Task Force Probes New Jersey’s $11B ‘Corporate Gravy Train’

NEWARK, NJ — Were a whopping $11 billion in New Jersey corporate tax breaks “properly awarded?” Or did the state agency in charge offer a rubber stamp for many of the already-wealthy applicants? These were two of the questions that a special task force sought to answer during a Thursday public hearing at Rutgers Law School in Newark.

On March 2, a task force appointed by Gov. Phil Murphy continued its ongoing probe into the New Jersey Economic Development Authority (NJEDA), the agency that oversees the state’s tax incentive program.

Much of the controversy centers around more than $11 billion in corporate tax subsidies that the NJEDA has given out to large companies over the past 14 years, the bulk of which took place before Murphy took office.

Spurred by a report from the State Comptroller that warned of a severe lack of monitoring and oversight over past awards – as well as thousands of promised jobs that couldn’t be substantiated – the task force recently began the job of reviewing every award with paid benefits.

Those companies include industry giants such as Prudential, Holtec, Honeywell and Campbell’s Soup.

• See related article: New Jersey 'Squandered' $11B On Corporate Tax Breaks, Governor Says

At Thursday’s hearing, the task force interviewed several witnesses about whether the past decade’s incentives and credits were properly awarded, and if the agency “applied appropriate scrutiny” to the companies seeking tax breaks. The task force also explored some of the “special interests” that played a role in shaping key aspects of the legislation at the center of the hubbub: the Economic Opportunity Act of 2013.

The programs established by the Economic Opportunity Act are set to expire this year, and Murphy has called for significant reforms, including a hard cap on per-job and annual awards, tighter reporting requirements, and targeting awards to emerging industries and “homegrown businesses.”

Witnesses who testified Thursday included Tim Lizura, former COO of the NJEDA; Fred Cole, senior vice president of operation for the NJEDA; David Lawyer, an NJEDA employee who is a manager of the underwriting section which vets applications for Grow NJ awards; whistleblower Kerrie-Ann Murray; John Boyd of The Boyd Company, a corporate site selection firm based out of Princeton; and Brandon McKoy of New Jersey Policy Perspective.

Task force members in attendance included chairperson Ronald Chen of Rutgers Law School; task force special counsel Jim Walden, Georgia Winston, Milton Williams, Avni Patel, Stephanie Levick, Derek Borchardt and Jennifer Prevete of Walden Macht & Haran LLP; and special counsel Pablo Quiñones of Quiñones Law PLLC.

Watch video of the March 2 hearing here. (Story continues below)

‘$11 BILLION CORPORATE GRAVY TRAIN’

Activists and community groups kept the pressure on the task force and the NJEDA in the week leading up to Thursday’s hearing.

Several groups have demanded the resignation of the NJEDA board members who oversaw the past decade’s tax breaks, going so far as to imply a lawsuit is in the works.

“There’s a long of taxpayers holding negligent or corrupt public officials accountable through the courts,” Rob Duffey, interim director of New Jersey Working Families, said last week. “If the NJEDA Board won’t do the right thing and resign over this $11 billion corporate gravy train, taxpayers may have to take matters into their own hands.”

Saily Avelenda, executive director of NJ 11th for Change, said the group applauds the efforts of the New Jersey Working Families Alliance to take “judicial action” on behalf of the people of New Jersey.

“We are tired of reading story after story about how New Jersey's resources are being given away to a few select insiders, with little documented benefit to New Jersey,” Avelenda said. “We are [also] tired of the EDA board continuing to ignore the concerns of activist groups. Litigation is always a last resort, but the EDA board has left the people of New Jersey with no choice."

• See related article: AG Has 'Tough Questions' About NJ's $11B Corporate Tax Breaks

One of the most vocal critics of the NJEDA tax breaks has been Gov. Murphy, who set the comptroller audit in motion with a Jan. 19 executive order.

"The ineffectiveness of how the state's tax incentive programs were structured and managed has now been laid bare for the eyes of New Jersey taxpayers," Murphy said in January.

However, during his tenure as governor, Murphy has also advocated in favor of Teva Pharmaceuticals USA, which the NJEDA gave a $40 million, performance-based tax break to move its U.S. headquarters from Pennsylvania to New Jersey, despite multiple lawsuits accusing it of contributing to the national opioid crisis.

• See related article: NJ Gives $40M Tax Break To Pharma Co. Accused Of Pushing Opioids

Murphy also supported the idea of giving Amazon $5 billion in state tax breaks to locate its headquarters in Newark, a bid that the city ultimately lost.

• See related article: Amazon Officially Passes Up Newark, NJ For New Headquarters
• See related article: GOP Senator In NJ Blasts Murphy's Tax Break For Film Industry

According to a recent WYNC report, the Chris Christie-era NJEDA allegedly put pressure on staff to approve billions in tax credits, manipulated the cost-benefit analysis mandated by tax incentive programs and turned a blind eye to fraudulent applications.

John Rosenfeld, former director of incentives at the state Economic Development Authority, told WYNC that the pressure to churn out tax credits came mostly from the governor's Business Action Center, a statewide office led by then-Lt. Gov. Kim Guadagno, who later ran to succeed Christie and ultimately lost to Murphy in 2018.

In many cases, corporations that received NJEDA subsidies were already paying so little in state taxes that they were able to sell the tax credits to other companies for a profit, the activists claimed. According to a recent report by Politico, a staggering 126 companies have sold NJEDA tax credits worth $204 million in 2017 alone.

Last week, WNYC and ProPublica published a report that alleged more than $1 billion in EDA tax incentives went to "unelected power-broker" George Norcross' own insurance brokerage, his business partnerships and charitable affiliations, and clients of the law and lobbying firms of his brother, Phil Norcross. Soon afterwards, The New York Times dropped another bombshell: a lawyer from Phil Norcross' law firm allegedly re-wrote the tax incentive legislation that made it possible.

‘FOLLOW THE EXAMPLE OF PRESIDENT OBAMA’

On Thursday – just before the task force was scheduled to reconvene after a break – a joint statement was issued by Camden Mayor Frank Moran, Camden City Council President Curtis Jenkins, Sen. Nilsa Cruz-Perez and Camden County Freeholder Director Louis Cappelli Jr.

The statement blasted Murphy, his administration and the “blatantly political leaning” task force for their “relentless, unfounded and disingenuous attacks” on the businesses that are attempting to empower Camden.

Their full statement follows below.

“As elected representatives of Camden, with deep roots in the city and singularly committed to the revival and prosperity of its residents, businesses and neighborhoods, we are deeply appalled by Governor Phil Murphy, his administration and the blatantly political leaning task force established by him, for the relentless, unfounded and disingenuous attacks on the businesses making generational investments. We will not be party to nor will we tolerate any efforts to turn back the hard-fought progress that has been made in Camden over the last several years to attract businesses, rebuild our housing inventory, improve public safety and our k-12 education system. We will continue to strongly advocate for the city and ensure that legislative and public initiatives originating in Trenton will benefit Camden just as they do North Jersey communities.

“For months, Governor Murphy has claimed, with zero evidence, that $11 billion in taxpayer money has been squandered because of lucrative tax credits given to huge companies. Perhaps in the age of Donald Trump, the Governor has learned all the wrong lessons of leadership and adherence to the truth. His invective has been particularly targeted at Camden companies that have received tax credits under the GROW NJ program, which was enacted into law in 2013, and not companies like JP Morgan, Panasonic, Merrill Lynch, Barclays, Ralph Lauren and Gucci which collectively received hundreds of millions in grants and tax credits but happened to be located in North Jersey. Also, we find it surprising and hypocritical that Governor Murphy happily accepted $165 million in tax credits when he was on the management committee at the huge and lucrative firm, Goldman Sachs, and was fully prepared to give away $5 billion to the planet’s richest company, Amazon, but has feverishly insinuated without proof that irregularities exist for tax programs that would help Camden. It must have been okay for him and Amazon because he was moving his firm to Jersey City and Amazon was considering moving to Newark.

“For fifty years this great city was socially and economically stagnant. But for the grit and soul of the residents, elected officials, non-profits and a few anchor institutions like Cooper Hospital and Campbell’s Soup Company, Camden would have never recovered from its tailspin. Public safety was virtually non-existent, the k-12 education system was in shambles, businesses were unwilling to move here, unemployment rates were at alarming levels, and investment in infrastructure whether it be in schools, roads and parks were anemic at best. Years of planning, discussion, and collaboration with policy makers, residents, business and religious leaders and non-profits, have led to improvements that few imagined was possible just a decade ago.

“Today, the city is the safest it has been in fifty years. Not only have graduation rates in the city reached 69%, but close to $335 million in public and private investments are or have been made to improve our school facilities. Over one thousand homes are being rehabilitated or being built in all neighborhoods, along with $75 million in roads and park projects. Unemployment is the lowest it has been in more than two decades. For the first time in two generations, 30 businesses are moving into or expanding their operations in the city. They range from marque companies like Subaru, Holtec, American Water, NFI, CSB, Michaels and EMR to small businesses like I-PAK, Camden Yards and Steel, and Contemporary Graphics. These businesses have made a generational commitment to Camden because of the GROW NJ program. According to a recent report, 10% of the workforce in these companies are already made up of Camden residents. Yet because of the unrelenting attacks, there has been a chilling effect statewide in the business community and in Camden; legitimate questions are being raised regarding the Murphy administration’s intent to honor binding agreements businesses have with the Economic Development Authority (EDA) even upon certification that the mandated requirements have been met. The Governor’s actions only further cement New Jersey’s reputation as one of the most unfriendly states in the country.

“Governor Murphy applauds community and business leaders, stakeholders and elected officials for the progress that has made every time he visits the Camden; we prefer to provide our residents and businesses a reliable and predictable pathway to success including eventual financial security for our governmental institutions based on our collective commitment and true leadership from the Governor without his geographic bias. In return, if we have to sacrifice his faint praise for the city so be it.

“It has occurred to us that the Governor maybe holding Camden and the business communities in general hostage to get his massive tax increases through the legislature. In an already high-taxed state like New Jersey, we think it is unwise to pile on the taxes even more and drive people and businesses out of state. Regardless, we think it is unfair and illogical to use the most significant contributors to our economy – our businesses – as pawns to get the massive taxes enacted.

“We are heartened by the fact that the most progressive leader of our time, President Barack Obama, visited Camden and held up this city as “symbol of promise.” Perhaps the Governor and his ilk would be better served following the example of President Obama instead of blindly and for abject political reasons undermining our city on the rise.”

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