Testimony of Naomi Mueller Bressler and Sarah Stecker on Economic Stimulus Act New Jersey Assembly Budget Committee

Good afternoon. My name is Naomi Bressler and I am a policy analyst with New Jersey Policy Perspective. I want to thank the committee for the opportunity to speak today. We are here to speak about the portion of the Economic Stimulus Act that repeals the Revenue Allocation District Financing Act of 2001 and replaces it with a different tax increment financing (TIF) structure. NJPP believes this bill is likely to result in a significant revenue loss to the state and its municipalities at a time when New Jersey cannot afford to gamble with its resources.

This bill would take public resources – state and local tax revenues – and give them to private developers. New Jersey already allows more revenues to be diverted from public use to private use than any other state. This proposal would more than double that to 21.

Under current TIF law, nine state and local taxes can be diverted from public to private use to help developers cover their costs. This currently includes only one state-level tax – the 3.5 percent of the sales tax that UEZ municipalities keep under the UEZ program. Under the provisions of A4048, revenue from 11 other state-level taxes and fees would be made available to developers. This includes some of the state’s largest revenue sources including the corporate business tax and the sales and use tax – collections from which have fallen precipitously this year. The law also expands to nine the number of local taxes and fees that can be diverted away from municipalities, counties and schools.

Advocates of this bill claim that providing public revenues to private individuals will help turn around the state’s economy faster. That has been the rationale behind the federal stimulus money the state is receiving. A big difference between the federal money and this is that the federal money actually provides additional stimulus to the state because it is coming from outside the state and represents new money and new investments.

This bill would divert current New Jersey revenues away from the public programs and services they are supporting. No new money is recommended or anticipated. At a time when falling tax revenues have forced the state and local governments in New Jersey to make deep and damaging cuts to services, is this the time to gamble with the state’s limited resources?

Is subsidizing the construction of a new mall more important than providing after-school programs to poor children? Is it more important than providing more access to affordable higher education to all high school graduates or Medicaid payments to nursing home residents?

Is a new office park more important than investing in the state’s infrastructure or meeting the state’s pension obligations to its employees?

When the economy recovers, every available resource will be needed to restore program cuts taking place now and to make investments in policy changes that will improve residents’ quality of life in the future.

New Jersey’s economy is struggling – along with the rest of the nation – but no other state has introduced legislation like this. One could say this bill will put New Jersey ahead of the redevelopment curve; one could just as easily make the case that New Jersey is bowing to the pressure of self motivated interest groups at a particularly vulnerable time.

New Jersey has a long history of poor financial decisions that have been aggravated by the state’s lax standards of accountability. NJPP believes this bill represents the wrong way to use our public money and the wrong time to do it.

Rather than rushing through such an important piece of legislation, NJPP urges you to reconsider what the state needs over the next 20 years – the time that taxes would be diverted. New Jersey’s TIF law should not divert any state taxes and only divert limited property taxes – the state and municipalities need existing tax revenue to provide crucial public services for current residents and business and any new residents and business brought by future development.

At a time when New Jersey has two commissions – the Local Unit Alignment, Reorganization and Consolidation Commission (LUARC) and the Tax and Fiscal Policy Commission – ready and able to evaluate the impact of these proposed changes, what’s the rush? This bill should be held until a full fiscal analysis of the costs and benefits of this bill can be determined. This will make for a more transparent process and will provide the public with a better understanding of the impact this legislation will have on the state and its municipalities not only today but into the future.

Thank you.