Verizon redials Newark to claim tax advantages

The New Jersey Economic Development Authority announced late last month that Verizon would be the first company to receive tax credits under the program, which Gov. Jon S. Corzine created in January to boost private investment and create job growth in urban centers. The corporation will receive tax credits of about $2 million annually for 10 years to invest more than $25 million and employ more than 700 people at its Newark headquarters at 540 Broad St., according to the EDA. To date, Verizon is the only company that has applied for the program.

The program was a “valuable instrument to help us make the decision to remain in Newark,” said Dennis Bone, president of Verizon New Jersey, a subsidiary of New York-based Verizon Communications Inc. “This certainly makes the business case [to stay in the city] much stronger.”

But critics, including Jon Shure, president of New Jersey Public Policy Perspective in Trenton, said companies “game the system” by announcing plans to relocate in order to gain leverage with the state. “They see what statements will get the state to make offers,” he said. The state has a history of awarding incentives to Verizon, most recently, a grant in 2005 to relocate 1,700 positions from 20 states to the Basking Ridge section of Bernards.

Verizon announced last fall that it planned to sell its headquarters building and move some 600 jobs out of the city, as the company aimed to consolidate its northern New Jersey operations. In an apparent reversal, however, Verizon in May said it had made a tentative decision to remain in Newark, agreeing to a 10-year lease with Fairfield-based Accordia Realty Ventures, which said it would buy the building in February.

After announcing its intention to sell, Verizon considered a dozen locations within a 30-mile radius of Newark, and found “there was a pretty substantial gap between staying in Newark and going to a suburban location,” said Timothy Lizura, EDA senior vice president of business development. He said the cost of doing business in Newark was several million dollars more than it would be in the suburbs, because of parking, higher rents and other operating expenses.

The company approached the agency late in the first quarter about participating in the program to offset some of the costs of staying in Newark, Lizura said; the tax credit “was a very meaningful piece of the equation.”

Newark had a lot to lose if Verizon ended up leaving. In 2007, Verizon paid $4.2 million in property taxes and in business personal property taxes to Newark, according to the company. Verizon’s exit would also hamper the city’s efforts to revitalize its commercial district, and would hurt local businesses, said Anne Studholme, counsel at the Newark office of law firm Herrick Feinstein LLP. “Each job that’s retained has an economic ripple effect, which helps to create and retain other jobs,” she said.

But while “it’s clearly good for the state that Verizon is going to be in Newark,” Shure said, “what we can’t say for sure is whether the state needed to pay Verizon to make that happen.”

While tax credits may have helped, Verizon had a strong incentive to stay on Broad Street to avoid relocation amid economic uncertainty, said Dan Levine, executive director of location and incentives services at ADP, a business outsourcing services provider in East Brunswick.

“Over the last four or five months, as financial turmoil has rocked Wall Street, companies have become risk averse in decision-making,” he said. “The company is more disposed to not rock the boat and stay where they are.”

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