TRENTON – Senator Nicholas P. Scutari today introduced legislation that would prohibit the state from providing tax incentives, loans or subsidies to businesses that owe New Jersey money from previously awarded subsidies.
“It is financially irresponsible and simply poor policy to provide companies that have failed to repay previously awarded loans or subsidies with new ones,” said Senator Scutari (D-Middlesex, Somerset, Union). “The economic incentives are intended to stimulate the growth of areas most in need of rehabilitation in the state, and we have to take appropriate measures to safeguard against companies taking advantage of these subsidies and ensure that their original intent is preserved.”
Under the proposed bill, a State public body would be prohibited from awarding an economic development subsidy to a business that was previously awarded one in the form of a loan or loan guarantee and is in default. In order to receive a financial incentive, the company would first have to pay any outstanding balance owed to the state in full.
A recent report by the Associated Press highlighted the case of a Camden developer who received millions of dollars in incentives from the state despite owing more than $6 million on a previous unpaid state loan. The news agency reported that the state awarded $13.4 million in tax credits to Broadway Associates 2010 LLC, a real estate development company controlled by Pennsylvania developer Israel Roizman, to refurbish 175 low-income housing units. He received the tax break despite owing $6.2 million to New Jersey’s Housing and Mortgage Financing Agency in unpaid principal and interest on a loan that has been overdue by several years. That loan was for a development called Camden Townhouses Development, according to the report.
Senator Scutari said the bill would prevent situations like this one from occurring again. “We cannot allow companies that are behind on payments to the state to be rewarded at the taxpayers’ expense,” he said. “Just like any financial institution would evaluate its risk when considering loan applications, the state must do the same.”
The bill defines “economic development subsidy” as funds to a business from a State public body with a value of greater than $25,000 for the purpose of stimulating economic development in New Jersey, including, but not limited to, any bond, grant, loan, loan guarantee, matching fund, tax credit or other tax expenditure.