Salvador Rizzo

NorthJersey.com

At a time when New Jersey lawmakers are rushing a bill to end what they call “corporate welfare” for the news media, Gov. Chris Christie’s administration this month surpassed $7.4 billion in tax subsidies awarded to hand-picked businesses and nonprofits.

This historic boom in tax giveaways — one of the largest on record in the United States — has been facilitated by both parties in the Legislature during a yearslong financial crisis and a plague of revenue shortages. Some of the biggest grants Christie has doled out have benefited politically connected insiders. The cost for state taxpayers could grow by billions of dollars more before New Jersey’s main subsidy program expires in 2019.

Christie asserts that government bodies and private businesses would save $80 million a year by posting legal notices online, instead of printing them in newspapers, as New Jersey law currently requires. The governor’s office has refused to break down its cost analysis and has not provided supporting documentation requested by The Record under the Open Public Records Act.

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Meanwhile, the New Jersey Press Association said the cost of publishing legal notices is $8 million a year for taxpayers and $12 million for businesses, according to a 2010 study. Advertisement rates for legal notices are set by law, and they were last increased three decades ago. Publication of public notices in newspapers is hardly unique to New Jersey and has for nearly a century been an established method of communication for governments across the nation.

Whether it is $8 million or $80 million a year, the figure pales in comparison to the $7.4 billion in corporate subsidies Christie has awarded as of this month through the state Economic Development Authority, an agency tasked with creating and retaining private-sector jobs. This subsidy boom has been enabled largely by the passage of the bipartisan Economic Opportunity Act of 2013.

Conservative and liberal groups have criticized the explosion in tax breaks under Christie, calling it textbook “corporate welfare” and noting that the state has garnered a record 10 credit-rating downgrades because of a lack of revenue to cover the cost of hospitals, pensions, schools, property tax rebates and other services. State revenue is not keeping pace with New Jersey’s ballooning, legally mandated costs, analysts at Fitch Ratings, Moody’s Investors Service and S&P Global Ratings say.

Fail to generate economic activity in state

Critics add that the biggest problem with the $7.4 billion in tax breaks handed out since Christie took office in 2010 is simple: They haven’t worked.

“We’ve seen very little impact from these corporate subsidies thus far,” said Jon Whiten, deputy director of the liberal think tank New Jersey Policy Perspective, which tracks EDA grants and tax credits. “By whatever metric you want to use, the state’s economic recovery has been lackluster and it’s near the bottom of all the states.”

Of the $7.4 billion total in grants and tax credits since Christie took office in 2010, $4.8 billion has been authorized since the Economic Opportunity Act was put in place in December 2013, Whiten said.

Erica Jedynak, state director of the fiscally conservative Americans for Prosperity, said that “despite these immense costs and large number of recipients, New Jersey has seen little return on the taxpayer’s investments.”

“Imagine what $7.4 billion could look like if it were instead used for tax relief across the board for the residents of New Jersey,” Jedynak said. “Government should not be in the business of picking winners and losers.”

Americans for Prosperity has not taken a position on the legal notices bill.

Awarding corporate subsidies has been Christie's "single strategy" for job growth, Whiten said. "The amount of focus on the corporate tax breaks, to the detriment of focusing on everything else, has been a flawed strategy," he said.

New Jersey began its tax subsidy program in 1996, handing out $1.37 billion in grants and credits in the 14 years before Christie took office, Whiten said. In his term, Christie has handed out nearly six times the amount of tax breaks that all of his predecessors did.

Legislative sources told The Record that Christie — in a bid to punish the press for its adversarial coverage — quietly brokered a deal with the leaders of the Democratic-controlled Legislature to allow official notices to be published on the internet as an alternative to newspapers. These notices alert residents about public meetings, bid opportunities, foreclosures, sheriffs’ sales and other official business. Christie is promoting the legislation as a cost-saving measure for overburdened local taxpayers.

Christie spokesman Brian Murray said the bill has "nothing to do with the press" and spent the week defending the administration's position.

The nonpartisan Office of Legislative Services said it cannot estimate any savings from the bill Christie is pushing, A-4429, and noted that costs might end up rising for taxpayers if new technological infrastructure was needed to publish official notices online. Analysts at the OLS on Friday cited the New Jersey Press Association’s $8 million estimate for annual taxpayer costs, and $12 million for businesses, as some of the most current authoritative data.

In addition, under the terms of the bill, government bodies would be allowed to hire contractors to handle their online public notices.

The bill, which would hurt the revenue streams of New Jersey newspapers and likely cause layoffs, sailed through Assembly and Senate committees last week and is up for a final vote Monday in both houses. It is sponsored by Assembly Speaker Vincent Prieto, D-Secaucus, and Assembly Minority Leader Jon Bramnick, R-Union, and it is backed by Senate President Stephen Sweeney, D-Gloucester, and Senate Minority Leader Tom Kean Jr., R-Union, who each asked other senators to sponsor the bill.

Lawmakers supporting Christie’s plan say New Jersey’s newspaper industry should not benefit from corporate welfare.

“The press has been very effective at using their platform to strong-arm legislators into continuing this unnecessary and expensive corporate welfare,” said Sen. Gerald Cardinale, R-Demarest. “If any other industry received this kind of favoritism at property taxpayers’ expense, editorial page writers would be the first to call for reform.”

Cardinale voted in favor of the Economic Opportunity Act, which sparked a huge boom in corporate subsidies. The law, backed by Christie, opened the door to bigger individual awards for businesses selected by EDA officials, and it eliminated a cap on the total amount of subsidies in New Jersey. Cardinale did not respond to a request for comment sent to his office on Friday regarding the $7.4 billion in subsidies.

Assemblyman Gary Schaer, the chairman of the Assembly Budget Committee, said during a hearing on the legal notices bill on Thursday that even if a municipality spends $7,000 a year on such ads, that cost is significant for taxpayers. He questioned why “the fourth estate is dependent upon government as a whole for its continuity and existence.”

Schaer, D-Passaic, voted in favor of ramping up tax breaks in 2013. On Monday, three days before his comments on the legal notices bill, Schaer held a hearing to examine the problems facing New Jersey’s economy and expressed concern over slower-than-expected tax collections for the state’s $34.5 billion budget halfway into the fiscal year.

The same day, Schaer introduced a bill that would raise salaries for legislative aides, judges, prosecutors, the governor’s Cabinet officers and others — at a cost to taxpayers of more than $10 million a year, according to estimates by the OLS and The Record. Schaer later said lawmakers need “well-educated” aides.

Assemblyman Michael Patrick Carroll, R-Morris, issued a statement last week saying “legal ads are corporate welfare for newspapers.” He voted against the Economic Opportunity Act in 2013, and he did not respond on Friday to a request for comment sent to a spokesman regarding the $7.4 billion subsidy boom. Carroll also sponsors the bill to raise salaries for political insiders by more than $10 million a year. The state could have trouble recruiting qualified judges with salaries in the low six figures, he argued.

Democrats acknowledged during legislative hearings on Thursday that Christie has agreed to the raises in Carroll and Schaer’s bill, A-4430, which the governor had blocked for years. In exchange, Democrats said, Christie asked the Legislature to relax a state ethics law that currently restricts him to his $175,000 salary as his only source of income. The bill would allow Christie to draw income from published works, such as a book contract.

Legislative sources told The Record that Christie also asked the top lawmakers in each house to revive the legal notices bill as part of the deal.

Critics: EDA favors politically connected businesses

Critics say the EDA under Christie has shown a tendency to pick politically connected businesses for some of its large tax subsidies. The former director of the agency, Michele Brown, is one of Christie’s closest advisers and now leads Choose New Jersey, a nonprofit created at Christie’s behest — and funded by some of the largest businesses and contractors in the state — that financed his trips to foreign countries as he was building up toward a presidential run. Brown led the business development agency from 2012 to 2015 and implemented the policy of expanded tax breaks.

The current EDA chief executive, Melissa Orsen, was formerly a top official in Christie’s Department of Community Affairs.

Some members of the agency’s board, who are in charge of approving or rejecting subsidy applications, are at the core of the state’s political elite. Phillip Alagia, a board member, is the right-hand man to Essex County Executive Joseph DiVincenzo, one of New Jersey’s most influential Democrats and a Christie ally. Board member Bill Layton is chairman of the Burlington County Republican Committee. A third board member, Charles Sarlo, is the brother of Sen. Paul Sarlo, D-Wood-Ridge, chairman of the Senate Budget and Appropriations Committee.

In most cases, the EDA awards are spread out over many years, and recipients must meet specific job-creation and retention targets to reap the benefits.

The 2013 tax subsidy legislation carved out especially favorable terms for businesses settling in Camden, a decaying urban outpost that serves as a home base to one of Christie’s closest Democratic allies, insurance executive George Norcross, who is chairman of the city’s Cooper University Hospital and whose allies in the Legislature often have given Christie the edge to pass controversial bills.

Of the $7.4 billion subsidy total, the Christie administration has approved $1.3 billion in tax breaks just for Camden. Because the terms of the tax breaks are so favorable to those businesses, Whiten said, there is a possibility state taxpayers could incur a $254 million loss on their investment instead of netting the EDA’s projected $561 million in economic benefits for that city.

The reason: Businesses getting tax breaks to locate in Camden are allowed to submit estimates of net economic benefits over a 35-year period, but the law requires them to stay in Camden for only 15 years, Whiten said. If they left after 15 years, New Jersey taxpayers would miss out on the remaining 20 years' worth of promised economic benefits. Whiten said the EDA might approve a regulatory change next year, not supported by the text of the Economic Opportunity Act, that would eliminate this loophole.

An EDA spokeswoman did not respond to a request on Friday for comment.

One of the largest EDA subsidies awarded by the Christie administration, worth $260 million, went to Holtec International, which is required to produce $155,520 in net economic benefits for Camden over 35 years but is allowed to leave the city after 15 years. The company plans to build a new breed of nuclear reactors that industry experts say may not generate much demand in the energy market.

Norcross sits on Holtec’s board, although his spokesman has said he does not own a stake in the company. Holtec's owner, Krishna Singh, is a Norcross friend who partnered with him and others to buy the Philadelphia Inquirer in 2012. Norcross and Singh later sold their stakes in the newspaper.

When she brings up the EDA subsidy boom with lawmakers, Jedynak said, "they often correct me and say I should call it 'tax credits' instead of 'corporate welfare.'”

“But it is big, politically connected businesses that benefit, distort the tax code, and drive up tax rates elsewhere on hardworking Garden Staters who lack the political connections to lobby the Legislature for carve-outs,” she said.

Whiten said that while some lawmakers acknowledge concerns with the program, there is no "appetite" for imposing limits.