As the New Jersey Economic Development Authority weighs new tax credits for companies who relocate to Camden, NJ, a liberal think tank is calling the projected economic benefits of those tax breaks inflated. New Jersey Policy Perspective estimates that new tax credits under the Grow New Jersey program could cost the state long-term, and bring in half the increased economic activity projected by the NJEDA.
$58.3 million in tax incentives will be up for consideration this week: $40 million for coatings and sealants company ACTEGA North America and $18.3 million subsidy for Dubell Lumber, both of which are already located less than 30 miles from the city. Those tax credits would join the $1.1 billion the state has promised to 18 companies since the Grow New Jersey program began in 2013.
Jon Whiten, the group’s Vice President, said in a statement that the tax breaks could cost the state a significant amount per job. Most, he said, would simply be relocated from towns in surrounding Camden County into the city, one of the nation’s poorest.
“The 18 companies are required to maintain 3,941 jobs in Camden as part of their deal to receive the $1.1 billion,” he wrote. “When measured as cost per each job, these Camden deals are literally off the charts, at an average cost of $291,000 for each job.
“Of those 3,941 jobs, only 35% are new to the state of New Jersey – and these come at an even steeper cost of $828,000 per job. The rest already exist elsewhere in the state, and are already filled. In the case of Camden, most of these so-called “retained” jobs are not only already in the state of New Jersey – they’re already in the Camden metro area, in Cherry Hill, Moorestown and other neighboring towns.”
Whiten believes the state’s criteria for awarding the tax credits issued under the Grow New Jersey program should include longer timetable and more accountability for creating a net benefit for the state. By NJPP’s calculations, the state is at risk of losing $273 million out of the $534 million it has projected in increased economic activity if it doesn’t change its terms.
“In the past, in order to be approved for a tax break, most projects would need to deliver a benefit to the state of at least 110 percent – in other words, 10 percent more than the dollar value of the subsidy – over the same period that the company was committed to keeping the jobs in-state. This was usually 15 years. If the corporation didn’t meet those promised obligations, it would receive less of a tax break, or none at all,” he continued.
“But now, a project in Camden need only deliver a 100 percent benefit – in other words, break even – over 35 years. But the company is obligated to deliver the proposed jobs and economic activity for only 15 years at most. After that, it can move out of Camden or slash its workforce – and the state would have no recourse to claw back any of the tax credits that have already been issued.”
Representatives from the NJEDA were not immediately available for comment.