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When it Comes to State Subsidies, Not All Transit Hubs are Equal

February 17th, 2011 by

Panasonic's current facility in Secaucus. Source: LoopNet

New Jersey Policy Perspective offers food for thought with an interesting blog post on the Economic Development Authority’s award of a $102.4 million Urban Transit Hub Tax Credit to Panasonic if it decides to move 800 jobs from Secaucus to Newark. Does it make sense to subsidize a company to move offices from the vicinity of one New Jersey train station to another? All other things being equal, no, it doesn’t.

All other things are not necessarily equal, however. In this particular case, the train station area being vacated (Secaucus) is a relatively strong market, and will be in a much better position to refill the empty office space once the economy recovers. There’s a reason Secaucus was not included in the list of municipalities eligible for the Urban Transit Hub tax credit, despite its phenomenally good rail access — it doesn’t need the help. Yes, it’s a transit hub, but it’s not distressed.

In contrast, the destination (Newark) is a weak market that would otherwise require some other form of state subsidy.  And in fact, the purpose of the Urban Transit Hub tax credit was to attract large employers to strategic locations where the move serves multiple state objectives.

So is subsidizing a company to move from a strong market to a weak one really all that bad? Haven’t a whole host of state agency investment decisions effectively been subsidizing the reverse movement (from distressed urban center to prosperous suburban office park) for several decades now?

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4 Responses to “When it Comes to State Subsidies, Not All Transit Hubs are Equal”

  1. Agreed that the Newark market is weaker to that in Secaucus but access to Newark’s transit stations is also far superior. The walking distance from Panasonic’s headquarters to the Secaucus Station is 2.1 miles. And while I’m amazed that the route actually has sidewalks, that’s still a 40 minute walk! There is a bus that will take you door to door which that runs every 15 minutes (which is a very good headway) but it still takes 16 minutes to cover that 2.1 miles (slow!). Combined that is a potential extra 30 minutes to get to their offices from the station. Might as well walk.

    By contrasts I’m quite sure that there is many tens of thousands of square feet of available office space within a 5 to 10 minute walk from Newark Penn Station. Never mind all the bus routes and the fact that thousands of people also live within walking distance of downtown Newark too! (To be fair, Panasonic’s Secaucus location, in that warehouse district, does just happen to be within walking distance of numerous residential area as well.)

  2. Tom O'Neill says:

    When a subsidy has to be justified on the grounds that it counter-balances other subsidies, maybe it’s time to think about ending all those subsidies –like those here– that transfer funds from the pockets of middle-class tax payers to the pockets of corporations, which usually manage to avoid most state taxes anyhow.

  3. Jay Corbalis says:

    Andy,

    I’m glad you brought up the accessibility of Panasonic’s current headquarters. Moving to Newark will definitely be an improvement in terms of accessibility, even though Panasonic is relatively close to arguably the most connected train station in the state. In fact, to my knowledge (which consists of looking out the window of the train), there isn’t much of anything within walking distance of the Secaucus train station.

  4. Lee says:

    This is a waste of taxpayer money. This program should be used to entice new businesses to set up shop in the state not to subsidize existing businesses who are threatening to move. NJ is in very bad financial shape and this is not time to be giving away tax incentives to big corporations! It does not appear that this program was very well thought out and the money should have been put to better use by shoring up the pension funds for state workers. Or, maybe the thought process was actually quite good on behalf of the one who will benefit from the program.

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