Economic incentives bill brings deals to S. Jersey

A gusher in tax credits for companies seeking to locate in Camden is the product of a blockbuster economic incentives package passed by the New Jersey Legislature last year.

After the 76ers landed a 10-year, $82 million tax break in June to open a practice facility across the Delaware River, the state Economic Development Authority last week approved $260 million in tax credits over the same period for the energy tech firm Holtec International to open a manufacturing plant on the Camden waterfront.

The Holtec deal is among the largest ever awarded.

The incentives were granted under the Economic Opportunity Act of 2013, which on its face streamlined existing incentives programs. But it also included big perks for South Jersey - Camden in particular - underscoring the region's growing political influence.

Stephen Sweeney, the state Senate president, is a Gloucester County Democrat. Insurance executive George E. Norcross III, a powerful South Jersey Democrat with strong ties to Camden, is chairman of Cooper University Hospital in Camden and also sits on Holtec's board. Norcross' brother Donald, a state senator and congressional candidate from Camden, cosponsored the 2013 bill. Another Camden County Democrat, Louis D. Greenwald, is majority leader in the Assembly.

Lawmakers passed new changes to the law last month, including one allowing the developer of a project to bring a full-service supermarket to Camden to apply for tax credits on the market's behalf. The bill awaits Gov. Christie's signature.

Of the 45 awards approved thus far under the revamped Grow New Jersey - the incentive program that targets commercial enterprises - 10 have gone to companies in South Jersey, accounting for $464.5 million, or 41 percent, of $1.1 billion awarded in total.

Offering mammoth tax incentives isn't the best use of state money, says Joseph J. Seneca, a professor at Rutgers University's Edward J. Bloustein School of Planning and Public Policy, but New Jersey can't be the first to blink in today's arms race for jobs.

"It would be better if the states agreed among themselves not to compete, and put these resources into other investments that promote the long-term growth of the economy: education, infrastructure, the environment," said Seneca, a former chairman of the state Council of Economic Advisers.

"But that's naive, because the states have intentionally competed for jobs since the founding of the country, and in the last 10 years, and even more so since the end of the recession."

The Garden State has regained less than 50 percent of the jobs it lost during the recession that ended in June 2009, adding to the competitive urgency.

The state has awarded $4 billion in corporate tax breaks this decade, up from $1.2 billion in the 2000s, according to a June report by New Jersey Policy Perspective, a liberal-leaning think tank that is critical of the incentives.

South Jersey figures to win a bigger share of the awards under the Economic Opportunity Act.

It wasn't always that way. When the Legislature last revised the state's incentives programs, the high threshold level of investment required of businesses to qualify for tax credits "made it impossible for the southern part of the state to participate," Sweeney said.

He noted that land and labor are both cheaper in South Jersey than in the north, lowering costs.

The Assembly version of last year's bill promised more of the same, Sweeney said. So after the Senate took it up, the 54-page bill expanded to 82 pages. Christie signed the bill into law in September.

New provisions specified, among other things, that of the $600 million in tax credits available under another incentives program, this one for residential development projects, $175 million was restricted to the city of Camden.

An additional $75 million was restricted to Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean, and Salem Counties.

In addition to base tax credits, the bill said the full award could increase annually for "a marine terminal project in a municipality located outside the Garden State Growth Zone, but within the geographical boundaries of the South Jersey Port District."

That refers exclusively to the Port of Paulsboro, which has already received $175 million in state funding through bonds and aid. Initially scheduled to open in 2012, the port may debut in 2016, officials say.

The bill lowered eligibility thresholds for businesses in the eight South Jersey counties, reducing capital investment requirements by one-third and full-time employment requirements by a quarter.

Projects in Camden are required to ensure the state will break even on its tax credits over 35 years. Elsewhere in the state, they must produce a benefit of 110 percent of the cost of the tax credits over a period of 20 or 30 years, depending on the case.

The state expects Holtec to produce a net benefit of $155,520 over 35 years.

There is no cap on the pot of money for commercial enterprise, though the Economic Development Authority stops accepting applications July 1, 2019. The state doesn't provide credits until the businesses pay taxes.

"I fought for the southern part of the state to benefit, just as the northern part of the state has benefited," Sweeney said.

Both Sweeney and State Sen. Raymond J. Lesniak (D., Union), also a bill sponsor, said politics had nothing to do with the benefits for South Jersey.

"The reality of economic viability in New Jersey is that northern Jersey is the prime area of location for investment and job growth because of the density of the population, the infrastructure, and proximity to Manhattan," Lesniak said. "As a result of that, South Jersey has a much higher unemployment rate than the state average. So in order to even that playing field, we added additional incentives for job creation and retention in South Jersey."

Whether residents stand to benefit is another question. The 76ers will bring 250 jobs to Camden to work at their planned 120,000-square-foot practice facility and team headquarters. However, 200 of the jobs are held by current team employees.

Holtec, a power-plant supplier that wants to develop small modular nuclear reactors, is expected to create 235 jobs and retain 160, according to the Economic Development Authority.

The EDA says the retained jobs will be relocated from Evesham, where the company has headquarters. Holtec had told the agency it was also considering opening a plant in South Carolina.

Seneca, the Rutgers economist, said job retention as a criterion of eligibility for tax credits was an "amorphous situation."

Speaking generally of businesses that win tax credits after threatening to leave the state, Seneca asked: "Would they really have left had not they gotten the incentive?"

Said Sweeney: "This is a great example of: We're going to bring a new business in, create brand-new jobs, in a city that needs the help. I think the legislation, the end product, is working out as we expected - jobs."