CAMDEN, NJ—The state may take another look at how almost $1.4 billion in tax incentives were awarded to businesses in Camden after a new report determined the cost of those jobs to the state is $25,000 more than the jobs created in any other city across New Jersey under the same program.
As part of a requirement of the New Jersey Opportunity Act, created in 2013, the New Jersey Economic Development Authority [NJEDA] enlisted the Rutgers University Bloustein School of Planning and Public Policy to conduct an analysis on the NJEDA’s Grow NJ Program and its State Economic Redevelopment and Growth Grant Program [ERG].
The Grow NJ program was created to give corporations tax incentives for either moving its business to, or keeping it in, New Jersey. The size of the tax incentive awarded to these businesses is primarily determined by how many jobs the company will create, or retain, in the state.
However, lawmakers specifically wanted to draw businesses to Camden, and special rules were created for those who wanted to move to, or keep their business in, the city. Instead of awards being determined by the amount of jobs it would create or retain, if a businesses met a certain number of jobs created and capital investment, the award would then be based on the size of the total project.
Under these rules, on the lowest end of the scale if a project were to have a minimum of 35 jobs and a minimum $5 million capital investment, it was eligible to receive a maximum tax incentive of $5 million. At the highest end, if a project had a minimum of 250 jobs, it did not have a cap on how much the tax incentives awarded could be.
According to the report, 13 projects were approved by the NJEDA under these special rules, and are projected to bring 1,418 jobs to the state, along with keeping 2,511 that are already in New Jersey. (See the table at the bottom of the article for a full list of the 13 projects.)
The average annual cost to the state for the jobs projected to be created by those 13 projects is $34,000 per year over 10 years. The average annual cost to the state of the jobs created by the projects approved under the regular Grow NJ rules is $7,650 per newly created job per year over 10 years.
Of the remaining 214 approved Grown NJ projects, almost $3.1 billion in tax incentives have been awarded, resulting in 27,342 jobs that are projected to be created and 28,006 jobs that will remain in the state. There are a number of other Grow NJ projects approved in Camden that did fall under the special rules.
According to the researchers, the high cost of the projects with lower employment levels approved under the special rules in Camden put into question whether they are consistent with the goals of the Grow NJ program — particularly because the alternative rules have already drawn a number of large scale projects.
“The Camden NJ Grow projects wind up being a major question mark. They have been, comparatively speaking, very costly to the state. But they are under a looser set of rules that seem to have been designed to get Camden's economy jump started,” Michael Lahr, a Rutgers research professor at Bloustein and one of the authors of the report.
“If expenditures on a per job basis are a concern, there may be approaches that would more closely tie awards to the same job creation/retention criteria used for other projects, while still encouraging large scale capital investment in Camden or elsewhere,” the report recommends.
The Rutgers researchers also examined where the awards were given, the amount and the type; evaluated the NJEDA’s qualifications for a project’s base award and the programs’ bonus categories; and offered observations and recommendations for the program's’ efficiency and effectiveness.
It found that the Grow NJ awards were concentrated in northern New Jersey, with 159 of the 227 awards granted to projects in northern counties, with Hudson County receiving the most at 63. However, the county with the second highest amount of Grow NJ projects was Camden County, at 39.
Other recommendations the report made were:
Eliminating or revising redundant bonuses
Eliminating or revising rarely used bonuses
Incorporate the most up-to-date data
In a letter to Gov. Phil Murphy from NJEDA CEO Tim Sullivan that accompanied the report, Sullivan states that, "Given the long lead time associated with Grow NJ and ERG projects, it is too soon to fully evaluate the impact of these programs on the State’s economy," and that while the analysis meets the statutory requirement, that there are several areas that "merit further explanation."
In addition to the Bloustein report, Murphy signed an executive order in January calling for the Office of the State Comptroller to carry out a complete audit of the tax incentive programs.
Note: This post was updated July 21 to indicate that under the Camden alternative, a project with $5 million in investment would be eligible for $5 million in tax incentives.