Facebook Twitter LinkedIn Google Plus RSS

New Jersey has educated workers, quality transportation options, and, of course, those big-ticket tax incentives, so … why are companies leaving?

By ,

Quality of life. That's what Elmwood Park-based Sealed Air, a Fortune 500 manufacturer of Bubble Wrap and other packaging, cited last month as one of the main reasons it's leaving New Jersey for North Carolina.

And for all the talk about the Garden State's aggressive incentive offerings now available under last year's landmark Economic Opportunity Act, it was all quiet on Sealed Air's front.

The company never even gave the state a chance to make its pitch.

Though many were surprised to hear Sealed Air didn't even consider New Jersey in its relocation process, the decision to bolt the Garden State, despite its attractive incentives, is not entirely surprising to some experts.

For some New Jersey-based companies considering a move, incentives sometimes are just not enough.

Jay Biggins, executive managing director at Biggins Lacy Shapiro & Co., said that while “undeniably needed” for New Jersey to be cost-competitive, incentives are just one of many variables that come into play in a company's relocation decision.

Other factors include potential cost-reduction opportunities elsewhere, access to talent, salaries, real estate costs and taxes, Biggins said.

So even New Jersey's strengths — an educated workforce, transportation connectivity and, of course, incentive offerings — are often clouded by concerns such as high tax structure and salary demands.

Or, quite simply, the need to consolidate.

Look no further than companies such as Hertz, Roche and CareFusion Corp., which have all left New Jersey in recent months or are preparing to leave, costing the state thousands of jobs.

Sealed Air's case should not be misinterpreted, or overinterpreted, as evidence of “some fundamental measure of a state's strategy,” said Biggins, whose Princeton-based firm advises on site selection and incentives.

Payroll costs alone, which are significantly lower in North Carolina than in New Jersey, could have been a driving force, as they have often been seen to represent 70 percent of total costs, Biggins said.

While New Jersey won't win them all, Biggins said he believes the “vast majority” of projects approved by the EDA have ultimately resulted in decisions to locate within the state.

RELATED: Why it stayed: Panasonic's decision was about more than tax incentives

“Once incentives have narrowed the cost gap, then other factors come into play and (New Jersey) will win some and lose some,” Biggins.

Site selection is a “highly complicated, multifaceted decision-making process,” said Ted Zangari, a real estate attorney with Sills Cummis & Gross. When site selection factors are mostly equal, that's when incentives can make the biggest difference, he said.

But often they're not. That's great news if New Jersey is competing against an area in New York City for a business. Not so great if it's Florida or Texas.

“There is a cost differential between New Jersey and, frankly, most other competing states,” Zangari said.

Still, with the retooling of incentives and marketing efforts, not to mention the work of the Red Tape Review Commission, Zangari said he believes New Jersey is in a better place to compete today than it has been in decades.

“We're ahead of the game,” Zangari said.

Lauren Moore, executive director of the New Jersey Business Action Center, points to the state's recent attraction of Forbes Media to Jersey City and retention of Marathon Data Systems in Neptune as examples of how, “with the right tools available,” New Jersey can compete.

Part of that includes incentives, but it also means making the state's corporate business tax structure more attractive and fostering a supportive business environment, Moore said.

“When businesses come to us, we work to understand the company's needs, pulling our resources together in an effort to retain the company and its associated jobs,” Moore said.

But then there are companies such as Hertz, which, much like Sealed Air, never really gave the state an opportunity to make its case in the first place.

With the help of an $85 million tax break, the Fortune 500 rental car company announced last May that it was leaving Park Ridge, where it had been headquartered for the past 25 years, for Estero, Fla.

Florida's incentives played an active role in the decision, but New Jersey would've offered them, too. Lt. Gov. Kim Guadagno said at the time that the state could have provided the company at least $40 million in incentives if it had chosen to stay.

But Hertz, Guadagno then said, only contacted the state the week prior to announcing its departure.

Again, incentives took a backseat to another factor in the relocation process. In Hertz's case, it was cost of living.

Having then recently acquired Tulsa, Okla.-based Dollar Thrifty and needing to consolidate its corporate offices, Hertz said at the time that New Jersey would've proved too costly a place to do it. Florida also offered a chance to relocate to a tourism hub, an asset for a rental car company.

And while New Jersey is competing for business both in other parts of the country and globally, its neighbors often prove to be some of the toughest obstacles to overcome.

Dietz & Watson had always been a Philadelphia-based company, but the deli meats and cheese producer had for years operated a large distribution center in Delanco, employing 110 people there.

After a large fire destroyed the building last year, the company had the choice of rebuilding or leaving.

While the EDA offered roughly $30 million in incentives to stay, Dietz & Watson decided instead chose Philadelphia for the new facility, accepting less.

Rather than tax breaks, the company cited other factors in its decision to leave. According to CEO Louis Eni at the time, it's what they had wanted to do for at least a decade.

And once again, the odds weren't in New Jersey's favor from the start.

“Our family thought long and hard about the decision to leave New Jersey,” Eni said. “But in the end, we believe it's the right decision for our employees, our customers and for the future of our company.”

E-mail to: andrewg@njbiz.com
On Twitter: @andrgeorge

Leaving: Park Ridge
For: Estero, Florida
Jobs: 550*
Why: Better quality of life, more tourism industry options

CareFusion Corp.
Leaving: Totowa
For: Mexicali, Mexico
Jobs: 390*
Why: Consolidation, lower cost of manufacturing

Sealed Air
Leaving: Elmwood Park
For: Charlotte, North Carolina
Jobs: 200*
Why: “Business-friendly environment” and “a good place for employees to raise their families.”

Leaving: Nutley
For: San Francisco
Jobs: 1,000*
Why: Industry challenges, downsizing

Dietz & Watson
Leaving: Delanco
For: Philadelphia
Jobs: 110*
Why: Long desire to relocate distribution center; “right decision” for employees, customers


ACCOUNTING SPOTLIGHT: Business casual - firms teaching staff the personal approach to communication

State accuses Telebrands of fraud act violations; 340 complaints investigated over 2 years

EDA votes to approve more than $27M in Grow NJ incentives

You May Have Missed...

Write to the Editorial Department at editorial@njbiz.com

Leave a Comment


Please note: All comments will be reviewed and may take up to 24 hours to appear on the site.

Post Comment
View Comment Policy