On Wednesday, the New Jersey Economic Development Authority (NJEDA) submitted a report to Governor Phil Murphy, conducted by Rutgers University’s Edward J. Bloustein School of Planning and Public Policy, which (among other things) recommended changes to the State’s business incentive programs, including the Grow New Jersey Assistance Program (Grow NJ) and the Economic Redevelopment and Growth Grant Program (ERG).
There has been a significant volume of project approvals under Grow NJ, which are associated with significant volumes of retained and created jobs, but which will also generate a substantial offset to the Corporate Business Tax and Insurance Premium Tax in the years ahead;
Commercial ERG projects leverage a considerable amount of private investment.
Given the long lead time associated with Grow NJ and ERG projects, it is too soon to fully evaluate the impact of these programs on the State’s economy;
Projects approved under Grow NJ are generally concentrated in the northern, more populous counties of the State. A significant percentage of project funding in the eight southern counties has been concentrated in Camden;
Redundancies in the Grow NJ base and bonus award structure are potentially providing more generous incentives than intended by the statute;
Because certain bonuses have been underutilized, it is not clear that the program has advanced certain policy goals intended by the legislation such as clean energy investment and the creation of incubators;
There is an opportunity to improve EDA’s analysis of proposed incentive projects.
The report suggested the following to improve the programs:
A deeper analysis of the types and quality of jobs created or retained, and whether some or all of the related economic activity would have happened with lower or no incentives.
A review of the overall impact of the reduction in Corporate Business Tax revenues (which would be made up for by higher Gross Income Tax from created or retained jobs), given the constitutional requirement that the Gross Income Tax fund property tax relief while the Corporate Business Tax and Insurance Premium Tax are the primary resources for the General Fund.
Given the Grow NJ program’s goals of job creation and retention, the report recommends that the alternative approach used in calculating certain awards in the city of Camden (the “Camden alternatives”) be revised to tie awards more closely to the employment created by these firms.
NJEDA should consider eliminating or revising the bonus for Transit Oriented Development in Urban Transit Hubs and Garden State Growth Zones. This bonus may be redundant in most cases in these jurisdictions, where it accounts for about 21 percent, or about $250 million of the total award value for projects qualifying for the bonus.
The programs are currently set to expire in July 2019. With the sunset of the programs only a year away, legislators will soon start to discuss potential changes to the programs. While change may be on the horizon, one thing is clear--incentives will continue to be part of New Jersey’s economic development toolkit.
If interested in learning more about state and local incentives, please do not hesitate to contact Murphy Partners LLP at (973) 877-6984 or email@example.com.
MURPHY PARTNERS LLP
Murphy Partners LLP is a boutique law firm specializing in real estate, development, and economic incentive advisory. With offices in Newark, New Jersey and New York City, the firm was founded to provide effective, efficient, and creative legal services to meet the distinctive needs of our clients. Through the development of comprehensive legal strategies, our team works tirelessly to create a blueprint for success and advance our clients’ interests in every matter.