Released Wednesday, the audit report was highly critical of the New Jersey Economic Development Authority’s monitoring of the incentive programs it oversees and noted that a review of 48 of the 401 projects awarded credits since their inception in 2005 determined that thousands of jobs supposedly created or retained by companies awarded tax breaks could not be verified.
TRENTON — New Jersey awarded nearly $11 billion worth of tax incentives to attract or keep businesses here, but the state has done little to verify that recipients followed through with the jobs and capital investment they promised, according to an audit by the New Jersey Comptroller’s Office.
Released Wednesday, the audit report was highly critical of the New Jersey Economic Development Authority’s monitoring of the incentive programs it oversees and noted that a review of 48 of the 401 projects awarded credits since its inception in 2005 determined that thousands of jobs supposedly created or retained by companies awarded tax breaks could not be verified.
Some 3,000 of 15,000 jobs promised by the projects reviewed could not be verified, according to the report. And in at least one case, the audit found that a company that received over $29 million in incentives actually reduced jobs during years it was receiving the tax benefits. The company was not identified.
“The audit identified deficiencies with EDA’s management and administration of incentive programs. Key internal controls were lacking or nonexistent for the monitoring and oversight or recipient performance,” the report said. “EDA was, thus, prevented from determining whether the incented jobs were actually created or retained or from ensuring that the awardees satisfied the incentive program requirements for these jobs. In addition, the agency lacks adequate policies, procedures and controls to provide accurate and reliable program results.”
The audit was ordered by Gov. Phil Murphy shortly after he took office last January. During his gubernatorial campaign, he had been highly critical of the roughly $8 billion worth of incentives awarded during Gov. Chris Christie’s eight-year tenure and suggested that the incentives should be reformed and targeted.
Murphy repeated that message on Wednesday during a news conference where he called for the programs to be scrapped and replaced.
“The comptroller’s report confirms some of our worst suspicions that billions of dollars worth of state tax incentives were awarded by the Christie administration with little regard to oversight or transparency and even less regard to making sure we actually got a return on the taxpayers’ investment,” Murphy said.
More than 241,000 jobs were expected to be created or retained and more than $33 billion in capital invested thanks to the some $11 billion in tax incentives awarded by the EDA. From those awards, the agency has certified about 83,000 of those jobs and $9.2 billion worth of capital investment, according to the report.
The incentives have long been one of the most debated issues in Trenton, with supporters claiming they are needed to attract private investment and retain employers in a high-cost state like New Jersey.
Critics like Murphy and others have questioned the incentives’ effectiveness in creating jobs, and contend the lost tax revenue would be better invested in education and infrastructure improvements that attract businesses.
During Wednesday’s news conference, Murphy said tax incentives should be just one part of a broad economic development strategy and that they must be specific and controlled.
“When economic incentives are used they must be forward looking and precise,” Murphy said. “They also must be handed out responsibly and with knowledge by both parties that someone is watching so that promises made are promises kept.”
The Comptroller’s report, while critical of the lack of oversight, revealed that Burlington County was supposedly one of the biggest beneficiaries of the incentive programs in recent years.
Since 2012, Burlington County has been the location of 18 projects that received incentives, ninth highest among the state’s 21 counties. Those projects reported creating a total of 8,008 jobs, the fourth highest among the counties.
The report did not identify the specific projects or the incentive program. However, Burlington County has previously been cited as a frequent beneficiary of the EDA’s Grow New Jersey program, which is the state’s primary incentive program for job retention, creation and business expansion. The program was revamped in 2013 to make it more competitive with incentives offered by other states, as well as to incentivize companies to make investments in distressed cities and South Jersey counties like Burlington.
County and state officials have credited the tax breaks with helping to entice companies like Burlington Coat Factory to remain in Burlington County and with convincing others like Destination Maternity to move its headquarters from Philadelphia to Moorestown and build a warehouse in Florence.
Defense contractor Lockheed Martin also used state incentives to make improvements to its Moorestown plant, which officials credited with helping the company obtain a new mission and keep high-paying jobs here.
The Grow New Jersey and the state’s Economic Redevelopment and Growth Grant Program, are due to expire in July unless they are renewed by the Legislature and Murphy.
The governor has already called for those programs to be replaced with new incentive programs that would be capped.
“The best reform measure will be to let these programs expire in ignominy in July and replace them with an entirely new set of programs that have accountability and responsibility written into them,” Murphy said.
Senate President Stephen Sweeney, D-3rd of West Deptford, said the state’s 2013′s revamp of the incentives included standards for oversight, but that they were never followed. He said that would have to be rectified with whatever replacement programs are created.
“We will work with the administration to create replacement programs that address the same priorities of generating economic growth, creating and retaining jobs and expanding long-term opportunities,” Sweeney said. “The new incentives must include significant oversight and accountability so that the programs maximize their effectiveness and do not squander resources.”
“Recommendations from the comptroller’s report should be used to make the current programs function more efficiently and should be considered to ensure the new programs are well implemented,” he added.
Sen. Troy Singleton, D-7th of Delran, described the report as a “sobering and disappointing look at the lack of institutional controls” related to the programs. He has previously pushed for greater oversight of the programs and penned legislation in 2015 when he was an assemblyman to require the administration to annually review all state tax incentives awarded and report back on their effectiveness. He reintroduced the measure last year in the Senate but it has yet to receive a hearing in the Senate Economic Growth Committee.
“I look forward to working with the governor and legislative leadership to ensure that we better use our tax code to create greater economic and employment opportunities for New Jersey taxpayers,” the senator said Wednesday.