Zangari thinks tumult around EDA could have ‘chilling effect’ on companies considering N.J.

With the tumultuous past few months at the Economic Development Authority, and the current spotlight on existing incentive programs in the state, businesses looking to move to New Jersey may be taking a more cautious approach.

That’s according to Ted Zangari, head of the Smart Growth Economic Coalition and an attorney at Sills Cummis & Gross.

At a panel Tuesday hosted by the New Jersey chapter of real estate organization NAIOP, Zangari said the fight in Trenton is a bit overwhelming right now.

“There is a lot of testosterone coursing through the veins of Trenton right now,” he said, noting his comment was a personal observation.

The effects of the state comptroller’s audit of tax incentive programs, replacement of the EDA board chair and discussions of restrictions on new tax incentives could have a chilling effect, he added.

“We need to be careful because the international, and certainly the national, corporate site selectors are watching, and they’re listening, more than ever because we live in an internet world where wire stories are picked up,” Zangari said.

“That’s not to say we shouldn’t have a healthy debate … but it is to say as we air our family laundry — I won’t say dirty laundry — we just need to be mindful of the fact that corporate site selectors who have the abilities to make decisions could potentially be turned off. There could be a chilling effect if the testosterone level gets too out of hand.”

Zangari previously has been vocal in his defense of the current tax incentive programs, which are under fire after a report from the Office of the State Comptroller showed some companies abused the lack of internal controls at the EDA.

Policymakers in Trenton agree that business incentives are necessary, but also that the Grow New Jersey program is more generous than the current economic climate needs, Zangari said.

What they may not realize, Zangari said, is that a majority of the recipients of tax incentives have been middle-market companies, rather than large corporations, as has been often criticized.

“We have our fair share of Fortune 500 companies … but a vast majority of the companies are medium-sized companies,” he said.

And they seek the existing infrastructure and labor force that New Jersey has to offer, he said.

Don’t be confused. Zangari is not down on incentives, which he has long said need to be amended, not ended. And he was overtly supportive of the governor’s economic development record in his first year in office, including trade trips to Germany and Israel.

But Zangari also told the crowd that the idea of capping tax incentives would harm New Jersey’s potential to attract businesses.

Already, existing caps have already “drastically reduced the awards on low-wage jobs” outside of distressed cities, Zangari said.

Similarly, the capping of new incentive awards can have a negative impact.

“You can’t do reliable budgeting … without having some kind of cap, because an open spigot would be maddening if I were the state treasurer,” Zangari said.

“Having said that, a cap should be a soft cap.”

The reason, he explained, is that, if he were to tell a company that were scouting sites today that there might be a cap on awards that it could apply for two years down the line, its level of commitment to New Jersey would change.

“So, let’s make sure that, if there’s a cap, that it’s soft, and that it’s high enough,” Zangari said.

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