New Report Criticizes Business Incentives Used to Lure Companies to Jersey City
Business incentives provided by New Jersey to lure companies to Jersey City and other locales are not providing the jobs they are supposed to, a statewide public-policy group argues in a new report.
“A Surge in Subsidies,” released today by the progressive group New Jersey Policy Perspective (NJPP), says that despite the state’s “unprecedented spending spree” of $822 million on business subsidies over the past 15 months, few jobs have appeared. The report targets the entire alphabet-soup of the state’s subsidy programs: the Business Employment Incentive Program (BEIP), the Business Retention and Relocation Assistance Grant (BRRAG), the Economic Redevelopment and Growth (ERG) program and the Urban Transit Hub Tax Credit (UTHTC).
Several of these high-profile programs have been used to lure companies to Jersey City recently; the NJPP report notes the $14.6 million ERG grant to New York-based Depository Trust and Clearing Corporation (DTCC), which was part of a nearly $90 million incentive package used to lure the company to Jersey City. As a result of the incentives, DTCC plans to move 1,600 jobs to a Newport office building in 2013.
The report also cites the $3.7 million BEIP grant given to Jersey City-based Atlantic Coast Media Group; that company’s CEO said in September that its “hiring of 153 New Jersey employees is a direct result of the state’s assistance,” and that it planned to hire at least 140 more employees as a result of the BEIP grant.
Proponents of the subsidies and local officials have long touted the trickle-down effect that the tax breaks and grants have on the local economy, in service-sector employment and the real estate market, for example. But the report argues that the logic of these business subsidies is not only faulty at its “trickle-down foundations,” but that it “misinterprets the job situation in the current economy”:
With big productivity gains and stagnant wages, many big businesses are sitting on huge cash hordes. What’s keeping these newly flush businesses from hiring, according to a number of prominent economists, is skepticism about the economy’s ability to sustain even minimal growth now taking root.
NJPP acknowledges there are benefits from the tax subsidies, such as “redeveloping blighted urban areas,” but it argues that the benefits have to be weighed against the cost to the state.
“In the case of these tax four programs alone, the state is conceding $822 million in revenue over the next 10 to 20 years,” the report reads. “That’s more money than the state collects in a year from the gasoline tax. It’s the same amount the governor cut in school funding for the current fiscal year.”