The head of the state’s Economic Development Authority got an earful Monday from lawmakers questioning if an administration critical of New Jersey’s corporate tax incentives was withholding promised tax breaks from businesses.
State Sens. Bob Smith, D-Middlesex, and Declan O’Scanlon, R-Monmouth, said at a Statehouse hearing Monday they have been fielding complaints from New Jersey businesses whose tax credits are past due and are concerned the EDA is not paying out.
“No. 1, is that true? No. 2, how many are we talking about?” Smith asked EDA CEO Tim Sullivan.
Sullivan, an appointee of Gov. Phil Murphy, told the Senate’s Select Committee for Economic Growth Strategies that the tax credits have been delayed as the EDA works to improve the system of oversight that was blasted in an audit released earlier this year.
The audit described the EDA as incapable of verifying the businesses poised to receive billions in tax breaks have made the investments in jobs and capital they had promised in exchange.
In its wake, Murphy has heaped criticism on the state’s generous tax incentive programs.
“The comptroller report provided a pretty stark set of findings with regard to our ability historically to ensure that we were accurately accounting how many jobs were actually created,” Sullivan said, adding the authority is asking for more data and cross-checking with the state’s Department of Labor and Workforce Development.
In light of the audit, he said, “it shouldn’t surprise anyone that we’re taking our time making sure we’re getting it right ... If the assertion is we’re being too thorough, I’ll cop to that.”
The EDA has awarded $11 billion in tax incentives since its inception. The majority — $8.6 billion — was awarded within the Grow New Jersey Assistance Program and the Economic Redevelopment and Growth Grant Program, though only $400 million in tax credits have actually been paid out by those programs, Sullivan told lawmakers. That figure is expected to soar to $1 billion annually starting this year.
The hearing’s pro-tax credit invited guests, including authors of legislation underpinning the EDA programs and business lobbyists, said they sought to fight the “absolute vilification” and “misinformation” of the state’s economic development strategies and tax credit recipients.
The hearing was the first held by the Senate committee — the Legislature’s answer to a controversial task force empaneled by Gov. Phil Murphy to investigate the EDA.
Smith argued that scrutiny is good but the delays are hurting New Jersey businesses counting on these tax credits and risk saddling the state’s tax incentive program with a bad reputation.
“They went in for their financing, presented to their bank that they were receiving these tax credits with a value of x, and now they’re not,” Smith said. “We want thorough. We want taxpayers to get the benefits that were promised. But the other side of that is you’ve made awards.”
The state’s pair of economic development programs expired at the end of June. Murphy has vowed to veto a bill (A4730) passed by the Legislature to extend those controversial programs into 2020.
News reports revealed more than $1.1 billion in incentives went to businesses or charities connected to south Jersey Democratic powerbroker George Norcross or people in his orbit. And Murphy’s administration said the task force found evidence that some companies gamed the system to increase their awards while others lied to qualify.
Norcross accused the task force of targeting him personally. He did not testify Monday.
The committee heard hours of testimony from tax credit boosters who argued they breathed new life into struggling cities and counteracted New Jersey’s high-tax, regulation-heavy business climate.
Allowing the programs to expire discourages businesses from moving into the state or growing here and invites competitors to poach New Jersey’s existing businesses, said former state Sen. Raymond Lesniak, who sponsored the Economic Opportunity Act that powered the Grow New Jersey Assistance Program and the Economic Redevelopment and Growth Grant Program.
“The open for business sign in New Jersey is hanging by a thread, if it hasn’t already fallen,” warned Tom Bracken, president of the New Jersey Chamber of Commerce, who said EDA programs aren’t perfect but the “absolutely vilification,” “ongoing vitriol” and “misinformation” surrounding the economic development programs are “damaging to the state’s reputation.”