It doesn’t get much more wonkish than “tax-increment financing,” but a new report by New Jersey Policy Perspective raises some interesting questions about the state’s use of business subsidies as an economic development tool.
In an analysis of a one-year-old law, the policy center’s Sarah Stecker examines how businesses exploited the Economic Redevelopment and Growth grant program and makes recommendations on how to fix it.
Wall St. Firm Hits the Jackpot
Her report recounts how a major Wall Street financial services firm won a $14.6 million grant from the program as part of a $100 million plus package of state and local government subsidies to relocate office from downtown Manhattan to Jersey City. Deborah Howlett, president of the Trenton policy center, noted that whether the Depository Trust & Clearing Corp. received the grant or not, it probably would have made the move.
The program, initiated in the Corzine administration as part of an economic stimulus package, allows developers to tap into 19 state and local revenue sources to finance economic development projects.
Other states also use the so-called tax increment financing, but New Jersey’s expansive use of multiple revenue sources is “off the charts,’’ according to Greg LeRoy, author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation.
Alleviating Blight and Poverty
While most states restrict the program to blighted and impoverished areas, Stecker found that developers can take advantage of the program in more than 80 percent of New Jersey’s municipalities, although it has been used sparingly so far.
The report concludes that the current law is not well-targeted to provide needed development to economically struggling areas, although it does mention a couple of success stories in Newark and Somerville. Still, the report notes that the program puts a long-term strain on governments at a time when they can ill afford it, by awarding developers packages that stretch out to 20 years.
“The only thing certain is that if the state gives away its resources with a broad brush, without careful analysis, the future will be bleak,’’ it concludes.