Businesses feel the sting after low-tax zones disappear in five struggling N.J. cities

 Franklin Griffith Electric across South Broad St. from Sun National Bank Arena is in Trenton's Urban Enterprise Zone. (<a href=Photo via Google Maps) " title="griffith electric" width="640" height="360"/>

Franklin Griffith Electric across South Broad St. from Sun National Bank Arena is in Trenton's Urban Enterprise Zone. (Photo via Google Maps)

When Bill Goodwin began working at Trenton’s Franklin Griffith Electric in 1998, the city had already been designated an Urban Enterprise Zone for more than a decade.

Started in 1986, the UEZ program attempted to help distressed New Jersey cities by encouraging business growth in them.

The designation meant that companies like Franklin Griffith Electric could, among other benefits, charge half the state’s sales tax and make company purchases tax free.

“I realized very early on that it was a very important program for a company such as ours,” said Goodwin, Franklin Griffith Electric’s executive vice president.

In 2015, Goodwin said, his company generated 15 percent of its business — $3 million out of a total $20 million in earnings — from customers who only bought there because of the cut sales tax rate.

Back then, customers could buy light bulbs, switches, and other electrical materials from Franklin Griffith Electric and pay 3.5 percent sales tax, half of the statewide rate of 7 percent. (New Jersey’s sales tax has since dropped to 6.875 cents and will fall to 6.625 cents in 2018.)

On January 1st the UEZ designation expired in the first five cities to win the designation: Trenton, Bridgeton, Camden, Newark, and Plainfield.

It has caused companies like Franklin Griffith Electric to question how they can maintain business at current levels without the tax benefits they have come to rely on for three decades.

“Where are we, as a small company, going to find $3 million more?” said Goodwin. “That’s a lot of business. It will be a struggle.”

A bill passed by the state Legislature in December would extend the UEZ designation in those five cities, and all the tax benefits that go along with it, for two more years.

But Republican Gov. Chris Christie has yet to take action on the bill, so the zones expired at the end of 2016. A spokesman for Christie declined to comment on whether he would sign or veto the bill.

However Christie’s veto of a bill last summer that would have extended the five UEZs for another 10 years provides a window into his thinking about the program.

In August he called UEZs a “failed 30-year experiment” and declared that “[s]tate resources to help financially distressed municipalities should be temporary in nature.”

However, in his veto, Christie also called for a study of the UEZ program to see if a similar initiative could “succeed where the current UEZ program has failed.” That change is included in the current proposal.

Yet the uncertainty over whether the UEZ program will stay or go is concerning to businesspeople like Steve Schwartz, president of PCM Co., a Camden-based company that manufactures environmental testing equipment and applies functional coatings like Teflon.

According to Schwartz, the most important benefit of the UEZ program to PCM was that the company could purchase equipment and materials without paying sales tax.

“If something costs $1,000 without sales tax, it costs $1,070 with sales tax,” said Schwartz, “and those dollars add up.”

After a fire gutted PCM’s Camden facility in 2014, the state offered the company a tax break through the Grow NJ program to stay in New Jersey and local officials helped the company get operations back up and running, which Schwartz called an “extremely positive experience.”

But he said that the expiration of the UEZ program will no doubt have a negative impact on PCM, which he said employs more than a dozen Camden residents. “Anything that you can do to help businesses, particularly in distressed areas like Camden, are things that I think should be preserved and encouraged.”

Goodwin, of Franklin Griffith Electric, said extending the life of those five UEZs should be a no-brainer and would be in line with the Christie administration’s efforts to support small businesses across the state.

“[Christie] talks a big game. He talks about helping small business,” said Goodwin, “but if he really wants to help small business, then this is something he needs to do. This is something he needs to sign.”

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