Firms that won tax breaks by threatening to leave N.J. were often bluffing, task force concludes

A New Jersey task force investigating the state’s multi-billion-dollar tax incentive program issued its final report on Thursday, offering more evidence that companies reaped tax breaks improperly, under the guidance of consultants who maintained close relationships with senior state officials.

Investigators, capping an 18-month investigation that split leading Democrats in New Jersey, continued to hammer on a familiar theme in determining that, too often, companies won tax breaks to keep jobs in the state, even when those employers were not actually at risk of leaving.

“This was the result of multiple factors,” the task force found, “including the willingness of companies to misrepresent their relocation intentions to the [Economic Development Authority], the conduct of professional consultants in facilitating the companies in doing so, the deficiencies of the EDA in evaluating applications, and the inherent pressures on the EDA to award tax credits.”

The task force has now recommended that the EDA suspend, terminate, or review $578 million worth of tax credits awarded to 12 companies. Separately, the task force recouped $11.5 million worth of awards from three companies, and the cost of the task force itself has totaled about $11 million so far.

Some consultants “inappropriately caused their clients” to look for office space outside of New Jersey, so they could qualify for an award to remain in the Garden State.

Fifteen companies that won tax breaks all claimed they were considering moving to the same office complex in New York — Blue Hill Plaza — if they didn’t get the tax incentives from New Jersey. Evidence shows that “at least some of these companies never sincerely considered the Blue Hill Plaza to be a real option,” said the task force, which is chaired by Rutgers law professor Ronald Chen and staffed by two law firms, Walden Macht & Haran and Quiñones Law.

The report recommended that New Jersey’s Economic Development Authority “consider options to hold consultants accountable,” such as requiring that they sign a code of ethical conduct in their dealings with the state.

The investigation set off an intraparty feud between Democrat Gov. Phil Murphy, who appointed the task force last year, and Democrat power broker and businessman George E. Norcross III, whose insurance brokerage and business partners won hundreds of millions in tax breaks to develop office space and apartments along the Camden waterfront.

Investigators also raised more questions about the EDA’s handling of an application by Holtec International, an energy technology company that won $260 million in tax breaks to build a manufacturing complex in Camden.

The task force had previously found that Holtec falsely wrote on its 2014 application that it had not been debarred as a government contractor, when in fact a federal agency in 2010 temporarily prohibited the company from contract work in the aftermath of a bribery investigation.

In the new report, investigators examined Holtec's claim on its application that it had competing incentive offers from South Carolina, and therefore tax credits from New Jersey would be a "material factor" in its decision to locate there.

Investigators said one of those two offers “appears to have been stale” by the time the EDA approved its award.

And the task force found that the second purported offer — at a shipyard in Charleston, S.C. — wasn’t binding. Holtec only had “oral conversations” with officials there about a possible investment, the report says.

Yet the EDA didn't request materials from Holtec that could have challenged those claims. "Holtec management has represented that South Carolina would convey the land to Holtec for no cost," an EDA staffer wrote in a memo analyzing the company's application.

Holtec told the task force that the company's representations regarding the South Carolina offers were "legally irrelevant," the report said.

In a statement on Thursday, Holtec spokesperson Joe Delmar said the company paid more than $300 million to move to Camden and relied on the state “to hold up its end of the bargain.”

The company “has continued to cooperate with all government reviews and has willingly provided documents upon request,” Delmar said. The EDA has rejected the company’s requests for meetings, he added. “Instead, false accusations continue to be made with no merit.”

Holtec is currently under criminal investigation over the incentives, according to a court filing made by an EDA attorney last month in response to a lawsuit the company filed against the authority. The court filing, which has since been redacted, was reported by Politico. A state grand jury issued a subpoena for records last year from the EDA, The Inquirer previously reported.

In addition, federal prosecutors launched an investigation into economic development in Camden related to the state’s incentive program, The Inquirer reported last year.

The task force has made referrals to law enforcement authorities based on its work. “I can’t speak to what they’re doing or what they’re not doing,” task force special counsel Jim Walden said during a Thursday news conference. “All I can say is that they are, how can I put this, amply resourced, heavily staffed, and appear to be taking our reports very seriously. And certainly one of the reasons that we’ve been so detailed in amassing and describing the evidence is not just for public transparency, but to make their work easier.”

New Jersey’s tax incentive programs expanded greatly under the 2013 Economic Opportunity Act, signed into law by then-Republican Gov. Christopher J. Christie. The legislation was drafted, in part, by the law firm Parker McCay, which is led by George Norcross’ brother Philip.

Parker McCay and its clients “appear to have had a significant impact” on the 2013 law, the task force determined in a 2019 report, which focused on how “special interests” shaped the legislative process.

The insurance brokerage that George Norcross heads as executive chairman, Conner Strong & Buckelew, won $86 million in tax credits in 2017 to help build a Camden office tower with two other companies. It’s one of the 12 awards the task force recommended for further review by the EDA.

“We are not aware of any reason why Conner Strong & Buckelew’s incentive award would be denied or modified and today’s report offers none,” spokesperson Dan Fee said in a statement. The firm, he added, moved nearly 150 employees from Philadelphia to Camden, “has substantially exceeded the number of jobs it promised to bring to Camden, complied with every request and requirement of the EDA and looks forward to the ultimate approval of its incentives.”

Another problem, the task force said on Thursday, is that the law empowered the EDA to award tax credits to businesses in “unlimited amounts,” without the constraints that apply to other state benefits that use public funds.

The report recommended putting caps on any future tax-incentive programs, so that the EDA would have to “make tough choices as to how to allocate scarce resources.” The tax incentive programs expired in 2019, and efforts to replace them moved slowly last year as the task force investigation continued, and the state Senate initiated its own hearings on the programs.

Walden, in an interview, called it the “height of fiscal irresponsibility to have a completely uncapped amount of public money that gets drained by companies” that aren’t competing meaningfully with one another. “This is really just a corporate giveaway that took a terrible turn based on a lack of oversight,” he said.

Under the 2013 law, state officials approved about $1.6 billion in tax credits for development in Camden, one of the poorest cities in the state.

Local officials, Norcross, and his allies have trumpeted the city’s “renaissance” as businesses rushed in to build, bringing their employees with them, and creating some new jobs in the process.

But many community advocates in a city that is majority Black and Hispanic have argued that the tax-credit program mainly served well-connected businesses while failing to generate enough jobs for residents or to include other community benefits guarantees.

George Norcross, Parker McCay, and several other businesses sued Murphy in 2019, claiming that the task force was created illegally and that they were improperly targeted. A Mercer County judge dismissed the suit, and an appellate court upheld that decision this week.

In a statement, Murphy said he knew 18 months ago that “our system of corporate tax incentives was not producing the promised jobs, but I had no idea of the ugly reality waiting to be uncovered. … With the information gleaned from this investigation, we can move forward with a new incentives program and ensure it is run effectively.”