New Jersey’s Economic Development Authority awarded millions of dollars in tax credits to unqualified companies that exploited the agency’s weak oversight of an $11 billion program, according to a state report.
A task force appointed by
Gov. Phil Murphy
to investigate the state’s corporate tax-incentive program found evidence that some companies misrepresented their intention to leave the state to qualify for tax breaks, according to the panel’s final report, released Thursday.
The EDA failed to verify whether companies were truly at risk of leaving the state if their application for tax credits was denied, the report said.
“By failing to effectively ensure that incentives are awarded only where jobs are truly at risk, the EDA has been deficient in its role as a steward of public funds,” the report said.
While the EDA didn’t willingly break any laws, the task force found instances in which the agency interpreted regulations in ways that tended to favor tax-credit applicants, the report said.
The task force made several recommendations, including establishing the role of independent inspector general within the EDA to investigate misconduct and negligence within the agency. The task force has also referred projects in the tax-credit program to the New Jersey Treasury Department and law-enforcement agencies, the report said.
New Jersey’s tax-credit program expired in June, and the EDA is no longer taking applications. Mr. Murphy, a Democrat, has called for capping the amount of tax credits that can be awarded annually and for streamlining the types of projects that can qualify. But he hasn’t reached an agreement with lawmakers.
George Norcross, a Democratic political power broker in New Jersey, has said the tax-incentive program has been instrumental in revitalizing the economically depressed city of Camden. Mr. Norcross is also chairman of the board of trustees of Cooper University Health Care and the executive chairman at the insurance brokerage Conner Strong & Buckelew, two Camden-based organizations that have come under scrutiny from the task force.
The EDA approved $40 million in tax credits for Cooper University Health Care in 2014 based on the belief that the organization would move jobs from New Jersey to Philadelphia, the report said. But those jobs were never truly at risk and $33 million in tax credits was awarded erroneously, the report said.
The task force said there was evidence that called into question whether Conner Strong & Buckelew, along with NFI, a supply-chain company, and Michaels Organization, a real-estate company, also misled New Jersey in their 2016 tax-credit applications. As they were trying to qualify for a total of nearly $245 million in tax credits to build a shared headquarters in Camden, they said they were considering a move to Philadelphia.
“We—my firm and its partners—have always complied with the letter and the spirit of the law,” Mr. Norcross said in a statement Thursday. “Nothing in today’s document changes that fact.”
When asked for comment, the Michaels Organization referred to the statement from Mr. Norcross.
“There is nothing new in the report,” an NFI spokeswoman said.
At a public hearing last year, Mr. Norcross told state lawmakers that Cooper never told the EDA its jobs were at risk of leaving the state. Mr. Norcross said new regulations issued in 2017 changed some requirements and added a component related to jobs at risk of leaving the state that differs from when Cooper applied in 2014.
The task force disputes that assessment and said Cooper wasn’t clear that it had no intention of moving out of state. According to the report, a Cooper official emailed colleagues in February 2019 about the company’s tax-credit application and included a term sheet for a potential site in Philadelphia that he said represented “a good faith effort to consider leaving the state as an option.”
“These emails are inconsistent with Cooper Health’s current position, which Mr. Norcross echoed in his testimony,” the report said.
The report “rehashes the same flawed legal arguments,” said a spokesman for Cooper. “To be clear, Cooper did nothing wrong in its application for tax credits,” the spokesman said.
Mr. Norcross offered to discuss the tax-credit application of Conner Strong & Buckelew with state lawmakers and with investigators from the New Jersey attorney general’s office leading an inquiry into the matter, according to a letter Mr. Norcross sent to state legislators in June.
Write to Joseph De Avila at [email protected]
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