Murphy says N.J. must revamp how it hands out tax breaks to companies as controversy rages over embattled program

Posted Jun 5, 2019

Less than a month before New Jersey’s embattled corporate tax incentive program expires, Gov. Phil Murphy on Wednesday pushed his plan for a complete revamp he said won’t just enrich large companies — as critics have charged — but boost startups and rebuild communities.

Murphy laid out his proposal during a speech in Cherry Hill, the backyard of South Jersey political power broker George Norcross, a fellow Democrat who is at the center of an increasingly heated battle over how taxpayer-funded incentives — or tax breaks — have been used in the Garden State.

Critics have alleged the program has enriched Norcross, a wealthy insurance executive, and various business entities that are tied to him.

“This is not about one city, one company, or one person,” Murphy said, without mentioning Norcross by name.

“What this is about is making sure we have policies in place that don’t just allow some to do well, but which allow entire communities to do well," the governor added during his speech at 1776, a cooperative workspace and market at the Cherry Hill Mall.

Murphy says he has no issue with New Jersey using tax breaks, which are traditionally handed out by states to lure or keep businesses and create jobs.

But the governor has spent months targeting the $11 billion in tax incentives handed out under his Republican predecessor, Chris Christie. And he reiterated Monday that he will not renew the program set to expire June 30.

“I will not unilaterally disarm our economic development while our competitor states are luring businesses, in part, through incentives,” Murphy said.

“However, I will not simply renew a set of incentive programs when serious questions exist about whether they have been successful in spurring broad-based economic activity in our communities, or even if their most basic promises have been met," the governor added.

The Legislature must agree to Murphy’s suggested changes for them to take effect by the end of the month, or the governor and lawmakers could reach a deal. Otherwise, the program will end with no replacement.

State Senate President Stephen Sweeney, D-Gloucester — a close Norcross ally who often feuds with Murphy — has said he prefers the current program and opposes Murphy’s calls to cap the amount of tax breaks doled out at $400 million a year.

Murphy has latched onto a scathing state comptroller’s report from January that said the New Jersey Economic Development Authority — which oversees the program — may have “improperly awarded, miscalculated, overstate and overpaid” tax credits to a number of companies that it could not verify had created the jobs they promised.

Murphy launched a task force to investigate the matter. The group will issue its first public report June 11 in Trenton.

Among the companies scrutinized are four with ties to Norcross, considered the most powerful non-elected official in New Jersey.

Norcross has sued the governor, claiming Murphy has overstepped his authority in creating the task force. Norcross insists the tax breaks were properly used to help revitalize Camden and that Murphy has a political vendetta.

Recent reports have said the EDA was served with a state grand jury subpoena seeking documents related to the program. Another report said the grand jury subpoenaed the authority to get information on the tax breaks given to Norcross-linked companies.

All of this has added more tension to the already strained atmosphere in Trenton, where Murphy has been clashing with his fellow Democrats who control the state Legislature less than a month before a new state budget must be enacted July 1.

In addition to capping the money awarded, Murphy wants the tax breaks focused on startups, incubators, and small businesses to help spur innovation.

His proposal includes five programs that would:

  • Give credits to companies in high-growth industries, U.S. businesses creating a northeast headquarters, foreign businesses creating a U.S. headquarters, and major job retention projects;
  • Invest in commercial, residential, and mixed-use projects;
  • Focus on redeveloping Brownfield sites;
  • Give tax breaks to developers who revitalize historic buildings;
  • Create an Innovation Evergreen Fund focused on luring venture capital investment into startups in the state.

Murphy said the state would make sure companies honor wage laws, hire union labor, and use workers from their communities.

“Instead of simply trumpeting the groundbreaking for a new office building, let’s trumpet the groundbreaking of a building that contributes fully to community redevelopment and rebirth,” he said.

Brandon McCoy, president of liberal think tank New Jersey Policy Perspective, praised Murphy’s proposal, saying the reforms would “correct the serious flaws” in the state’s “economic development programs.”

“This package of reforms is forward thinking and, more importantly, follows best practices from across the nation," McCoy added.

Peter Kasabach, the director of advocacy group New Jersey Future, says his organization favors “incentives that not only spur economic development but do so in a place-based way.”

“This shift in the conversation is essential if we want to see real, lasting results in our cities and downtowns which are already seeing the greatest demand for housing,” Kasabach said.

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