Gov. Phil Murphy detailed his plans to update the state’s incentive programs, speaking Wednesday during an event in Jersey City. — Courtesy: Edwin J. Torres/Governor’s Office
By Joshua Burd
After lashing out at New Jersey’s high-profile tax credit incentives, Gov. Phil Murphy has detailed his plans for new subsidy programs that are capped and targeted as part of a strategy focused on innovative and high-growth industries.
Murphy on Wednesday revisited his plans to reform and update the tax incentives, including the Grow New Jersey and Economic and Redevelopment Growth programs that have helped propel major deals and projects in recent years. Those programs are set to expire on June 30 and have come under fire over the past week, due in large part to a scathing audit of how the state Economic Development Authority monitors the performance of the incentives and of the companies that are awarded the generous subsidies.
“I believe there is a role for tax incentives in economic development, but they must be targeted and closely monitored as part of a broader strategy involving investments in mass transit, public education, infrastructure and workforce development,” Murphy said. “I look forward to working with the Legislature to encourage state investments in high-growth sectors, support our entrepreneurs and small businesses, and use tax incentives in a sensible, fiscally responsible manner.”
The programs, which proliferated under former Gov. Chris Christie, are meant to incentivize companies to preserve or create jobs in New Jersey or to fill a cost gap for developments in areas that the state hopes to revitalize. The vast majority of the tax credits have not been issued, given that recipients must first provide evidence that they have held up their end of the bargain, but last week’s audit has put the programs in the crosshairs.
Murphy’s economic plan includes a package of five new programs and provisions to cap the volume of incentives that are doled out in a single year. Here are the details, as described by the governor’s office:
- A jobs-based incentives program to replace Grow New Jersey
- Companies are eligible if they are creating new jobs in a high-growth industry, creating or retaining jobs in an Opportunity Zone-eligible tract, a U.S. business relocating or creating its Northeast headquarters, a foreign business creating a U.S. headquarters or a major retention project.
- Bonus criteria emphasize local employment, above-average salaries and transit-oriented development.
- Awards under NJ Forward will be capped at $200 million annually, allocated on a first-come, first-served basis and will last for five years.
- The replacement for the Economic and Redevelopment Growth program
- A gap-based financing tool awarded twice annually and capped at $100 million per year to support real estate goals in the new economy. Projects will be assessed on their cost, community benefit, advancement of regional planning and workforce and apprenticeship programs.
- Bonus criteria include food desert alleviation, electric vehicle charging stations and incubators/shared workspaces. Aspire will support the innovation economy and target urban centers and transit-rich downtowns.
- This credit will catalyze remediation projects and increase job creation and economic development.
- EDA and the state Department of Environmental Protection will run two competitive application rounds each year.
- The credit will be capped at $20 million per year and equal 40 percent of rehabilitation costs with a $4 million project cap.
- The new Historic Preservation Tax Credit will support place-based economic development with projects evaluated by EDA, DEP and the Department of Community Affairs. It is limited to revenue generating projects and capped at $20 million annually with a $4 million project cap.
- The state will run two competitive applications each year for recipients with proven financing gaps, and projects will receive bonuses for including affordable housing or collaborative workspaces on-site.
NJ Innovation Evergreen Fund
- A $500 million effort that will raise funds over five years by auctioning off state tax credits and then leveraging partnerships with the state and private venture capital funds to co-invest in New Jersey startups. These investments will target the life sciences, financial technology, digital media, and cybersecurity sectors, among others.
- The fund would also require ecosystem building and support diverse founders that reflect the state’s rich cultural makeup.
- As companies are acquired or IPOs occur, proceeds would flow back to the fund. In the event of significant returns, some funding would flow back to the general fund.