TRENTON – A new report that criticizes states for “poaching’’ companies from one another takes aim at New Jersey for spending huge sums to lure businesses from New York.
The report, “The Job Creation Shell Game,’’ by a non-profit, Good Jobs First, which examined cases in states such as Texas, Tennessee, and Georgia, claims that New Jersey in particular has spent millions luring Wall Street firms that were likely to relocate anyway.
“Many large companies in sectors such as finance and media feel they need to be based in Manhattan, but when pressured to cut costs they often look across the Hudson River to New Jersey in the quest for lower rents. Rather than simply taking advantage of geography, New Jersey bestows lavish subsidy packages on companies making the short-distance move,’’ says the report.
The report points out that after the 9/11 attacks, many financial services businesses decentralized to improve security and reduce rents, which meant looking toward New Jersey as a new home as a matter of course.
“Jersey City, just across the Hudson, became a favorite destination: between 2001 and 2005, Goldman Sachs, Lord Abbott, U.S. Trust, Merrill Lynch, Morgan Stanley, and J. P. Morgan Chase all opened office operations there, and many were subsidized by New Jersey,’’ the report states.
“New Jersey appears to have paid some very wealthy firms to do what they planned to do otherwise.’’
The report criticizes the state’s Business Employment Incentive Program, which it says “has ballooned to over $178 million per year as of 2011.” Through this program, the state awards up to 80 percent of “new” employees’ state income taxes to their employers.
The report also takes aim at the Urban Transit Hub Tax Credit program, whose tax credit pool has grown to $1.75 billion, approximately $1 billion of which has been awarded to job retention projects and what the report calls “pirated’’ businesses since 2010.
The report recounts one particular instance in which New York Mayor Michael Bloomberg “accused New Jersey of bribery” in trying to lure the FreshDirect online grocery company.
New York responded by awarding FreshDirect a $127 million retention subsidy.
“What was long ago dubbed a Second War Between the States is, unfortunately, raging again in many parts of the country, and New Jersey is one of the leading participants,” said Greg LeRoy, executive director of Good Jobs First and principal author of the report. “The result is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs rather than new business activity. By pretending that these jobs are new, public officials and the recipient companies engage in what amounts to interstate job fraud.”
LeRoy noted: “The costs are high and the benefits are low, since a tiny number of companies get huge subsidies for moving what amounts to an insignificant number of jobs.”
The solution, according to the report, is simple: The states should stop subsidizing companies for existing jobs that are treated as “new” simply because their location has changed.
The study claims that the vast majority of states already know how to do this: four-fifths of the states already refuse to pay for intrastate job relocations. For at least one and sometimes most of their major incentive programs, 40 states disallow subsidies for existing jobs that are merely being moved within their own borders, according to the report..