Senate Committee Issues Economic Development Reform Recommendations

TRENTON, NJ—A special Senate Committee charged with evaluating the state’s troubled economic development programs issued a report on Friday that included 25 recommendations that would reform and improve the process.

The recommendations include bringing greater transparency and oversight to the Economic Development Authority and measures focused on improving the effectiveness of the policies used to create jobs, attract investments to distressed communities and generate long-term economic growth in New Jersey.

The bipartisan Senate Select Committee on Economic Growth Strategies’ report follows eight months of work, which included a comprehensive review of past programs and four public hearings that focused on the best practices for economic expansion, said Sen. Bob Smith, the committee’s chairman, and Senator Joe Pennacchio, the panel’s vice chairman.

The reforms include the creation of an independent inspector general to oversee the EDA, a chief compliance officer within the authority, the annual recertification of awards with additional penalties for violations, and the Senate’s advice and consent on the appointment of top EDA officials.

The recommendations include a strict cap on individual awards, but no annual limit on the total program; an increase in the “net benefit” standard to require a greater return on investment, and a revision to the “but for” test that invites companies to pursue plans to relocate to other states.

Other recommendations call for job training, support for affordable housing, a residential tax credit, a program targeted for small and mid-sized businesses and community benefit agreements.

“We took a hard look at the programs in place to determine the reforms needed to make them work with more transparency and accountability,” said Sen. Smith. “We reviewed past practices with a critical eye so that we can develop constructive strategies for economic growth. This report provides a blueprint for reform and improvement to maximize New Jersey’s ability to compete for jobs and economic growth, with an emphasis on expanding opportunities in distressed communities.”

The specific committee recommendations include:

• create Economic Development Authority Chief Compliance Officer Position, • establish an Office of the Economic Development Inspector General, • make each project’s net benefit analysis publicly available, • make explicit that the Attorney General can prosecute companies for falsifying information, • the annual recertification of awards, • data sharing agreements, • advice and consent by the Senate for top appointments, • biennial program evaluations, • reduce generosity of key incentive programs, • require community benefit agreements, • increase of the required net benefit, • impose a strict cap on individual awards, but no annual program cap, • provide enhanced benefit to selected cities in need of private and public investment, • encourage development in population centers and business districts including those in suburban areas, • include a residential tax credit program to facilitate urban revitalization • reduce reliance on “but for” test, • incentivize private investment in infrastructure, • allow upward and downward adjustment in award amounts, • structure incentives to target high growth potential, high tech, and environmentally beneficial industries, • simplify the application process for small and start-up businesses, • incorporate workforce training and educational partnership requirements, • develop agreements based on entirety of a business’s operations, • require pilot agreements to be incorporated into incentive agreements, • provide housing tax credits towards affordable housing projects, • and create a business expansion program for small and mid-sized businesses.