Latest Proposed 'Economic Opportunity Act' Revisions Another Step in the Wrong Direction

Below is a statement from New Jersey Policy Perspective president Gordon MacInnes on both the “Economic Opportunity Act of 2014, Part 3” (A-3213) and the conditional veto of the bill that the governor issued yesterday. Below the statement are some key facts about how the legislation would change New Jersey’s business tax subsidy programs.

“New Jersey policymakers should be responding to the unprecedented surge in business tax subsidies by making the state’s programs more effective, imposing greater discipline on incentive awards and increasing accountability and transparency. This bill, for the most part, does the opposite and is yet another step in the wrong direction. And the governor’s conditional veto, while making a few improvements to the legislation, will open the floodgates even more by expanding some of the state’s most lucrative and poorly-measured incentives to Atlantic City.

The bill will almost certainly increase the amount of subsidy dollars being awarded over the next five years at a time when these awards are already at a record high. This is bad enough on its own, since subsidies are known to be an ineffective method of growing a state’s economy. But it gets worse. The bill will also weaken standards used to determine whether a project can receive an incentive, greatly expand the types of projects that can receive the most lucrative subsidies and create a whole new five-year incentive program.

The bottom line is this bill is good news for a few companies and developers. But it’s certainly bad news for New Jersey’s economy and the state’s taxpayers.”

KEY FACTS:

Among other things, the legislation:

1. Changes the Grow New Jersey program to:

– Expand the definition of “Garden State Growth Zone” to include Atlantic City. Garden State Growth Zones are currently defined as the four New Jersey cities with the lowest median household income (Camden, Trenton, Paterson and Passaic). Projects in these cities are eligible for more lucrative tax incentives than most projects, and the estimated economic benefits for these projects is measured over 30 years, despite the fact that companies are only required to stay in New Jersey for 15 years – a mismatch that unnecessarily puts New Jersey taxpayers at risk.

– Expand the definition of a “mega project,” which, like projects in Garden State Growth Zones, are eligible for more lucrative tax incentives than most projects. Also as with Garden State Growth Zones, the estimated economic benefits for mega projects are measured over 30 years, twice the length of time a company is required to stay in New Jersey. Previously the definition of “mega project” was relatively narrow and included only certain projects in port districts, aviation districts or a handful of cities defined as Garden State Growth Zones or Urban Transit Hubs. This bill expands that eligibility greatly to include certain projects in eight South Jersey counties.

– Reduce the minimum capital investment required for the rehabilitation and improvement of certain properties in order to receive a tax subsidy

– Soften the eligibility criteria for incubator facilities in certain areas of the state that are pursuing incentives

– Allow approved projects in Camden to receive additional tax subsidies down the road if they exceed the employment level as defined in their incentives agreement with the EDA

– Automatically give the highest level of tax incentive to any Camden projects receiving at least $4 million in subsidies a year; previously it was either the highest level or the amount the state deemed necessary to complete the project, whichever was lower.

– Allow a number of organizations in a number of locales to “bundle” tax incentive applications for several businesses that would not have qualified for subsidies on their own.

2. Creates a new tax incentive program for developers that build and then donate certain types of public infrastructure to governments. The new program will last five years and, if the legislature agrees with the governor’s conditional veto, have an overall cap of $25 million (the initial legislation had no spending cap). Tax credits will be issued for the full cost of a developer’s expense on said infrastructure.

3. Extends the existing Economic Redevelopment and Growth (ERG) subsidy program for residential developments in two key ways: extends the application deadline by one year, to July 1, 2016; and defers the date by which projects must have obtained certificates of occupancy by three years, to July 28, 2018.

4. Lowers the minimum amount of tax credit a recipient can sell to another taxpayer under the Urban Transit Hub program to $25,000 from $100,000. This lower minimum will enable recipients to sell more of their unused tax credits.