Standing in the half-built atrium of Atlantic City’s Revel casino in February 2011, New Jersey Gov. Chris Christie made a bet. The state would provide $261 million in tax incentives—its largest award ever—to help shore up the financially stalled project. But Revel, which opened in April 2012, has yet to generate as many jobs as expected or receive any state money. This March, the casino filed for bankruptcy.

Earlier this year, Christie addressed a crowd of Lockheed Martin employees at the company’s Moorestown facility, hailing a $100 million defense contract the company had landed. Grant funding from the state to upgrade the Lockheed site helped secure the contract. But the deal also came at a cost: $40 million over 10 years.

The push for tax incentives has been a key part of Christie’s strategy for turning New Jersey’s economy around, what he often touted as the “New Jersey Comeback” early in his tenure. It’s a continuation of an economic development approach that’s generally enjoyed bipartisan support in the state legislature for years.

Most states offer their own attractive incentives to lure out-of-state employers and boost existing businesses, and many became more aggressive after the recession. But perhaps no other state—both in sheer dollar amounts and an expanded range of offerings—has bolstered its tax incentive programs in recent years quite like New Jersey.

Since January 2011, the state’s five major incentive programs awarded an estimated $1.95 billion to companies, mostly tied to long-term agreements yet to be disbursed. That’s more than the entire prior total since the state began awarding incentives in 1996, a Governing review of state data found. New Jersey has also expanded the number of options available to employers. As recently as 2009, the state Economic Development Authority issued awards through just two tax incentive programs; today it administers five. The scope of the programs could soon widen even further if a proposed bill makes its way through the state legislature.

“New Jersey has gone off the charts in the types of incentive deals it offers,” says Dan Levine, a former assistant state treasurer who now runs MetroCompare, a corporate relocation firm. “We’ve just got into a cycle of doubling down on incentives.”

The problem, say critics, is that New Jersey’s all-out effort on tax incentives hasn’t delivered, or at least it’s failed to live up to expectations. The state’s economy has begun to recover, but it has only created about half the private-sector jobs lost since the height of the recession, trailing neighboring states. In the last few months of 2012, the gap between New Jersey’s unemployment rate and the national rate was the largest since 1977. The state’s rate has since declined a bit, but it’s still one of the nation’s highest.

Companies receiving subsidies are expected to create jobs and make billions in private investment. But some aren’t immune from economic shifts, either. Since 2010, according to a Governing analysis of New Jersey records, at least 20 companies receiving incentives filed layoff notices while they were still subject to grant terms with the state. Verizon Communications, one of the top beneficiaries, has netted about $60 million in incentives over the past decade. Yet the telecom giant laid off 336 New Jersey employees last year as demand for landline phones withered. Biotech firm ImClone Systems laid off 141 workers in 2010, not long after the state approved incentives worth an estimated $32 million for its Branchburg headquarters.

Other sectors of the state’s economy, hit hard even before the recession, have continued to struggle. Pharmaceutical and telecom companies downsized or consolidated. Atlantic City’s casinos faced growing out-of-state competition. Last summer, Christie quietly retired the “Jersey Comeback” banner from his town hall speeches.

Proponents say incentives help offset New Jersey’s pricey real estate and high taxes. Funding is crucial to encourage economic development, they argue, and many new jobs will not be realized for years to come. The state expects the $1.95 billion in awards approved since 2011 to create an estimated 18,473 jobs and protect another 17,579 considered at risk, not including construction. “We’ve been very aggressive since the collapse of 2008 in trying to do whatever we can to work with the private sector to create the economic conditions they need,” says Assemblyman Al Coutinho, a Democrat who heads the Commerce and Economic Development Committee. Incentives matter, he says. “I’ve seen development in my city that would have never happened if not for this.”

Others aren’t convinced. “We don’t see the type of job creation we would have expected,” says Levine, “and it’s a very legitimate public policy question.”

Much of New Jersey’s upswing in subsidies resulted from mega deals with major corporate players. The state has awarded incentives to more than 500 businesses since it began giving out incentives in the mid-1990s, but about half of approved incentive money has gone to just 22 companies. Those receiving some of the biggest packages in recent years took part in the state’s high-profile Urban Transit Hub Tax Credit Program, which Christie and the legislature expanded. The biggest recipient so far is Prudential, the insurance and financial management company, which received a tax credit worth $210.8 million over 10 years to build a new 20-story office tower in downtown Newark.

But Prudential already leases space down the street, and none of its jobs were at risk of leaving. Similarly, officials in Secaucus expressed outrage when the state approved $102 million in Transit Hub incentives for Panasonic to move its headquarters there about 10 miles down the road to Newark. Others also contend doling out money to companies already in the state isn’t the best use of taxpayer dollars. Much of the debate centers around whether a company is actually “at risk” of leaving.

State officials see it differently. Investing in existing companies, they say, can help spur new development; Transit Hub credits are intended to drive growth in underserved urban areas. “Many of these communities have not had any significant private investment for decades,” says Timothy Lizura, the state Economic Development Authority’s president. Under the Prudential deal, for instance, the company pledged to invest $444 million and create 400 new positions. And there’s “no question” that Panasonic, which was considering sites in Brooklyn, Atlanta and California, would have left the state, says Lizura. The state estimates the $1.08 billion already awarded will result in $2.82 billion in private investment, creating or saving nearly 6,000 jobs.

When it comes to luring companies from out of state, New Jersey’s primary tax credit is the Business Employment Incentive Program (BEIP), initiated in 1996. The subsidy provides businesses relocating or expanding their footprint with grants up to 80 percent of employees’ state income tax withholdings. Good Jobs First, a watchdog group critical of incentives, published a report last year examining 22 similar programs redirecting workers’ withheld personal income taxes in 16 states. New Jersey’s BEIP disbursed $178 million in fiscal year 2011, by far the most of any program in the study.

New Jersey does have “clawback” provisions—allowing it to recoup tax incentives from firms that don’t hold up their end of the bargain. After Morgan Stanley announced plans in March to relocate all 95 of its Princeton employees, it paid back the entire $7.3 million in BEIP grants it had received. Verizon and ImClone weren’t asked to return any money following their layoffs, however, because they still employed a minimum number of workers, the state Economic Development Authority says.

No one argues New Jersey should completely do away with all its incentives, ceding ground to other states. “It’s an arms race,” says Rutgers University economist Joseph Seneca. “Every state would be better off if none of them did it.”

But some critics are concerned that New Jersey’s corporate incentives have ballooned in size and breadth in recent years. (Indeed, Gov. Christie has so far vetoed only one project, a film tax credit for the MTV show “Jersey Shore” dubbed “the Snooki subsidy.”) The governor and the legislature now appear poised to broaden subsidies even further, with a bill that would enhance incentives for smaller companies and those outside of urban areas. The proposed Economic Opportunity Act would also consolidate the state’s five main incentives programs into two. Sen. Joseph Kyrillos, the bill’s sponsor in the senate, says it will help streamline the application process and make the programs more marketable. “We need to do everything we can at the state level to make New Jersey as competitive as possible.”

The question being asked in New Jersey is the same as in nearly every state: Do tax incentives really matter when a company decides where to locate?

With New York City, Philadelphia suburbs and wealthy Connecticut enclaves just outside the state, New Jersey leaders say the competition to land jobs is intense. Every competitive edge helps, says Philip Kirschner, president of the New Jersey Business and Industry Association. “We have really developed incentives on a bipartisan basis that are equal or better to surrounding states and any state in the country,” he says. “I think an incentive really has the power to seal the deal.”

But Patrick O’Keefe, a New Jersey resident and the director of economic research at the accounting firm CohnReznick, says tax incentives have little, if any, effect on most relocation decisions. “If cost is the only consideration, we’re not competing across the Hudson or Delaware River, we’re competing across oceans,” he says. The hurdles the state faces in attracting employers are the product of an accumulation of policy decisions made over decades. New Jersey should broaden its approach to economic development and eliminate unneeded regulation, O’Keefe says, rather than focus on incentives. “The incentives serve a political—not an economic—objective.”

Without knowing how deals will play out, estimating indirect revenue gains against costs of tax credits is difficult. In a 2012 fiscal analysis, New Jersey’s Office of Legislative Services wrote it could determine “neither the direction nor the magnitude of the net fiscal impact” of a bill proposing additional funding for Transit Hub tax credits.

The fact is that company executives weigh an array of factors when deciding where to locate. For example, Mission Solutions Engineering president Michael Knowles, whose company secured incentives to relocate to a building in Moorestown, says the available workforce, facilities and proximity to customers were top priorities in his decision to retain workers in the state. Still, the state’s tax credits did factor into the selection of the location over a competing Pennsylvania site, he says. Incentives typically aren’t going to woo a company halfway across the country, but they’re more relevant when businesses compare real estate options within a labor market, says Levine, who drafted the state’s original Business Retention and Relocation Grant program.

With so much emphasis on landing large projects, the incentives that states award frequently don’t benefit smaller projects. “Too often, economic development has gotten highly aspirational and going after the glitzy technology company and corporate campus,” Levine says. And some New Jersey companies resent others receiving large incentive packages when they’re left out. Two CEOs Levine worked with viewed it as an “annoyance” and eventually took their companies out of state, he says.

Across the Hudson River, New York has had its share of wins and losses in vying for employers against the Garden State. Mark Jaffe, president and CEO of the Greater New York Chamber of Commerce, says governments across the region would be better off working together. Jockeying for top companies with incentive deals, he says, too often creates a “reactionary” environment for economic development. “If New Jersey comes up with a great program,” Jaffe says, “New York is going to want to match it.”

Tax Incentive Awards

The following companies have received the highest total awards approved since New Jersey began issuing incentives in 1996. Totals refer to estimated amounts approved so far; not money received. Credits for some awards, particularly those issued in recent years, have yet to be disbursed.

Company Awards Total Approved Revel Atlantic City/Revel Entertainment Group, LLC 1 $261,364,000 Prudential Financial 1 $210,828,357 Goldman Sachs 4 $169,146,683 Panasonic Corp. 1 $102,408,062 Citigroup 3 $95,588,400 Verizon 5 $91,947,910 Wakefern Food Corp. 2 $87,250,000 Pearson 2 $83,128,719 Goya Foods 1 $81,901,205 Transit Village (Residential Project) 1 $76,600,000

Source: Governing analysis of state Economic Development Authority data