An ongoing economic recovery in Atlantic City has been boosted by lucrative state-tax incentives, and lawmakers want to use the same approach to revitalize an area surrounding the seaside resort’s airport. The only problem: They can’t convince a governor to go along.
For the second time this year, a gubernatorial veto has thwarted efforts to use tax incentives to jumpstart an aviation and technology center at Atlantic City International Airport, where a major Federal Aviation Administration facility is located.
The first rejection came in the form of a pocket veto issued by former Gov. Chris Christie on January 16, 2018. The latest was the handiwork of Gov. Phil Murphy — a conditional veto issued in late August.
While Murphy’s action left the door open to compromise, it remains to be seen whether lawmakers will concur with his recommendations, creating a temporary economic-development zone at the airport that would expire in less than a year. All current tax incentives are scheduled to expire in 2019.
Sweeney wants a bigger window
Senate President Steve Sweeney, a primary sponsor of the bill, has called the tight window for tax incentives that Murphy is offering “too limiting,” putting hopes for a compromise in question. It’s just the latest example of Sweeney (D-Gloucester) and the governor bumping heads over a major policy issue.
Only Atlantic City and four other communities in New Jersey were officially designated several years ago as “growth zones,” meaning that businesses that locate can qualify for some of the most lucrative economic-development tax breaks the state can offer. The others are Camden, Trenton, Passaic, and Paterson.
The bipartisan bill sponsored by Sweeney and Sens. Chris Brown (R-Atlantic) and Jeff Van Drew (D-Cape May) would establish a technology-cluster centered on the aviation industry at the airport, which is not located in Atlantic City, but on the mainland in nearby Egg Harbor Township. It is also home to the FAA’s William J. Hughes Tech Center campus.
Local officials have for years been trying to diversify the region’s economy so it is not as heavily linked to the casino-gambling industry. Nearby Stockton University recently opened a new campus in Atlantic City as part of that effort, and university officials broke ground last year on a planned research and technology park on a site adjacent to the airport that would fall within the proposed economic-development growth zone.
No-go on growth zone
Lawmakers first sought to have the growth zone established on the mainland in 2017, but Christie blocked the plan, without offering an official explanation. The sponsors revived their effort after Murphy took office a few weeks later, and both houses passed the new version of the bill overwhelmingly in June.
But Murphy has been an outspoken critic of the state tax-incentive programs that were created during Christie’s tenure, and he’s ordered a comprehensive audit of their effectiveness. The incentives are up for reauthorization in July 2019. If they are changed or not reauthorized, the state would continue to honor existing agreements, but could not enter into any new deals under the current rules.
In his conditional veto last month, Murphy said next year’s deadline was a reason to recommend the airport growth zone would expire July 1, 2019. Lawmakers wanted to have the growth zone in place from July 1, 2018 until July 1, 2022.
New Jersey’s inefficient incentives?
“While I understand the desire of the sponsors to expand these programs further into Atlantic County, I continue to believe that we must fully examine the merits of these tax incentive programs in light of evidence that they have been less effective than those in other states,” Murphy said in the conditional veto.
“I commend the sponsors for advocating for Atlantic City and its surrounding region, and I remain steadfast in my commitment to the region and its economic prospects,” he went on to say.
Van Drew said in response to the governor’s CV that he was “profoundly disappointed.” Sweeney also spoke out, suggesting it will take time to build a diversified economy in the Atlantic City region and that the governor’s CV “hurts that (effort) by opening a window of opportunity for a year and then closing it tight.”
“A one-year extension for aviation businesses to apply for enhanced incentives is too limiting,” Sweeney went on to say. His office declined comment yesterday when asked whether the Senate is planning to concur with Murphy’s recommendations, which have already been put up for a first reading in the Assembly.
This is just the latest policy disagreement between Sweeney and Murphy since their high-profile clash over taxes and spending in the run up to the state budget in early July.
For example, Sweeney said he was “deeply offended” in response to Murphy’s recent veto of a measure that would have given lawmakers a role in determining the future of a longstanding reciprocal income-tax agreement with Pennsylvania. The agreement is cherished by many South Jersey residents, who would face higher taxes if it weren’t in place. Sweeney also noted the Murphy administration has temporarily suspended all service on New Jersey Transit’s Atlantic City Line as part of a broader effort to install positive train-control safety equipment before the end of the year to comply with federal regulations.
Asked for a response, a Murphy administration official suggested each policy decision has been made on its individual merits and said the CV also fits in with the governor’s willingness to make changes to tax-credit legislation that impacts other parts of the state.