Tax Incentive Task Force report isn’t pretty — but here’s why one expert thinks it could speed up process of getting new incentives

By ROI-NJ Staff
Trenton | Jan 17, 2020 at 6:00 am

The economic development professional — desperate for any sign of a thaw in the negotiations to get a new set of incentives on the books — read over the findings of the second report from Gov. Phil Murphy’s Tax Incentive Task Force and found a silver lining.

“In a way, it’s probably good that a new program wasn’t enacted yet, because now the recommendations can be considered by legislators and incorporated in whole or part in the law from the get-go,” the person said.

The person, of course, did not want to be identified. No one in this game wants to pick sides in what appears to be a tussle between Murphy and state Senate President Steve Sweeney (D-West Deptford) and South Jersey powerbroker George Norcross.

And there’s plenty in the report that figures to annoy the South Jersey team, including, “Additional evidence relating to the EDA’s oversight of the tax incentive applications of Cooper Health, Conner Strong & Buckelew, the Michaels Organization and NFI.”

Norcross, of course, is the chair of Cooper Health and the executive chairman of Conner Strong & Buckelew, an insurance brokerage firm. (The summary of findings is below.)

Our insider, however, said they are not too concerned about any additional acrimony between the sides.

“It’s been red light, green light on every legislative initiative, including incentives, so I don’t see how a little more gasoline on a raging inferno makes any difference,” they said. “It’s sad.”

The New Jersey Chamber of Commerce CEO said he hopes the report means everyone can look forward.

“As I’ve said all along, if there are any people who broke any laws, they should be dealt with individually,” Tom Bracken said. “They keep making allegations. If someone has done something wrong, deal with them. But that should not delay the efforts to move forward.

“Their recommendations are things that can easily be implemented. Let’s do it.”

Bracken also said he wished the committee had taken a more complete view of the program.

“Everything is on the negative side, which distorts this dramatically,” he said. “They have not tried to figure out how much the state has benefited from some of these programs.

“That should be the next report: You’ve outlined the negatives, now talk about the positives.”

The hope, another insider said, is that the task force report, released on the same day as the governor released more than $120 million in frozen funding — including money for Cooper’s cancer program — will help smooth over the differences between Murphy and Sweeney.

The only thing left is to see if Murphy’s package of incentives — originally outlined in October 2018 — can find their way to a vote.

The governor reiterated his hope for that during his State of the State address earlier this week. Whether that will happen anytime soon, remains to be seen.

Here’s a look at the findings, as written by the task force:

  • In its administration of tax incentive programs, the EDA has demonstrated a culture of “getting to yes” with companies applying for awards. Although the task force has not observed that the EDA willfully awarded incentives in violation of legal requirements, there are instances in which the agency made efforts to interpret and apply regulations in a way that favored the interests of the applicant, raising questions concerning the extent to which the state body carried out its role as a steward of public funds.
  • The EDA’s funding structure is such that the award of tax credits is directly and positively correlated to the agency’s own revenues.
  • The EDA’s manner of administering of New Jersey’s tax incentive programs failed to maximize the intended economic benefits to the state.
  • Deficiencies in the EDA’s evaluation of tax incentive applications may have resulted in certain improper awards to companies.
  • The EDA’s post-approval and certification processes lack robust due diligence, rely too heavily on the data provided by awardees and may have resulted in improper or inflated awards.
  • The EDA failed to accurately determine whether applicants are “at risk” of locating jobs outside of New Jersey if denied incentives, resulting in incentives awarded in error. Due to the agency’s deficient evaluation process, companies applying for tax incentives may easily misrepresent their relocation intentions without fear of likely consequences. There is evidence that certain companies obtained millions of dollars in awards based on assertions that they would move to out-of-state locations that were never genuinely under consideration. We therefore conclude that these incentives were awarded in error.
  • Consultants who apply for EDA tax incentive awards on behalf of clients were aware of and have exploited deficiencies in the agency’s method of evaluating the jobs “at risk” of leaving the state. Certain consultants have also failed to register and disclose lobbying efforts as required by New Jersey state law.
  • Additional evidence relating to the EDA’s oversight of the tax incentive applications of Cooper Health, Conner Strong & Buckelew, The Michaels Organization and NFI.
  • The EDA lacks a robust due diligence and review process for required disclosures of certain criminal, civil and legal proceedings that involve applicant companies or their affiliates.
  • New evidence regarding “phantom tax provisions,” which were identified in the first report of the task force as permitting companies to artificially boost the amount of their awards by characterizing taxes that the company will never actually pay as “benefits to the state.” In its second report, the task force finds that these provisions were introduced into the Economic Opportunity Act of 2013 for the benefit of Holtec International.
  • The task force submits new recommendations to the EDA pertaining to its decision-making processes, measures to mitigate potential conflicts of interest between the agency’s administration of programs and its own funding, measures to improve due diligence in evaluation of company claims on applications, and the appointment of an inspector general to promote oversight.

To view or download the second report of the Task Force in its entirety, click here.

ROI-NJ Staff | editorial@roi-nj.com | @roinjnews