Incentives Deal of the Month
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New Jersey Revives
Key Incentive, Aims to Create 200,000 Jobs
by JACK LYNE, Site Selection
HOBOKEN, N.J. What a difference eight months make: Resuscitating a key business-expansion incentive that seemed on life support in March, New Jersey Gov. James McGreevey (D) has signed into law an ambitious, subsidy-rich job-generation program. With the nearly departed Business Employment Incentive Program (BEIP) as its centerpiece, the Garden State's new blueprint aims to add 200,000 jobs over the next five years, with 500 expanding or relocating firms generating US$6 billion in new public and private investment.
"Job creation must be our state's No. 1 priority,'" said McGreevey, who signed the new legislation at the Hoboken headquarters of John Wiley & Sons, one of 275 companies that have received grants since the BEIP's inception in September 1996. The program has awarded some $800 million in funding and helped create some 38,000 jobs, according to the New Jersey Economic Development Authority (EDA at www.njeda.com).
BEIP offers 10-year rebates of as much as 80 percent of state income taxes for new jobs created in New Jersey. And the new legislation that McGreevey signed lowers the qualifying job-creation threshold to 25 from 75; for high-tech firms the BEIP bar drops even farther, with only 10 new jobs required to qualify.
"The new BEIP program will be the cornerstone of our economic development plan to bring new business and thousands of new jobs to our state," McGreevey said in Hoboken. "The state is on a sound financial footing. We have balanced the budget, and now we need to move forward aggressively. We are in a competitive world and this is a competitive game, and we have to identify our strengths to make sure we put every tool possible forward."
Governor Proposed Suspending BEIP in MarchThe Hoboken bill-signing marked an outcome dramatically different from the BEIP's prospects in March. Facing a $5-billion state deficit, McGreevey unveiled a new budget that proposed suspending the incentive program. BEIP subsidies will cost the state $38 million in fiscal 2003, with costs estimated a $45 million for fiscal 2004.
That idea sent the Garden State's political climate shooting to hothouse-range temperatures. McGreevey's proposal unleashed a firestorm of opposition from the state business community, including the state Chamber of Commerce's (www.njchamber.com) "Where's the BEIP?" Coalition.
The governor quickly backed off the idea, instead appointing the New Jersey Business Incentives Study Commission to devise legislative recommendations for BEIP financing. The commission this summer issued a report to McGreevey, recommending that the state "devise a capital markets mechanism to finance promised payments to BEIP grantees."
That's what the new legislation does: If the approved state budget fails to fund BEIP grants, the new legislation empowers the EDA to fund them by issuing economic development bonds. BEIP's revamped funding mechanism received strong support from New Jersey lawmakers: The Senate approved the new legislation this summer by 35-2, and the Assembly ratified it by 63-15.
"Providing incentives for businesses to create jobs in New Jersey is an important tool for economic development," New Jersey Assembly Speaker Albio Sires (D-Hudson) said in Hoboken. "Following through on grants the state has promised companies is equally important."
The new program "makes changes that bring greater reliability and predictability to the BEIP grant process," said State Treasurer John McCormac. McCormac rejected the idea that selling bonds to bankroll a general fund-backed program constitutes deficit financing, contending that the new program replaces existing state contracts with "firmer contracts." New Jersey's benefits from expanding businesses, he said, are greater than the borrowing costs that the new law could create.
New Law Re-jiggers Tax ReciprocityThe new incentives, McGreevey noted, especially buttress the state's business-attraction strengths vis-à-vis its neighbors, enabling it to "readily match New York City and Pennsylvania in addition to targeting particular industries."
Agreement with Pennsylvania
Targeted industries are specially favored in the state's new subsidies. The new law allows larger BEIP percentage rebates for expanding companies in specified target industries, which include biotech, high tech, financial services, logistics and transportation.
Significantly, the revamped BEIP also re-jiggers a long-standing New Jersey/Pennsylvania reciprocal tax agreement. That accord provides that residents of either state who work in the other state don't pay withholding taxes to the state in which they work; instead, they pay to the state in which they live.
The new BEIP, however, extends corporate benefits to workers who live in the Keystone State. Now, all new jobs that a company brings to New Jersey - including positions filled by Pennsylvania residents - will be factored into the formula determining the firm's BEIP grant.
The revised BEIP puts pressure on both Pennsylvania and New York City's suburbs to fatten their location incentives.
Higher Payouts for 'Smart Growth Principles'The new incentive's parameters also alter guidelines for rebate percentages.
Under the original law, all applicants were eligible for a maximum 80-percent rebate. Under the new law, though, BEIP maximum grants are set at 50 percent.
But companies can still qualify for the 80-percent rebate if they follow what McGreevey called "smart growth principles" specified in the State Development and Redevelopment Plan. Qualifying activities outlined in that plan include redeveloping underutilized, polluted or vacant properties; locating near new residential construction or renovation; locating on sites positioned near mass transit lines; and locating near and collaborating on R&D with public or nonprofit universities.
For New Jersey business recruiters, at least, the BEIP's herky-jerky rejuvenation would seem to suggest that all's well that ends well. Not so, state Republican leaders contend. They continue to claim that they, not McGreevey, saved the state's job-creating incentive program.
One of those leaders is Sen. Robert Littell (R-Franklin), chairman of the Senate Budget and Appropriations Committee, who clashed with the administration when BEIP funding was threatened.
"With many New Jerseyans concerned about the economy and the job market, this was not the right time to be cutting a program that stimulates the economy and brings new jobs," said Littell.
©2003 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.