NEWARK-While this city’s downtown rebuilding effort has made huge strides lately—most notably with Panasonic’s decision to relocate its headquarters—a couple of smaller developments and a report noting the high cost of doing business here make it clear the future remains cloudy.
Newark and the surrounding area is the fifth most expensive place in the United States for corporations to operate, says a new report by the Princeton-based Boyd Co. New York City, a mile across the Hudson, is the most expensive place of 50 metropolitan areas surveyed.
Using public data on taxes and electricity costs, and doing its own research on employment and real estate costs, Boyd compared the cost of operating a corporate headquarters with 500 employees and 100,000 square feet of space. The annual tab in New York: $47.2 million.For Newark and North Jersey, it was $43.3 million. Elsewhere within the state, New Brunswick and central Jersey showed operating costs of $42.2 million for the simulated corporation, and Cherry Hill and southern Jersey had a $39.3-million annual cost.
Of course, some costs are offset by tax and business incentive programs offered by New Jersey, considered to be among the most generous offered by any state. For example, the Panasonic deal was triggered by a $102.4-million tax deferral over 10 years made available under the state’s Urban Transit Hub Tax Credit program.
Still, the law firm McManimon & Scotland did not even pursue incentives before deciding to move out of the Newark office it has occupied for 40 years at the end of the month. The law firm’s chairman, Joseph P. Baumann Jr., told a reporter Thursday that it will be significantly less expensive to do business outside the city. "When you add all those things together, the savings are pretty dramatic," Baumann said in an interview with the Star-Ledger.
Also, this week, uncertainty heightened over Prudential’s plans to build a new office tower near Military Park in Newark when Prudential’s current landlords at the Gateway Center filed a formal protest of the state’s award of a $250-million tax credit for the project. Attorneys for a group of landlords filed a legal challenge to the Economic Development Authority award, arguing that the agency miscalculated the economic benefits of Prudential’s planned project. They said the EDA neglected to take into account the overall effect on Newark’s office market, public safety and infrastructure costs of the move, and potential loss of sales tax revenues from businesses at the Gateway buildings.
“This might be good for Prudential’s bottom line, but it is bad for Newark and New Jersey,” the lawyers wrote in their protest document. According to NJBiz, an EDA spokeswoman declined comment on the protest filing, which is tied to pending litigation, while a Prudential spokesman said it was “premature and inappropriate to discuss this matter before the EDA has an opportunity to review comments from all parties.”
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