Standing at Tigerlabs, a Princeton incubator for tech startups, Gov. Phil Murphy claimed small businesses have been ignored for far too long in New Jersey while the state showered big corporations like Holtec, Goya and Panasonic with exorbitant tax incentives, an estimated $8 billion in return for promises to remain in New Jersey and create jobs.
“And the people of New Jersey deserve to know exactly what they got for that $8 billion, with a ‘B’ as my son, Sam would say, $8 billion dollars,” said Murphy.
To find out, Murphy signed his third executive order, instructing the state comptroller to audit records for tax incentive programs the Economic Development Authority oversaw back to 2010, basically during the Christie administration.
“We’re going to compare the actual economic benefits with the projected benefits when the awards were handed out,” said Murphy. “And we’re going to examine the entire application process including, and I’m sort of bracing myself for this, the fees that were paid to lobbyists and consultants, bless their hearts.”
One example: In 2014, Holtec in Camden got a 10-year, $260 million EDA tax credit in return for creating and retaining 395 jobs. Murphy said New Jersey is spending, on average, $162,000 per job “purportedly created” this way. That’s seven times the $22,000 per job Massachusetts spends.
Meanwhile, Murphy said the state will refocus its approach to small business investment and incubation. New Jersey only has 15 incubators like Tigerlabs, compared to 179 in New York. Murphy’s pitch had a deep impact on Roy LaManna, co-founder and CEO of video technology company Vydia.
“Someone like me who just started from Middletown, New Jersey, who has a startup, who honestly thought New Jersey couldn’t care less whether I had a business here or not, it gives me a lot of high hopes for what’s to come,” said LaManna.
But, what about Amazon? New Jersey’s offering $5 billion, a gargantuan tax break on top of the $2 billion offered by Newark, to attract the corporate giant’s HQ2 and its 50,000 jobs. That probably helped boost Newark onto the list of 20 finalists. Murphy sees it as a special case.
“This was a once-in-a-lifetime. Not everybody comes along with 50,000 jobs,” said Murphy.
The audit may take weeks or months. Murphy obviously expects to find discrepancies, but wouldn’t speculate.
“I’d like to wait and see this begin to unfold, to see the magnitude or the gap between the purported and the actual,” said Murphy.
If the audit reveals the companies didn’t create the jobs they promised, Murphy says he’ll have to figure out what to do. He said some states actually clawed back some of those tax breaks.