The Economic Opportunity Act: What’s In It for South Jersey?

Tara Nurin | January 13, 2014 | More Issues
Original legislation established important incentives; new bill would bolster some of these -- especially for a few cities in the south

When state Sen. Ray Lesniak (D-Union) introduces a bill early in the next legislative session to tweak his Economic Opportunity Act — which overhauled the state’s corporate incentive programs — north Jersey developers and politicians will be watching carefully. What they’ll want to know is whether the new measure adds any concessions to those they begrudgingly made to South Jersey when they negotiated the original act.

Though Lesniak’s new bill doesn’t touch the exclusive business attraction and retention packages allotted to South Jersey last year, he does hope to push through a few revisions. These are chiefly intended to further assist depressed residential real estate markets in Camden, Trenton, and elsewhere.

As he shepherds the bill through Trenton, Lesniak will be watching for pushback from North Jersey. The negotiations are likely to be a balancing act that provides for residential rehabilitation in blighted urban areas across the state, while respecting existing commercial and industrial tax credits and bonuses that give South Jersey a competitive edge in the fierce battle to win new and relocating businesses that could opt for other parts of the state.

As legislators pushed through the original Economic Opportunity Act, they spent a year or more strong-arming north Jersey politicians to accept special deals for South Jersey. The fight amounted to just one more between north and south — but the victory could help level the proverbial playing field and transform the state’s eight southernmost counties.

Residential Construction and Affordable Housing

The new bill would amend a provision in the original act that requires contractors to include 20 percent affordable units in their projects in order to qualify for incentives, no matter where they build.

Because Lesniak believes the state’s poorest cities need more market-rate housing rather than affordable housing, he is seeking to allow some 60 urban municipalities to opt out. Instead, he would allot an overall $200 million in tax credits to convert 1960s-era affordable housing to townhouses and low-rises. He says Camden and Trenton are among many cities where low-income high-rises have become “dens of iniquity” ruled by gangs and drug warfare.

For New Jersey’s eight southern counties, this simply adds to current law, which gives residential contractors exclusive access to $250 million in bonuses — including $175 million set aside specifically for Camden. And the designated “Garden State Growth Zones” of Camden, Trenton, Paterson, and Passaic will still be able to compete for another $250 million in bonuses currently allocated to residential developers in those cities.

Former Assemblyman Al Coutinho, who sponsored the original bill, told NJ Spotlight before the vote last spring that he and Gov. Chris Christie initially planned for Camden to be the only Garden State Growth Zone. They expanded the list because of Trenton’s deep need for redevelopment and the North Jersey contingent’s desire for parity.


Commercial Development Thresholds and Incentives

Before elected officials voted on the Economic Opportunity Act, Coutinho told NJSpotlight, “The Senate president and (other) folks from South Jersey said we need to do more for it. Senator (Don) Norcross (D-Camden) was always trying to get more, more, more for Camden and wouldn’t sign off until he got enough that he was comfortable with.”

But for his part, Norcross is proud that he succeeded in pushing through provisions that favor South Jersey and Camden. Among them: a one-third lower minimum capital investment per square foot to qualify for incentives for rehabbing an industrial facility in any of the state’s eight southernmost counties ($13.33 per square foot vs. $20) ). Also part of the package: a requirement that a tech startup or manufacturer need to create only eight new full-time jobs to qualify for relevant incentives, as opposed to 12 elsewhere.

Companies locating in Camden have even lower minimum thresholds. Before the vote last spring, Norcross said of the startup and relocation packages for businesses, “Ninety-five percent of incentives under the old programs went to North Jersey. I think when this is passed you’ll see some tremendous interest in moving to the city.”

Business Challenges in South Jersey

South Jersey, and Camden in particular, face realities that make it harder for the region to compete for large-scale business projects.

The first challenges, Norcross says, are population and geography. With a smaller population and a longer distance from New York City, South Jersey doesn’t offer as attractive a workforce or as convenient a location for companies considering locating or relocating there. The next challenge comes from South Jersey’s neighbor to the west: Philadelphia, which not only offers an extremely popular incentive program called the “Keystone Opportunity Zone,” but also Pennsylvania is less expensive than New York, so companies don’t face the same economic pressure to move to cheaper digs across the river.

“Trying to increase the incentives to bring somebody in is not only needed but warranted,” Norcross said. “We’ve tried everything else literally for decades. So now we’re going to try something else.”

On top of this, Camden has its own disadvantages. With a high crime and poverty rate, a crippled education system, and an infamous reputation, the beleaguered city struggles to compete for new business.

“It doesn’t matter how much or how little we’ve gotten over the past decades; no city in America has the conditions that Camden has,” said Norcross.

But Camden’s most noted historian disagrees that Camden needs public incentives to fund private projects. Howard Gillette, professor emeritus at Rutgers-Camden and author of Camden After the Fall, feels awards are politically driven and insensitive to the actual needs of the population.

“What’s bothersome about Camden — and it’s a big, deep problem — is that it’s a chessboard for outsiders to play their pieces to the absolute disinterest to the people who are most immediately affected. Fundamentally, it’s a system out of whack. The whole system is tilted toward development issues that don’t necessarily accommodate the nature, depth, and magnitude of the needs of the people of Camden.”

Gillette points to many proposed projects over the years — some completed, some not — that opened the door to private developers over the protests or concerns of residents. Most notable have been a hotly contested takeover of the waterfront Cramer Hill neighborhood (delayed indefinitely by lawsuits), the demolition of a historic yet long-abandoned Sears building to make way for a Campbell Soup Co.–led office park (in process), and the destruction of a waterfront prison to free up land that is being readied for the right developer to come along.

But it’s lots like the prison site that lead Norcross to argue that Camden boasts an amenity nearly extinct in other parts of the state: available land.

“We have something they will never have again,” he said.


Pet Projects

The act also provides incentives for several specific projects and includes language that critics argue seem to have been written with other projects in mind. One such endeavor takes advantage of some of that available Camden land Norcross is referring to and is, in fact, a project he champions.

The project in question is the impending construction of a big-box retail development anchored by a ShopRite and located along a main thoroughfare that runs through Camden to connect Philadelphia to New Jersey. The act provides an extra 10 percent incentive grant to “a supermarket or grocery store (minimum of 15,000 square feet) selling fresh products or a prepared food establishment selling nutritious, ready to serve meals” that’s situated in “a distressed municipality lacking access to nutritious food.” The USDA has designated much of Camden as a food desert; the store will be 75,000 square feet.

What bothers skeptics about this program is that it reduces the job requirements to levels they find inappropriate. In fact, while other industries or zones must comply with a set of rules that define a full-time employee, this program allows the incentive recipient to define its own guidelines according to “generally accepted by custom or practice,” which are typically below 35 or 40 hours per week. These types of retail jobs also tend to be low-paid and lacking benefits.

The structure of this provision leads Jon Whiten of New Jersey Policy Perspective to question whether there might be a better way to encourage companies to provide food and jobs to areas that need both.

“Is any job a good job if people don’t have jobs? To a certain extend it is. But people might not get full-time jobs or good jobs that can help them get off social services and into the middle class,” he said. “And you don’t want to bring everybody’s standards down. Should the state be in the business of subsidizing that? I would say no.”

Another bonus program seems to target Subaru, whose executives are considering moving their American headquarters from Cherry Hill to Philadelphia. Camden County freeholders have been lobbying for a program to help convince the auto manufacturer to stay in the county and it appears they may have gotten it.

The law stipulates that companies applying for certain tax credits can receive credit for 100 percent of gross tax receipts for each newly created job and 25 percent for each retained job unless “the jobs are part of a megaproject which is the United States headquarters of an automobile manufacturer located within a priority area or in a Garden State Growth Zone, in which case the business shall be entitled to tax credits equaling 100 percent of the gross amount of tax credits for each retained full-time job.”

Again, Jon Whiten: “Are there other ways to approach that besides putting in language that weakens what’s intended to be a statewide bill designed to create jobs? To a certain extent it seems people felt they could get all of their little pet things in here, and I don’t think that’s necessarily the right way to go about it.”

Less controversial but equally region-specific are the creation of an Atlantic City tourism district that comprises any number of publicly owned properties and clusters where a majority of businesses support tourism; an aviation district designed to foster a cluster of aviation-related businesses one mile around the Atlantic City airport; and a port district radiating out from “each marine terminal facility established, acquired, constructed, rehabilitated or improved by the South Jersey Port District,” which is based in the city of Camden. All three areas provide added bonuses or incentives or lessen the requirements for various types of qualifying projects in those areas.