N.J. tax-break programs poorly monitored, audit finds

An audit critical of the New Jersey Economic Development Authority’s tax incentive programs found a lack of oversight and few policies to ensure that companies make good on promises outlined in their tax break agreements.

The EDA failed to verify that businesses honored their job commitment goals, the audit found, meaning the state could not be sure it was getting the economic benefits it had anticipated.

In a sampling of companies that received tax breaks, the N.J. State Comptroller’s office was unable to verify if 20 percent of the promised jobs had been created.

“The money just flowed from taxpayers’ pockets into a black hole,” said Gov. Phil Murphy, who ordered the audit a year ago.

Murphy suggested that New Jersey’s $11 billion tax-break program was failing to propel the state’s economy.

Yet he also claimed that tax incentives should be part of the state’s economic development plan and vowed that the EDA would continue granting new awards.

“But it’s gonna be done the right way. It’s gonna be done where we know where every penny goes. We know exactly what got created or retained,” he said at a Wednesday press conference.

The EDA’s tax incentive programs — chiefly Grow NJ, the main program for job creation — have been opposed by critics who say the awards are too generous and that the state is losing critical tax revenue that could be better spent on other public uses.

Yet proponents of the idea, such as former Gov. Chris Christie, have said corporate tax incentives are one of the best ways to entice businesses to relocate to New Jersey or expand operations there.

Many supporters credit the expansion of the tax-break program in 2013 for a wave of economic development in Camden, which saw Holtec International, Subaru, American Water, and other firms set up shop there in the last few years.

Companies do not receive the actual tax cuts until they satisfy certain requirements, but the audit found that the EDA often failed to ensure that those benchmarks are met.

The EDA often relied on information reported by the company itself but did not verify it, which may have resulted in tax breaks that were “improperly awarded, overstated, and overpaid,” the audit found.

It also noted that the “EDA did not perform a comprehensive evaluation of the economic benefits realized from the nearly $11 billion of approved incentive awards,” which is the main function of the tax incentive program.

The report angered those who said New Jersey was offering financial handouts to businesses but not to other parts of state government.

“Today’s audit of the EDA is the latest in a long line of findings, both by state government and independent organizations like NJPP and McKinsey, that New Jersey’s lavish corporate subsidy programs operate with little oversight and no evidence of spurring economic growth,” said Sheila Reynertson, a senior policy analyst with the left-leaning New Jersey Policy Perspective.

“Every New Jersey taxpayer should be furious knowing that the state has handed out billions of dollars in corporate tax breaks — with no real strings attached — while simultaneously cutting funds for public schools, NJ Transit, and state colleges and universities.”

State Sen. President Steve Sweeney, who supported the Economic Opportunity Act of 2013 that greatly expanded the state’s tax-break program, echoed the criticisms of the EDA.

“When we passed the legislation for these tax incentive programs, we included standards for oversight and we expected them to be followed. As this report clearly states, the oversight requirements were not followed,” he said in a statement.

Sweeney also said he agreed with Murphy’s call to let the current tax incentive programs expire so that the state can put new rules in place.

“We will work with the administration to create replacement programs that address the same priorities of generating economic growth, creating and retaining jobs and expanding long-term opportunities.”