New Jersey’s $11 Billion Tax Incentives Faulted for Weak Oversight
(Bloomberg) -- New Jersey has promised $11 billion in corporate tax breaks but has fallen short on monitoring the grantees’ compliance, at times overpaying or improperly doling out awards, the state comptroller’s office found.
Former Governor Chris Christie, a Republican who greatly expanded the incentives in his two terms, argued that the tax breaks would pay for themselves and then some because of job growth. In a key weakness, though, 2,993 reported positions “were not substantiated as having been created or retained,” according to a 72-page report issued by Comptroller Philip Degnan, who joined the office during the Christie era.
Overall, the yearlong audit found “inadequate monitoring, insufficient oversight and non-existent policies and procedures” that weakened transparency and accountability by the state Economic Development Authority, a 43-year-old agency that arranges public financing for private businesses. “As a result, incentive awards have been improperly awarded, overstated and overpaid.”
Governor Phil Murphy, a Democrat and retired Goldman Sachs Group Inc. senior director who replaced the term-limited Christie in January 2018, campaigned on restructuring the incentives. In October he proposed auctioning tax credits to draw venture-capital investors.
At a news conference in Trenton, Murphy said he didn’t know which companies had benefited from lax oversight. The state, though, will seek the return of any money improperly paid, he said.
“The public has a right to a full accounting as to why jobs that were promised were not created and yet public money was still spent,” the governor said.
In a 14-page audit response, Tim Sullivan, chief executive officer of the development authority, said three of the five programs examined are no longer accepting applications, and two are set to expire in July. The agency has hired an accounting firm and is reorganizing its database, he wrote. The staff will “remain steadfast in our commitment to exercise the utmost level of due diligence and fiduciary oversight,” he said.
One company, the audit found, had a certified incentive reward that exceeded its cap by $1.3 million, and $65,000 of that has been paid, investigators found. Elsewhere, incentives worth $3.7 million were either improperly paid or were pending. The report didn’t name any of the companies.
Though the development authority has pledged incentives worth at least $8 billion in its Urban-Transit Hub, Economic Redevelopment and Growth and Grow New Jersey programs, less than 9 percent of the total has been paid out, because recipients must hit milestones that can take decades to reach.
The audit made 21 recommendations on policies and controls.
©2019 Bloomberg L.P.