Finance

Newark is 1st city to get Opportunity Zone grant aimed at socially responsible investment

Newark has been awarded a grant of nearly $1 million from the Rockefeller Foundation and Prudential Financial as part of an initiative to help U.S. cities attract responsible private investment in economically distressed communities through Opportunity Zones.

The initiative is part of the Rockefeller Foundation’s U.S. Jobs and Economic Opportunity program focused on expanding economic opportunity for low-income Americans through policy, partnership and place-based transformation.

The foundation said the initiative aims to make it easier for cities to attract and responsibly deploy some of the more than $6 trillion of unrealized capital gains that could qualify for investment in Opportunity Zones.

The grant, the first of six the Rockefeller Foundation plans to announce, will total $920,000. It will be administered through the Newark Alliance.

In addition to funding a chief opportunity officer position and two community engagement specialists, each city also will receive two years of support in the form of a national Opportunity Zone Technical Assistance team to compile and leverage local, state and federal incentives, and help structure and support deals.

Newark Mayor Ras Baraka was thrilled the city received the grant.

“The only way to make sure the ‘opportunity’ in Opportunity Zones benefits all Newark residents is to intentionally focus resources to ensure it happens,” he said in a release. “I am so pleased that, through the support of our longtime partner in progress, Prudential, Newark was able to be the first city in the Rockefeller Foundation initiative.”

Lata Reddy, Prudential’s senior vice president of diversity, inclusion and impact, said the program embodies what Prudential believes in.

“Prudential is committed to maximizing the potential impact of the Opportunity Zone program to spur catalytic investments in our hometown of Newark,” she said. “By providing capital, as well as our expertise from our other Newark redevelopment and Opportunity Zone projects, we will help close the gap between inequality and opportunity as the city grows.

“Our partnership with the Rockefeller Foundation is a crucial step toward ensuring that inclusive, responsible investment benefits all Newark residents and communities.”

Rajiv J. Shah, president of the Rockefeller Foundation, said his group sees the enormous potential the Opportunity Zone program brings.

“Opportunity Zones have the potential to unlock billions of dollars in innovative job creation and community infrastructure private investment in cities, lifting up Americans who most need this support and preventing their displacement by irresponsible development,” he said.

“Philanthropy has an important role to play in ensuring opportunity zones improve the lives of the residents in distressed communities. Starting with Newark, the Rockefeller Foundation will help empower communities to attract and implement investments that will provide real economic mobility to the greatest numbers of disadvantaged people.”

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Pru names new chief information officer

Prudential Financial Inc. has named a new chief information officer, the Newark-based financial services giant said Monday.

Stacey Goodman will serve as executive vice president and CIO, starting July 15. In her new role, she will lead a strategic organization to deliver added value through the use of data, information and technology platforms, Prudential said in a news release.

She replaces Barbara Koster, who announced her retirement in December after 23 years with the company.

Goodman, who joins Prudential from Freddie Mac, where she was also CIO, will serve on Pru’s executive leadership team and report to Vice Chair Robert Falzon.

“Technology is a critical advantage, and Stacey is a purpose-driven leader and experienced technologist who has successfully guided complex, global companies through transformation to become leaders in their fields,” Falzon said in a prepared statement. “Her ability to unlock business value, realize better outcomes for customers and streamline operations — while also accelerating growth — will support a differentiated capability for Prudential.”

She has also served as CIO at CIT, and in positions at Bank of America, UBS and Salomon Bros., among others.

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Camden incentives squabbles overshadow RFQ for Riverfront State Prison site

The specifications and descriptions of the property in the RFQ were reasonably precise:

  • Riverfront property, views of Philadelphia skyline;
  • Approximately 8.75 acres of prime land, close to a newly established public park, roadway improvements;
  • Large-scale environmental cleanup that involved capping the property with clean fill, topsoil and vegetation;
  • Seemingly ideal location for commercial or mixed-use development.

If interested, the EDA release says (bolded and ALL CAPS as it was presented):

Qualifications must be received by 2 p.m. on September 18, 2019 in a securely SEALED envelope or carton.

Here’s what the Request for Qualifications for those interested in redeveloping the former Riverfront State Prison Site in Camden doesn’t say:

Will the developer or any companies using the site have access to any Economic Development Authority-sponsored tax incentive programs?

Will those using any potential incentives become pawns in the growing war involving Camden — a war Gov. Phil Murphy’s team says it did not want, but it has, thanks to a task force many in Camden feel (rightly or wrongly) was constructed with an eye on them?

Will — and it’s becoming increasingly easier to question — there be any incentive programs actually on the books when it comes time to advance the process?

And, finally, if there are no incentives available, will that be an acknowledgement that the previous incentives for Camden did what they were supposed to do: create an urban environment where incentives are no longer needed to attract development?

If the EDA’s release of the RFQ for the former prison site was intended to show the Murphy administration is committed to development in Camden, it may have fallen short.

Firms are not racing to do business in Camden right now.

“The EDA is toxic,” one developer, speaking on condition of anonymity, said. “No one wants to be associated with it right now. That’s not good.”

There is a lot of uncertainty.

And tension.

Earlier Friday, Camden Mayor Frank Moran (along with city council President Curtis Jenkins and state Sen. Nilsa Cruz-Perez) issued a tough-talking news release regarding Murphy’s planned visit to the city — only his second since taking office, they said.

“Gov. Phil Murphy is swooping into Camden to attend a small group event out of the eye of the public, but he won’t come here to talk to the leaders of the city about why he’s attacking it or the potentially devastating impacts his attacks could have on the amazing progress Camden is making,” Moran said in the release.

“That’s why it’s so important that he understand from those of us who were elected to represent the people of Camden a simple message: He’s not welcome here unless and until he stops attacking the city and talks to the people of Camden and the leaders who were elected to represent them.

“Using Trenton attack dogs to try to destroy any of the more than two dozen companies which are making major investments in Camden makes it harder to attract new ones here, and that hurts the people of Camden.”

Darryl Isherwood, a spokesperson for the EDA, took exception to Moran’s words, and reiterated the governor’s interest — and efforts — in Camden. Efforts, he said, are demonstrated by the RFQ.

“The focus of the task force has never been about one geography or one company or one person,” he said. “It’s always been about determining if taxpayer dollars — including those paid by the residents of Camden — have been spent wisely, and to ensure that the program works for everybody, not just a select few.

“Gov. Murphy continues to make the well-being of the city of Camden a priority,  in areas like education where we have allocated more than $310 million to school funding, the most in recent memory; transportation, where we have distributed more than $54 million to the county; and property tax relief, where more than $180 million has been earmarked under three separate programs.”

Isherwood said the governor is eager to get his new incentive programs passed.

“The governor has proposed a robust package of tax incentives that we’re still hopeful will be passed into law by the Legislature,” he said. “Those incentives certainly would benefit developers interested into the site.”

The process figures to be a long one. The RFQ is just the first step.

But it’s the first step into a situation some are hesitant to get into.

This much is a clear: A highly desirable piece of real estate (and a good part of that desirability comes from the investment that has come to Camden) is available. But it comes with many more questions than can be answered right now.

And that’s not good for New Jersey.

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NJDCA awards Watson Institute $155K grant to assess UEZ program

The New Jersey Department of Community Affairs announced Thursday it has awarded a $155,000 grant to The John S. Watson Institute for Public Policy at Thomas Edison State University to assess the DCA’s Urban Enterprise Zone program.

The DCA said a UEZ designation provides financial incentives to local businesses in the zone. The incentives can help drive capital improvements, business expansion and employment, and overall improve the quality of life for residents, DCA said.

The Watson Institute’s assessment will measure whether the UEZ program is a viable tool for encouraging economic development in New Jersey. The institute will also provide recommendations on the future build of the program.

“In response to the opportunity, we will focus our capabilities on a comprehensive assessment of the critical factors that impact enterprise zones,” said Barbara George Johnson, executive director of The Watson Institute, who serves as a project lead for the initiative.

“The grant will allow us to redouble our efforts in this valuable endeavor,” she said.

“I look forward to receiving the study findings from the accomplished team at the John S. Watson Institute for Public Policy,”” Tracy Fredericks, executive director of the UEZ program at the NJDCA, said. “We are optimistic that the results will provide appropriate data and a clearer picture that will help legislators decide on the direction the program should take in the future.”

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Secrets to being second-gen business owner come to light at ACG event

As president of IMG Business Advisors in Morristown, Michael Givner said he has seen his share of family business issues.

“Family dynamics can be a very challenging aspect of servicing the middle market,” Givner said while moderating a breakfast meeting hosted by the Association for Corporate Growth’s New Jersey chapter on Tuesday at the Pleasantdale Chateau in West Orange.

The four panelists, however, were all there to discuss how they overcame multiple challenges to take their companies to new heights as next-generation business owners.

“I took every single business and psychology course offered at Baruch College,” said Harvey Wexelman, CEO and president of Alwex Inc., a New York City-based independent insurance agency specializing in high net worth individuals and families. “And, once I could prove to (my father and his partner) that I knew more than them, I was given a nice long leash.”

Wexelman’s father and his business partner founded the company in 1991 after leaving their prior agency. Wexelman joined in 1993 — three years prior to his graduating Baruch College.

“I was 19 years old when I was told I had to take over the business because none of the other kids wanted to be involved,” he said. “So, I went to night school and worked every day for four years to learn the business from the ground up.”

Wexelman said he was at first challenged with taking charge of employees who felt as though he had simply had the business handed to him by his father.

“There’s that initial sort of change, when all the employees hate you because they don’t feel like you’ve earned it,” he said. “But I was told to eat what I killed and that the sky was the limit. I received a $16,000 salary when I took over the company and the only additional money I made was business I brought in.

“And, if I wanted to implement new technology or hire more people, that came directly out of my paycheck.”

Darren Slosberg, CEO of Legacy Converting in Cranbury, said he willingly accepted the challenge to transition his father’s company, Nosaj — a distributor of non-woven and paper disposable wiping products founded in 1971 — into a larger, more lucrative manufacturing company in 2007.

“But my brother and I at first wanted nothing to do with our father’s company,” he said.

Slosberg wanted to open a gym, he added. His brother, Jason Slosberg, wanted to become a surgeon.

However, upon learning that one of their father’s partners was stealing from him, the brothers stepped in to help.

“There was an opportunity for both of us to come into the business and help my father navigate the path in which to get rid of this guy,” Slosberg said.

Though their family bonds never wavered, Slosberg said many heated battles followed.

“We had defined roles, but I thought I was running the company while my brother and my father were also thinking the same thing,” he said. “But we always said, look, I’ll do it the way I want, you do it the way you want and, whichever way works best, that’s what we ultimately will go with.

“My father did a very good job at giving my brother and I the autonomy to make a lot of mistakes.”

After six years working with Nosaj, the brothers transitioned into the manufacturing and private labeling of disposable wiping products when they created Legacy Converting.

“The business has grown 12-fold since,” Slosberg said. “Though my brother and I are still 50/50 partners in the company, I run the day-to-day while he takes a year and a half to live on a sailboat in Croatia, sailing the Mediterranean with his wife and kids.

“He wants to explore and do things outside of the company now, but I still love it. I don’t want to leave. But he, too, is helping me to grow, as I figure out how to incorporate such work-life balance.”

John Conforti Jr., president of Air Group in Hanover, said his family dynamics made business more complicated due to having a third sibling involved.

“When my parents would leave for Florida for a few months, we all tried to run the business without them and ultimately it always came down to pandering for the third vote,” he said.

Conforti Jr.’s grandfather and father started the heating, ventilation, air conditioning, electrical and plumbing company for New Jersey customers in 1965.

However, in 1999 — while Conforti Jr. was working in construction as an engineer — his father merged the company with another family business.

“I called my older brother to ask him why he wasn’t putting his foot in the door and he said, ‘Where have you been?’” he said. “So, I moved back to New Jersey so that my brother, my younger sister and I could battle together with how we were going to move forward.”

The siblings would buy out the shares from the other family in 2012, only to struggle with deciding who ultimately was going to run the business.

“We get along now as well as we ever have, but there were meetings with professional psychiatrists,” Conforti Jr. said. “Aside from our own juggling act behind the scenes, though, we also had to gain the confidence of the employees who we still needed to foster a culture with, like the one that had previously been instilled.”

It was nearly four years ago that the family began to trust in each other and their clearly delineated roles, Conforti Jr. said. Even his brother-in-law has joined the business.

“In the end, the bottom line is what it is and, if the company is profitable, everyone in the family is happy,” he said.

Catherine Choi, president of Bulbrite in Moonachie, said she also quickly realized how a trio of siblings working together in a family business was not harmonious.

“For a very short period of time, my sister, my brother and I all worked in the business — and that was not good,” Choi said. “Working with my sister was great, as well as with my brother, but for whatever reason, having all three of us in the same building at the same time did not work.”

Her younger sister, Choi said, has since happily left the business to pursue other life goals, while her younger brother remains as chief strategist to the leading manufacturer and supplier of innovative light source solutions.

“My father immigrated from Korea to New York City to start this business in 1971,” Choi added. “But, because we have a rule that we must work outside of the family business before we can join, I graduated from college, got my MBA and worked out in Hollywood for eight years.

“Then, when I and the business were turning 30, my dad asked me to coffee and said, ‘No pressure, but I’m turning 60 — if you’re interested in coming into the business, now would be the time. If not, I will plan for the next phase, which may include selling.’

“Then he went on to say how he had come to this country empty-handed, without speaking English and without a dollar in his pocket. So, I joined.”

Choi said that, while she worked her way through the company for eight years before becoming president, she, too, struggled with company culture once her father handed over the baton.

“The success of a second generation and generations beyond that has a lot to do with the first generation, I think, and their willingness to be open minded,” she said. “I think a lot of business owners say they are ready to pass the baton, but they hold on to the other end of it for a really long time. Sometimes, I can tell by the look in my father’s eyes that he might want it back, but he very clearly and truly gave over the business to me when he did.”

When an employee asked her how to address a problem, however, Choi said she was taken aback by Choi’s response.

“I said: ‘I don’t know. You’ve been here longer than me. What do you think?’ And she struggled with that, because my dad had made all of the decisions for 30 years,” Choi said. “But Andrew was not the boss anymore.”

Choi said she then set out to redefine Bulbrite’s culture.

“I hired a culture consultant to help us retain the core values that my father’s business was built on, such as integrity and building relationships with partners, but I also wanted to put my own spin on it, too, to encourage our employees to take ownership, to learn and to grow — just like I had.”

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EDA investment has been part of watershed transformation of Camden — and wasn’t that exact purpose of Economic Opportunity Act?

(Editor’s note: This op-ed originally appeared on NJ.com. It is reprinted here with permission.)

There’s another round of “dog pile on the rabbit” occurring in New Jersey. In this case, it’s politicians and the media bashing the how the Economic Development Authority has been doling out tax credits to businesses connected with South Jersey political leader George Norcross — the rabbit, it would seem, at the bottom of this particular pile of dogs.

I’ve sat and watched this with incredulity, because it appears that everyone so scandalized by the Economic Development Authority’s actions seems a bit clueless about the law itself, and what its intentions were.

A primer:

What was the intended purpose of the Economic Opportunity Act?

The bill was designed as a mechanism to help bring economic development to South Jersey, specifically creating set-asides for the eight southern counties, especially Camden. Why? As Matt Friedman (then with NJ.com, now with Politicoreported in 2013, state Senate President Steve Sweeney (D-West Deptford) noted that in the “last incentive bill … almost 97 cents out of every dollar went to Jersey City and Newark. If something isn’t done, South Jersey won’t see any of it.” At that point, $211 million had gone to Prudential for its headquarters in Newark. Honeywell received $40 million to move five miles from Morris Township to Morris Plains, and on and on.

But the geographical inequities in state funding weren’t limited to the Economic Development Authority: Millions of dollars of Casino Reinvestment Development Authority money had gone to North Jersey pet projects. CRDA money was taken from needy Atlantic City and used to help build a museum to Yogi Berra (who I love, but that’s beside the point) on my Montclair State University campus (which I also love, but is also beside the point) in one of the most affluent communities in the state (which is the point). The EOA was designed to address some of these historic inequities.

Who supported it?

In short, almost everyone. OK, not everyone. A total of seven legislators in both houses opposed the measure, with the lone Republican opponent in the Senate citing his support of the free market system rather than government subsidies as his motivation for opposition. The point is that sometimes, in politics, deals are made. Through logrolling, one legislator supports a bill that doesn’t matter to her in order to gain support of a measure that will benefit her constituents. It’s not pretty, but it’s how politics is done. And the overwhelming majority of the state Legislature supported the set-asides for South Jersey.

Why Camden?

When this legislation was drafted, Camden was the poorest city in the nation. Its unemployment rate was approaching 40 percent, nearly half of its families lived below the poverty line, and the average income was about $26,000 (compared with a statewide average of over $70,000 at the time). And, unlike most of the state, the damage to Camden’s economy hadn’t been caused by the Great Recession. Rather, Camden had witnessed decades of abandonment by industry and outmigration by residents.

So, what’s the deal with the George Norcross ‘connections’? 

He’s the most powerful unelected man in the state, and, by all accounts, the Camden native envisioned Camden’s transformation. Should it be surprising that companies that want to do business in Camden are “connected” to him, or, heaven forbid, he convinced companies to locate in Camden? Is there something illegal about that?

At the height of his power, could you imagine development in Newark’s North Ward in which the principals didn’t go kiss Steve Abudato Sr.’s ring? Or major development in Union City where Brian Stack wasn’t tangentially involved? If a company is looking to secure tax incentives, wouldn’t it be reasonable that they contract with a law firm that specializes in securing these incentives?

In watching the recriminations of companies connected to Norcross, I couldn’t help but ask, “So what?” Should business leaders with “connections” to Norcross be precluded from receiving the tax incentives? Is there something illegal about having a connection to the man? Are these people who are so incensed new to politics? To New Jersey? Do they not understand how spheres of influence work?

Have you been to Camden lately?

Since the EDA’s investment, the poverty rate is down 5 percent, the unemployment rate is down 8 percent, the high school graduation rate is up 20 percent, and the crime rate is down nearly 60 percent. There have been improvements in public safety and green spaces to encourage Subaru, Holtec International and the Philadelphia 76ers’ employees to stay in town; the Eds & Meds anchor institutions — Rutgers University and Cooper University Hospital — have expanded their downtown footprints; market-rate housing is being built for millennials who are increasingly seeing Camden as desirable. A hotel is opening.

I am not claiming that all of these indicators are a direct result of the EDA investment exclusively, but, clearly, the investment has been part of a watershed, systemic transformation of the city of Camden, what the Wall Street Journal characterized as “a development boom.” And isn’t that exactly what the purpose of the Economic Opportunity Act was?

Brigid Callahan Harrison is professor of political science and law at Montclair State University, where she teaches courses in American government. A frequent commentator on state and national politics, she is the author of five books on American politics. Like her on Facebook at Brigid Callahan Harrison. Follow her on Twitter @BriCalHar.

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This year’s budget battle starts early, as Sweeney blasts Murphy

Let New Jersey’s tax incentive programs run out with a replacement?

State Senate President Steve Sweeney thinks that would be a horrible idea. But he’s not afraid to call Gov. Phil Murphy’s bluff on the issue.

“He’s the governor — and, if he wants to see the economy really slow under his watch, that’s up to him,” Sweeney (D-West Deptford) said.

Sweeney was speaking after making remarks at a forum sponsored by Garden State Initiative on Thursday night in New Brunswick.

Most of his thoughts were the same as they’ve been for months — he pledged to not support the millionaire’s tax and to fight to make state employees pay a greater share of their health care benefits.

A new wrinkle, however, came with the incentive programs, currently under attack.

Sweeney, looking for comprehensive reform on so many issues, put incentive reform in Murphy’s lap.

“We put a committee together to look at what kind of incentive program we could put in place,” he said. “But, if he wants to be the state with no incentive programs with what’s going on and businesses start moving out of here, he can explain it. He’s the governor.”

Sweeney repeated his calls to lower the cost of government in the state.

He does not want to do so, however, with total giveaways to big business. In fact, he brought up how he not only supported raising the Corporate Business Tax, he wanted to do so more than the state did last budget season.

“Last year, we raised the CBT,” he said. “(Murphy is) the one that fought us on raising the CBT and actually had us reduce the amount of CBT. He fought me over taxing the C-corps, who were the real benefactors of the Trump tax cut.

“You know, companies went from 35% (taxes) down to 21%. They were the people that got more money for doing nothing. So, why am I going after people that are making so much money and I’m taking it away from them rather than focus on the corporations?”

Sweeney said he knows he was right for one simple reason: He didn’t hear a lot of objections.

“You didn’t hear a whole lot of hollering, because how do you holler when you’ve got so much more money for doing nothing?” he said. “That Corporate Business Tax is going to come in almost double what we projected. And if we hadn’t done the Corporate Business Tax and we had just done the millionaire’s tax, we would have a deficit right now.”

Sweeney’s disagreements with Murphy did not stop there.

Sweeney said he plans to counter the state’s EDA Task Force hearings with some of his own.

“We’re going to form a committee on Monday to examine the (Economic Development Authority) tax incentives and allow everyone to come to speak, unlike what Gov. Murphy’s panel is doing,” he said. “Right now, if you want to defend yourself, you only can submit in writing — you’re not given the opportunity to submit publicly like they’re doing.

“I’m a believer — like when we do budget hearings and we do hearings in Trenton — both sides get to present in front of you. So, we’re going to allow everyone.”

Sweeney said he’s open to modifications.

“We’re going to figure out what’s wrong with the EDA, what’s right with the EDA and how do we fix the EDA,” he said. “I agree these payments are too rich, but it’s because our state isn’t such a bad place with tax policy.

“People don’t want to come here unless you’re putting big tax incentives in front of them.”

If you thought you would have to wait until the end of June to see the real budget battles begin, think again.

The fight is on now. Sweeney said he’s not backing down.

He said he has no choice.

“This state is in serious financial trouble,” he said. “And if we don’t start fixing things now, it’s going to be too late.”

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Most CPAs are telling clients to relocate out of N.J. — here’s how we can change that

Certified public accountants often hear objections about New Jersey’s high taxes from clients who are looking to leave New Jersey — and this past tax season was no exception, according to members of the New Jersey Society of Certified Public Accountants. And a Rutgers-Eagleton poll done in collaboration with the New Jersey Business & Industry Association serves to underscore why.

The overwhelming majority of New Jersey residents polled — 82 percent — said they are overburdened by taxes and are not getting their money’s worth in services. Similarly, 81 percent of respondents said they were dissatisfied with the way state leaders are addressing New Jersey’s affordability challenges.

Against this backdrop of taxpayer angst about some of the highest personal and business taxes in the nation, Gov. Phil Murphy’s Fiscal Year 2020 budget proposes more tax increases on top of the $1.6 billion in tax hikes enacted last year. He is proposing a top 10.75% marginal tax rate affecting income over $1 million. If enacted, more New Jersey residents and small businesses that flow income through their personal returns would be taxed at rates well above New York state’s 8.82% and Pennsylvania’s flat 3.07% rate.

It is no wonder a recent NJCPA member survey found that 75% of CPAs have advised some clients to relocate their homes or businesses out of New Jersey in order reduce their tax burden.

New Jersey must break its destructive tax-and-spend habit by addressing the structural imbalances in its budget in order to put the state on sounder financial footing.

A recent NJBIA analysis of 10 years’ worth of audited state revenues, expenses and debt found state debt increased 382% from 2007 to 2017, and state spending increases outpaced revenue, 45% to 23%. New Jersey’s combined net pension liability and post-employment benefit obligation totals $151.6 billion, which is four times the size of the annual state budget.

Without changes to the pension and benefit structure, costs will rise from $6.6 billion a year to about $11 billion annually in 2023, according to state Treasury projections and other health benefit reports. That means 27% of the state budget would go to support pensions and benefits, leaving less money for essential state services and making it more likely the state will resort to additional tax increases to make up the difference.

The NJCPA strongly endorsed the pension and benefit reforms spelled out by the New Jersey Economic and Fiscal Policy Workgroup in its Path to Progress report last year. These include shifting from the current defined benefit pension system to a more sustainable hybrid system that combines the best elements of both a defined benefit and defined contribution system.

In May, the state treasurer will brief legislative budget committees on the administration’s updated revenue projections for the current fiscal year that ends June 30. Murphy had been counting on 7.7% revenue growth to balance the FY 2019 budget; however, through March, the total growth rate of all major revenue sources has been only 4.74%.

In short, New Jersey remains on a counterproductive path of spending more money than it has and relying on tax increases to make up the difference. The changes to the income tax bracket in the proposed FY 2020 budget will further undermine the state’s ability to grow and attract businesses.

NJCPA supports policies that produce a fair tax system and economic growth so that companies and residents will stay in New Jersey and thrive. NJCPA stands ready to serve as a resource to the governor, his administration and the Legislature to develop policies that foster economic growth.

Ralph Albert Thomas is CEO and executive director of the New Jersey Society of Certified Public Accountants. With more than 14,500 members, NJCPA represents the interests of the accounting profession and advances the financial well-being of the people of New Jersey. The NJCPA plays a leadership role in supporting the profession by providing members with educational resources, access to shared knowledge and a continuing effort to create and expand professional opportunities.

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Ex-employee testifies financial firm used false info to obtain incentives

World Business Lenders recently made a splash in the New Jersey business sphere by aggressively pursuing legislation to govern its operations and creating a partnership with the Statewide Hispanic Chamber of Commerce of New Jersey to help minority small businesses overcome obstacles of access to capital.

But, on Thursday in Newark, WBL made headlines for a different reason: A former employee said the company used false information to obtain and then sell a Grow New Jersey tax credit — which rewards companies for creating and retaining jobs in New Jersey with tax credits ranging from $500 to $5,000 per job.

In her testimony at the second EDA Task Force hearing, Kerrie-Ann Murray said her company made a sudden move from New York City to Jersey City in 2016, and hired and fired about 80 people just to meet the requirements of the Grow NJ tax credit it was awarded for its move.

WBL, in a statement provided to ROI-NJ, vehemently denied Murray’s allegations, saying they came from a disgruntled former employee.

“Before today, World Business Lenders conveyed to the Task Force on the Economic Development Authority‘s tax incentives that there were numerous and serious reasons to believe Kerrie-Ann Murray would not testify truthfully,” the statement said.

“We are bitterly disappointed that the task force has, nevertheless, allowed Kerrie-Ann Murray to provide her biased and unreliable testimony without also allowing World Business Lenders the opportunity to have a witness testify. Kerrie-Ann Murray is a disgruntled former employee of WBL.”

Murray’s allegations are noteworthy.

Doug Naidus, center, is CEO of World Business Lenders.

When it was located in New York, WBL had 80 employees, and needed to hire 100 to 125 more in a two-month timespan, between May and July 2016, after the staff knew it was moving to Jersey City.

Murray said staff were instructed to create a relationship with the New Jersey Department of Labor & Workforce Development to fill the positions, and in that process also benefitted from DOL incentive programs to encourage hiring of individuals on welfare, who live in specific zones, or are veterans, and the company was also reimbursed for half of the hourly wage per employee it hired from a certain pool of unemployed individuals.

WBL then hired the more than 100 people, paid them $10 per hour and created a new department to cold-call small businesses to see if they were interested in and qualified for a loan.

“It wasn’t a role or positions that the company previously used,” Murray said.

“The company does subprime lending, if I can say that, so you would have to be very experienced in sales, experienced in selling, experienced in getting borrowers to actually borrow money at the high percentage rate.”

Murray also told the task force members that the company kept a monthly spread sheet, entitled Grow New Jersey, which tracked the number of employees. It included information such as employee names, positions, hours worked, annual salaries and earned pay per month.

If an employee didn’t meet the full-time hours, managers were asked for reasons. If no reason was provided, Murray said, the company would backfill the hours as paid time off, or PTO.

That went on for about six months, and, in January 2017, the entire department was eliminated.

When employees who were left asked why, they were told it was because the tax credit had been sold.

In a recent interview with ROI-NJ, WBL CEO Doug Naidus said there is a cold-calling department whose operations matched those described by Murray.

The statement also addressed the tax credit being sold, and the rehiring of the cold-calling department.

“In accordance with the Economic Opportunity Act, WBL voluntarily sold (and was not forced to sell) its tax credit for 2016,” according to the statement.

“Under the Act, this is a permissible practice employed by many companies across the state. The reasons for WBL’s decrease in payroll in 2017 is one that would be familiar to anyone who follows industry trends. In the second half of 2016, the fintech credit bubble began to deflate, which led to downsizing across the industry. WBL was forced to reduce its payroll count the following year, even as many of our competitors went out of business altogether. Since then, our industry has recovered and we have begun to hire again.”

But Murray also told the task force Thursday that other falsified information was used to boost the jobs numbers, such as keeping an employee on the payroll even though they had already been terminated while in New York, and the severance pay was kept on the books, just to help maintain the needed number of employees for the grant.

From July to December 2016, Murray said, staff were instructed to, despite constant turnover, maintain a minimum of 225 employees.

The statement from WBL does not address this claim. Instead, it claims Murray was responsible for falsifying information.

“During 2016, Ms. Murray reported incorrect employee headcount information to WBL’s chief financial officer, which was intended to be sent to the Economic Development Authority,” the statement said.

“Ms. Murray proceeded to argue her incorrect data was, in fact, correct despite being proven wrong by management employees. In the end, the numbers submitted to EDA for 2016 exactly match the payroll numbers from ADP, the company’s payroll provider. This well-documented data is clear, transparent and unimpeachable.”

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Task force could be preparing case against ‘special legislation,’ experts say

James Walden, a special counsel for the EDA Task Force, questioned several witnesses about special legislation in referencing changes made to a draft version of the 2013 Economic Opportunity Act at a hearing Thursday in Newark.

The hearing, the second held by the task force that is investigating the state’s Economic Development Authority over potential violations, focused heavily on the $1.1 billion in incentives that went to companies that relocated to Camden.

During the hearing, there were suggestions of falsified job numbers, phantom alternate sites and questions about the access a private lawyer had to the draft bill.

But whether Camden was able to take advantage of the legislation — or whether the legislation was written solely to benefit Camden — was one line of questioning Walden pursued.

Legal experts, speaking on the condition of anonymity, suggested to ROI-NJ that Walden could use the questioning as a basis for a future lawsuit.

Walden asked several questions about how or why lines added to the bill by Kevin Sheehan — a real estate attorney at Parker McCay, a firm run by Philip Norcross, the brother of South Jersey power broker George Norcross — were put in.

There were lines about the U.S. headquarters of an auto company, which Walden suggested pointed to Subaru, and specific requirements for a grocery store, which Walden suggested would match the project specifics of a Sheehan client.

Special legislation has to explicitly name or identify a company or group that it is benefiting and is not constitutional.

There are ways to avoid directly naming places or people.

For example, without naming Camden, a piece of legislation could describe it by its population size, demographics or location. Similarly, a type of business can be described but not named.

Walden raised the issue of special legislation to Tim Lizura, the former president and chief operating officer of the EDA — even though the EDA does not participate in the crafting of legislation.

Walden: Do you know whether or not this provision was added for a specific company?
Lizura: I do not.
Walden: Do you know what special purpose legislation is? Explain it for us, please.
Lizura: It’s a colloquial term that lawyers would use that would describe a certain kind of legislation.
Walden: Is it the kind of legislation that benefits a single purpose or company?
Lizura: That is what I … understand.

Lizura and the EDA, it should be noted, have no power to interpret any legislation that is given to them.

Avni Patel, a lawyer at Walden’s firm, Walden Macht & Haran, followed a similar line of questioning to Brandon McKoy, who recently was elevated to president of New Jersey Policy Perspective:

Patel: Historically, and generally, did the NJPP get called upon … for bill drafting?
McKoy: Yes, we provided comments and helped legislators.
Patel: From a policy perspective … what is your reaction of a private law firm having access to the draft language of a bill and the impact it would have?
McKoy: I don’t think it is uncommon for legislators to ask for outside expertise in crafting a bill. So, seeking that assistance and input is perfectly normal and proper. For an individual or entity to directly edit and write a bill, particularly if that individual has opportunity to benefit financially, I would consider that improper.

NJPP also did not participate in the drafting of the Economic Opportunity Act.

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