|04-04-2012, 10:32 PM||#1|
Join Date: Sep 2004
Christie Leaning on Tax Subsidies in Hunt for Jobs
Since taking office in 2010, Gov. Chris Christie has approved a record $1.57 billion in state tax breaks for dozens of New Jersey’s largest companies after they pledged to add jobs.
Christie Leaning On Tax Subsidies In Hunt for Jobs
By CHARLES V. BAGLI, New York Times
Published: April 4, 2012
Panasonic received $102.4 million in tax credits to move its headquarters nine miles within New Jersey. Goya Foods picked up $81.9 million in credits to build offices and a warehouse in Jersey City, two miles from its current complex. Prudential Insurance obtained $250.8 million to move a few blocks to a new tower in Newark.
Prudential Insurance, now in the Gateway complex in Newark, will receive $250.8 million in tax breaks to move a few blocks.
Since taking office in 2010, Gov. Chris Christie has approved a record $1.57 billion in state tax breaks for dozens of New Jersey’s largest companies after they pledged to add jobs. Mr. Christie has emphasized that these are prudent measures that are intended to help heal the state’s economy, which lost more than 260,000 jobs in the recession.
The companies often received the tax breaks after they threatened to move to New York or elsewhere.
The generous distribution of subsidies in New Jersey has come under fire from government-reform groups, Mayor Michael R. Bloomberg of New York City and some New Jersey landlords, who contend that the programs are an expensive and ineffective form of assistance to wealthy corporations. The critics pointed out that even when the promised jobs have not materialized, the Christie administration has merely reduced, not withdrawn, the subsidies. And they say that the administration is mortgaging the state’s future by forgiving so much tax revenue for the next 10 to 15 years.
“Christie has taken this to a whole different level; it’s become a feeding trough,” said Deborah Howlett, executive director of New Jersey Policy Perspectives, a liberal policy organization. “It seems ridiculous to steal jobs from one city in the state and move them to another city a couple miles away. There just doesn’t seem to be any benefit to taxpayers.”
Mr. Christie, who has portrayed himself as a fiscal conservative, has in particular used a new program, the Urban Transit Hub Tax Credit Program, for the subsidies. The program, which is intended to encourage development around nine cities, offers tax credits equal to 100 percent of some capital investments.
“This is another success story about one of our largest businesses choosing to stay in New Jersey, continue to grow and invest in our state and people,” Mr. Christie said at Panasonic’s groundbreaking in October. “This project directly benefits New Jerseyans by keeping over 800 jobs here, creating up to 200 new, permanent positions, and spurring private investment.”
Under the program, the Christie administration has granted more than $900 million in state tax credits over 10 years to 15 companies, including Panasonic, Goya, Prudential and Campbell’s Soup. The companies have promised to add 2,364 jobs, or $387,537 in tax credits per job, over the next decade.
The most controversial of those deals is also the largest.
The state approved up to $250 million in tax credits last year for Prudential, Newark’s most important corporate citizen, to build a new office tower. The company acknowledged that the jobs were not “at risk” of leaving the state and that renewing its leases at three buildings in the nearby Gateway complex were the “low-cost options by a wide margin when compared to the cost of new construction.”
The $250.8 million in tax credits, however, made the office tower project possible. In return, Prudential claimed it would create 400 new jobs, including 100 coming from outside New Jersey. The other new jobs were based on the company’s past growth patterns, which presumably would occur at either location.
The three landlords at Gateway filed a lawsuit in December to block the tax credits, arguing that the loss of Prudential, which leased a combined 922,000 square feet, would have a “devastating financial impact” on both Gateway and Newark, as the office vacancy rate shot up.
They contended that Prudential would have renewed its lease if not for the state’s intervention in the form of tax credits. The state’s decision, the landlords said, amounted to “corporate welfare at its worst.”
Another agreement has also stirred criticism. In February 2011, the state approved a $42 million tax break for Campbell’s Soup to renovate its longtime headquarters in Camden and add new jobs.
Campbell’s then announced in June that it would eliminate 130 jobs in Camden. The administration responded by reducing the subsidy to $34.2 million and warning Campbell’s that it could not use the tax credits until it restored the work force to the level before the job cuts and added five jobs a year for a decade.
Of course, no elected official wants to be blamed for the loss of jobs after major employers leave the state. Like his predecessors, Mr. Christie has deployed longstanding tax-credit programs, providing more than $500 million in tax breaks for a variety of companies.
For example, the state provided $261.4 million in tax incentives for the Revel casino in Atlantic City, where the gambling industry’s revenues have fallen sharply. And it plans to give a total of $650 million in public financing for a twice-failed entertainment and retail complex in the Meadowlands.
But the state’s adoption of the Urban Transit Hub Tax Credit Program has expanded companies’ chances of obtaining subsidies. The Transit Hub program is a bipartisan initiative that has been revised three times since 2008 to make it easier for companies to qualify. Caren S. Franzini, chief executive of the New Jersey Economic Development Authority, said the tax incentives offered by Mr. Christie had been highly successful.
“It’s very much worth it,” Ms. Franzini said. “We’re sharing with the companies a percentage of new revenues. But we’re always getting more than we give out. There will be jobs, but there will also be more tax ratables for those communities and more spinoffs.”
Panasonic, which had threatened to move out of the state, will get up to $102.4 million in Transit Hub tax credits to move from an aging headquarters in Secaucus to a new building in Newark.
The company is to occupy about 60 percent of a new tower built by private developers.
Panasonic of North America’s chairman, Joseph M. Taylor, said that “absent the tax incentives, Jersey wouldn’t have been an option.”
But Mr. Taylor conceded that he had to take into account that “probably 80 percent” of the company’s 900 employees wouldn’t have made the trip to California, Georgia or other competing locations considered by the company.
Hartz-Mountain, Panasonic’s landlord in Secaucus, sued the state over the deal last year. It dropped the suit after New Jersey created another tax credit program for suburban developers.
Despite Mr. Christie’s efforts, New Jersey has recovered only 20 percent, or 51,500, of the 261,000 jobs lost during the recession, compared with 80 percent in New York City.
The state says 12,168 jobs were retained through the Urban Transit Hub Tax Credit Program, although opponents of the program doubt those estimates.
Mayor Bloomberg has chastised Mr. Christie for reigniting a bidding war for jobs.
Seeking to lure New York companies to New Jersey, the Christie administration offered an estimated $300 million in subsidies to GAD Bakeries, makers of Junior’s cheese cakes; Fresh Direct, the online grocer; and the Hunts Point Terminal Produce Cooperative.
For 20 years, companies have routinely pitted the two states against each other in an effort to extract tax breaks and other subsidies.
Stephen Katzman, co-president of the Hunts Point cooperative, said Mr. Christie had called him last year offering “pretty much whatever it would take to get us there.”
So far, those companies have not taken the bait, but the competition did force New York to match New Jersey’s offers.
Gil Medina, a former New Jersey commerce secretary, said New York, New Jersey and Connecticut should work together.
“We need to collaborate more on a regional basis instead of spending a significant amount of time outmaneuvering each other,” said Mr. Medina, who is now a real estate broker for Cushman & Wakefield. “We should think of a way to put together a regional approach to being more competitive globally.”
|04-05-2012, 09:45 AM||#2|
Join Date: Mar 2005
The Development Subsidy Job Goals Accountability Act needs to be amended so that all the benefits of these tax expenditures are placed on the web BEFORE the shovel hits the ground and (it is hoped) BEFORE a penny is spent!
Sigh... I'm about a hundred and a dozen pages into Why Nations Fail, by Daron Acemoglu and James A Robinson. I fully expect to get to Christie's part. Spending money wisely isn't just about the nickel and dime extracted inciting modest-means people to beat up on each other. That's not fiscal responsibility. And for what it's worth it's definitely not endearingly statesmanlike and is why so many people see through this blowhard governor. It is, to use the words of another book, a polemic on Why America Failed (by Morris Berman): Chris Christie is another hustler selling us something that really ain't good for us. At least in the long run. A moment on the lips, a lifetime on the.... Well, you get the picture.
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