From left: Gene Preston, NAIOP New Jersey president and a partner with Dermody Properties; state Senate President Steve Sweeney; Skip Cimino, executive director of the state’s Assembly majority office; and Eugene Diaz, principal partner with Prism Capital Partners, took part in a Q&A during NAIOP’s recent public policy symposium.
By Joshua Burd
State Senate President Steve Sweeney last week came to the defense of New Jersey’s use of tax incentives — a recent target of Gov. Phil Murphy’s administration — while pledging to find a solution to extend and update the programs by the time they sunset on June 30.
Sweeney, the state’s top lawmaker, reiterated his support for the programs on Friday during a program hosted by NAIOP New Jersey, speaking directly to a crowd of commercial real estate industry leaders. He said tax credit programs such as Grow New Jersey have been “very good for the state” and have helped it maintain a competitive edge.
“You’ve got to look at the total sum of the benefit,” Sweeney said during the program at the Heldrich Hotel in New Brunswick. “And since we are a high tax state — and we have to do something about our taxes in the state — we need these incentive programs to attract people.”
The Gloucester County Democrat also criticized the recent rhetoric by Murphy, who has said he supports some use of incentives but has lashed out against the volume of tax credits approved under his predecessor, Gov. Chris Christie.
“Maybe they don’t understand that, when you make statements and when you send threatening letters out, that you put an enormous chill on an industry,” Sweeney said. “And people start thinking, ‘Well, we’re not getting anywhere (and) nothing’s going to get done here’ — and, at the end of the day, we’re in a situation where people just decide to go somewhere else.”
Sweeney echoed the recent concerns of developers and other industry professionals, speaking during NAIOP’s annual public policy symposium. The event came a little more than a week after Murphy presented his budget to the Legislature and as the industry faces uncertainty over the future of incentives and other issues, including infrastructure, liquor license reform and legalized adult recreational marijuana.
“We’re all pleased that Gov. Murphy has found over a billion dollars in savings,” said NAIOP New Jersey President Gene Preston, a partner with Dermody Properties. “But the governor is still looking to raise taxes on high earners and raise fees on businesses, while weakening an incentives program that has helped to level the playing field to enable our high-cost state to compete with neighboring states.
“Developers are already feeling the chill from the negative messages about incentives, so we must change the tone of the conversation.”
Preston, who moderated the discussion alongside Eugene Diaz, a principal partner with Prism Capital Partners, said NAIOP “strongly supports” a recent bill unveiled by Assemblywoman Eliana Pintor Marin. The legislation calls for extending the application deadline for Grow New Jersey for four years beyond its current sunset date of June 30, 2019, while refining other aspects of the program “to reflect current market and economic realities.”
The proposal drew praise from Anthony “Skip” Cimino, the executive director of the state Assembly’s majority office, who noted that Assembly Speaker Craig Coughlin was also committed to such a solution.
“We think that’s a very good piece of legislation,” Cimino said. “We think that’s been developed with expertise from this organization and the speaker looks favorably on that particular piece of legislation as we begin to move that through the process.
“Eliana serves as well as our budget chair, so there’s a nexus between that piece of legislation as well as what we’re looking at in terms of the totality of the state budget.”
Speaking to reporters after the panel discussion, Cimino said Pintor Marin’s bill will be among several ideas considered as the Legislature crafts a new package of incentives. The Assembly expects to tackle the issue in tandem with the state Senate, he said, as it has with other major issues over the past year.
Asked if the Legislature will have a proposal by June 30, Sweeney said, “We have to.”
“Is it something the governor will sign? I don’t know,” Sweeney said, later adding: “There might be some aspects of what the governor proposed — we’re looking at them — that we can agree on.”
“I don’t think we’re all in agreement yet, but what we’ve been successful in is, when the Assembly and the Senate get together and come up with something, and then we go sit with the governor, we’ve had great results. So we’re trying to get our house in order and come up with something. That’s why we started early.”
The remarks by Sweeney and Cimino came two months after a blistering audit by state Comptroller Philip Degnan, which criticized the state Economic Development Authority for its management of incentives such as Grow New Jersey and the Economic Redevelopment and Growth program. The findings drew a harsh response from Murphy, who had ordered the audit, before he went on to blast Christie for the billions of dollars in tax breaks awarded under his administration.
Both the EDA and its defenders have noted that, of roughly $8 billion in tax credits approved for projects under the state’s three largest incentive programs, less than 9 percent has actually been paid out to date. The state only begins to issue tax credits to a recipient once it verifies that the company has met its commitment for employment and capital investment.
For his part, Sweeney said the comptroller’s audit was flawed in its sample size of only 48 award recipients. He also said the Murphy administration “tied the comptroller’s hands” in that investigators were able to obtain information from the EDA but not follow up with the companies whose awards were being audited.
“We passed that law,” Sweeney said of the 2013 Economic Opportunity Act, which created the current slate of incentives. “I was very involved in it, so if we made mistakes, I want to fix it. And if people were cheating New Jersey, they should be held accountable. And the fact that they won’t release (the names of) the corporations or any of the information tells me what they said and what is, is not accurate.”
Murphy, meantime, has repeatedly said that believes that tax incentives do have a place in economic development, but only on a more targeted basis and as part of broader, more well-rounded strategy. The second-year governor has proposed a slate of new incentive programs as part of an economic agenda unveiled last fall, which includes replacing Grow New Jersey and ERG with what are known as NJ Forward and NJ Aspire, respectively.
The package also includes tax credits for brownfields projects and historic preservation, along with a program to spur venture capital investment. All of the programs would be capped, a feature that could be a main sticking point with legislative leaders.
“We certainly have not agreed at this juncture that the package as proposed … are the right programs,” Cimino said. “That’s why we joined with the Senate in terms of collaboration on two hearings so far.
“One of our concerns is whether in fact the cap is the right direction for us as a state. It appears that the cap may be way too limiting for us.”