Gov. Phil Murphy toured Indiegrove, an innovative coworking space in Jersey City, the day after he surprised many viewers by devoting the top third of his maiden State of the State speech to a scathing audit of New Jersey tax incentive programs worth billions of dollars. He called them, “a system that has been rigged to work for a favored few.”
And the governor followed up Wednesday with more withering criticism.
“There will be no more outsized awards that were won through connections, rather than merit, and no more open-ended commitments we can’t afford,” Murphy said. “When you can’t prove any economic benefit from $11 billion, or you can’t even find 20 percent of the jobs, something went wrong.”
To revise the soon-to-expire tax incentive programs that are currently administered by New Jersey’s Economic Development Authority, Murphy instead is offering five of his own initiatives that are designed to generate jobs and rehabilitate neighborhoods but with more oversight, stricter rules and capped payouts. Some advocates applauded Murphy’s doubling down during the speech.
New Jersey Policy Perspective’s senior policy analyst Sheila Reynertson said the reforms could save significant taxpayer dollars going forward.
“We’re going to see, especially going into the 2020s, a ramping up of potential payouts of a billion dollars per year. But the proper reforms we can slow that down a little bit because we’ll have more stringent reform around those requirements,” Reynertson said.
“We were surprised that it took up as much of the speech as it did. But I think he made some very important points about changing the direction of the program. And we’re excited to hear about some of the new programs that he’s going to be introducing, and how the old programs are going to evolve,” said Peter Kasabach, Executive Director of New Jersey Future.
But New Jersey’s Chamber of Commerce objected claiming the EDA-run programs have worked well.
And the path to reform threads a political minefield. In Camden, which benefited significantly from EDA tax incentive programs, the freeholder director, Louis Cappelli Jr., fumed, “these critical comments ring hollow … ” since Murphy “ … has employed this same tax incentive program to the tune of more than $5 billion … to move a part of the Amazon corporation to Newark … ”
But perhaps most crucially for Murphy, Senate President Steve Sweeney raised eyebrows and questions about the audit’s conclusion.
“The comptroller’s report didn’t say the legislation was bad and the programs were bad. They weren’t. And every program that was approved, was approved by the New Jersey Attorney General’s Office,” Sweeney said.
The governor’s plans to remake these tax incentive programs still need legislative approval, and lately that’s not a given.