The New Jersey Economic Development Authority this morning approved a $260 million business tax subsidy to Holtec International to bring 395 jobs to Camden and build a new 600,000 square foot “manufacturing facility and design center.”
The Tax Break is Very Lucrative
At $260 million, the tax break is the third largest ever awarded by New Jersey, behind the American Dream Meadowlands project and the Revel casino. It is the largest award given under the state’s programs that are focused solely on job retention or creation.
The $260 million tax break is tied to 395 jobs – 235 of which will be new to New Jersey and 160 of which are already in New Jersey and being “retained.” That means each of the 395 jobs has a cost to taxpayers of $658,228 – a sky-high number that has never been seen before in New Jersey and is even far higher than the average per-job cost of the largest “megadeals” across the country.
The Tax Break is Made Possible by a Mismatched Economic Benefits Test
The tax break relies on a 35-year economic-impact test that the EDA estimates will result in a slim net benefit of $155,520 to the state. Yet under the terms of the tax break, the company is only required to stay in New Jersey for 15 years. After that, it can leave without any penalty. If it stayed for only 15 years, the estimated $155,520 net benefit would turn into a $148.7 million loss to the state.
This is why we’ve recommended that the state use a shorter timeframe to determine potential benefits to the state – ideally, and to minimize risk to the state, the amount of time the company is required to stay without being penalized should be equal to the amount of time over which the net benefit is calculated.
The Tax Break Continues an Unprecedented Increase in Subsidies After Last Year’s Overhaul Legislation
The award continues a trend – first documented in our June 2014 report – of an unprecedented increase in the size and scope business tax breaks under legislation overhauling the state’s subsidy programs. The increase we’ve seen under this new law dwarfs even the subsidy surge of the early 2010s, which was one of the most prominent increases in the use of tax breaks in the nation.
Through the first seven months under the new law governing subsidies (ie, prior to today’s meeting), New Jersey has awarded just over $1 billion in tax breaks. This is a rate of $145 million in subsidies per month, more than 10 times higher than the rate in the 2000s, and more than double the historically high rate in the first four years of this decade.
The subsidy awards are also getting far more lucrative for companies. After the overhaul, each job tied to a subsidy award has been worth $96,463 in tax breaks – nearly 6 times higher than each subsidy job’s worth in the 2000s, and more than double the historically high cost per job in the first four years of this decade. (This figure doesn’t include the tax subsidies approved today – given the richness of the Holtec deal, it is sure to increase substantially.)
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