M E M O R A N D U M
TO: Members of the Senate Economic Growth Committee & the Assembly Commerce and Economic Development Committee
FROM: Debra P. DiLorenzo, President & CEO, CCSNJ
RE: Joint Hearing on the NJ Economic Development Authority’s Tax Incentive Programs
DATE: March 8, 2019
Thank you for the opportunity for the Chamber of Commerce Southern New Jersey (CCSNJ) to weigh in on a topic crucial to South Jersey – how the New Jersey Economic Development Authority’s (NJEDA) various tax incentive programs, including Grow New Jersey and the Economic Redevelopment and Growth (ERG) Program - have impacted the state, as well as what changes can be made to improve these programs in the future.
The CCSNJ believes that there are three economic anchors to the South Jersey region: Atlantic City, the City of Camden and the area in and around the Joint Base McGuire-Dix-Lakehurst in Burlington County. Historically, if these three economic engines are prospering so does the entire region. In 2014, the Economic Opportunity Act was amended to do something not done initially – focus on distressed South Jersey municipalities, including Camden and Atlantic City. This change has led to unprecedented growth in Camden and a diversification of Atlantic City’s economic landscape, which has historically been overly dominate on the gaming industry.
South Jersey, and Camden in particular, face realities that make it harder for the region to compete for large-scale business projects, such as population, geography and the popular incentive program in Pennsylvania called the “Keystone Opportunity Zone” that has attracted many companies to the Philadelphia Naval Yard. Of course, on top of these factors, Pennsylvania and Delaware – the region’s neighboring states – are far less expensive than New York, so companies do not face the same economic pressure to move to South Jersey.
It is these reasons that Grow New Jersey and the ERG have seen such tremendous success attracting and retaining businesses in South Jersey. Earlier this year, a report prepared by Econsult Solutions Inc. highlighted progress the City of Camden has seen since 2006, including how investments in public safety, education, neighborhood and physical environment, health and health care, and economic development have led to positive changes for the entire community.
Specifically, the report touted the Grow New Jersey incentives and the ERG program grants from the NJEDA. The report states, “Between 2013 and 2017, $1.6 billion in Grow NJ awards have been given to businesses that are likely to relocate to Camden. The same companies have made or will make at least $1.3 billion in capital investments in Camden. In addition, these companies have created an economic environment that has provided new non-Economic Opportunity Act businesses intrinsic certainty to open or expand their operation in Camden.” This type of investment and growth is undeniable and cannot be understated.
However, the CCSNJ believes there is always room for improvement and a rigorous evaluation of all incentive programs is consistently needed and essential to assuring New Jersey’s return on investment is meaningful and legitimate. Simply put, added oversight by state government is something we support as long as it does not add administrative burdens on the employer community to remain eligible and comply with program requirements.
There have been several proposals offered by Governor Murphy, two of which that would replace Grow New Jersey and the ERG in full. These proposals make several changes, including putting restrictive caps on the amount of tax incentives allocated in a given fiscal year. The CCSNJ feels strongly that by placing a cap on incentives the state will be unable to remain competitive versus other states that are offering generous attraction measures to businesses looking to relocate.
It is no surprise that New Jersey is an unfriendly place to do business. This reputation has only been exacerbated by the recent passage of a $15 minimum wage, an earned sick leave mandate on employers, the expansion of New Jersey’s Paid Family Leave Act, and a restrictive and confusing equal pay mandate. These measures come on top of the fact that New Jersey has the highest property taxes in the nation, highest Corporation Business Tax in the nation, the second highest top marginal personal income tax rate in the nation and a slew of other taxes and fees that impact business operations. In short, capping the tax incentive programs will remove the only tool New Jersey has left to appeal to business.
However, Governor Murphy’s focus on making more small businesses eligible for these programs is a welcomed initiative. A strong New Jersey economy cannot be realized without a strong small business community. Any effort to further incentivize small and mid-sized employers to take advantage of tax incentive programs can only be a positive for the state.
Equally welcome is the Administration’s desire to target specific industries for tax incentives such as life sciences, information and high tech, clean energy, advanced manufacturing, advanced transportation, logistics and aviation, finance and insurance, food and beverage, and film and digital media. With Atlantic County’s focus on the aviation industry and Cumberland County’s emphasis on food manufacturing, Governor Murphy has hit the mark on identifying two of the growing economic sectors in the southern portion of the state. The CCSNJ would offer that the tourism community should also be added as a targeted industry as it remains essential to New Jersey’s prosperity.
The CCSNJ is incredibly fortunate for the success the South Jersey region has seen from Grow New Jersey and the ERG. As we near the June 30 expiration date, the CCSNJ recommends simple tweaks to the existing programs as opposed to a complete overhaul that includes caps on incentives, with an added emphasis on oversight and compliance, as well as targeted industries and the small employer community.
The CCSNJ appreciates the opportunity to share our thoughts with the Joint Committee on this critical issue to the New Jersey business community.