Gov. Murphy decries ‘rigged system’, pledges to veto legislation extending controversial tax programs

Gov. Phil Murphy on Tuesday vowed that he would veto legislation to extends controversial tax-credit programs set to expire July 1, saying current New Jersey law “allowed hundreds of millions of dollars to flow to insiders based on misleading, false, omitted, or fabricated information.”

“We are not just dealing with a broken system; this is a rigged system,” Murphy, a Democrat, said at a Trenton news conference. “This was designed by special interests to benefit special interests.”

His remarks came a day after a task force he appointed concluded in a report that the law firm run by Philip Norcross helped shape the 2013 law to benefit his clients, including the insurance brokerage chaired by his brother George E. Norcross III, the South Jersey Democratic power broker. The law helped steer $1.6 billion in tax breaks to companies that moved to Camden.

In a letter to legislative leaders Tuesday, George Norcross called the task force report “largely erroneous and factually incorrect.” He requested an opportunity to testify in Trenton in order, he said, to correct “gross misstatements and misleading information released by the governor’s task force.”

“We have been, and continue to be, willing and ready to publicly discuss our application for tax incentives and our decision to move to Camden in any fair and appropriate forum,” said Norcross, executive chairman of Conner Strong & Buckelew.

The Democratic-controlled Legislature is set to vote Thursday on a proposal to extend the programs through Jan. 31, 2020.

A state grand jury is also investigating the programs. Last month it issued a subpoena to the Economic Development Authority, which administers them.

“This is one of those moments that begs the question: Whose side are you on?” Murphy said. “I remain firmly on the side of our communities, our taxpayers, our middle class, and our small businesses.”

In an interview Tuesday, Senate President Stephen Sweeney (D., Gloucester) called Murphy’s veto threat “shortsighted.”

“To go without a program makes no sense,” he said. Sweeney also pointed to Murphy’s authority to veto incentive awards and noted that the EDA’s leaders are Murphy appointees. “Doesn’t he trust himself?” Sweeney asked.

Sweeney called for delaying changing the tax incentive programs until the Legislature conducts hearings. The Senate will begin taking testimony on Monday, he said.

A spokesperson for Assembly Speaker Craig Coughlin (D., Middlesex) said the speaker was reviewing the report.

The governor on Tuesday also reiterated his call for the Legislature to raise the marginal tax rate on income above $1 million. Lawmakers on Monday advanced a budget proposal that does not include the so-called millionaires’ tax. A budget must be signed into law by the end of the month.

Murphy has proposed capping state tax incentives at $400 million a year, under five new programs aimed at start-up businesses, the preservation of historic buildings, and commercial and residential projects that would help revitalize downtown areas.

The Legislature appears poised to pass a bill that would extend the two tax-incentive programs — one aimed at spurring job growth and recruiting businesses, another for development — in their current form.

The task force — chaired by Rutgers University law professor Ronald Chen — has so far focused on how the 2013 tax incentive law was crafted behind the scenes, and how the EDA managed the Grow New Jersey incentive program that was expanded under that law.

Its report was released minutes after a judge on Monday denied George Norcross’ request to halt the task force’s proceedings until the court could rule on a lawsuit he filed last month seeking to disband the panel.

Investigators said they identified more than $500 million in questionable awards. Within that pool, some companies have agreed to voluntarily terminate their awards. The task force referred other tax credit recipients to state Treasury Department officials, law enforcement, and the EDA for possible suspension or termination.

As for the legislation itself, the report found that “numerous” clients of the law firm Parker McCay benefited from sections that the firm helped draft. While Conner Strong qualified for $86 million in tax credits in 2017, investigators said “an award of that size would have likely been impossible” without the legislative amendments Parker McCay helped incorporate.

That award amount was based on provisions in the 2013 law that allowed applicants to claim anticipated construction costs. But using a different formula in an older law, tying the dollar amount to the number of proposed jobs, Conner Strong “could have potentially … qualified for a maximum award of $40.2 million,” according to the report.

The definition of “capital investment” in the 2013 law also allowed Conner Strong to include the costs of a helipad as part of constructing an office tower in Camden. “Whether Grow NJ was intended to enable the state to subsidize helipads for corporate executives can reasonably be questioned,” investigators wrote.

Assemblyman John Burzichelli (D., Gloucester), a Norcross ally, said the consensus among legislative leaders was that the programs should be temporarily extended until lawmakers could agree how to modify them.

Burzichelli said that while there are critics of the programs, they have achieved their intended effect: to boost investment in Camden, one of the poorest cities in New Jersey.

The report’s depiction of special interest influence “had a little bit of an Oliver Stone feel of it to me,” Burzichelli said, referring to the film director known for playing loose with historical facts. “It seemed to be missing a lot of details.”