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Drilling Down on the Most Egregious Finding in the Governor’s NJEDA Task Force Report

NJEDA Tax Incentive Task Force Counsel Jim Walden

Camden was a pretty horrible place a few years ago. Everyone knew that, including the task force looking into state business incentive grants.

But … there is a “but” here. In a very telling observation in the just-released task force report, the panel concluded that Camden’s plight required something to be done, but not something that ran afoul of the law. That really is the crux of the matter.

The report came out this week after the courts stopped an outrageous attempt by South Jersey political boss George Norcross to suppress it. Gov. Phil Murphy said on Tuesday that the report’s findings were worse than he thought. He has a point.

Overall, the state incentive programs in question are pretty straightforward – at least on paper.

If a company relocates to the state, it is eligible for tax credits equal to the number of jobs it brings to the state. Also, if a company abandons serious relocation plans, it can get credits that coincide with the number of jobs it did not take out of New Jersey.

However, the report details that when it came to firms connected in various ways to Norcross and his family, those regulations were often ignored.

For example, the Economic Development Authority, which oversees the program, in some cases based awards to companies not on jobs created or saved, but on the firm’s dollar investment. That may have seemed sensible, but it was inconsistent with the program.

A more glaring problem was “phantom taxes.” These were instances in which a company was given credit for property taxes they wouldn’t have been requited to pay in the first place.

In summary, the report notes that the EDA grant programs were “structured to favor certain parties while disfavoring others in certain respects.” Or in more blunt language, politically-connected companies got the goodies, others did not.

The most egregious finding has to do with the requirement that companies seeking credits for not relocating must demonstrate an out-of-state location suitable to their needs. In general, the requirement seems a bit troubling. How does the state EDA know if company executives truly are thinking of leaving?

The cases cited by the report show how troubling the requirement is. It found that a number of companies with ties to Norcross claimed to be contemplating a move to Philadelphia when they already had decided to move to Camden. And yes, they got credits for “saving” jobs that were in no danger of vanishing.

While it was the EDA’s job to mind the store. the report – curiously perhaps – does not directly fault EDA personnel. It says that the EDA failed to follow guidelines and perform due diligence, but it seemed to conclude that was because of incompetence, not malfeasance.

One must acknowledge that the EDA is not a neutral organization. It works for the governor.

And when Chris Christie was governor, EDA officials knew Norcross and Christie were political buddies,. And they also knew that the grant programs were a very big deal for the administration for at least two reasons.

One was political – the notion that unlike Democrats, Republicans respect business and want companies to prosper. The other was that business growth and development help the state by increasing jobs. So EDA officials clearly knew what was expected of them.

Back when the task force was created  after a critical report of the incentive program by the state comptroller’s office, many prominent New Jerseyans stepped forward to defend it.

This bipartisan defense included former governors Christie, Jim Florio and even Jon Corzine, who had been more or less invisible on the state political scene since leaving office almost 10 years ago.

Florio and Corzine, in fact, both appeared at a press event in Camden to extol virtues of the grant program.

Then there was the dinner.

In mid-May, Christie, Corzine and Norcross were photographed dining (or at least drinking) together in Manhattan. Were they chatting about the EDA task force?

If so, now that the task force report is out, it may be time for another dinner.

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