Economic Opportunity Act II Comes Hard on Heels of Its Progenitor

Tara Nurin | November 15, 2013 | More Issues
Senate committee green-lights measure intended to address flaws, oversights in original legislation

Sen. Raymond Lesniak
A Senate committee has unanimously passed a revised version of the Economic Opportunity Act, just two months after Gov. Chris Christie signed into law the sweeping overhaul of the state’s system of awarding business subsidies.

The original sponsor of the bill, Sen. Raymond Lesniak (D-Union), introduced the revision in part to correct several provisions he disagreed with in the final version of the New Jersey Economic Opportunity Act of 2013. After hearing testimony from approximately a half-dozen speakers, the Senate Economic Growth Committee signed off on the reworked legislation, which the senator is calling “Economic Opportunity Act II.”

The bill revisits and revises the affordable housing component included in the original, and does the same with the hospital subsidy, which offers tax incentives to companies and organizations that reopen shuttered healthcare facilities that left a void in their communities when they closed.

New this time out: The measure increases and extends the incentives available to film, TV and digital media production outfits, hoping to attract or keep them in the Garden State. It also caps the amount corporate defendants must allocate to appeal a court verdict. This so-called appeal-bond provision chiefly aims to keep the state’s pharmaceutical industry flourishing.

The Economic Opportunity Act II seeks primarily to eliminate a clause in the law that requires housing developers using state funds to build in certain impoverished cities to dedicate at least 20 percent of their project to affordable housing. To offset the lack of such a mandate, the bill would allocate $200 million in tax incentives to property owners who build developments designated as 100 percent affordable.
During negotiations for the original bill, Lesniak unsuccessfully pushed for the affordable housing component on the grounds that poor cities don’t need more low-income housing and that renters in those cities wouldn’t be able to afford the higher rents property owners would have to charge on market-rate units to offset the 20 percent mandate. As a vocal advocate of affordable housing, Lesniak hopes to enact these tenets this time around.
Christie conditionally vetoed an almost identical provision to the current hospital subsidy when he signed the first Economic Opportunity Act The difference in this bill, Lesniak says, is that it cuts in half the amount of incentives available to fund these projects.

The senator says he hasn’t spoken to the governor about the new bill, and a spokesperson did not return a request for comment. But Christie wrote in his veto message that he “recommend(s) modifications to the level of incentives for certain projects,” leading some observers to speculate that he found these incentives too generous.

Most at the senate committee hearing spoke in favor of the bill, with the notable exception of the state director of Americans for Prosperity, the only group at the hearing to oppose EOA II in its entirety. Americans for Prosperity, a national antitax organization, vehemently opposed the first bill — and now this one — on grounds that New Jersey should not be in the business of providing corporate welfare. Instead, testified Daryn Iwicki, the state should cut its corporate tax rate across the board.

“Time and time again you’ll see us rise up against subsidies,” Iwicki promised. With an 8.5 percent unemployment rate, he said, “it’s clear the policies enacted in the last decade aren’t working.”

Lesniak countered Iwicki’s claim that corporate incentives allow the state to create winners and losers by telling him, “We already have winners and losers. The urban areas don’t have the same opportunities as the wealthier areas.” The first economic opportunity act established lower thresholds and higher rewards for companies locating in the state’s four poorest cities.

Jersey City Mayor Steven Fulop spoke in favor of the film subsidy, telling senators that New York’s lucrative incentive packages are luring production out of New Jersey. The bill would raise the tax credit to 22 percent on money spent by production companies in the state’s four poorest cities. Currently, credits max out at 20 percent.

The bill also extends the credit by five years to 2020 and quintuples the total annual allotment to $50 million. The Legislature failed to override a Christie veto to a similar increase two years ago, despite the fact that New York’s annual budget for film credits is $420 million, and Brooklyn can offer qualified crews a fully refundable 30 percent tax credit for certain expenses along with a 35 percent postproduction credit and free comarketing opportunities with New York City’s Made in NY film and TV office.

The appeal-bond portion of the bill imposes a $50 million cap on the bond money a civil defendant must post while appealing a verdict. According to supporters, it could make the difference between a company choosing to locate here or not, surviving or succeeding.

As the result of a major settlement some years ago, the tobacco industry is the only one in New Jersey to enjoy such a cap. All others are at the discretion of the court. The Administrative Society of Courts weighed in on the subject yesterday, calling the cap too broad and arbitrary and one that eliminates the jurisdiction of the courts to make judgments on individual cases.

Representatives from The Sierra Club and the NJ Environmental Lobby argued that the bill should prevent incentives from going to companies that build on ecologically sensitive areas — a point of vehement contention during negotiations on the last bill. Lesniak noted that amendments will be debated when the Senate budget committee takes up the issue.

Lesniak says Senator Paul Sarlo (D-Woodbridge), who chairs that committee, has agreed to schedule a hearing, perhaps during the committee’s next meeting. At the time of the morning hearing, no Senate cosponsors had come forward, but by press time four cosponsors had signed on. He doesn’t know where Senate President Stephen Sweeney (D-Gloucester), who cosponsored and led Senate negotiations on the first bill, stands. An email to Sweeney’s office was not returned.

No Assembly sponsor has yet come forward, and former legislator Al Coutinho, who spent years steering the original act through that chamber, resigned amid a legal scandal the day after he convinced a majority of his colleagues to vote for the bill.