Caught up in Gov. Phil Murphy’s ongoing squabble with lawmakers over the future of the state’s expiring economic-development tax-incentive programs is his plan to establish a public-private venture-capital fund in New Jersey to help new tech companies get off the ground.
Called the “Innovation Evergreen Fund,” the governor’s proposal won praise from the venture-capital world when he introduced it last fall, but now it’s stalled in the Legislature as he’s been feuding with lawmakers about the state’s broader economic-development strategy.
With only days left before the state can no longer accept applications for existing tax-incentive programs, Murphy yesterday made a new pitch for the evergreen fund and other economic-development policy changes. The governor, a Democrat, was surrounded by several venture-capital executives as he made the case for a policy overhaul during a news conference on the campus of New Jersey Institute of Technology.
Murphy also said he’s holding back for now a promised veto of a bill, already passed by both houses of the Legislature, that would simply extend the existing programs for another seven months to allow more time for last-minute negotiations with lawmakers.
“There’s an opportunity between now and June 30 to get this right,” Murphy said.
A flagship element of the broader economic-development plan that Murphy first rolled out in October was the proposal to establish athat would be seeded with a combined $500 million raised from both the state and private investors. The logic behind the fund is that startups hold the most growth potential for investors — and by partnering with proven venture capitalists, the state could use its tax dollars to ensure the best firms take root in New Jersey.
The fund could also help the state reclaim its standing among the top places for venture-capital investments after falling to 15th place in recent years, Murphy said yesterday.
Under the governor’s plan, the state would raise half of the $500 million by auctioning off tax credits to existing corporations. The rest of the seed money would be “co-invested” by the private sector. The fund would target startups in specific fields, such as life sciences, financial technology, digital media, advanced manufacturing and cybersecurity. It would also operate as a revolving fund so that money could be reinvested. Murphy has said it also has the potential to generate revenue for the state budget’s General Fund.
Other changes to the state’s economic-development strategy that Murphy has proposed include capping tax incentives to lessen the impact on the budget and targeting them more toward specific goals like brownfields redevelopment and historic preservation.
“The Legislature, by the way, can take up this new (strategy) that we have proposed immediately,” Murphy said yesterday. “This is not that hard.”
As Murphy gave way to other speakers during the news conference, Tom Wisniewski, managing partner of Newark Venture Partners,of his own company, which works with public universities like NJIT to bring startups to Newark, as he praised the proposed evergreen fund.
“It’s not hard for me to be a very enthusiastic supporter,” Wisniewski said. “It’s in our DNA that we know there’s this (economic) impact.”
Aaron Price, the founder of Propelify, an annual outdoor festival for venture capitalists and entrepreneurs that’s held in Hoboken, suggested the evergreen fund would also help keep existing startups from leaving New Jersey for other places, including New York.
“Raising capital is painful, it takes a lot of time, and it takes time away from building your business,” Price said. “(Entrepreneurs) can look to New Jersey and say, ‘Now when I raise capital from these venture capitalists in New Jersey I can significantly add to my investment.’”
But the bill that passed both houses of the Legislature last week in Trentonproposed by Murphy. Instead, lawmakers said a simple extension of the two main programs that are currently run by the state Economic Development Authority will allow more time to decide the right course of action, especially after issued by the Office of the State Comptroller and a impaneled by Murphy have raised questions about oversight and the effectiveness of the existing programs.
Lawmakers are planning to hold a series of hearings on the tax incentives over the summer, but they also want to extend them to ensure the state continues to have something to offer companies seeking to relocate to New Jersey.
“Passing an extension gave the governor the opportunity to continue those (programs) for a limited period of time while we work together to put together an economic-development package that we can all agree on,” said Assembly Speaker Craig Coughlin (D-Middlesex) last week.
But Murphy has made it clear that as long as major questions linger over the existing programs — including amade by the task force — he has no interest in simply renewing them. He also said, however, that holding back his veto provides more time to work out a deal with lawmakers before the deadline.
“I still hope, perhaps naively, that between now and June 30 that we can find some common ground,” Murphy said yesterday.
While the debate over the future of the tax incentives is playing out at the same time Murphy and lawmakersover major elements of the next state budget — which also has to be enacted by June 30 — he said the two issues are being discussed separately.
“I think we have to prove that we can walk and chew gum at the same time,” Murphy said.