Cooper Health System gets $4.59 million tax break, delayed during N.J. task force probe

New Jersey’s Economic Development Authority has approved tax credits for Cooper Health System that were on hold during a state task force investigation that drove a major rift between Democratic power broker George E. Norcross III and Democratic Gov. Phil Murphy.

The EDA announced a review of five Camden-based projects, including Cooper’s nearly $40 million award, in June 2019, after a task force examining New Jersey corporate tax breaks alleged that the hospital and some other applicants had misrepresented information to the state. Cooper denied those claims.

In Cooper’s case, investigators asserted that the hospital misled the state about whether it was considering moving part of its operation to Philadelphia. The hospital rejected the criticism, saying that a task force report contained “fundamental misstatements of the law.”

In a March letter to Cooper, the EDA acknowledged “certain allegations” about its application. “Given the time that has elapsed, and the lack of any further developments,” the agency said it was granting the health system’s annual tax credit allotment for 2018, worth $4,594,000, according to public records obtained by The Inquirer.

The letter said that if the EDA “learns of any new information” regarding the allegations, including “the filing of any civil or criminal charge against the company accusing it of having materially misled or defrauded the EDA,” the agency can recapture and suspend the incentives in the future.

The EDA’s approval of Cooper’s tax credits amounts to a significant win for a company at the center of the Norcross orbit. Norcross, the executive chairman of insurance brokerage Conner Strong & Buckelew, is also chairman of Cooper’s board of trustees, overseeing years of expansion for the health system in South Jersey.

Cooper Health had no comment on the approval.

Conner Strong, and two companies it partnered with to build an office tower in Camden, have also received an important certification from the EDA. They were among the awardees the EDA said it was reviewing in 2019.

A spokesperson for Norcross and Conner Strong said they had no additional comment.

The governor’s office declined to comment.

Norcross has also championed the state’s tax credit programs and incentive awards that allowed companies — including his insurance brokerage — to build in Camden. He served as a key ally of Gov. Chris Christie’s when the programs expanded under 2013 legislation. The law firm led by his brother, Philip Norcross, helped write that legislation behind the scenes, and later represented companies as they applied for credits.

Norcross unsuccessfully sued Murphy in 2019 when the programs — and awards to Cooper, Conner Strong, and other firms — came under scrutiny from the Murphy-appointed task force. The task force published its final report last July, ultimately recommending internal reforms to the EDA, as well as additional agency review of $578 million worth of tax credits awarded to 12 companies.

The task force also made referrals to law enforcement based on its work. In 2019, The Inquirer reported that federal authorities had launched an investigation in connection with New Jersey tax incentives and economic development in Camden.

Conner Strong, along with logistics firm NFI and housing developer Michaels Organization won approval, in 2017, for a combined $245 million incentive package to build an office tower and move to the Camden waterfront.

A spokesperson for Conner Strong said last July that the company “complied with every request and requirement of the EDA and looks forward to the ultimate approval of its incentives.”

The Grow N.J. tax credits are typically awarded in increments over a 10-year-period. To claim the annual amount, companies must go through a series of reviews with the EDA, showing they finished a project, such as moving to a new office, and are filling jobs they promised.

In response to questions this week about the status of the EDA’s review and the certification process for Conner Strong, NFI, and Michaels, an EDA spokesperson said the three companies “have received their aggregate certifications” for a completed project, including verified capital investment.

Getting that certificate “in no way guarantees a company will receive any or all of its tax credits,” the EDA spokesperson said.

Once companies obtain that level of approval, they must submit another round of paperwork annually to certify the jobs they created or retained, allowing the company to receive the tax credits, which can be used to offset tax bills or sold to other companies for cash.

The three firms “have not yet received annual certifications and any tax credit disbursements,” the EDA spokesperson said.

Michaels had no comment, and NFI did not respond to a request for comment.

Another firm that built in Camden, energy technology company Holtec International, sued the EDA last year over its $260 million tax credit award. In the lawsuit, Holtec said it had lost money because the EDA stopped paying its annual tax credit, and that the agency was using an “amorphous ‘review’” as a “delay tactic.”

The agency, in court papers, alleges that Holtec could be disqualified from receiving the state incentives, because of a failure to disclose that it was previously debarred temporarily from contract work by a federal entity. Both sides declined to comment on the pending litigation.

Murphy established the task force in January 2019 after a state comptroller’s audit found problems with oversight of the multi-billion-dollar tax credit programs, including jobs companies promised to create but could not be substantiated. The task force, chaired by Rutgers law professor Ronald Chen and staffed by two law firms, held multiple public hearings and produced three reports over 18 months.

Investigators called out the influence of special interests in crafting the tax credit programs, an agency culture of “getting to yes” in order to approve tax breaks, and empty claims by companies that they were considering moving to another state, so they could qualify for awards to locate in New Jersey.

Cooper Health’s 2014 application for tax credits, according to investigators, contained “red flags” about a hunt for office space in Philadelphia. If Cooper’s award were recalculated without the risk of jobs going to Philadelphia, the task force said in 2019, it would have received $7.15 million “at most,” instead of an incentive package worth nearly $40 million to move more than 350 jobs from within the state to a new location in Camden.

Cooper pushed back hard on that contention. It argued that its tax credit application did not claim jobs were “at risk” of leaving New Jersey, and that it provided comparisons for an alternative location to comply with EDA requests. Cooper also argued that it was not required to show jobs were “at risk” of leaving the state — only that the tax credits were a “material factor” in its decision to relocate — under the regulations in effect at the time.

After Cooper was awarded the incentives in December 2014, a Cooper subsidiary bought a 49% stake in the Camden property where it set up new offices.

In response to questions about what the EDA had determined, the spokesperson said: “Based on available information surrounding Cooper Health’s application and a thorough review of the applicable facts and the law, the EDA certified Cooper Health’s 2018 Grow N.J. annual certification and provided its annual disbursement of tax credits, which had been on hold pending investigation.”