Governor Makes Case to Municipal Leaders for Revamping Tax Incentives

John Reitmeyer | November 22, 2019 | Budget
Murphy says there’s ‘too much at stake’ not to reform the programs, but sticking points remain between him and legislative leaders
Credit: Gov. Phil Murphy/Facebook
Gov. Phil Murphy promoted reform of state tax incentives at the League of Municipalities’ annual conference on Thursday.

Gov. Phil Murphy brought his pitch for an overhaul of New Jersey’s tax incentive policies to a meeting of local government leaders in Atlantic City yesterday, saying there is “too much at stake” for cities and towns throughout the state to hold back reform.

The governor used the annual conference of the New Jersey League of Municipalities to highlight proposals aimed at targeting the state’s job creation policies more toward specific goals, like brownfield redevelopment, historic-site preservation and fostering the growth of small businesses and startups.

After meeting with about 30 local government officials before delivering the conference’s keynote address, Murphy said his proposed reforms — which have been stalled in the Legislature for over a year — could be particularly helpful for struggling cities seeking to rebound from economic decline.

“It’s time to get this over the goal line,” Murphy said. “There’s too much at stake…”

Several urban mayors who participated in the meeting with the governor expressed a similar sense of urgency as they discussed the economic development ambitions of their respective cities.

“It’s time we act,” said Paterson Mayor Andre Sayegh. “There are communities waiting for investment. There are communities waiting for job growth.”

New Jersey’s tax incentives for economic development were last overhauled in 2013, during then- Gov. Chris Christie’s tenure. Among other changes, programs that were designed to encourage new investment and job creation were made more generous as the state struggled to create economic growth in the wake of the Great Recession. But those programs also drew complaints for being overly generous and skewed too much toward the needs of large corporations instead of New Jersey’s communities.

Allowed to expire

When the programs came up for renewal earlier this year, the governor, a Democrat, was unable to get on the same page with legislative leaders from his own party who control both the Assembly and Senate, and the incentives were allowed to expire at the end of June. Murphy and lawmakers have been in talks over a possible compromise for several months, but they have yet to strike a deal.

Amid those talks, Murphy launched an investigation of how the tax-break programs were administered, including during Christie’s tenure. That followed an audit the Office of the State Comptroller released earlier this year, which raised serious questions about the state’s oversight abilities over the more than $9 billion in tax breaks that have been pledged to companies going back over a decade. Meanwhile, lawmakers have been conducting their own review, with the latest public hearing in Trenton turning into a spectacle earlier this week.

The governor’s meeting with local government officials yesterday at the Atlantic City Convention Center lasted about 30 minutes. Murphy was joined by Tim Sullivan, chief executive of the state Economic Development Authority (which administers the tax incentives), and other administration officials as they pitched the governor’s package of reforms.

While briefing reporters afterward, Sullivan said they made the case during the meeting for “why it’s time to turn the page and have a new approach to economic development.”

“We think this represents a really forward, pro-growth (and) progressive approach to economic development and we’re excited to get on offense and get to work on this,” Sullivan said.

The mayors from some of the state’s biggest cities also spoke after the meeting about the need to put in place new tax-incentive programs.

Trenton Mayor Reed Gusciora said his city has land available in prime locations, but tax incentives would “really get the ball rolling with developers.”

“At the end of the day, we’d like to see a package signed into law sooner than later,” Gusciora said.

Critical for Atlantic City’s recovery?

Atlantic City Mayor Marty Small said tax-break programs could play an important role in ongoing efforts to diversify the resort’s economy, thus offsetting an overreliance on casinos and the gambling industry.

“I think that’s very critical to the full comeback of … Atlantic City,” Small said.

One issue that didn’t come up yesterday was Murphy’s continued insistence on revenue caps for how much could be sacrificed each year to fund tax incentives. In addition to pushing goals like brownfield redevelopment and growth in the high-tech sector, Murphy has emphasized the need to rein in spending on corporate tax breaks in light of the state’s deep fiscal constraints.

The issue of a cap is thought to be a key sticking point in any deal between the governor, Senate President Steve Sweeney (D-Gloucester) and Assembly Speaker Craig Coughlin (D-Middlesex). However, Murphy did suggest yesterday that he has had “constructive conversations with the Legislature and their teams” on the tax incentives.

“We think we’re close,” Murphy added.

Coughlin also said progress is being made. “There’s a framework in place, but we continue to work through the details,” he said.

Sweeney couldn’t be reached for comment yesterday, but when asked by NJTV News last month about the status of tax incentive talks he too said there have been recent “productive” conversations.

“But,” Sweeney added, “we don’t have any agreement on anything at this point.”