Gov. Phil Murphy said his administration is moving closer to an agreement with legislative leaders on a major overhaul of the state’s troubled economic incentive program, which expired at the end of June.
The program, mired in scandal, continues to be the focus of an ongoing clash between the legislators — who support lucrative tax incentives meant to lure business to New Jersey — and the governor, who has called for major changes over the economic offerings that have come under siege.
At the same time, a task force appointed by the governor has been continuing to put a spotlight on alleged abuses of the tax incentive programs, which have handed out $11 billion in tax breaks over the past decade. Millions of those dollars have been called into question over whether the money went to political insiders, or was awarded to New Jersey businesses that had no intention of leaving the state.
At a tour Friday morning of the Hoboken Business Center, which, serves as an incubator for small startups and growing companies, Murphy said there have been ongoing meetings with the Legislature over the past several weeks, and told reporters that there was what he called a “conceptual agreement” on many of the issues dividing the two sides.
“The conversations have borne fruit. Now we have to get them over the goal line,” Murphy said. “Let’s get this done.”
Senate President Stephen Sweeney confirmed there have been meetings, but said talks were still ongoing.
“Our discussions have been productive, but we don’t have an agreement and I don’t expect to reach a final agreement until the hearings being conducted by the administration and the Legislature are done,” said Sweeney. “The governor has always agreed that we need tax incentives in order to compete and I agree that we want to get it done. But we need to do it right.”
At the heart of the governor’s proposed changes, unveiled by Murphy earlier this year, would be five programs that would greatly change how tax breaks were awarded in New Jersey. Those proposals include:
- Providing 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.
- Investments in commercial, residential, and mixed-use projects.
- A focus on redeveloping Brownfield sites.
- Giving tax breaks to developers who revitalize historic buildings.
- An “Innovation Evergreen Fund” focused on luring venture capital investment into startups in the state.
The governor has also called for caps on how much money can be awarded.
Until now, his proposals have appeared dead on arrival in the Statehouse, where the Legislature has been holding its own hearings on the state’s economic incentive program. Both houses voted to temporarily extend the major tax incentive legislation that expired over the summer, but the governor vetoed the measures.
At his tour in Hoboken, Murphy was not specific about whether the administration or the legislature have made any concessions, and would say only the two sides had “great conversations.” He added that he remains strongly committed to caps on tax breaks.
In the testimony before a Senate committee in September, several analysts said that despite enthusiasm for corporate tax incentives nationwide, they rarely — if ever — pay for themselves. They said the state should consider strong “claw back” provisions that would require companies that fail to meet benchmark goals pay back awards, or to give out incentives as loans that would be forgiven if the jobs thresholds were met or maintained.
They also recommended that New Jersey get more bang for the buck by targeting economic development programs in different ways, and cap the amount of money offered by the state as incentives for job growth.
Sweeney, in response to the governor’s comments, said he believes that caps are not the right thing to do in New Jersey.
“They would put us at a competitive disadvantage. Jobs and economic growth should be our primary goals,” remarked Sweeney.
Tim Sullivan, the chief executive officer of the New Jersey Economic Development Authority, which administers the incentive programs, said the conversations with the legislative leadership have focused in part on the proposed Evergreen program that would target startup companies and small businesses, which he said is where long-term economic growth occurs. He added they have already found common ground on finding new tools to deliver incentive money, and more accountability.
A source with knowledge of the talks with the legislature said there has been some consensus as well on a program offering rent assistance to incubator companies, providing development money for anchor institution development, including hospitals, universities and major corporations, and also in addressing the state’s food deserts with tax credits to developers that open supermarkets or grocery stores in one of the 75 food deserts designated by the state.
On his tour to the Hoboken Business Center, where 100 small companies have moved into a building and shared office space renovated by JDA Group, Murphy met a number of entrepreneurs and company officials that recently relocated in New Jersey. Among them was Jarrett Bauer, co-founder and CEO of Health Recovery Solutions, who brought the company that uses technology to help patients recover after hospital stays from SoHo to a new home in New Jersey.
“We’re at 100 people now. Next year, we’ll be at 200,” he told the governor.
Have a tip? Tell us. nj.com/tips
Get the latest updates right in your inbox. Subscribe to NJ.com’s newsletters.