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Tax Breaks Won't Fix Camden, but They Will Break NJ's Economy

Earlier this month, New Jersey Governor Chris Christie stood in a parking lot in Camden—one of America’s poorest and most dangerous cities—and said that it was time for the city to “make its new history.” The cost for that new history: $342 million in...

by Peter Moskowitz
Jul 25 2014, 3:44pm

A street scene in Camden, NJ. Photo by Gabe Angemi

Earlier this month, New Jersey Governor Chris Christie stood in a parking lot in Camden—one of America’s poorest and most dangerous cities—and said that it was time for the city to “move beyond its troubled past and… make its new history.”

That day, the Governor announced a deal to build a nuclear power plant parts factory on the Camden waterfront that would bring at least 235 jobs to the city. The month prior, Christie announced another deal to build a Philadelphia 76ers practice facility in Camden that would bring about 50 new jobs to the city.

The cost for Camden’s new history: $342 million in tax breaks, or about $1.2 million of taxpayer money for each guaranteed new job.

As New Jersey’s economy struggles to recover from its Great Recession lows, bumbling along at number 13 on the list of states with the highest unemployment, Christie has trumpeted massive tax breaks as a way to turn the economy around. His new pet project is Camden, a city where nearly 40 percent of residents are living in poverty. But many Jersey residents aren’t so sure Christie’s strategy will work. They say Christie’s plan might only minimally help Camden, and could empty out the state’s coffers in the process.

The nuclear deal would bring Holtec International to Camden, guaranteeing at least 235 new jobs for $260 million. The 76ers deal would have the basketball team move their practice facility from Philadelphia to Camden, creating at least 50 jobs for $82 million.

Local politicians have been enthusiastic about the deals, saying the moves signal the start of a full-on renaissance that’s sure to return Camden to its former glory.

“Camden is on a path to reestablish itself as the mecca of manufacturing,” said Robert Corrales, the business administrator for the City of Camden. “Holtec and the 76ers are just the beginning.”

The beginning of what is unclear. Many residents, activists, and politicians say the money Christie is giving to companies could be better spent on job training for Camden residents, on transportation infrastructure, and on education. And experts seem to agree. Several studies in the last few years, including one from the Kauffman Foundation, have found that using tax incentives to lure large companies to flailing economies doesn’t usually bring much economic revitalization at all.

Raymond Lamboy, 45, is now the president of the Latin American Economic Development Association in Camden and a city resident. When he was growing up, he sat outside his father’s furniture store on Broadway in Camden every Saturday.

“I watched the city crumble before my eyes,” Lamboy said.

Camden used to be booming. Its residents built famous warships, made Campbell’s soup, and manufactured high-quality RCA stereos. But RCA moved out of the city for Indiana in the 1940s. Camden’s main shipbuilding company left in the 1960s. And Campbell’s closed its factory in 1990. The company still proudly calls Camden home, but it only houses a few hundred corporate employees there, in a business park surrounded by walls taller than most basketball players.

Governor Chris Christie announces a deal to build a nuclear power plant parts factory on the Camden waterfront. Photo via the Government of Camden, NJ

The gap between what Camden once was and what it now gives people like Lamboy reasons to doubt Christie’s plan to save Camden. “The typical unemployed person can't go through a training program and wait four years to get a job,” he said. “We’ll take the Holtec-type jobs, but we’ll also take the jobs that basically if you have two hands and are able-bodied and are ready to work—those types of jobs. The typical guy or gal can’t find anything in the city today.”

Holtec International’s owners, and Christie’s boosters, say the new Camden plant could eventually bring 3,000 jobs to the city, and give the city a needed jump that will attract more investment, including the kind people like Lamboy are looking for.

But Holtec is only legally required to bring 235 new jobs to the city, and transfer another 160 existing job from another facility in New Jersey in order to get its $260 million in tax break. The factory will take four years to build, and Holtec is free to leave without any consequences after 15 years. If they do leave, the state will be out $147 million, according to Gordon MacInnes, the president of liberal-leaning think-tank New Jersey Policy Perspective.

“It’s the most recent example of NJ providing the most flamboyant tax breaks in the nation,” MacInnes said. “Christie is setting records in terms of the magnitude.”

Even if Holtec stays, MacInnes says the state’s analysis of potential benefits from the deal are “wildly optimistic.” If Holtec survives for 35 years, MacInnes says the state stands to get about $150,000 in tax revenue.

Terms of the 76ers deal may be even worse for Camden, with the deal’s backers admitting only about 50 jobs would be created by bringing the practice facility downtown, and the eventual tax benefits are even more murky.

But you don’t need to look 35 years down the line to see how Christie’s strategy will play out. It’s already been tried across much of the state and across the country, without much success.

Camden, New Jersey, is one of the poorest and most dangerous cities in the country

Christie gave a $261 million tax credit to Revel, a shiny new casino in Atlantic City, justifying it with the same grandiose claims he used in Camden—that one big project could help revitalize the downtrodden city. In June, Revel announced it would declare bankruptcy

Christie also approved a $390 million tax break for a project called American Dream, an insane shopping complex/indoor ski jump near New York City that will have been in construction for nearly 10 years by the time it’s slated to open in 2016 (and it may not open by then).

In total, Christie has spent $4 billion on tax breaks and incentives since becoming governor, according to New Jersey Policy Perspective.

Christie has also been accused of using tax breaks to reward companies with owners who are politically connected to him, including with the Holtec deal.

The strategy is starting to take a toll on the state budget. This week, Christie lobbied New Jersey residents to support his plan to cut billions from state workers’ pensions to make up for a nearly $3 billion state budget gap.

According to the Kauffman Foundation, using tax incentives to bring jobs to a state is almost never a good idea. Incentives usually just shift jobs around without creating any new ones, Kauffman’s report says. It says encouraging entrepreneurship, training people on how to open small businesses, and bringing immigrants into cities are all strategies more helpful and less expensive than giving away state money to corporations.

New Jersey knows firsthand how tax incentives can be harmful.

This week, bubble wrap manufacturer Sealed Air announced it would move its headquarters and 1,300 jobs from Elmwood Park, New Jersey to North Carolina in exchange for $36 million in tax breaks. In other words, North Carolina got a much better deal than Camden did, poaching each job for the fire sale price of about $27,600.

Even for people who aren’t totally anti-tax incentive, the tax breaks in Camden seem too high to justify—seemingly enriching a few select companies while the rest of the city remains poor.

“If you compare what other states are doing, I think New Jersey is giving away the store,” Republican State Senator Michael Doherty said. “If you look at Holtec, it’s just too much. It’s crony capitalism and it’s unprecedented.”

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