Includes Strategies for Greater Transparency & Oversight, Actions to Improve Effectiveness of Tax Incentive Programs
Trenton – The special Senate committee created to evaluate the state’s economic development programs issued its report today with a broad array of proposed reforms to bring greater transparency and oversight to the Economic Development Authority, and to improve the effectiveness of the policies used to create jobs, attract investments to distressed communities and generate long-term economic growth in New Jersey.
The bipartisan Senate Select Committee on Economic Growth Strategies’ report follows eight months of work, which included a comprehensive review of past programs and four public hearings that focused on the best practices for economic expansion, said Senator Bob Smith, the committee’s chairman, and Senator Joe Pennacchio, the panel’s vice chairman.
“We took a hard look at the programs in place to determine the reforms needed to make them work with more transparency and accountability,” said Senator Smith. “We reviewed past practices with a critical eye so that we can develop constructive strategies for economic growth. This report provides a blueprint for reform and improvement to maximize New Jersey’s ability to compete for jobs and economic growth, with an emphasis on expanding opportunities in distressed communities.”
The reforms include the creation of an independent inspector general to oversee the EDA, a chief compliance officer within the authority, the annual recertification of awards with additional penalties for violations, and the Senate’s advice and consent on the appointment of top EDA officials.
“I would like to commend Chairman Smith for ensuring the Select Committee’s review of New Jersey’s tax incentive programs was accomplished in a fair and bipartisan manner,” said Senator Pennacchio. “The report includes significant input from Senate Republicans that reflect many of the priorities we laid out at the beginning of the process. Given New Jersey’s challenging business environment, we believe the final report represents a thoughtful strategy to make the Garden State more competitive, create new opportunities for residents, and better protect taxpayer dollars.”
The recommendations include a strict cap on individual awards, but no annual limit on the total program; an increase in the “net benefit” standard to require a greater return on investment, and a revision to the “but for” test that invites companies to pursue plans to relocate to other states.
It also calls for job training, support for affordable housing, a residential tax credit, a program targeted for small and mid-sized businesses, and community benefit agreements.
The committee gathered input from state and regional leaders in the business community, academics specializing in economic development, and qualified experts to identify a strategic approach to maximize private investment and job growth, especially for distressed communities. The panel also sought a true accounting of the costs and the return on investments, including total capital investments by those participating in the programs.
The 25 recommendations are:
Reforms to Enhance Transparency, Accountability, and Oversight
Create Economic Development Authority Chief Compliance Officer Position
Establish an Office of the Economic Development Inspector General
Make Each Project’s Net Benefit Analysis Publicly Available
Make Explicit that the Attorney General Can Prosecute Companies for Falsifying Information
Annual Recertification of Awards
Data Sharing Agreements
Advice and Consent by the Senate for Top Appointments
Biennial Program Evaluations
Recommendations to Improve Effectiveness & Efficiency of Programs
Reduce Generosity of Key Incentive Programs
Require Community Benefit Agreements
Increase of the Required Net Benefit
Impose a Strict Cap on Individual Awards, But No Annual Program Cap
Provide Enhanced Benefit to Selected Cities in Need of Private and Public Investment
Encourage Development in Population Centers and Business Districts Including Those in Suburban Areas
Include a Residential Tax Credit Program to Facilitate Urban Revitalization
Reduce Reliance on “But For” Test
Incentivize Private Investment in Infrastructure
Allow Upward and Downward Adjustment in Award Amounts
Structure Incentives to Target High Growth Potential, High Tech, and Environmentally Beneficial Industries
Simplify the Application Process for Small and Start-up Businesses
Incorporate Workforce Training and Educational Partnership Requirements
Develop Agreements Based on Entirety of a Business’s Operations
Require PILOT Agreements to be Incorporated into Incentive Agreements
Provide Housing Tax Credits towards Affordable Housing Projects
Create a Business Expansion Program for Small and Mid-Sized Businesses
The panel’s other members are: Senator Nilsa Cruz-Perez; Senator Dawn Addiego; Senator Joseph Lagana, and Senator Declan J. O’Scanlon.