Charles Burton is LeFrak’s head of community relations. –
Generative artificial intelligence is almost a loaded term these days. It conjures high levels of excitement, opportunity and fear. From an economic development perspective, it is the next big thing. According to a report issued this year by Massachusetts Institute of Technology research scientist Andrew McAfee, AI will affect economic growth more quickly than other general-purpose technologies.
“Generative AI is already improving the productivity and quality of many tasks, and the technology is beginning to be used to redesign multistep, multigroup processes, making them faster and less labor-intensive,” McAfee wrote. “This technology’s deepest impact on the world of work will come as it’s used to reimagine entire organizations. This deep reimagination will be a decentralized and distributed phenomenon, carried out by innovators and entrepreneurs throughout the economy.”
That’s why Gov. Phil Murphy and the state Legislature were spot-on to create a tax credit for innovative AI companies to come to New Jersey. Sponsored by state Sen. Raj Mukherji (D-Jersey City) and Assemblyman Chris Tully (D-Paramus), the Next New Jersey Program is intended to attract new investment into the state’s AI industry, creating new jobs and economic opportunities. The program will unlock access to capital for New Jersey’s innovators and entrepreneurs and ensure they have access to the infrastructure necessary to make new, cutting-edge developments, which will position the state as a national leader in the industry, according to the governor.
The Next New Jersey Program will be administered by the New Jersey Economic Development Authority, which will award tax credits to eligible businesses that are engaged in AI work or large-scale artificial intelligence data centers. Artificial intelligence-related activities could include developing new algorithms and techniques, such as machine learning and natural language processing; creating AI-powered software and hardware products, including for medical modeling; and developing AI chatbots for customer service, according to EDA.
Jersey City tops the list of where AI companies should thrive in New Jersey. The city’s growth rate remains vibrant because of its working, living and playing environment that fully integrates an incredible talent pipeline into modernity. That reality is a vital component for attracting the employees AI companies will need. Just as important, in a further unique way that is vital for the AI industry, Jersey City has a huge power infrastructure. At a time when access to power is at a premium, Jersey City has the capacity to meet AI needs.
Mukherji, who represents Jersey City and is a former information technology CEO, clearly understands how Jersey City can flourish as an AI hub.
When the legislation was enacted, he said: “Through the responsible incentives in the Next New Jersey legislation, we are cementing New Jersey’s place at the forefront of technological advancement and economic competitiveness as we tap into the transformative potential of AI. Through job creation, catalyzing innovation, and empowering our higher education institutions, we will see incredible return on our investment.”
Still, the major challenges of firmly establishing New Jersey as a true home for AI will fall to the next governor, working from the foundation the Murphy administration has established. There are several issues that will have to be addressed.
- First, Jersey City is an Urban Enterprise Zone municipality. Since January 2022, only the first $100,000 of taxable purchases in a calendar year is exempt from Sales and Use Tax in UEZ zones. Let’s eliminate that cap for tenants who are undertaking substantial renovations or rehabilitations of commercial buildings to accommodate both AI tenants and AI technology procured by existing tenants.
- Second, given the enormous power demands of AI technology, the state should create a program that provides discounted utility rates or rebates.
- Third, new and existing AI companies should be exempted from the state’s Corporate Business Tax surcharge to ensure New Jersey maintains a competitive edge in this sector.
It’s important to recognize New Jersey won’t just be competing with Pennsylvania and New York for these businesses, or even the rest of the nation, for that matter. AI is a global opportunity. Our next governor will have to recognize this reality as we position the state for the next generation.
Charles Burton is LeFrak’s head of community relations.
