Delayed Vote on Incentives Bill Threatens Corporate Real Estate Deals
Despite last-minute compromises and concessions, lawmakers can't get bill onto floor before Senate recesses for summer
When state senators recessed for the summer without casting an expected vote on the Economic Opportunity Act of 2013, it was yet another twist in the bill's tortured history. And while the lawmakers will be back in Trenton in the next few weeks, there is currently no vote scheduled until August 26.
It was not a delay that supporters of the legislation took lightly.
They warned that continued hold-ups in the biggest proposed overhaul to corporate real estate incentive programs in New Jersey history will force businesses with pending deals to abandon the state for locales that offer more aggressive recruitment packages.
Backers also caution that even several weeks can equal a lifetime in the hypercompetitive world of corporate real estate planning.
And at an unrelated appearance last week, Gov. Chris Christie proclaimed, "It's time for them to get their rear ends back in Trenton and vote on this bill and get it on my desk so we can get moving on creating more private-sector jobs."
“Absolutely there are projects in jeopardy,” said Michael McGuinness, CEO of the New Jersey chapter of the Commercial Real Estate Development Association. “There is a horizon of two-to-five years of planning and undertaking, so this is going to really affect projects down the road if folks are getting impatient.”
Bill sponsor Assemblyman Al Coutinho (D-Newark) says he knows of two specific projects in Trenton and Newark that risk losing their financing if they can’t close on properties before interest rates rise.
“And to the extent that there are a few major corporations with leases coming up,” he added, “we’re somewhat at an impasse to attract people, and we risk even Jersey companies leaving.”
Essentially, the act, which was negotiated for a full year before being overwhelmingly passed by the assembly on May 20, consolidates five existing incentive programs into two. It provides bonuses for certain desirable industries, extends programs to small- and medium-sized businesses, creates a distinction between companies looking to move into New Jersey and those threatening to leave, and redraws areas eligible for extra incentives -- notably transit hubs, distressed urban centers, and aging suburban office parks.
So with the Assembly all sewn up, what happened?
The short answer is Senate President Steve Sweeney (D-Gloucester).
Although most observers believe he’s trying in good faith to find a date when enough of his members will return from summer vacation to cast a vote, they worry that too much more delay will run them into the distraction of election season.
And some are miffed that Sweeney excused his members earlier than anticipated on June 27, the last day of the regular session, without holding them for a vote.
“What I felt was going to happen was we would get it done that night,” said Coutinho.
Sources who’ve been privy to some of the bill’s negotiations privately believe Sweeney adjourned prematurely because he was angry with Assembly Speaker Sheila Oliver (D-Essex) for refusing to let her members vote on a bill he proposed to dissolve the Rutgers University Board of Trustees.
Coutinho says Sweeney explained to him that he didn’t want to keep his members late into the night while they all waited for the governor to conditionally veto the bill, as was expected.
Christie’s conditional veto would have removed two sections of the bill -- one that guaranteed a prevailing wage for unionized maintenance workers in buildings housing companies receiving state incentives and another that provided credits for repurposing and redeveloping abandoned hospitals -- while leaving most of it intact.
That action would have required both chambers to vote again on whether to accept the governor’s changes or to override his veto.
Indeed, waiting for the governor’s signature would have made for a very late night, considering Coutinho had spent the entire day trying to reconcile the Assembly-passed version of the bill with a very different one Sweeney had negotiated with Christie. Regardless, it was yet another critical hold-up for the bill in a year-long process that was full of them.
Coutinho started working on the legislation with Sen. Ray Lesniak (D-Union) last summer but political and policy disputes, followed by Hurricane Sandy, brought Trenton – and the bill – into 2013. Now championed by Sweeney, who took the lead in negotiating it with Christie’s administration, it gained little momentum throughout the winter as Sweeney and his South Jersey peers worked to add amendments that would allocate special incentives to the southern part of the state. The springtime primary and budget seasons took the focus off the bill again, and finally, a frustrated Coutinho had his version posted for a vote in the Assembly on May 20. It passed 53-6, with 15 abstentions.
But on the senate side, Sweeney remained busy in negotiations and didn’t post the bill for a vote until June 27. His version looked very different from the one the Assembly approved. It stripped the bill of numerous protective environmental amendments and added substantial set-asides for South Jersey.
When the assembly got the bill back for a consent vote on the last day of the regular session, they couldn’t accept the Senate’s removal of the environmental provisions, though they went along with the South Jersey amendments. After spending an hour with his infuriated caucus, Coutinho, who had suffered cardiac arrest just a week earlier, passed the rest of the afternoon with Sweeney and the administration negotiating ways to work back in the concessions he had made with the state’s environmental groups.
They came to an agreement, and late in the afternoon the assembly concurred. But by then the senate was gone.
That's pretty much how it played out behind the scenes, but what does it mean for companies waiting for the bill to be passed before making their move?
One prominent company facing critical deadlines is Lockheed Martin, whose $40 million state tax credit helped its Moorestown facility land a lucrative contract with the federal government in March. The federal sequester is severely limiting government contracts, leading to fears that Lockheed could choose to close more than just its Cherry Hill facility, a move that’s forcing transfers and layoffs of 300 employees. In order to bid competitively on future business, observers say, the company needs all the incentives it can get.
Lockheed Senior Manager of Media Relations & Public Affairs Keith Little denies that its Moorestown operations will move and adds that he can’t comment on legislation “that is out of our control.” But he confirms that the bill is “competition-sensitive to potential contracts Lockheed is bidding on
While companies waiting on a verdict can choose to instead take advantage of existing programs, those aren’t considered as attractive to most businesses. Plus, two have already distributed their available funds, and as anyone in the real estate industry knows, uncertainty bodes poorly for business. “Those that are in the know, know this is an important piece of legislation,” said Michael Egenton, senior vice president of government relations for the state’s chamber of commerce. “Though they [companies] may be waiting in the wings they may be hesitant to make any further moves.”
“There’s no doubt that that companies considering New Jersey may say to themselves, 'Maybe this wasn’t a good idea and maybe we should look elsewhere because other states have their act together,' ” agreed McGuinness. “Of course it’s going to have a negative impact. But you can’t force somebody into action.”
Neither Sweeney nor Lesniak were available for comment. A representative for the governor declined to comment on pending legislative issues.