How One Address Led to a $100 Million Tax Credit Scheme
PEARL RIVER, N.Y. — In the summer of 2015, Jaguar Land Rover North America told state officials in New Jersey that it was considering moving to an office development in New York called Blue Hill Plaza.
To keep the automotive giant’s headquarters in New Jersey, the state offered $26 million in tax credits. So Jaguar stayed.
Five months later, FC USA, a travel company, also told New Jersey that it was looking to relocate to the very same office development in New York.
So did Groupe SEB, an appliance manufacturer.
In total, over five years, 12 companies threatened to leave New Jersey and move to Blue Hill Plaza unless the state provided tens of millions in tax credits.
None followed through on the threat. In fact, an investigation by The New York Times suggests that nearly all of the 12 companies never seriously considered moving to New York.
But all 12 received lucrative tax credits from New Jersey to stay — more than $100 million in total, according to documents obtained by The Times.
Even the leasing agent at Blue Hill Plaza in Pearl River, N.Y., said he realized that the companies were using the site largely to “maximize their incentive packages” from New Jersey.
“We are aware that often times the tenant has no intention at all of relocating to the Blue Hill,” said the leasing agent, James B. Tully, an executive vice president at CBRE, a real estate company.
The threats to move to Blue Hill Plaza have emerged as a prominent example of how many companies took advantage of New Jersey’s economic incentive programs that in total have awarded $11 billion, The Times’s investigation found.
That 12 companies all happened to pick the same out-of-state location underscores one of the main criticisms of the programs: The state agency responsible for overseeing the incentives, the Economic Development Authority, carried out little if any oversight. It does not appear that state officials found it suspicious that companies repeatedly threatened to move to the same office complex in New York — or that the officials even noticed.
Nor did the state officials appear to check whether the companies had sought competing economic development packages from New York, as is typically the case in these cross-state battles over jobs. It turns out that nearly all of the 12 companies did not seek benefits from New York or merely filed cursory applications, The Times found.
The tax credit programs were approved by Gov. Chris Christie, a Republican, and the Democratic-controlled Legislature in 2013 in an effort to jump start New Jersey’s economy after the recession.
But the programs have become embroiled in scandal over revelations that politically connected companies received what amounted to corporate giveaways. Far fewer jobs were retained or created in New Jersey than companies had promised, state officials now acknowledge.
A New York Times investigation in May found that the economic development programs were easily manipulated by lawyers and other insiders.
The controversy over the tax breaks has consumed Trenton, prompting investigative hearings, subpoenas to companies and at least one state agency and setting off open warfare between Gov. Philip D. Murphy, a Democrat, and legislative leaders of his own party.
Mr. Murphy, who took office in 2018, has assailed the economic development programs, appointing a task force to investigate and overhaul them.
After The Times recently began inquiring about Blue Hill Plaza, New Jersey’s attorney general issued another round of subpoenas seeking information from the state agency that administers the incentive programs — a request that would include information about Blue Hill Plaza.
Mr. Tully, the leasing agent, said many more than the 12 companies identified by The Times sought leases at Blue Hill Plaza in pursuit of tax credits in New Jersey. “We believe the number of companies you cited was a bit light,” he said.
Blue Hill Plaza, which consists of a 21-story tower and an 8-story building, is home to a mix of companies and offices, including the North American headquarters of Hunter Douglas, the window blinds manufacturer, and Syncsort, a software company that relocated from New Jersey in 2016.
The complex, located in a town of about 15,000 people that is 30 miles northwest of New York City, would seem to be ideal in making the case for New Jersey tax credits.
It is out of state, even if just barely, and offers leases at a lower rate than many similar high-end buildings in New Jersey.
Most of the 12 companies that The Times identified either declined to comment or would not explain why they had listed Blue Hill Plaza on their applications for credits.
Some of the companies were assisted in the application process by well-connected lobbyists and lawyers. Ted Zangari, a prominent real estate attorney in New Jersey who founded the lobbying group Smart Growth Economic Development Coalition, served as a consultant for two of the 12 companies.
Those companies, Unique Designs and Creative Management Services, were awarded a combined $10.3 million in tax credits to stay in New Jersey.
The lobbying group championed the tax credit when it was approved and has defended the program as it has come under scrutiny.
Mr. Zangari did not directly answer questions about his role in the companies’ applications but said that, in general, Rockland County is a “natural location” to be considered by businesses in northern New Jersey.
Chris Marx, a senior vice president at Savills, a commercial real estate consulting firm, who identified Blue Hill Plaza for Groupe SEB, the appliance manufacturer, said nothing untoward had happened.
Asked about allegations that these companies never seriously considered moving to Blue Hill Plaza, he said, “I don’t think that’s true.”
“It’s the closest to New Jersey, and it’s a great complex with a great environment and great amenities,” Mr. Marx said.
Tim Lizura, head of the authority in 2015 under Governor Christie, did not respond to requests for comment regarding Blue Hill Plaza.
Mr. Christie has called criticism of the economic development programs “political assassination,” saying that the programs saved thousands of jobs in the state.
A spokeswoman for the state Economic Development Authority, Virginia Pellerin, acknowledged this month that the role of Blue Hill Plaza “strengthens the already strong case for adopting Governor Murphy’s proposed incentive programs, which prioritize the creation of new jobs over job retention.”
The fallout in New Jersey over abuses of its tax credit programs mirrors problems other states have faced in managing economic incentive programs, with budget-strapped agencies often no match for well-heeled lawyers and deep-pocketed corporations.
“Most states just have not invested their resources or the statutory authority, or frankly the political will, to be able to do serious front-end analysis of these kinds of opportunities,” said Justin Marlowe, a professor at the University of Washington who specializes in public finance management.
Blue Hill was not the only out-of-state building with multiple potential New Jersey tenants.
Three companies said they were going to move to the same warehouse in Orangeburg, N.Y., and ended up getting a total of nearly $25 million in tax incentives to stay in New Jersey, according to documents reviewed by The Times. The warehouse is just east of Blue Hill Plaza.
Two other companies, the Michaels Organization and N.F.I., cited the same building in Philadelphia as their potential out-of-state location.
The two companies even expressed concern about the optics of settling on the same building, according to documents uncovered by a state task force.
One top executive wrote in an email, “I think it would be a little suspicious to ask for a duplicate.”
The two companies ended up moving to Camden after the state granted them a total of $158 million in tax credits.
Three of the 12 companies who threatened to move to Blue Hill Plaza told the state that they could receive millions of dollars in economic incentives from New York if they moved across the border.
But there was little evidence that they seriously pursued the incentives in New York, if at all, the Times found.
One company, the pharmaceutical supplier Lonza AG, said in documents that were reviewed by The Times that it had sought a $600,000 “IDA sales tax exemption,” referring to the Industrial Development Agency in Rockland County, where Blue Hill Plaza is located.
But Steven Porath, executive director of the agency, said he had never heard of the company.
“I have no record of that company applying to us for anything,” Mr. Porath said. “To my recollection, I don’t recall ever talking to them.”
Jaguar Land Rover North America and FC USA also told the state in their applications they had requested a tax exemption from the county development agency.
Mr. Porath said he remembered talking with Jaguar Land Rover about a potential move to Rockland County but neither company applied for one.
Those same three companies also claimed to have requested another economic incentive through the New York Power Authority, called ReCharge NY, which can reduce energy costs for businesses by up to 25 percent.
But their names are not mentioned on a list of more than 1,700 companies that have submitted a ReCharge NY application.
Lonza AG, an international pharmaceutical supplier, which was awarded $3.26 million in tax credits, said, without providing specifics, that it had “informal and preliminary discussions with Empire State Development” in New York about possible economic incentives.
“ESD confirmed its support for the type of project that Lonza was considering, as well as the type and amounts of incentives that would typically be available for such a project,” said Sanna Fowler, a company spokeswoman. “Formal applications for New York incentives were not required by ESD or to support the subsequent Grow NJ application.”
A spokeswoman at Jaguar Land Rover North America said that its consultant, the real estate services firm JLL, “received a written incentive proposal from ESD” outlining available tax credits and grants in New York. The company did not formally apply for them, she said.
FC USA did not respond to requests for comment.
At Blue Hill Plaza, the notion that New Jersey companies were not serious about moving there appeared to be an open secret.
The leasing agent there, Mr. Tully, said that there was a “low probability of success from this pool of prospects” and that “the decision quite often has already been made before they ever tour the Blue Hill Plaza.”
Nick Corasaniti is a New Jersey-based correspondent, covering the politics, policy, people, trains, beaches and eccentricities that give the Garden State its charm. A New Jersey native, he previously covered presidential campaigns for The Times. @NYTnickc • Facebook
Matthew Haag covers the intersection of real estate and politics in the New York region. He previously was a general assignment and breaking news reporter at The Times and worked as an education reporter at The Dallas Morning News. @matthewhaag
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