50+ Organizations Call for Resignation of NJ Economic Development Board in Response to Whistleblower Allegations, Audit

Trenton– Fifty-six community, labor, grassroots, and environmental organizations called for the resignation of all non-ex-officio members of the New Jersey Economic Development Authority Board of Directors. Representatives of the broad-based coalition will deliver an open letter during the public comment section of the EDA board meeting starting at 10 a.m. ET this morning. The call comes in the face of growing scandal over the $11 billion in corporate welfare it has pledged to profitable and politically connected companies.

Members of the NJ EDA Board include Chairman Laurence Downes, Vice Chairman Charles Sarlo, Phillip Alagia, Fred Dumont, Massiel Medina Ferrara, Louis Goetting, Bill Layton, and Thomas Scrivo.

“The EDA has failed to protect taxpayers from corruption and fraud, and the buck stops with the board,” said Rob Duffey, interim director of New Jersey Working Families. “Board members should resign immediately so that the EDA can begin to rebuild its credibility and regain the public trust.”

In January, New Jersey State Comptroller Phillip Degnan released a scathing audit which found the NJ EDA lacked basic internal controls and oversight necessary to determine whether companies that had received tax incentives from the state were creating the jobs they promised. In response to the audit, Gov. Murphy has convened a special task force headed by Ronald K. Chen to investigate.

Last month, WNYC reported on a whistleblower lawsuit alleging that Gov. Christie’s Business Action Center pressed EDA staff to approve tax incentives without due diligence and may have turned a blind eye to fraudulent applications. One week later, another whistleblower came forward to tell Gov. Murphy’s task force that her employer lied about its plans to leave the state in order to receive a tax incentive. Worse, the EDA awarded the company the tax incentive even knowing the company had failed to comply with the terms of a previous grant.

“It is clear from the comptroller’s January 2019 audit report, as well as from the testimony elicited by the Governor’s task force and from WNYC’s reporting, that the EDA board has failed to perform its most basic duties,” said Saily Avelenda, Esq., executive director of NJ 11th For Change. “We cannot continue to allow the EDA to jeopardize New Jersey’s financial future so they can reward a few, politically connected entities. Therefore, we are asking that the entire Board step down. New Jersey deserves better.”

New Jersey’s already generous tax incentive programs began to spiral out of control after Democratic legislators joined with Christie to pass the Economic Opportunity Act of 2013. Under the programs established by the EOA, the NJ EDA pledged billions to profitable and politically connected corporations like Prudential, Holtec, Honeywell, and Campbell’s Soup. The bill is now coming due for those individual awards, with New Jersey set to lose $3.5 billion in revenue over the next three years.

“The EDA board members let New Jersey taxpayers down by rubber-stamping overly generous subsidies to corporations, allowing fraudulent applications to obtain tax breaks, and ignoring rules and regulations that should have safeguarded our state’s revenue sources. Under their watch, New Jersey’s business tax subsidy program has become a national embarrassment. The EDA board members should resign without delay, and make space on the Board for those who would work diligently to safeguard any taxpayer’s investment in a New Jersey corporation,” said Dena Mottola Jaborska, Associate Director at New Jersey Citizen Action.

The programs established by the Economic Opportunity Act are set to expire this year, and Gov. Murphy has called for significant reforms, including a hard cap on per-job and annual awards, tighter reporting requirements, and targeting awards to emerging industries and homegrown businesses.

“New Jersey could have created jobs and protected public health, by spending $11 billion on paying skilled workers to get lead out of our drinking water, repair aging infrastructure, move us closer to 100% renewables by 2050, and upgrade NJ Transit,” stated Amy Goldsmith, NJ State Director, Clean Water Action, “but instead they gave it away to largely undeserving corporations without any oversight on how the money would be spent and often at the expense of the environment, public health, and communities in real need of family-supporting jobs.”

In many cases, corporations that received EDA subsidies were already paying so little in state taxes that they were able to sell the tax credits to other companies for a profit. According to a recent report by Politico a staggering 126 companies have sold EDA tax credits worth $204 million in 2017 alone.

“New Jersey’s small business owners cannot wait around as the same old tactics continue at the EDA which favor large corporations over Main Street,” said James Parker, owner of Riverview Studios in Bordentown City. “Over the past decade we have seen no return on investment from giving away $11 billion in tax breaks. If we want our state economy to blossom, we should fund services that benefit all businesses so that we can see money go into the pockets of true consumers and business creators.”

Public policy, advocacy, and grassroots organizations from across the ideological spectrum had sounded the alarm about the EDA and the Economic Opportunity Act for years before the Comptroller’s audit. Signers of the letter calling for the board to resign include unions like ATU, CWA, HPAE, NJEA, and SEIU32BJ; community groups like Make the Road New Jersey, NJ Communities United, and the Latino Action Network; grassroots organizations like Action Together New Jersey and Westfield 20/20; environmental groups like Environment New Jersey and Clean Water Action; and public policy organizations like New Jersey Policy Perspective.

“Grassroots groups are clamoring for a full investigation, from North Jersey to South Jersey, from Paterson to Camden,” said Sue Altman, spokesperson for South Jersey Women for Progressive Change. “We need to get to the bottom of the mismanagement of our taxpayer dollars, and we will not rest until we understand the full story of what happened, from the inception of the Economic Opportunity Act, to the awarding of lavish grants to politically connected corporations.”

LETTER:

To Chairman Downes and Members of the New Jersey Economic Development Authority Board of Directors:

Given growing allegations that the NJ Economic Development Authority (EDA) rushed through billions in corporate subsidies to profitable and politically connected corporations without adequate oversight or accountability, and may even have turned a blind eye to fraudulent tax incentive applications, we the undersigned demand your resignation.

The state of New Jersey has awarded a staggering $11 billion in tax incentives to corporations through EDA programs. But a January audit by Comptroller Philip James Degnan found that the EDA suffered from “inadequate monitoring, insufficient oversight, and non-existent policies and procedures,” including poor practices including self-reporting, insufficient monitoring, incongruous evaluation measures for approvals, and failure to comply with state laws and procedures. In short, the EDA lacked the basic internal controls to make sure companies were delivering on their promises to create jobs.

This month, WNYC reported on serious allegations that Gov. Christie’s Business Action Center pressured staff to approve tax incentives without due diligence. According to a whistleblower lawsuit cited in the report, the EDA approved at least one grant application where a company detailed non-existent locations that the company would move to if it was not awarded the grant. The same lawsuit maintained that the EDA manipulated the “net benefits test” that determines whether a tax incentive is in fact beneficial to the state.

Just last week, Gov. Phil Murphy’s special task force identified yet more allegations of corruption, political cronyism, and abuse. Gulsen Kama testified that her company worked with a consultant to misrepresent its plans to move jobs out of the state in order to secure a “Grow New Jersey” grant from the EDA. The EDA approved the grant, even though it knew that the same company had failed to comply with an earlier grant awarded under the Business Incentive Employment Program.

According to the task force, there are more whistleblowers who have yet to come forward, and more allegations of corruption and graft that have yet to surface. It is clear that companies have been playing New Jersey taxpayers for fools, lying about their plans to leave the state in order to extort untold amounts in corporate subsidies from the EDA. Worse, there are credible allegations that the EDA knew it and even helped companies cook the books.

For years, politicians and political appointees promised New Jersey taxpayers that giving billions to big corporations in exchange for empty promises to create jobs would pay for itself. But nearly a decade later, poverty is on the rise while the state’s wealthiest get even wealthier. Meanwhile, New Jersey faces a fiscal crisis and a structural deficit that prevents it from making needed investments in education and transit, or meeting its obligations and regaining the faith of credit agencies.

Every dollar in tax breaks awarded to companies is a dollar that can’t be spent meeting our collective needs. There is a role for reasonable, targeted, and fiscally responsible tax incentive programs that include adequate labor standards in New Jersey’s economic development strategy. But at a minimum, taxpayers must have faith that companies are holding up their end of the bargain and delivering the jobs they promised. The EDA has broken that faith repeatedly under your watch.

We urge you to resign from your positions on the EDA Board of Directors so that the Authority can begin to regain the trust of taxpayers across the state.

Resign now.

Signed,

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