During Chris Christie's first term as governor, he made tax incentives a cornerstone of a promised "New Jersey Comeback" that would lure new businesses to the state. With New Jersey's job growth still poor at the beginning of his second term last year, the governor doubled down.
New Jersey's Economic Development Authority has handed out more than $2 billion in tax breaks since 2014, more than the total amount issued during the decade before Christie took office.
The aid has gone disproportionately to businesses in Camden, a city of 77,000 that ranks among the nation's most impoverished. Development projects in the city received $630 million in future tax breaks last year. Because of those grants, Christie said in his State of the State address, Camden is "seeing a new tomorrow."
As Christie considers a Republican presidential campaign, the prospect of a renaissance for heavily Democratic Camden would offer a useful counterpoint to New Jersey's lackluster economic performance. But a closer look at the grants - which will amount to nearly four times Camden's annual budget - indicates they may do less for the city than advertised and more for Christie's political alliances. The state law that set up the more generous grant program was adopted in 2013 by a Democrat-controlled legislature and signed by Christie.
Most of the jobs coming to Camden are filled by existing employees who currently work just a few miles away. One tax break exceeded the value of the company that received it. Another went to a developer who owes New Jersey millions of dollars in long-unpaid loans. And nearly all the recipients boast notable political connections - either through an affiliation with a prominent southern New Jersey power broker, Democrat George Norcross, or through donations to Christie and the Republican Governors Association during his tenure overseeing it.
New Jersey's Camden incentives raise questions about his administration's stewardship of New Jersey's finances - and whether Christie's claims of revitalizing Camden will resonate with Republican voters opposed to corporate welfare. For conservatives, incentives buck the free market and could undermine New Jersey's prospects for legitimate tax reform.
"Giving huge subsidies to companies moving from the suburbs of Camden to the city is just off-the-charts crazy territory," said Michael Doherty, a Republican state senator. "If you're a high-profile individual, you can get the EDA to make decisions to your benefit."
Christie spokesman Kevin Roberts said in an email that critics of the tax breaks "offer no alternative plans for creating jobs, growing the economy or renewing our urban centers."
Driving the 4 miles from Subaru's current U.S. headquarters in Cherry Hill to its new home in nearby Camden takes eight minutes. Tax credits granted by the state of New Jersey will make that trip worth nearly $118 million for the company.
Subaru's short trip is not an exception: Most of New Jersey's incentives for Camden have gone to projects shifting existing employees from nearby locations. Holtec International Inc., a manufacturer of nuclear reactor components, is receiving $260 million for relocating 160 nearby jobs and adding 235 more. Cooper University Hospital will receive $40 million, mostly for returning 353 employees that it previously moved to the suburbs. The Philadelphia 76ers will receive $82 million for bringing 250 jobs across the Delaware River, just a few thousand feet from the Pennsylvania state line.
The low bar for incentive payouts is justified due to Camden's dire circumstances, said Timothy Lizura, president of the Economic Development Authority.
A top economist at Rutgers University's Center for Urban Policy Research, Nancy Mantell, said: "It always concerns me that you're just moving people around, not creating anything particularly new to the regional economy. And this is not going to help the places the companies left."
The scale of New Jersey's generosity has bolstered one profitable new industry: the resale of tax incentives by businesses that can't use them.
Economic development incentives are transferrable under state law. When New Jersey awards tax breaks in excess of a company's tax bill, the recipient can sell them to an unrelated corporation looking to pay less in taxes. The 76ers, for example, told the AP last year that the team expects to sell a portion of its $82 million in New Jersey incentives - the NBA franchise doesn't make enough money to use them all.
In at least one case, the value of the tax credits outstripped the value of the business that received them. In November, a Maryland medical testing startup, DioGenix Inc., received a $7.9 million tax incentive to relocate to Camden. Two months later, DioGenix sold itself for between $8 million and $10.9 million to a buyer that announced it would resell the tax breaks for at least $6 million.
Lizura said he was unaware of DioGenix's upcoming sale when it received its state tax credits but called the sale evidence of success. The incentives are awarded only when companies meet their job and investment obligations.
"If a capitalized company comes in and buys a startup company and they live up to the approval we had, how great is that?" he said.
Diogenix's buyer, Amarantus Biosciences Holdings Inc. of San Francisco, has been unprofitable since its founding in 2008, has less than $2 million in assets and warned investors in November that there is substantial doubt about whether it can stay in business, according to Securities and Exchange Commission filings. The company did not return phone calls from The Associated Press over several weeks.