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Report finding minimal impact of N.J. business incentives draws fire from critics

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While a well-publicized report has criticized New Jersey's liberal use of incentives dollars to attract and retain businesses, supporters call them a critical tool in competing for corporate tenants.

"The competitive environment in the post-recession period has really intensified," particularly when considered alongside lower-tax states like Pennsylvania, said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.

"Other states have ratcheted up their incentive programs, so it's not surprising New Jersey has to respond," he said. "I think most economists agree that everybody would be better off if we didn't have to apply these incentives, but you can't unilaterally disarm yourself. It's a debate without end."

The report, by the New Jersey Policy Perspective, found the volume of subsidy awards has skyrocketed since 2010. In the 1990s, New Jersey awarded an average of $3.9 million each month. From 2000 to 2009, it went up to $10.4 million, and in just the last three years, the average was $52.9 million a month. But despite the aggressive use of subsidies, the report says, post-recession job growth in New Jersey lags that of neighboring states and the nation.

"New Jersey now relies on a few mega-bets that move jobs around within the state to restore jobs and prosperity," said NJPP President Gordon MacInnes. "It ignores the lessons from states that are taking our best jobs, that investments supporting research, educational opportunity, and improved infrastructure are much more productive."

A spokesman for Gov. Chris Christie dismissed the report as a partisan attack, adding that the study fails to consider the disadvantage the state would be in without effective job retention and business incentive programs.

"This outfit is notoriously biased and consistently goes out of its way to fit an agenda," said Michael Drewniak. "The business incentive and job retention programs they denigrate have long had bipartisan support and sponsorship. Also, let's take objective note of the record job growth during this administration concurrent to expansion of our incentive and job retention programs."

The numbers show New Jersey's private-sector job growth has increased along with the increase in subsidies. According to the New Jersey Department of Labor and Workforce Development, the state lost 107,000 jobs in 2008 and 115,700 in 2009. When the subsidies increased in 2010, 9,200 private sector jobs were added to the economy. That rose to 28,400 in 2011 and 59,100 in 2012.

"Clearly there is a strong correlation between job growth in 2011 and 2012 with the increased subsidies," Hughes said. "Of course, there is a dilemma with the evaluations. Would the companies make the same move with or without the subsidy? There is no way to really tell that."

State Sen. Raymond Lesniak (D-Union) has sponsored a number of incentives measures, and believes they work.

"New Jersey can't retain jobs and create new jobs without the tax incentives to offset the structured high cost of doing business in the state," he said. "That includes the high cost of land, which is scarce; the high cost of cleanup of contamination, because of our industrial past; and the high cost of construction, because we believe in using union business trades to strengthen the middle class. All of those things put us at a competitive disadvantage with other states that don't have those costs."

Lesniak cited the Jersey Gardens mall, in Elizabeth, as a subsidy success story.

"That was an abandoned garbage dump," he said. "Now it employs thousands of people and generates millions of dollars for the city of Elizabeth and for the state."

Lesniak said the business subsidy program was the only thing creating new jobs and keeping jobs in New Jersey during the recession, and is still vital in a state with a jobless rate above the national average. He also noted corporations must go through a vigorous process in order to receive these tax breaks, showing proof that there are viable and better alternatives for them out of state.

"The program is not perfect, but there are many safeguards," he said.

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Write to the Editorial Department at editorial@njbiz.com

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