opinion_feature

Why aren’t more doctors being trained in N.J.? Start with 1996 rule congressional leaders are trying to change

There was the incredible number: The country is expected to have a shortage of 120,000 doctors by the year 2030.

And the incredible local number: New Jersey is expected to be short 2,500 doctors next year.

And then there was the even-harder-to-believe number: Holy Name Medical Center is only allowed to train six medical residents a year, thanks to a regulation based on 1996 statistics.

In that year, Holy Name had just six residents — thus, that is its limit today.

U.S. Rep. Josh Gottheimer (D-N.J.) is looking to change that, proposing what is called the Graduate Medical Education Bill that would allow hospitals to get reimbursement to train as many doctors as they are able.

It’s a way, he said, of tackling the coming physician shortage head-on — improving health care for state residents and the state economy at the same time.

“Our legislation corrects the arbitrary cap, which will help us recruit and retain more talented physicians to help our New Jersey medical community grow,” he said. “It will make graduate medical school slots available to hospitals that have been locked out for decades now and allow hospitals to invest in teaching programs to attract medical students to Jersey and keep our health care workforce competitive.”

Gottheimer, flanked by U.S. Sen. Bob Menendez (D-N.J.) and U.S. Rep. Bill Pascrell (D-N.J.) at an event at Holy Name in Teaneck, is confident the GME bill can get through. Menendez and Pascrell said they will use their status in their legislative houses to see that it does.

“It’s just common sense to have more hospitals to have our new doctors train here in New Jersey,” Gottheimer said.

Holy Name CEO Mike Maron agrees. But, he does so knowing that nothing about the current regulations make sense.

Maron, the well-respected health care thought leader, has been stymied by this ruling for years. He points to nearby hospitals to show just how arbitrary the cap is. Simply put, every hospital is capped at the number of residents it had in 1996 — unless the hospital in question didn’t have a program. Those medical centers can add residents at will.

“Palisades General had none in 1996, now they have over 100 residents — and they are getting fully reimbursed, because the rule says if you had zero in ’96, you’re free to go,” he told ROI-NJ. “(Valley Hospital CEO) Audrey Meyers could do this unencumbered tomorrow. She wouldn’t have to do anything special. She could just start it and get paid for it. I can’t.”

All because of something that happened more than two decades ago.

“What happened in 1996 was a (Centers for Medicare and Medicaid Services) regulation,” Maron said. “And, in order to change the regulation, you need new legislation. So, 1996, believe it or not, is the base year for how Medicare reimburses hospitals today across all services.

“The (system) Medicare uses to pay us is based on 1996 practice. Graduate medical education is a component of that system. And, so, what they did is, they just froze it.”

Despite this, most hospitals are not impacted today. Many did not have programs in 1996. Others have since joined greater health care organizations.

“There aren’t many of us left,” Maron said, refereeing to standalone hospitals.

This confusion, he said, caused a previous version of this bill to be presented poorly.

“The (Congressional Budget Office) marked up the bill all wrong,” he said. “I remember the headline: It said this bill would cost more than building a wall. How are you going to get that passed?”

Menendez said he is hopeful the new bill can be attached to upcoming legislation on Medicare.

Maron said it can’t happen soon enough.

He said no one in the state would object, saying more than 300 graduates last year did not have residency programs available. Holy Name, he said, would gladly take them.

And Holy Name already has a bigger partner ready to help provide students and assistance: Mount Sinai Hospital in New York City.

Mount Sinai Chief Medical Officer Ben Kornitzer said the hospital is ready to partner.

“We understand the resources and investment that are needed to be made for this to be a successful program,” he said. “We are 100% committed to working with the excellent leadership here and identifying what those resources are, what those strategies are, so we can be partners and help support further growth of this residency program.”

Maron said new rules — and a new partnership with Mount Sinai — could help change another number: The small percentage of medical graduates who actually want to become the doctors that are needed most: general practitioners.

“Many of the major academic centers want to train specialists because the general perception out there is that there’s more money to be made being a specialist and better work hours,” he said. “What we’re trying to do is dispel that myth.

“We’re going to show doctors that you can have a balanced lifestyle and have a very rewarding career as a primary care physician. We think we can move that needle significantly by exposing them to how we do things here.”

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Craft brewers: Developing right infrastructure to grow

Nearly a decade since craft beer first hit mainstream popularity, the industry continues to grow at steady rates. The national craft beer market now tops $26 billion and key players continue to seek new ways to scale their business to meet this increasing consumer demand.

Craft beer popularity has grown in part due to its availability in a wide range of venues — from pop-up beer gardens to fine dining restaurants. Locally, New Jersey is home to over 100 breweries, and according to a study by the research company C + R, New Jersey has seen a 43% growth in the craft beer industry since 2015.

Many breweries across the state are expanding to meet the demand. In 2012, the state allowed breweries to starting selling beer on-site, but some restaurant and bars claimed it hurt their businesses. Recently, New Jersey’s Division of Alcohol Beverage Control announced new regulations for breweries with a craft brewery license; no breweries can sell food, they are required to give guests a tour, and breweries can only host 52 private events per year and 25 public advertised events.

For local brewers seeking to improve production and distribution, and use the new legislation to their advantage, here are some best practices on expanding your craft beer network.

Local, regional and national brewers

Craft beer companies typically fit into three categories based on size: the small, local brewpub; the regional brewer; and the national production brewery. Each has unique needs when it comes to production and distribution.

The local brewpub typically sells most of its beer on premise or at the brewer’s restaurant. This reduces the need for distribution and allows the brewpub to recognize profits quickly. A regional brewer, on the other hand, typically requires more equipment, such as tanks, as well as a larger amount of real estate to produce and store inventory. A regional brewer, on the other hand, might be selling out of a tasting room from one or multiple breweries, but most of their revenue and growth comes through selling its brews into other retail accounts, both on- and off-premise. Between 2016 and 2017, regional craft breweries grew by 5%, to reach 70.6% of overall craft beer industry production volume. At a much larger scale, a national production brewery may have several operations and requires a more sophisticated and robust distribution system.

To grow or not to grow

In today’s market, expansion is a matter of choice rather than survival. Each category of brewery has its advantages and drawbacks, and each has the ability to be profitable. It’s important for investors and owners of breweries to align on objectives when it comes to growth targets and appetite for expansion. Once brewers and investors agree on business objectives, they can set priorities for investment and determine the amount of capital they’ll need to build their infrastructure. If a brewer aims to slowly expand a brewpub, for example, he may not need to purchase a new warehouse to store beer right away; instead, he can gradually scale up distribution. As part of this evaluation process, brewers will also want to consider operational needs to maintain equipment, including maintenance and upgrades.

Assessing where (and how) to expand

Brewers also need to evaluate where to expand. Craft-centric regions, including Philadelphia, San Diego, Colorado and the Pacific Northwest, as well as the newer craft hubs of Austin, Texas, Atlanta, Chicago and Asheville, North Carolina, have turned into highly sought-after destinations for craft beer tourism. This equates to a high demand for craft beer in these areas, but it doesn’t come without fierce competition from brewers seeking to reach the same customer base.

A key partnership for craft brewers are beer wholesalers, who support, sell and distribute their product. As the craft beer industry has continued to grow over the last decade, wholesalers have adjusted their business models from supporting a few key suppliers (such as Anheuser-Busch InBev or MillerCoors) to now having more than 30 breweries to support, sell and distribute. Wholesalers have also increased the training and size of staff, often deploying craft-only sales teams. Today, brewers have the opportunity to work with large distributors as well as craft-only distributors. Craft beer’s continued growth will be in part due to the commitment and support of these innovative beer wholesalers.

What works best for your craft beer?

Ultimately, the value for a particular brewer is case dependent. Key factors to consider include quantitative elements (growth rate and profitability), intangible factors (brand awareness), competition (assessing if similar products are in the market) and, finally, succession planning based on the end goal (for example, an initial public offering or selling to a larger brewer).

Brewers must assess if the distribution strategies implemented would support their growth and closely align their financial strategies with their long-term goals. The craft beer industry has already climbed to nearly one-quarter of the U.S. beer market, and continues to become more competitive for the next generation of entrepreneurial brewers. Though craft brewers face fierce competition and a unique set of industry challenges, their ability to secure capital and the future of the craft brewing industry has never been better.

Cathleen Callahan is a senior vice president and market executive for Bank of America.

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N.J.’s new medical marijuana applications enhance market for patients, providers

File photo

John D. Fanburg of Brach Eichler.

The most recent request for proposals by the New Jersey Department of Health‘s Division of Medicinal Marijuana portends not only an enhanced marketplace for both patients and providers, it exhibits the sophistication of Gov. Phil Murphy’s administration fulfilling its mission of creating a mature marijuana market in New Jersey.

The 25 new licenses are also the best opportunity yet for New Jersey entrepreneurs to gain an equal footing with their out-of-state peers in creating successful business plans under the program. The Murphy administration also left itself in a position to control the quality of participants in the program by offering only 25 new licenses, as opposed to the previously discussed 108. If there is a great depth of demand from patients and a population of qualified prospective providers, the administration can always continue to expand the market.

It’s good for business

The last round, which attracted nearly 150 applications for six licenses, definitively eliminated companies without substantial prior experience, which left New Jersey-based applicants out of the running. Now that the largest companies already received licenses, the more than 144 unsuccessful applications from the last round have a head start on this cycle of licensure.

The existing 12 licensed entities required vertically integrated businesses, which disadvantaged local or smaller companies that frequently formed collaborative entities out of necessity to fulfill all the application requirements in previous rounds. This new application process offers 21 opportunities for entrepreneurs to apply for a specialized license, allowing the previous 144 unsuccessful applicants, and many more who were discouraged by the expansiveness of the previous cycle, to apply based on their expertise.

It’s good for consumers

The state will continue to select locations based on serving population centers. With 31 providers (19 new providers in addition to the current 12) throughout the state, anyone with a prescription should be within a half-hour drive, and many people within 10 minutes, increasing access to the estimated 300,000 New Jersey residents who need medical marijuana for chronic issues.

Dispensaries, like coffee shops, have innovative retail concepts and product differentiation. Under the expansion, the marketplace will bloom beyond the cigarette or pipe, which are often less popular options to edibles, vape, edible oils and THC pill form.

More suppliers will lead to more specific strains and better treatment options, as well as, presumably, more advantageous pricing.

How many applications for +/- 40 municipalities?

We expect that the New Jersey Department of Health’s request for applications for the next 25 licenses, due Aug. 22, will generate hundreds of applications.

The complexity is that each of those applicants will need a commitment from a municipality to welcome medical marijuana enterprises, and that is a shrinking rather than an expanding number. Many towns declined to participate in the last round — and opposition to any cannabis at all was solidified as a result of the politicking of the Adult Use (Recreational) Cannabis bills during this spring.

As a result of the six applicants chosen in the last round, the field is that much narrower. Look for only 25 or so municipalities to put out the welcome mat, and, while some will provide blanket endorsements, many of these will have a filtering process before endorsing specific applicants be cited in a dozen or more applications.

John D. Fanburg is managing member; chair, healthcare law; and co-chair, cannabis law, for Brach Eichler.

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Life after liquidity: 3 things to know before selling your business

As we draw closer to the end of a business cycle, mergers & acquisitions activity in New Jersey is anything but quiet. The business lifecycle continues to accelerate, creating both pressure and disruption for business owners. Innovation across the state’s core industries has fueled further competition across the spectrum. At a time when organic growth has been slower over the past few years, companies have been turning to more acquisitive opportunities in order to continue to hit their growth trajectories and stave off new competitive entrants. This point is further illustrated in JPMorgan Chase’s 2019 Business Leaders Outlook survey, where a number of business owners have identified M&A as a catalyst for future growth.

JPMorgan Chase
Lester Pataki of JPMorgan Chase Commercial Banking.

What generates concern for business owners is often the uncertainty around the M&A or sale process and what the outcomes may be. The inevitable worries might include “Is now the right time? Will I get the maximum value for my business? What happens to me and my family after the ink is dry?”

Among the top ways to prepare for such an event, and to ease anxieties, are educating yourself on three key considerations as you prepare for a sale or restructuring.

Don’t underestimate the emotional side of the transaction

Business owners often focus on how to maximize transaction value and do not take the necessary steps to secure the best personal outcome from the sale of a business. Deciding to sell a business is a deeply personal decision. The right sale structure is often motivated by factors other than financial metrics, and can depend greatly on how the owner envisions their life post-transaction.

For these reasons, it is important to establish in advance the primary purpose, or intent, for your money — both the financial and structural outcome — before taking any other steps. Identifying a primary intent moves the focus on a company’s sale to the broader purpose of the financial and structural outcome, which can align overall wealth strategy and decision making with the individual’s or family’s goals.

Key questions to ask yourself:

  • What’s the level of involvement you envision for yourself post-transaction? What level of control, or lack of, are you comfortable with?
  • Do you have family members whose livelihoods are dependent on the business?

Know your options

Each business owner’s exit strategy may look different depending on the role they want to play post-transaction and how they want to structure their deal. Business owners need to marry their business and personal objectives to arrive at the best option. While selling is a common path for business owners seeking liquidity, it’s just one option. There are lots of ways to extract liquidity that are often overlooked.

Aside from a full sale of your business — a clean break — you might continue with an equity stake. With a minority controlled equity stake, you may contribute still to the company’s strategic operations if your goal is to still maintain some control. You may also consider a structured sale or employee stock ownership plan.

Key questions to ask yourself:

  • What are the strengths and weaknesses of the business?
  • Am I aware of what the industry multiples are/market value of my industry?

Ask the tough questions during planning — and do it early

Planning helps avoid risk to your business and your personal financial plans, and also keeps the peace among business partners, stakeholders and family. If an exit strategy is on the horizon, understanding economic conditions and trends is key. For example, technology is both an enabler and disruptor of business models and, in New Jersey, the bio and medical technology industries are growing apace. Having an informed view of the outlook for your business’ sector from a regional and industry point of view will be additive to understand the price value of the business.

Timing is also a critical consideration. Decision makers should be of sound mind, and not “under the gun” with time constraints or financial distress. Ideally, transaction planning begins as much as three to five years in advance of execution. When there is a compressed time period to finish the deal, the owner may not get the most out of their hard-earned equity interest, and may regret a strategic decision they could have handled differently.

Depending on the leadership structure of the business, you may be exposed to some unique risks. For example, if the No. 1 decision maker can no longer fill that role, what happens to the company’s operations? If the business is family-owned or operated, is there a logical succession plan in place? No matter what age an owner or business might be, this step is critically important.

Key questions to ask yourself:

  • How will the talent, financial and operational executions function after the deal?
  • Is there a succession plan in place for critical roles to support the business?
  • Have you established procedures for conflict resolution and exits from the business to avoid disruption?
  • Have you established a contingency plan in case of your incapacity or death?

J.P. Morgan Private Bank in New Jersey is run by Market Manager Alma DeMetropolis, who leads a team of local professionals that provide wealth management advice, strategies and services to successful individuals, family offices, foundations and endowments throughout the region. Lester Pataki is a managing director and middle market banking region manager for JPMorgan Chase Commercial Banking in New Jersey. He leads a team of commercial bankers who help local companies succeed at every stage of growth through tailored solutions, including credit and financing, treasury and payments and international banking.

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Why N.J. needs the U.S.-Mexico-Canada agreement

“I know where you were born!”

I find myself yelling that each time I see an Audi Q5 on the Garden State Parkway these days. Because I know the answer.

That birthplace is Puebla, Mexico. Better known for the May 5, 1862, defeat of the French Army that started the Cinco de Mayo tradition, Puebla is also home to a $1.3 billion manufacturing facility that employs 5,000 people and produces more than 500 Audi Q5s every day.

It was on the floor of this facility earlier this spring, as part of a recent bipartisan delegation hosted by the U.S.-Mexico Foundation, that I saw firsthand how interconnected the economies of the United States and Mexico are, and how much New Jersey stands to benefit from the pending U.S.-Mexico-Canada Agreement, or USMCA.

The Audis taking shape before our eyes, and the Volkswagens produced just down the road, are shipped all over the world, many of them entering the United States at ports in Newark, Bayonne and Elizabeth. These imports currently come to New Jersey at a lower price, thus expanding consumer choices. The same is true for the other Mexican products Americans purchase — from household appliances and medical equipment to tequila, avocados and baked goods.

This trade relationship is, of course, very good for Mexicans. The thousands employed by Audi, Volkswagen, and countless other international companies have helped stabilize the country’s economy and contributed to a sizeable middle class. Both immigration hawks and doves can find something to like in a more sustainable Mexican economy, which invariably relieves pressure at the U.S.-Mexico border.

At the same time, New Jersey exports nearly $2 billion worth of products to Mexico, plus another $7 billion worth of products to Canada. The two countries are New Jersey’s largest trading partners, accounting for nearly a third of our state’s total exports. Mexico, Canada and another 200 countries purchase a range of New Jersey products — from the chemicals developed in laboratories in Princeton and Bridgewater to the aerospace technology manufactured in Edison and Parsippany. Exports alone account for 6.8% of our state’s GDP.

Trade is wired throughout New Jersey’s economy — we are the 13th-biggest exporter by total dollar value and in the Top 10 for fastest-growing export states — which makes us a critical stakeholder in the current trade debate.

Manipulation of the U.S.-Mexico trade relationship through tariffs starting at 5 percent and possibly growing to 25 percent will, of course, increase the price New Jerseyans pay for an Audi in Paramus or an avocado in Asbury Park — to say nothing of the inevitable retaliation on the products New Jersey exports to Mexico.

The extent to which this government intervention would influence consumer behavior is hard to measure, in part because the size, scope and time horizon for tariffs have been uncertain as of late.

New Jersey’s elected representatives will criticize these tariffs, but they should go a step further and affirmatively support a solution. The USMCA, which the leaders of the United States, Mexico and Canada signed in November 2018, needs a vote in Congress.

Swift passage of this agreement would not only safeguard the 1 million New Jersey jobs directly or indirectly supported by trade, but also bring key elements of NAFTA into the 21st century, particularly around the digital economy and worker and environmental protections.

The USMCA ensures that more parts of automobiles originate in the United States, Mexico or Canada; it opens Canadian dairy markets to the United States; and it strengthens intellectual property and copyright protections for technologies that didn’t exist at the time of NAFTA.

The USMCA’s greatest strength is, however, what it preserves about NAFTA: abundant, affordable choices for American consumers and the ability for places like New Jersey to confidently pursue foreign markets for our products and services.

Opening new markets to trade has worked before. Since NAFTA became law in 1994, New Jersey’s exports to Mexico alone increased by more than 400 percent. Now is the time to reaffirm one of the world’s largest and most successful trading relationships.

The USMCA will provide a critical and very significant boost to the economies in the United States, Mexico, and Canada — and it will remind us all that trade, with its natural ebbs and flows, is an inevitable and powerful force for good.

Michael Inganamort is a partner at ASG Advisors and Republican councilman in Chester Township.

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Sweeney on negotiating with Murphy: He hasn’t learned to respect Legislature yet

The question was a good one. And it spoke to the type of negotiations that take place this time of year — or, rather, in the final days of June.

Are you looking to trade an agreement for provisions in your Path to Progress proposal in exchange for support of the governor’s new tax incentive programs?

State Senate President Steve Sweeney didn’t hesitate with his answer.

And, he said, he couldn’t even answer, “Yes” or “No.”

The reason: Sweeney said there are no negotiations between the Legislature and the Executive Branch. And there haven’t really been since Gov. Phil Murphy took office.

“Here’s the problem,” Sweeney (D-West Deptford) said. “Phil Murphy worked at Goldman Sachs and I think he still thinks he’s there.

“The Legislature is an equal partner. I can’t get anything done without them. And he can’t get anything done without me or (Assembly Speaker Craig Coughlin). So, rather than go about this the way he’s going about it — (running commercials) instead of negotiating — we’re going to go to war.

“I’m not changing. I’m really not.”

Anjalee Khemlani/ROI-NJ
Senate President Steve Sweeney met with the ROI-NJ Editorial Board on Wednesday.

Sweeney, in an hourlong meeting with the ROI-NJ Editorial Board on Wednesday, touched on a variety of subjects. But much of the time was spent not on his Path to Progress — his plan to help reform the state’s financial issues — but on the stalemate the state has come.

One that not only is threatening to create a state shutdown (no real surprise there), but also create an adversarial relationship between the state’s leaders.

It’s getting personal.

“He hasn’t learned to respect the Legislature yet,” Sweeney said.

Worse, he said, he’s encouraging the unions to take the same approach.

“I’m trying to get them to negotiate, and they’re not going to, because the governor’s basically taken a position of, ‘You don’t have to,’ which is really reckless,” he said.

“(For the) leader of our state to just say, ‘Don’t worry, regardless of how many reports that come back from Moody’s and Standard & Poor’s that say we’re the second-worst in the country, “We have a pension problem and what are you doing about it?” just ignore it. Don’t worry about it.’

“It’s just not the way to do things.

“I’m telling you, I’m open to negotiating the solution, but it can’t be ‘Give me everything and you get nothing in return.’ That’s not how it works.”

Sweeney said that, in some cases, the unions are leading the governor, pointing to his relationship with the New Jersey Education Association — the teachers union that tried to oust Sweeney from his Senate seat in the last election.

“I think it’s a problem when you’re totally, wholeheartedly owned by the largest union in the state, and that every decision is made for them before it’s made and looked at for the taxpayers,” he said. “Yeah, I think that’s the problem.”

Much of the discussion was on the inability to get state union workers to reduce their health care coverage one notch to a “gold”-level plan — an agreement Sweeney said not only will save money for the state, but ultimately will benefit the union workers.

In fact, the level is better than most people in the state have.

Anjalee Khemlani/ROI-NJ
Steve Sweeney got booed off stage at a recent forum at Rutgers University.

The unions obviously disagree.

Sweeney said he’s eager to discuss the issue, but gets blocked at every turn — the latest being an event at Rutgers University where he was shouted down and no discussion took place.

“The sad thing was, we wanted to have conversations with people,” he said. “They were doing that to scare people away from coming. We were there to have conversations. We really worked to try to have conversations and listen.

“A gold plan is not substandard, high-deductible, cheap health care,” he said. “But there was no one talking honestly to their members.

“It’s really a lack of leadership on their side.”

“If you’re going to take a leadership role, take a leadership role. To do the yelling and screaming, that was done years ago with labor, and you know why labor got away from it? It doesn’t work. You get with people; you talk to people.”

Sweeney said calls to have a debate with Hetty Rosenstein, the powerful head of the Communications Workers of America union, were turned down by her side.

“I’ll debate her anywhere, anytime,” he said.

Sweeney, as everyone knows, is a proud union member. He’s stunned by what he hears.

“They’re calling me anti-labor,” he said.

“I did the minimum wage every time I did. I did (paid) family leave both times.

“How can I be anti-labor?”

He said he’s a labor realist. In fact, he talked about voting to cut his own ironworkers pension.

“You think I wanted to do that?” he asked. “I didn’t want to do it, but I really didn’t have a choice.”

What he really wants, however, is more discussion with the governor.

Especially when it comes to the incentive packages the state needs to compete.

“We’re working on incentives as we talk,” he said. “The speaker and I had been talking incentives for a while. We need to get on the same page before we go see the administration.

“I don’t think there’s a sticking point. I think it’s just us getting our heads together to go to the governor and say, ‘Here’s what we think — what do you think?’ And, until we have a document to give them, we really don’t want to go to them, not being on the same page. And we’ll have to negotiate at that point.

“But, again, this isn’t Goldman Sachs. We’re not going to be dictated to.”

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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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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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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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‘Credibility issue’: Zoffinger, longtime power broker, says EDA upheaval puts N.J. in bad light — one it caused itself

George Zoffinger has served on approximately a dozen boards across the state — and across the globe.

He’s overseen the Economic Development Authority and the New Jersey Sports and Exposition Authority — and he’s the current chairman of the New Brunswick Economic Development Corp.

He’s worked — in some capacity — for every New Jersey governor since Jim Florio, who appointed him commissioner of commerce and economic development.

So, he knows a thing or two about how agencies and government are supposed to operate. And he’s not happy about what he sees going on in connection with the EDA.

“It pains me to see what has happened at that organization,” he told ROI-NJ.

Zoffinger is talking about Chairman Larry Downes stepping down at the request of Gov. Phil Murphy — a request other members of the EDA who were appointed by former Gov. Chris Christie have not complied with so far.

He’s talking about a scathing audit — the parameters of which have been called into question.

He’s talking about the efforts of outside groups calling for a complete overhaul of the EDA for reasons some feel are based more on politics than performance.

“It’s not necessary, I guess is the way I would put it,” Zoffinger said. “We’ve had so many good people that have dedicated their life to it and have done some really positive things for the economic development of the state.

“And, now, because people didn’t agree with some of the things that were done during the Christie years, they’re basically throwing the baby out with the bath water.”

Zoffinger was on a roll.

“I know Larry Downes very well,” he said. “I’ve worked with Larry. I’ve been on the board of New Jersey Natural Gas for 20 years. I’ve seen him. And I know the kind of person he is. And all Larry wanted to do is to make a positive contribution, and he’s done that.

“To make him a scapegoat because you don’t agree with some of the policies that were undertaken at the time, in my opinion, is really wrong. So, it’s really pretty bad to see what’s happening there.”

Zoffinger did offer some praise for Kevin Quinn, who was named to replace Downes on Friday morning.

Quinn is the founder of the Genki Advisory investment firm in Short Hills and, like Murphy, a former Goldman Sachs executive.

“It could be a good first step,” Zoffinger said. “He seems to be a qualified guy.

“As long as the turmoil doesn’t continue, I think it’s a positive thing. But if they’re going to fight over the four board members, then that will be the focus of the place. They won’t be focusing on what they should be focusing on, which is economic development.”

Regardless of what happens going forward, Zoffinger knows it won’t go perfectly. He’s been around the block enough times to know that no agency is like that.

But, he said he has confidence in the EDA. He said he’s never lost it.

“You’re always going to have situations where people try to game the system,” he said. “You’re always going to have that. But in the case of the EDA, over the years, to my knowledge, it’s always been very difficult to game the system. They basically have so much backup, not only the paperwork, but the constant scrutiny they are under.”

Zoffinger said the problem is an age-old one in the state.

Because the governor — whoever it is — has so much power, few people are willing to challenge the office, he said.

“The governor’s position is so strong, people will not buck it,” he said. “They won’t fight against it. If the governor’s position is to do just about anything — we gave away Giants Stadium (when I was at the sports authority) because the governor wanted to do it.

“People in New Jersey have this aversion to bucking what most governors say. It’s really sad, because some really good people maybe could have made some of the policies (better), but we don’t do that in New Jersey.”

This will lead to a bigger problem, Zoffinger said.

How many others will want to serve the state?

“They’re going to ask, ‘What’s going to happen when somebody else comes along and they don’t like them because Murphy appointed them,’” he said. “We’re going to throw them out for no reason — or because some conservative groups or some liberal groups or some other groups say that they should?

“When people say, ‘We’ve got to get rid of all these people,’ what do they mean get by, ‘these people’? These are people. You got to look at the person and see what’s this person all about.”

Why would people — or, more importantly, big companies — want to settle here? And who is going to help them?

“Larry is a really good guy who brought real stability to that organization,” Zoffinger said. “Now you put the whole organization into an upheaval.

“Now, what’s going to get done while these people fight over whether they’re going or staying, right? I would say, ‘Nothing.’”

Zoffinger said it’s necessary for the state to clean up the mess. He hopes Quinn can do that.

“You have to make sure that people understand their responsibilities and you have to stop the personal attacks and the rancor that seems to be around the organization,” he said. “Because, if you don’t, they will never be able to have the credibility necessary to be able to do that job.

“That’s really what it comes down to. There’s a credibility issue right now that has to be addressed, and it has to be addressed by competent people. Hopefully, some stability or some kind of positive reaction will take place instead of fighting.

“So, if a company wants to come to New Jersey, they know that they could deal with the people that are there versus people that have been asked to leave.”

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