HOW COMPANIES AND ALLIES OF ONE POWERFUL DEMOCRAT GOT $1.1B IN TAX BREAKS

NANCY SOLOMON, WNYC, AND JEFF PILLETS | MAY 2, 2019

NJ Spotlight

George Norcross

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This article was produced by ProPublica in partnership with WNYC, which is a member of the ProPublica Local Reporting Network. It was co-published with The Star-Ledger.

CAMDEN, N.J. — On a blustery day here in early March, a waterfront amphitheater in one of America’s poorest cities became the unlikely venue for a rare public performance by New Jersey’s top political boss.

George E. Norcross III, a silver-haired insurance broker who is widely regarded as the most powerful unelected official in New Jersey, showed up at the BB&T Pavilion in Camden to tout the “rebirth” of his long-suffering hometown and praise the state tax break program that made it possible.

“It looks to me like the state got a pretty good deal,” said Norcross, standing before projected photos of children cavorting in what appears to be an idyllic Camden, only blocks away from streets lined with dilapidated buildings.

In an interview a few weeks later, Norcross called himself “one of the loudest cheerleaders” for the embattled tax break program. “I’m certainly very proud to be part of it,” he said.

Norcross and his associates have reaped substantial benefits from the tax breaks. Of the $1.6 billion in tax breaks for companies that agreed to make a capital investment in Camden, at least $1.1 billion went to Norcross’ own insurance brokerage, his business partnerships and charitable affiliations, and clients of the law and lobbying firms of his brother Philip, an investigation by WNYC and ProPublica found.

Camden reaped more than four times as many tax breaks as the combined amounts of other cities designated as “growth zones,” according to data from the New Jersey Economic Development Authority.

Many of those benefits are a direct result of state legislation that Norcross was instrumental in getting passed in 2013. One influential lawmaker remembered the bill as “George’s baby.” Philip Norcross helped draft key amendments in 2014, and brother Donald Norcross — then a state senator and now a member of Congress — co-sponsored the bill.

A panoramic view of the waterfront shows the range of Norcross’ influence within the program, which is run by the state Economic Development Authority and is now in the crosshairs of Democratic Gov. Phil Murphy.

On the banks of the Delaware River, a soaring 15-story tower will be the new headquarters of Norcross’ company, Conner Strong & Buckelew, and its partners, The Michaels Organization and NFI LP. All three companies are moving to Camden from the suburbs, a little more than 10 miles away.

The project won tax breaks worth $245 million to be doled out over the next 10 years — a one-for-one match for the total cost of the construction — beginning when the companies show they have moved some 900 employees to Camden. An additional $20.4 million tax break went to the same Norcross business partners, The Michaels Organization and NFI, to construct a luxury apartment building nearby that, when finished, would allow tower employees who rent there to safely walk a short distance to work.

Camden’s crime rate is the second highest in New Jersey, and few workers walk to the waterfront complexes that are already open. Shuttle buses carry them from a local transit stop to gleaming buildings rising from vacant lots. From her apartment, community activist Sue Altman, a political opponent of Norcross, watches as “every morning a lot of cars drive in and every evening a lot of cars drive out.” Colandus “Kelly” Francis, the chair of Camden’s NAACP and a local community development group, contends the suburban workers infuse little money into the local economy.

“They are not moving into Camden, and they do not shop, they do not stay in Camden,” he said. “They come in at 9 and they leave at 5. Camden downtown at 5 o’clock is a ghost town.”

A visit on a late Friday afternoon in April tallied with their impressions, with empty train station platforms and downtown streets leaving a deserted urban landscape as a clock registered 5:13 p.m.

On the riverfront next to the Norcross tower sits the new glass-and-steel headquarters of American Water, a giant public utility represented by Optimus Partners, a lobbying firm owned by Philip Norcross. The water company has paid Optimus $854,000 since 2012, records show.

The company won $164 million in tax breaks. CEO Susan Story told NJ.com last year that George Norcross encouraged the move to Camden. “And we’re here. Thank you, George,” she said. She declined an interview request.

Just down the road, the Philadelphia 76ers built a “mecca of basketball” that houses a new practice court and corporate headquarters. Philip Norcross’ law firm, Parker McCay, represented the team in securing an $82 million tax break. A 76ers spokeswoman and Norcross declined requests for comment.

Nearby, Holtec International makes storage casks for spent nuclear fuel. Holtec won tax breaks worth $260 million, the second-largest total in New Jersey history.

George Norcross is an unpaid member of Holtec’s board, and his insurance brokerage shared a $400,000 contract for construction insurance at the Holtec site, according to documents in a lawsuit over the project. Joy Russell, senior vice president of business development and communications at Holtec, said the company supports George Norcross “and all that he has done for Camden.”

Norcross bristled when asked in an interview how many of the businesses that received tax breaks are his insurance clients.

“If you’re suggesting that, for some reason, Conner Strong, by virtue of moving to the city of Camden, somehow miraculously is making money here, you’re misinformed,” Norcross said. “We’re taking an enormous risk here. We could have moved anywhere in the country, enjoyed many different states’ incentive programs.”

In a lengthy response to questions, a Norcross spokesperson said Wednesday, “George Norcross has invested over $100 million of his company’s and his family’s money in Camden’s future. While it is true that some of the projects in which he has invested has received approval for an award, neither he nor any company from which he receives compensation has received a tax credit award, although they have been approved for them in future years subject to review and certification the projects met their obligations.”

The New Jersey law offered special incentives to investors willing to put money into Camden and other “distressed” South Jersey cities. The goal was to stimulate the creation of jobs, and some research suggests it has done so. But some Camden activists complain that not enough jobs have gone to local residents.

And now, the tax break program is under scrutiny as the latest example of political influence in New Jersey, where Norcross has been a kingmaker for at least 20 years.

Special breaks for the boss’s hometown

The most detailed study of the program came in a state-commissioned report by researchers at Rutgers University in 2018. The study found problems across New Jersey in how the tax breaks have been administered.

But its most pointed criticism focused on 13 projects it dubbed “the Camden alternatives,” which it said appeared to be excessive uses of taxpayer money for limited job creation.

Camden’s median annual household income hovers around $26,000. Every job created in the Camden alternatives would cost taxpayers $34,000 a year — a staggering $340,000 per job over the 10-year life of a grant, according to the Rutgers study. By comparison, the average cost per job in the program around the rest of the state is about $5,000 per year.

“You get these numbers that jump out and you say, ‘Wait a minute,’” said Will Irving, an economic analyst at Rutgers who co-authored the 2018 review. The researchers said they came to understand that the Camden awards were so lucrative for a simple reason — the law allows it.

Norcross has a link to at least nine of the 13 “Camden alternatives,” according to the WNYC-ProPublica investigation.

Murphy ordered an audit and, this year, named a special task force to dig into the EDA’s operations. Murphy appointee Gurbir Grewal, the attorney general, launched his own inquiry and said in a statement that he intends “to figure out what exactly happened and whether any laws were broken.”

Investigators have indicated publicly they are going back to the beginning of the legislative process, but it is unclear whether they are focusing on Norcross or his brothers. They have homed in on the Legislature’s passage of the 2013 law and amendments giving advantages to Camden and other locations.

The governor’s task force is also investigating claims made by whistleblowers who say that companies falsely threatened that they would move out of state, and that the EDA was pressured into approving applications by the administration of former Republican Gov. Chris Christie.

The program is governed by complex rules and financial calculations that have evolved over time. To qualify for a tax break, companies must make a capital investment in a new factory or office in one of about 80 “distressed” towns or other designated areas in New Jersey. They must promise to create at least 10 new jobs or retain 25 that would otherwise move out of state.

In return, the companies can deduct a portion of their investment from their state tax bills each year. The exact amount is based on a complex cost-benefit analysis of their application. They typically get a portion of the overall tax credit each year over 10 years, starting when the capital project is complete. They have a maximum of four years to finish construction.

Companies must certify their employment levels each year in order to receive the tax credit. A “clawback” provision requires them to maintain at least 80% of their target employment level for the duration of the program and five years after it expires — or pay some money back.

The program allows companies to sell their tax credits to other companies for no less than 75 cents on the dollar, cash. They can also bundle them into securities and sell them to raise working capital. Still, they are required to maintain their promised employment levels or return money to the state.

The rules became even more nuanced in projects targeted for localities known as Garden State Growth Zones, distressed areas like Paterson, Passaic, Trenton and Atlantic City. The state required a lower minimum investment and lower numbers for job retention and creation there.

The incentives to move to Camden were even more generous. Companies did not have to promise as many new jobs and would be eligible for a maximum award of $35,000 per job every year — $5,000 more than the maximum allowed anywhere else. Large projects, with at least 250 jobs and $30 million capital investment, would have no award limit.

Depending on the cost-benefit analysis, companies moving here are also eligible for a dollar-for-dollar match against their initial capital investment.

The rules left room for interpretation on a key point. In applications for every other New Jersey city, the EDA required certifications from companies that they planned to leave the state unless New Jersey granted them tax breaks. Applicants in Camden only had to certify that the tax breaks were necessary for them to move jobs into the distressed city.

It is unclear why Norcross’ company went the extra step and submitted materials to show that it was considering an out-of-state move to Philadelphia unless the tax break was awarded. Its application included a cost analysis and photographs of a potential location just across the river. Conner Strong CEO Michael Tiagwad certified that the firm “will not make the contemplated capital investment in the city of Camden without the requested tax credit.”

The EDA staff recommended its board approve the Conner Strong tax break. “The applicant has certified that the 157 New Jersey jobs listed in the application are at risk of being located outside the state,” the report said.

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