Gov. Chritie Leaning on Tax Subsidies
Christie Leaning on Tax Subsidies in Hunt for Jobs
By CHARLES V. BAGLI
Published: April 4, 2012
Panasonic received $102.4 million in tax credits to move its headquarters nine miles within New Jersey. Goya Foods picked up $81.9 million in credits to build offices and a warehouse in Jersey City, two miles from its current complex. Prudential Insurance obtained $250.8 million to move a few blocks to a new tower in Newark.
Prudential Insurance, now in the Gateway complex in Newark, will receive $250.8 million in tax breaks to move a few blocks.
Since taking office in 2010, Gov. Chris Christie has approved a record $1.57 billion in state tax breaks for dozens of New Jersey’s largest companies after they pledged to add jobs. Mr. Christie has emphasized that these are prudent measures intended to help heal the state’s economy, which lost more than 260,000 jobs in the recession. The companies often received the tax breaks after they threatened to move to New York or elsewhere.
The generous distribution of subsidies in New Jersey has come under fire from government-reform groups, Mayor Michael R. Bloomberg of New York City and some New Jersey landlords, who contend that the programs are an expensive and ineffective form of assistance to wealthy corporations.
The critics pointed out that even when the promised jobs have not materialized, the Christie administration has merely reduced, not withdrawn, the subsidies. And they say that the administration is mortgaging the state’s future by forgiving so much tax revenue for the next 10 to 15 years.
“Christie has taken this to a whole different level; it’s become a feeding trough,” said Deborah Howlett, executive director of New Jersey Policy Perspectives, a liberal policy organization. “It seems ridiculous to steal jobs from one city in the state and move them to another city a couple miles away. There just doesn’t seem to be any benefit to taxpayers.”
Mr. Christie, who has portrayed himself as a fiscal conservative, has in particular used a new program, the Urban Transit Hub Tax Credit Program, for the subsidies. The program, which is intended to encourage development around nine cities, offers tax credits equal to 100 percent of some capital investments.
“This is another success story about one of our largest businesses choosing to stay in New Jersey, continue to grow and invest in our state and people,” Mr. Christie said at Panasonic’s groundbreaking in October. “This project directly benefits New Jerseyans by keeping over 800 jobs here, creating up to 200 new, permanent positions, and spurring private investment.”
Under the program, the Christie administration has granted more than $900 million in state tax credits over 10 years to 15 companies, including Panasonic, Goya, Prudential and Campbell’s Soup. The companies have promised to add 2,364 jobs, or $387,537 in tax credits per job, over the next decade.
The most controversial of those deals is also the largest.
The state approved up to $250 million in tax credits last year for Prudential, Newark’s most important corporate citizen, to build a new office tower. The company acknowledged that the jobs were not “at risk” of leaving the state and that renewing its leases at three buildings in the nearby Gateway complex were the “low-cost options by a wide margin when compared to the cost of new construction.”
The $250.8 million in tax credits, however, made the office tower project possible. In return, Prudential claimed it would create 400 new jobs, including 100 coming from outside New Jersey. The other new jobs were based on the company’s past growth patterns, which presumably would occur at either location.
The three landlords at Gateway filed a lawsuit in December to block the tax credits, arguing that the loss of Prudential, which leased a combined 922,000 square feet, would have a “devastating financial impact” on both Gateway and Newark, as the office vacancy rate shot up.
They contended that Prudential would have renewed its lease if not for the state’s intervention in the form of tax credits. The state’s decision, the landlords said, amounted to “corporate welfare at its worst.”
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