$82 Million EDA Subsidy of 76ers Facility in Camden Spurs Debate On Tax Breaks

Mark J. Magyar | June 11, 2014 | More Issues
Think tank questions $4 billion in tax breaks under Christie, but Chamber of Commerce says New Jersey needs subsidies to compete

Camden Mayor Dana Redd and 76ers CEO Scott O´Neil.
It isn’t often that liberal New Jersey Policy Perspective and conservative Americans For Prosperity agree, but yesterday both ends of New Jersey’s political spectrum sharply criticized the state Economic Development Authority’s decision to grant an $82 million tax subsidy to the Philadelphia 76ers to shift 250 jobs to a new practice facility in Camden.

The subsidy to the 76ers, which comes out to $328,000 in state tax dollars per job, sparked a furious debate yesterday. Camden Mayor Dana Redd and EDA President Tim Lizura defended the tax-subsidized move as a boon to the state’s poorest city, and state Sen. Michael Doherty (R-Warren) joined Americans For Prosperity and NJPP in denouncing the tax breaks as wasteful.

The 76ers’ move is just the latest large-scale subsidy handed out by the EDA, which has awarded $4 billion in tax breaks averaging more than $47,000 per job — with 43 percent of the subsidies going to companies already located in New Jersey simply as incentives to stay in the Garden State, NJPP President Gordon MacInnes noted.

“New Jersey has bet the ranch that handing out tax breaks to mostly large corporations
alone will somehow improve our economic future,” MacInnes said in releasing a new report on the state’s business subsidy programs. “So far, it’s clear that the bet isn’t paying off — yet last year policymakers decided to double-down on this failed approach, and now the odds against the taxpayer are even longer. The bottom line is that New Jersey’s financial crisis worsens with every taxpayer-subsidized payday for a very small share of New Jersey’s businesses.”

Nevertheless, Michael Egenton, senior vice president for the New Jersey State Chamber of Commerce, said subsidies are “a necessary weapon in the economic incentive war that is being waged between New Jersey and other states, and New Jersey and other countries over where companies and jobs are going to be located.”

Egenton said New York Gov. Andrew Cuomo has been a “trailblazer” in offering tax breaks and incentives to lure companies to the Empire State, which — unlike New Jersey — has more than regained all of the jobs lost during the Great Recession of 2007-2009. And Massachusetts — “which we used to jokingly call Taxachusetts” — is using tax incentives to build a pharmaceutical and biotech research-and-development core, some of it at New Jersey’s expense, he noted.

“We say our cities need help, and these tax incentives are one way to bring employers and employees where the infrastructure and transit hubs already exist,” Egenton said after the Camden deal was announced.

Redd was delighted not only by the 250 jobs the Philadelphia 76ers would bring and the state-of-the-art practice facility the team would construct, but also by the symbolic value of a professional sports team choosing to practice in Camden.

The approval of the deal by the Christie administration’s EDA was also touted by George Norcross, the South Jersey Democratic powerbroker who teamed up with Republican Gov. Chris Christie on a series of initiatives to rebuild Camden, including the Cooper Medical School, the Cooper Cancer Institute, and the KIPP Cooper Norcross Academy.

However, Doherty, the leading conservative in the Legislature, asserted that “the facility will essentially be a free gift from the hard-pressed taxpayers of New Jersey to Joshua Harris, the billionaire owner of the team. How can New Jersey not make this year’s full pension payment, but the state government can find an extra $82 million for a basketball practice facility?”

Daryn Iwicki, state director of Americans For Prosperity, the New Jersey chapter of the conservative political advocacy organization founded by the billionaire Koch brothers, said it is “regrettable that Gov. Christie and others in the Legislature continue to buy into the idea that these kinds of corporate welfare handouts will bring jobs and economic growth.

“If they were right, Atlantic City would be a bastion of prosperity today, but it’s far from it,” Iwicki said, taking an unnamed swipe at the $261.4 million subsidy the EDA approved in 2011 for the Revel Casino, which has been drowning in red ink ever since.

MacInnes noted that tax subsidies for sports stadiums and facilities “are notorious for short-changing the taxpayer,” and pointed out that under the 76ers agreement, “New Jersey will match the team’s investment dollar for dollar, giving up $82 million in tax revenue over a decade in the process.”

“This subsidy deal is among the worst we’ve seen under the Economic Opportunity Act,” MacInnes declared. “The net benefit to the state is incredibly low — $76.6 million over 35 years, according to the state’s own projections. That is, if the team even stays that long, since they will only be required to stay for 15 before they can seek tax breaks elsewhere. Each job promised in this deal is worth an astounding $328,000 in state tax dollars, despite having a median wage of just $45,000.”

MacInnes asserted that the bipartisan 2013 Economic Opportunity Act overhauling the state’s subsidy programs accelerated three troubling trends: (1) a jump in the number of $100 million subsidy megadeals, (2) an increase in the tax subsidy cost per job created, and (3) an increase in the percentage of subsidies going to jobs considered to be “at risk” of leaving New Jersey, rather than to attracting new jobs from outside the state.

As detailed in “New Jersey’s Surge in Business Tax Subsidies Reaches New Heights,” a report by NJPP Deputy Director Jon Whiten:

  • The $4 billion in business tax subsidies awarded since Christie took office in 2010 is three times the $1.4 billion in subsidies awarded during the previous 13 years by three Democratic and two Republican governors.
  • In the first six months since passage of the Economic Opportunity Act, the state has been awarding $165.3 million a month in subsidies — up from $75.9 million a month previously under Christie, $10.1 million per month from 2000 to 2009, and $3.8 million per month from July 1996 to December 1999 under Republican Gov. Christine Todd Whitman, who created the first business subsidy program.
  • The $4 billion in subsidies awarded under Christie are designed to attract or retain 83,960 permanent jobs, which comes out to a cost of $47,916 per job — up from $16,430 in the 2000s and $8,612 in the latter 1990s.
  • Forty-three percent of the subsidized jobs are those classified as “at risk” of leaving, compared to just 25 percent in the 2000s and none in the late 1990s.
  • Three of the four biggest tax incentive packages have been awarded in the past year — a record $390 million to American Dream Meadowlands to take over the unfinished Xanadu project in East Rutherford in 2013, and a $224.8 million subsidy to JP Morgan Chase, and $223.3 million to Sayreville Seaport Associates, both this year.

    “Some of New Jersey’s highest-profile ‘wins’ this decade are hollow victories, as the state increasingly uses public tax dollars to merely shift private economic activity and jobs around the state — consider the $210.8 million tax break for Prudential to vacate its office space in Newark’s Gateway Center and build a new tower a few blocks away; the $102.4 million subsidy to Panasonic to move its headquarters one train stop, from Secaucus to Newark; the $81.9 million award to Goya Foods to move one mile from Secaucus to Jersey City; or the $40 million grant to Burlington Coat Factory to build a new facility (on land it already owned) less than half a mile from its current location on Route 130,” Whiten wrote.

    With New Jersey facing a major long-term crisis caused by unfunded pension and retiree health care liabilities, the state cannot afford to lose the $2.9 billion in revenue over the next five years that the EDA projects the subsidy program will cost, the NJPP report concluded.

    We’re in this together
    For a better-informed future. Support our nonprofit newsroom.
    Donate to NJ Spotlight