In Targeting State Incentives, Location Matters
Star Ledger, Jan. 13, 2013
Like most states, New Jersey has joined the arms-race competition for jobs and economic development. While companies will look to move to or remain in the Garden State for its great location, extensive infrastructure, educated workforce and existing networks of businesses, the state still competes with similarly situated places across the country to offer additional inducements for attracting and retaining businesses.
In New Jersey, the governor has an imposing array of tactical weapons at his disposal to court companies looking to find the most hospitable locations for themselves and their much-coveted workforces.
But the New Jersey economic incentive armory may be changing. Existing incentive programs are running out of money and a new legislative proposal has been introduced to re-think and re-fund these programs. While revisiting and updating these programs is a good idea, it will be critical that decision-makers keep at the forefront of their thinking that where these jobs are created and retained is a particularly important consideration in our small state and that the financial incentives must reflect this geographic imperative.
Two of the most successful and popular economic incentive programs – the Urban Transit Hub Tax Credit and the Economic Redevelopment and Growth program – are proposed to change. One of the strongest themes that run through these two programs is that they have powerful smart-growth location-based criteria that provide incentives for businesses to grow in places with the appropriate infrastructure and not in places with important environmental features or that will be more costly for the state. Criteria for awarding tax credits and grants should continue to depend on where a business seeking the incentives intends to add or retain jobs.
As the state re-examines its array of economic incentives, it should keep the following points in mind:
- The state has a strategic plan that prioritizes some places for growth and development and other places for environmental protection and preservation. Incentives should be given in priority growth and development areas, and not go to subsidizing sprawl. There is considerably greater value to New Jersey in attracting and retaining jobs in locations where infrastructure already exists, rather than in places that would require construction of new or wider highways and new or expanded water systems and sewage treatment plants.
- The nine urban transit hub cities offer enormous commercial, residential and mixed-use investment opportunities for both the public and private sectors, and should continue to be a focal point for state incentives, including dedicated subsidies for housing development in order to create vibrant mixed-use places.
- Weak-market places that already receive state support should be prioritized, since economic growth and movement toward self-sufficiency will mean fewer state subsidies will be required for these places in the future. This is a much more efficient use of state resource than subsidizing development in strong markets, where it will likely occur on its own.
- The state has 243 transit stations, most of which have not met their future development potential. These station areas should be prioritized for economic incentives, reflecting the fact that there is greater value to New Jersey in attracting or retaining a job in an area served by transit than one that can only be reached by car, which would add more vehicles to the state’s already overcrowded roadways, worsening congestion and increasing fossil-fuel emissions.
- Supporting job growth requires new housing types in the right places. Economic incentives should support transit-accessible mixed-use development that combines office and retail uses with residential uses, including providing direct incentives for producing housing in weak markets.
There’s an old saying that the three most important factors in the value of real estate are location, location and location. New Jersey’s job-creation and retention programs need to reflect this focus and offer maximum value to New Jersey taxpayers for the economic incentives that are doled out. Redeveloping great places for the future of the state could be a silver lining to the current economic development arms race, but only if we link economic development incentives to these locations.
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Peter Kasabach is executive director of New Jersey Future, a Trenton-based nonprofit research and advocacy organization focused on smart growth and sustainable development.