Murphy Doubles Down On Criticism Of ‘Rigged’ Tax Incentives

John Reitmeyer | June 19, 2019 | Budget
Governor promises to veto legislation providing seven-month extention of scrutinized EDA programs, without ‘meaningful reform’

Credit: Edwin J. Torres/Governor's Office
Gov. Phil Murphy
Armed with a new report from a special investigative task force that raised fresh concerns about political influence and shoddy oversight, Gov. Phil Murphy is ramping up his criticism of New Jersey’s main economic-development tax-incentive programs.

During a news conference held in Trenton just days before lawmakers are planning to send him legislation that would renew the same tax-break programs for another seven months, Murphy laid into the current incentive system, calling it “broken,” “rigged” and in need of “meaningful reform.”

The governor, a Democrat, also renewed a threat to veto the extension bill, which is favored by lawmakers. It was drafted earlier this year in response to a deadline established in the existing law prohibiting any new applications for tax incentives from being accepted after June 30.

“This system cannot be allowed to continue for one day past June 30,” Murphy said during a news conference in Trenton. “Let me once again be perfectly clear: If the Legislature sends me a bill to renew this system as is without the necessary reforms it will be vetoed.”

The high-profile clash on the future of the tax incentives is playing out just as Murphy and legislative leaders are set to begin negotiating the details of the state’s next budget, which must be in place by July 1 to avoid a government shutdown, less than two weeks away.

Sweeney: ‘Economically irresponsible’

The governor’s strong comments on the tax incentives drew a mixed response yesterday afternoon. Senate President Steve Sweeney (D-Gloucester) issued a statement that said it would be “economically irresponsible” to allow the programs to expire. Meanwhile, a spokeswoman for Assembly Speaker Craig Coughlin (D-Middlesex), said he was still reviewing the 75-page task-force report yesterday.

The report released by the investigative panel Monday evening comes after several months of close review and scrutiny of some $11 billion worth of tax incentives that have been awarded through the Trenton-based Economic Development Authority going back over a decade.

The report focused primarily on tax breaks that have been offered to companies as a way to lure them to New Jersey or to keep existing companies from leaving the state. The report also detailed questions that have been raised about claims made by several companies with ties to Democratic power broker George Norcross that were awarded tax breaks during the tenure of former Gov. Chris Christie.

While much of the turf covered in the report had already been made public amid a series of public hearings and media scrutiny, it also included some new emails and other materials that had not previously been released publicly.

The task force also disclosed that some $500 million worth of incentives have been “voluntarily terminated or may be subject to suspension/termination” due to companies either submitting inaccurate information in their applications for tax breaks or no longer being qualified to receive them.

The task force also made nine recommendations to improve the state’s administration of the tax-break programs, including a call for future legislation that would require that “legitimate public policy goals are applied neutrally, without favoring specific business interests.”

Email casts doubt on claim

The task force has scrutinized tax breaks awarded to companies with close ties to Norcross, including Cooper Health System, where Norcross serves as executive chairman.

The new report included an email exchange involving a Cooper executive and a real-estate broker that seemed to cast doubt on the likelihood the company was considering moving some jobs to Philadelphia even as an EDA memo was drafted suggesting that hundreds of positions could be relocated. But Cooper has strongly criticized the task force’s portrayal of the email and officials maintain it instead confirms claims the company made about not moving any jobs that were in Cooper’s original application for a tax incentive.

During his news conference yesterday, Murphy said he and his staff were still going through the report, but he also didn’t hold back when discussing some of the task force’s conclusions.

“We are not just dealing with a broken system,” Murphy said. “This is a rigged system.”

“This was designed by special interests to benefit special interests,” he went on to say. “It allowed hundreds of millions of dollars to flow to insiders based on misleading, false, omitted or fabricated information.”

Governor: Programs ‘stink’

While taking questions from reporters, Murphy also highlighted changes that have been made at the EDA since he took office in early 2018. They include a new chief executive and board chairman and ramping up compliance efforts.

“They’re doing things that have never been done at the EDA,” he said.

The tax-incentive law was last rewritten in 2013, and Murphy believes the programs are overdue for a serious overhaul. He’s proposed making them more targeted and is also calling for annual caps to be placed on incentive awards to minimize the impact on the state budget.

“It’s the programs that stink … and I don’t think any of us can justify voting to just kick that can down the road and keep them going without meaningful reforms,” Murphy said.

Credit: NJTV News
Senate President Steve Sweeney
But lawmakers in both the Assembly and Senate are planning to vote tomorrow on the legislation, which would extend the current programs until the end of January 2020 without making any substantive changes. In the interim, legislative leaders have scheduled a series of hearings to come up with any ways to improve the programs.

“The seven-month extension will prevent the state’s economic incentive programs from expiring and will provide an opportunity to gain a full understanding of the effectiveness of the programs, any failings in how they have been implemented, and how they could be improved,” Sweeney said yesterday.

Norcross: Give me an opportunity to testify

“Everyone agrees that tax incentives are a necessary tool,” he went on to say. “It would be economically irresponsible for the Governor to allow these programs to expire before we have the opportunity to develop effective replacements.”

Meanwhile, Norcross, who has spoken out strongly against the task-force investigation and was part of a lawsuit that sought to block the report from being released publicly, sent a letter to lawmakers yesterday seeking an opportunity to testify before them. Doing so would allow him to “correct the factual inaccuracies, gross misstatements and misleading information released by the Governor’s Task Force,” the letter said.

Dan Fee, a spokesman for Norcross, said later yesterday that the task-force report was a “factually dubious narrative almost completely without balance or context.”

Thomas Rubino, a spokesman for Cooper, also criticized the report, calling it “a one-sided report with inaccurate assumptions, verifiably incorrect legal arguments, and misleading insinuations to support predetermined conclusions.”