With the potential value of state-administered corporate-tax incentives just having soared to over $6 billion since Gov. Chris Christie took office more than five years ago, another legislative effort is underway to step up oversight of the incentive programs to ensure they are being properly utilized.
Assemblyman Troy Singleton -- a key Democratic sponsor of the bipartisan legislation that remade New Jersey’s tax-incentive programs in 2013 -- has introduced athat would require a regular review of their effectiveness to be prepared and posted online.
The bill from Singleton (D-Burlington) comes in the wake of Christie’sof an earlier measure he sponsored that would have required yearly evaluations of the incentive programs to gauge how well the tax breaks have been benefitting the state and its economy.
Christie, a second-term Republican, said in histhat the incentives shouldn’t be subjected to one-year reviews because it can take longer for the effectiveness of the tax breaks to fully develop.
Singleton latest try also comes just as the agency that administers the tax incentives, the state Economic Development Authority, approved a series of new tax breaks last week that bumped up the total potential value of the incentives awarded since Christie took office in 2010 to a full $6 billion. They included $188 million in new tax breaks for JPMorgan Chase Bank and $27 million for Jaguar-Land Rover of North America.
As a point of comparison, the total dollar value of the tax credits awarded through EDA for the decade before Christie took office was less than $2 billion. Thus, from 2010-2015 the awards totaled roughly three times the amount of those bestowed from 2000-2010.
Ideally, the tax incentives -- which are not outright grants but provide breaks on future tax bills if certain requirements are met over time -- allow the state to remain competitive with neighbors like New York and Pennsylvania, which have aggressively sought to lure companies out of New Jersey with their own lucrative incentives.
But critics in recent years have questioned whether New Jersey’s tax breaks have become too generous and whether enough analysis is being done to ensure the state is getting good value in exchange for the incentives at a time when funding for things like education and transportation has been stretched thin.
The 2013 legislative changes cosponsored by Singleton and signed into law by Christie included lowering minimum investment and job-creation requirements and establishing special zones and conditions that can help companies looking to move to New Jersey or to stay here qualify for even greater incentives.
For Christie, the incentive programs have become a key feature of his economic-growth strategy as the state has struggled to recover jobs and tax revenue lost during the past recession. And since the 2013 changes were enacted, more than $3 billion in potential tax breaks have been awarded by the Economic Development Authority, according to New Jersey Policy Perspective, a liberal think tank based in Trenton that has kept close track of agency’s use of the tax breaks.
But at the same time as the incentives have become more lucrative for corporations in recent years, the issue has taken on new political undercurrents as Christie has joined the 2016 GOP presidential primary. New Jersey’s and remain political weaknesses for Christie, fueling fears that he’s now using the incentives as a way to juice up jobs numbers in the short-term with little regard for how the state budget will be affected in the long run.
Sen. Ray Lesniak (D-Union), one of Christie’s loudest critics in the Legislature, earlier this year sought toon any new incentives until the Christie administration started producing more detailed information demonstrating their effectiveness. But Lesniak pulled the bill from consideration after word leaked out that Rutgers University was working with the Economic Development Authority on ways to better evaluate the incentive programs.
Virginia Pellerin, a spokeswoman for the EDA, said on Friday that an agreement with Rutgers’ Edward J. Bloustein School of Planning and Public Policy is still being “worked out.”
She alsoalready maintained on the agency’s website that indicates despite the $6 billion in promised incentives, only a little more than $72 million has actually been paid out to date due to the rules that ensure companies are living up to their promises.
Still, Singleton said his bill will seek to hold the Christie administration more accountable by statutorily requiring the evaluation to be performed by Rutgers. The bill calls for a report to be compiled within three months of passage and then every three years, and for the results to be made available to the public via the Economic Development Authority’s website.
“Essentially, we’re placing into law the work that Rutgers University recently announced it was undertaking at the request of the NJ EDA,” Singleton said.
Another important aspect of the bill, he said, would be a requirement that the state change the way it currently calculates the net benefit to the state from a project that is proposed for a tax break. In some places where the state is trying to see more development, the net benefit can be tabulated over three decades -- even if the company has only made a promise to stay at most for half that term.
“The tax credits that can be awarded are spread out for a longer period of time than the businesses are required to stay without having to repay anything,” Singleton said. “The bill corrects that by marrying the schedules.”
The legislation also includes language that would require prevailing wages be paid for projects that involve building maintenance, and custodial and security workers. And it would also ban incentives from being offered to companies shielding tax liabilities through corporate inversions -- a way some companies attempt to lower their tax burden, typically by incorporating in a foreign country.
Jon Whiten, deputy director of New Jersey Policy Perspective, said Singleton deserves praise for his efforts.
“He has proven in the last two (legislative) sessions to be a leader on transparency,” Whiten said. “There’s a lot to like in the bill.”
But Whiten also said his organization would still seek more rigorous oversight, including tougher disclosure requirements that werethat the state Department of Treasury has said it cannot follow without breaking federal Internal Revenue Service privacy rules.
“It doesn’t have to be the way it is in New Jersey,” Whiten said. “We’ve gone way, way off the deep end.”