In an ever-changing economy, business incentive programs are an important tool for any state trying to compete for jobs in a global marketplace. As businesses continue to look for ways to remain competitive and increase their bottom lines, deciding where to locate can make all the difference.
Generally, this important decision will depend on multiple factors, including access to talent, transportation, infrastructure, and state and local taxes and regulations. However, more than ever, the availability of incentives at the state and local levels are playing a critical role in the decision-making process.
If you live in New Jersey, you have likely seen the television commercials for START-UP NY. The commercials specifically target out-of-state companies, encouraging them to “relocate, expand, and grow” with the promise of paying “no taxes for 10 years.” Without getting into the details of the program, one thing is clear—New Jersey has some serious competition.
It is not surprising that those ads play over and over again in New Jersey. New York wants businesses that are currently located here to rethink that decision. Luckily, New Jersey currently has the tools it needs to incentivize business to stay in the State, while also being able to aggressively attract new business (New York isn’t the only one courting out-of-state companies).
Created under the Economic Opportunity Act of 2013 (with overwhelming bipartisan support), the Grow New Jersey Assistance Program (Grow NJ) is the State’s main job creation and retention incentive program. Under Grow NJ, businesses creating or retaining jobs in the State may be eligible for tax credits ranging from $500 to $5,000 per job, per year, with bonus credits ranging from $250 to $3,000 per job, per year (awards vary based on applicable criteria).
The Grow NJ program has been wildly popular and incredibly successful. Since its implementation, 229 projects have received awards, totaling over $4.4 billion in tax credits. Approved applicants generally have three years to certify, or complete, a project. A project is deemed complete when the applicant has hired or retained the number of employees listed in its application, and satisfied the program’s capital investment requirements (Grow NJ is a performance-based program, therefore, an applicant must complete a project prior to realizing the approved incentive). Once certified, the 229 projects will drive over $3.9 billion in private capital investment, create over 28,000 new jobs, and retain over 30,000 jobs at risk of leaving the State.
In an election year here in New Jersey, there has been a lot of talk about the use of incentive programs as part of the State’s overall economic development strategy. While both candidates for governor have shown support for some form of business incentive program, they have both pointed out the need for the State’s current incentive programs to evolve.
I agree that incentives can and should change over time. Nevertheless, I would urge our next governor, and policymakers throughout the State, to understand how important incentives are in the corporate site selection process. While some have argued that companies do not make location decisions based on incentives, policymakers should keep Connecticut in the back of their minds. Recently, Connecticut has lost multiple companies to other states, including most notably Aetna and General Electric. While multiple factors came into play in both cases, both involved major incentive packages being offered by the competing states.
New Jersey should not unilaterally disarm. To drastically scale back, or eliminate, business incentive programs would be an unforced error. We should continue to use the tools at our disposal to attract new business, and continue to work to retain existing companies. Business incentive programs should change over time. They can and should evolve. Ultimately, we should have one goal in mind—creating and retaining jobs in the State of New Jersey. Business incentives should continue to be part of the discussion.
Chris J. Murphy is a partner in the economic incentive advisory, and governmental affairs groups at Murphy Partners LLP, a boutique law firm located in Newark, New Jersey.