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Posted Jun 18, 2019, 4:39 PM
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Registered User
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Join Date: Dec 2015
Location: South Philly
Posts: 1,680
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Potentially very bad news for Camden:
Quote:
New Jersey Corporate Tax Incentives Task Force Says $500 Million in Awards May Be Ended
Report Finds Mismanagement, Raising Questions Over Real Estate Practice Used Across the US
A special task force issued a report blasting New Jersey's Economic Development Authority for favoring the city of Camden in handing out tax incentives to companies, an effort similar to initiatives in other states across the country that's important to the commercial real estate industry. The findings so far have identified more than $500 million in awards that may need to be terminated.
The 75-page report was made public Monday night about a half hour after Superior Court Judge Mary Jacobson, sitting in Trenton, New Jersey, rendered a 90-minute oral decision declining to issue a temporary injunction to block its release. George Norcross III, who is active and powerful among Democrats, and four Camden, New Jersey-based companies -- his insurance firm Conner Strong & Buckelew, The Michaels Organization, Cooper University Health Care and the law firm Parker McCay -- had sought the restraining order, and several were mentioned in the task force report.
The investigative panel, convened by New Jersey Gov. Phil Murphy earlier this year, in its report took full aim at Norcross, his brother Philip Norcoss, who is the chief executive of Parker McCay, and Kevin Sheehan, a real estate lawyer with the firm, accusing them of helping to craft tax incentive legislation that would benefit them, their associated companies or their clients. Conner Strong & Buckelew alone received $86 million in tax breaks to relocate to Camden.
New Jersey's practice of offering companies incentives to do business in the state may be used around the country, but locally, it's under fire for accusations of mismanagement and potential fraud. New Jersey politics is also part of the backdrop of the investigation because Murphy and Norcross, though both Democrats, are still foes in state politics.
The report also found that the authority failed to flag patently false information from companies seeking tax breaks and gave special interests an upper hand in the city of Camden. In some ways, the findings confirm some of the reasons why tax incentive opponents disapprove of the programs.
The issue is politically sensitive in the Garden State, where state officials and leaders in the New Jersey's largest city, Newark, combined last year to offer online retailer Amazon about $7 billion in tax breaks, the biggest package of incentives offered by any of the 20 finalist competing cities across the country, to locate its second headquarters, known as HQ2, in Newark. New Jersey's effort was unsuccessful and officials around the United States have subsequently discussed whether offering such tax breaks is worth the effort to lure development.
The report also provides more color and detail about issues that were raised in January by the state Comptroller Office’s critical audit of the authority, which found the agency mismanaged and improperly monitored $11 billion in state tax incentives. The task force also said it plans "to recommend recapture of improperly credited taxpayer dollars" through "coordination with several areas of New Jersey State government, including the EDA, the Department of Taxation and the New Jersey Attorney General’s Office."
The task force said it will connect companies willing to cooperate and disclose any potential noncompliance with the State Treasury for settlement. But first such companies must repay their tax incentive award, and the task force said it reserves the right to report any evidence of criminal misconduct to law enforcement authorities.
The state’s two tax incentives programs –- Grow New Jersey and the Economic Redevelopment and Growth programs -– expire June 30. State lawmakers want to temporarily extend them, but Murphy has said he won’t continue what he consider flawed programs. He had proposed legislation that would entirely overhaul the tax incentives.
George Norcross and the other plaintiffs had sought the restraining order after filing a lawsuit charging Murphy didn't have the legal authority to impanel the task force, and that they are being accused of wrongdoing in its public hearings without due process.
But Jacobson said, "The public interest weighs out over the private interest" in this particular case, adding that the Legislature should have the task force's initial findings before current tax incentive programs expire in less than two weeks.
Failure to Comply
In part, the task force said it has uncovered examples where companies, “whether intentionally or not,” had failed to comply with the requirements for their tax incentives by either submitting inaccurate information in their applications or later falling out of compliance.
“The task force has obtained some voluntary terminations of awards, and has referred others to the State Treasury or either law enforcement agencies, the EDA, or both, which may result in, among other things, steps to suspend or terminate these awards,” the report said. “The aggregate value of the awards that were either voluntarily terminated or may be subject to such suspension/termination actions exceeds $500 million.”
One of the reasons Jacobson said she was refusing to block release of the task force’s report was that the Legislature needs to know its findings in order to set a future course for tax incentives in the Garden State.
The task force said that "special interests" -- who it later identifies as George Norcross III and Sheehy of Parker McKay -- had "succeeded in molding" 2013 tax incentive legislation and seeing that implementation of its regulations was in their favor.
"The result is that New Jersey’s tax-incentive programs have not been 'neutral' in their design but have rather been structured in respects both large and small to favor the business interests of favored parties, sometimes in ways of debatable merit from a public policy standpoint," the report says. "This is troubling for many reasons, including that the New Jersey constitution contains certain prohibitions on 'special legislation.'”
The report cited many examples where it claimed Camden had received preferential treatment in terms of incentives and the 2013 legislation because of Norcross's actions and those of his associates. The task force said that aiding poverty-stricken Camden should be a priority for the state, but "as laudable as that end is, it does not necessarily justify, without any question or limitation, every conceivable means to accomplish it."
In one case, a simple internet search by the EDA would have revealed that three companies — Conner Strong & Buckelew, The Michaels Organization and NFI — had committed to move to Camden more than a year before submitting their tax incentive applications claiming they were considering relocating to Pennsylvania, according to the report.
"Had the EDA’s employees found this information, the EDA may have found these applications materially misleading, and denied an award on that basis," the task force said. "At a minimum, armed with this information, the EDA should have calculated these awards based only on new jobs moving to Camden from outside the state, and the awards to these three entities combined would have been reduced by over $70 million."
In another example, an simple internet search revealed that one business, nuclear company Holtec International, had been temporarily barred from doing business with the Tennessee Valley Authority but never mentioned that in its New Jersey tax incentive application, according to the task force. Holtec's past situation in Tennessee would been grounds for the EDA to turn down the company's application. But the EDA approved Holtec for a $260 million tax incentive award, the state's largest such award.
Holtec Award Suspended
Last month Holtec acknowledged that it did not disclose its prior "debarment" in Tennessee and sought to amend its application, according to the task force report. The EDA has suspended Holtec’s tax-incentive award pending further investigation, the report said.
George Norcross and the companies involved in the litigation did not immediately return requests for comment, but issued a statement to several media outlets.
“We will continue this litigation in an aggressive manner to protect our rights," the statement said. “Our litigation has never been about blocking an investigation, but rather to ensure that the governor’s task force gave each firm basic due process rights, including the opportunity to present fully the facts about their companies, their applications, and their decisions to move to Camden. Each of these companies has only ever requested a fair hearing and it is clear that was never going to happen with the governor’s task force.”
While the task force said its investigation is ongoing, it made a number of recommendations for future legislation, as well as for the EDA’s procedures in administering the tax incentive programs, including:
• Designing any future legislation to ensure as much as possible that the public policy goals are applied neutrally, without favoring specific business interests;
• Assuring that persons or firms who represent tax-incentive applicants are properly registered as lobbyists under the New Jersey Legislative and Governmental Process Activities Disclosure Act;
• Refraining from providing draft EDA regulations to people or firms that represent tax-incentive applicants outside the public notice-and-comment procedure under the New Jersey Administrative Procedure Act;
• Taking steps to ensure that tax incentives are structured so that they result in a net gain to the state, or, if they do not, that fact is transparent;
• Ensuring that the language of any new legislation and implementing regulations more clearly sets forth the standards to be applied in determining eligibility for tax incentives;
• Strengthening the EDA’s ability to withhold all or part of an award where a company has failed to meet its commitments, and ensuring that the EDA has sufficient data to fully evaluate a company’s compliance with its incentive agreement;
• Requiring the EDA to implement formal written policies and procedures governing all aspects of the programs and their administration and to undertake to formally train its staff in how to review program applications and monitor compliance;
• Requiring the EDA to use an experienced professional services firm to conduct a background check on each applicant and its affiliates and senior executives;
• Strengthening the EDA’s process for conducting diligence into an applicant’s claim that it intends to locate out of state absent the award of tax incentives from New Jersey.
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https://product.costar.com/home/news/1275158898?tag=1
Full Report: https://costar.brightspotcdn.com/0a/...rst-report.pdf
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