Murphy Close to Restoring Enterprise Zones in 5 Cash-Strapped Communities

John Reitmeyer | April 17, 2018 | Politics
Move would reverse former Gov. Christie’s decision to strip UEZs from Bridgeton, Camden, Newark, Plainfield, and Trenton

Pleasantville UEZ
Five New Jersey communities that were longtime members of the state’s Urban Enterprise Zone economic-development program before being removed early last year may be on the verge of getting back in.

Under legislation that’s currently sitting on the desk of Gov. Phil Murphy, the UEZ status for Bridgeton, Camden, Newark, Plainfield, and Trenton would be reinstated and extended at least through the end of 2023.

Murphy, a Democrat, has recently sent signals that he supports the UEZ program, which for decades has attempted to boost New Jersey’s struggling cities and downtowns using a series of tax and hiring incentives, including allowing their businesses to levy a reduced sales-tax rate.

His endorsement of an extension would reverse the actions of former Republican Gov. Chris Christie, who was a critic of the program and blocked lawmakers’ efforts to renew the UEZ status of the five communities before it expired at the end of 2016. Meanwhile, other Republicans have continued to question the effectiveness the program as the efforts to extend it were revived when Murphy took office in January.

If the renewal legislation does win Murphy’s signature, the future of the program will still be up for debate as dozens of other communities are in danger of losing their UEZ status over the next decade. To resolve that issue, the bill calls for the Murphy administration to coordinate a study of the program, and for a report to be issued within 12 months that discusses whether it should be renewed, reconstituted, or allowed to expire.

Urban vs. suburban malls

Started in the 1980s as a way boost small businesses in New Jersey’s struggling urban communities as they tried to compete with suburban malls, the UEZ program’s main attraction has been the authorization for businesses to charge half the state sales-tax, which right now is 6.625 percent. But the UEZ program which is administered by the Department of Community Affairs, also provides several other tax incentives, elements of the program that advocates say are equally important but often overlooked.

They include a break on energy taxes, business-to-business tax exemptions, subsidies for unemployment insurance, and corporate-tax credits for investing and hiring residents from within the UEZ community.

“The UEZ has been an important tool for distressed cities to encourage business growth, stimulate local economies, and create jobs within the community,” said Sen. Shirley Turner (D-Mercer).

Sales-tax break too costly

Still, not all lawmakers have agreed with Turner and other sponsors of the renewal legislation. In fact, the issue was hotly debated on the floor of the Assembly last week, with Assemblyman Anthony Bucco (R-Morris) suggesting the state can no longer afford to forfeit the sales-tax revenue that’s lost to the UEZ discount.

“It has become abundantly clear, after 35 years of this program, that the program is just not doing what it intended to do, and that is to revitalize our communities where it exists,” said Bucco, who held up urban economic-development efforts in Pittsburgh as an alternative.

Under the original terms of the UEZ program, the special designation was to sunset 20 years after it was first established in each community. Lawmakers already voted for one reprieve, in 2001, allowing for a 16-year extension. But Christie blocked lawmakers’ attempts to renew the UEZ designation in the five charter communities of Bridgeton, Camden, Newark, Plainfield, and Trenton, allowing their UEZ status to expire at midnight on December 31, 2016.

All the remaining UEZs in 32 municipalities across the state are also on course to see their designations run out between 2019 and 2026, starting with Millville and Vineland next year, according to DCA records.

The renewal legislation that made it to Murphy’s desk after winning final approval in both the Assembly and Senate last week would immediately reinstate the five charter communities, and also ensure those communities and Millville and Vineland remain in the program through at least the end of 2023. The bill also represents a compromise; some lawmakers had been seeking a longer, 10-year extension of the program that would have covered all 32 remaining UEZ municipalities.

Outside assistance

The bill would also require the DCA to work with the Department of Treasury to review the program, including by allowing the Murphy administration to use an outside consultant or university to study what the state should be doing to help UEZ communities remain competitive. The report and any recommendations about the future of the program would be due 12 months from the time the bill becomes law.

While Christie rejected UEZ renewal bills while was in office, the swearing in of Murphy earlier this year renewed hope for those who have been seeking to extend the program. The importance of the UEZs was also highlighted in a report issued by a group of experts who were assembled by Murphy’s transition team to study urban issues. And the governor himself praised the UEZ program during a recent radio interview, calling it “smart policy.”