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Appearing before Governor Phil Murphy’s Task Force this morning, state Senator Ray Lesniak (D-20) – prime sponsor of controversial 2013 NJEDA tax incentive (LINK) legislation, opened with harsh criticism of the task force and Murphy.
“Governor Murphy was flat out wrong when he said tax incentives squandered $11 billion,” said Lesniak.
“I agreed to amendments to the Economic Opportunity Act in four cities with the lowest [family income],” said the retired senator. “Your task force seems to have concluded that the sole purpose for tax incentives was to draw jobs into the state [or to prevent them from leaving].”
Apologizing on two occasions for “getting his Polish up,” the Elizabeth-based Lesniak – who lost his bid for governor to Murphy in the 207 Democratic Primary – made the case for the tax incentives as a way to foster mixed use development and combat poverty.
“Our tax incentives need to be amended, not ended,” he said.
It was an emotional appearance for the senator, whose wife died last week.
He had been on the schedule to appear before the task force since last month, and today went ahead with his testimony amid the throes of great personal loss.
The Senator’s full statement is reprinted here:
Statement of Former Senator Raymond J. Lesniak
As the sponsor of New Jersey’s first tax incentive that transformed a contaminated garbage dump in Elizabeth into the Jersey Gardens Mall which has generated thousands of jobs and millions of dollars of revenue for Elizabeth and the State and has more visitors from out of state than any other location in New Jersey, I come not to bury tax incentives, but to praise them.
I see that Governor Murphy’s Task Force has no person with an economical development or economic financial background, or a background in city planning or smart growth or the legislative process, upon which to assist your mission launched by Governor Murphy with his unsupported statement that tax Incentives have squandered up to $11 bil. of tax dollars.
As someone who has those qualifications and who has been involved in sponsoring and advocating for New Jersey’s tax Incentives, I offer this testimony.
My first recommendation on tax Incentives is to mend them, don’t end them.
Tax incentives are necessary for New Jersey to attract business investment and create and retain jobs in the state that’s at the bottom of studies of states that are business friendly.
Without tax incentives, Revel would still be a white elephant casting a blight on Atlantic City, but instead, Building Trades workers were put to work completing the building and hundreds of workers who would otherwise have been unemployed got jobs. All thanks to tax incentives that did not cost taxpayers one dime.
Without tax incentives, Panasonic’s America’s Headquarters would not be in Newark, New Jersey, but would be in Atlanta, Georgia.
Without tax incentives, Teachers Village in Newark would still be a five block collection of old rundown buildings that tax incentives transformed into moderately priced apartments which have stimulated other new construction in the neighborhood with new restaurants, shops, and cultural amenities for Newark’s residents, all thanks to the ERG tax incentive legislation I sponsored.
There are hundreds of other examples of the benefits flowing from New Jersey’s tax incentives, none of which have been discussed by this Task Force, at least not publicly, although you have made very public statements about a handful of tax incentives awarded by the EDA.
Let me set the record straight from the start. Governor Murphy was flat out wrong when he stated that our tax incentives have “squandered” $11 billion.
On the contrary, tax incentives increase revenue to the state. If a company does not locate in New Jersey or leaves New Jersey, because it has a lower cost of doing business elsewhere, we lose 100% of its taxes. A tax incentive that brings in or keeps jobs from leaving our state generates 80% of those taxes. 80% of X is more than 100% of zero. The $11 billion of tax incentives Governor Murphy said has been squandered will instead be a net positive to the state treasury, generating many $billions more for the State treasury than if there were no tax incentives.
Tax incentives have come under intense criticism, some fair, some unfair, some based on a thoughtful analysis, some based on pure politics. Making the tax incentives debate political is fraught with danger to the economic health of our state. New York lost 50,000 Amazon jobs to Virginia because of a political attack on tax incentives.
As with all government programs, our tax incentives should be periodically reviewed to determine their effectiveness. I recognized that when I sponsored the Economic Opportunity Act under which the Bloustein School of Planning and Public Policy at Rutgers University made recommendations. I support, without getting into the weeds, those recommendations, the recommendations of the State Comptroller and those announced by Senator Troy Singleton.
Most important are the Comptroller’s recommendations that EDA have a robust independently verified certification process to determine that but for the tax incentive jobs would not have been created or would have left the state, or in the case of the 16 Camden City incentives, the tax incentives were a material factor in that regard.
The material factor standard was established for Camden City because economic concerns are not always the most significant factor in a business decision as to where to locate when the location is the poorest city in the nation with a high crime rate. That’s why I supported enhanced tax incentives for the poorest municipalities which have lagged behind in economic development and job creation and why I agreed to amendments to the Economic Opportunity Act which enhanced incentives for businesses to locate in the four cities that have the lowest median family income: Camden, Trenton, Passaic and Paterson and in Atlantic City which had the highest unemployment rate in the state.
Your Task Force seems to have concluded that the sole purpose of tax Incentives is to attract jobs to move into the state or to keep them from leaving the state, ignoring the needs of the poorest communities in New Jersey and contributing to income inequality in the state. There are tax Incentives that can help these communities which need their neighborhoods redeveloped to keep employees living near their jobs, rather than leaving after the work day is over.
I urge you to support A2596 and S1482 which will create a comprehensive urban development strategy designed to transform the State’s urban centers from areas with just offices, to 24-hours per day, seven-days per week communities with robust residential populations and have been endorsed by The Housing & Community Development Network of New Jersey which stated, “Addressing the need for people at every income level to access affordable homes through mixed income developments would be an economic boon for our state. This approach can help our economy and our future by creating jobs, thriving neighborhoods and giving opportunities for our State’s lower income residents.” It has also been endorsed by The Anti-Poverty Network which stated, “New Jersey lags behind in the number of affordable units available to individuals and families at various income levels. Incentives for mixed use communities would help our state’s economy grow for the benefit of all our residents.”
Our tax Incentives need to be mended, but not ended. The longer New Jersey is without tax Incentives, our residents will be deprived of employment opportunities and our business climate will deteriorate.