to different rules than other regions, according to the report.
Hudson County, namely Jersey City, has received the vast majority of approvals (70 percent) for incentives.
From December 2013 through August 2017, the EDA approved 227 Grow New Jersey awards for 59,000 jobs, totaling over $4.4 billion in potential tax credits — not all of which have been realized yet.
In a nutshell, critics and supporters have both been right: There is indeed room to improve the structure of incentives, and, simultaneously, it is too early to tell the true impact of the incentives on the state’s economy.
Here are other observations from the report:
- There has been a significant volume of project approvals under Grow NJ, which are associated with significant volumes of retained and created jobs, but which will also generate a substantial offset to the Corporate Business Tax and Insurance Premium Tax in the years ahead.
- Given the long lead time associated with Grow NJ and Economic Redevelopment & Growth projects, it is too soon to fully evaluate the impact of these programs on the state’s economy.
- Projects approved under Grow NJ are generally concentrated in the northern, more populous counties of the state. A significant percentage of project funding in the eight southern counties has been concentrated in Camden.
- Redundancies in the Grow NJ base and bonus award structure are potentially providing more generous incentives than intended by the statute.
- Because certain bonuses have been underutilized, it is not clear that the program has advanced certain policy goals intended by the legislation, such as clean energy investment and the creation of incubators.
The report suggests room for improvement through:
- A deeper analysis of the types and quality of jobs created or retained, and whether some or all of the related economic activity would have happened with lower or no incentives.
- A review of the overall impact of the reduction in Corporate Business Tax revenues (which would be made up for by higher Gross Income Tax from created or retained jobs), given the constitutional requirement that the Gross Income Tax fund property tax relief while the Corporate Business Tax and Insurance Premium Tax are the primary resources for the General Fund.
- Given the Grow NJ program’s goals of job creation and retention, we recommend that the alternative approach used in calculating certain awards in the city of Camden (the “Camden alternatives”) be revised to tie awards more closely to the employment created by these firms.
- NJEDA should consider eliminating or revising the bonus for Transit Oriented Development in Urban Transit Hubs and Garden State Growth Zones. This bonus may be redundant in most cases in these jurisdictions, where it accounts for about 21 percent, or about $250 million of the total award value for projects qualifying for the bonus.
The full report can be found here.