Court upholds $210M tax credit award for Prudential in Newark

TRENTON – A N.J. appeals court has upheld a $210 million tax credit award to Prudential Financial today. The grant,

TRENTON – A N.J. appeals court has upheld a $210 million tax credit award to Prudential Financial today.

The grant, for $210.82 million, in the form of an Urban Transit Hub Tax Credit, was for construction of a Newark office building.

“Instead of continuing to lease space in the Gateway Center, Prudential intends to relocate its Gateway Center operations to a $444 million, 650,000-square-foot office tower it plans to construct on Broad Street in Newark, a site in an area designated by the City as in need of redevelopment,” the court stated.

The new site is expected to accommodate existing workers plus approximately 400 new ones, the case file stated.

It has approximately 2,000 workers at the Gateway Center.

Hub tax credits are granted by the Authority when a business makes a capital investment of at least $50 million in a facility located within a half-mile radius of an urban transit hub rail station. In order to qualify for the credit, the business must employ at least 250 full-time employees at the facility, and must demonstrate that the capital investment will yield a “net positive benefit” to both the State and the eligible municipality, according to the court.

Gateway appealed the initial decision by the state to award the tax credit, initially OK’d in 2011. In June 2012, EDA approved a modified application.

Gateway argued that the Economic Development Authority’s net benefit analysis contained errors, which if corrected would have cut the tax credit award to $80 million.

The court rejected that argument, stating there is no evidence the analysis was tainted.

Gateway argued that the Authority’s analysis was “fatally tainted” because it relied on a consultant, JLL, who had not disclosed, as it was required to do, that it also served as a consultant for Prudential and as a consultant for Newark with regard to a redevelopment project which included the property on Broad Street.

Gateway argued JLL’s advice was biased and the award should be overturned. Gateway contended that JLL was in a unique position to help Prudential apply for the highest possible tax credit award.

But the court found that JLL performed no work for Prudential on its tax credit application. In addition, the court found that JLL’s limited work for the EDA did not taint the process.

“In fact,  as a result of JLL’s analysis of the job categories, the  Authority used a lower average salary than asserted by Prudential,” the court stated.

Gateway argued that if the court took into account what Gateway says would have been a more accurate analysis of the project, and pertaining to the average salary of the 400-some new employees, the tax credit should have been cut by $34 million.

 

Gateway also argued that EDA did not take into account increased costs for fire and police service, but a deputy mayor asserted that any increase would be minimal. Court upholds $210M tax credit award for Prudential in Newark