Last year the “temporary” Urban Enterprise Zones program began to sunset as planned when it was started three decades ago. The state gave the program a “one-time extension” of 16 years in 2001, and then former Gov. Chris Christie rejected the Legislature’s attempt to extend it again for another decade, calling instead for a study to determine a better way to help the state’s distressed cities.
Legislators are giving another extension another try. A bill to keep the current UEZs covering 32 municipalities for 10 more years and reinstate the original five that expired last year — Bridgeton, Camden, Newark, Plainfield and Trenton — passed the state Senate last week. Without an extension, the next zones to expire would be Millville and Vineland in 2019. Whether Gov. Phil Murphy finds the program worthwhile, or even affordable, remains to be seen.
Conceived as a tool for urban redevelopment, UEZs are best known for letting businesses give customers a 50 percent break on state sales tax. Originally, the tax collected was returned to finance local improvements, low-interest business loans and sometimes even municipal salaries, but that practice ended as the state’s need for revenue increased.
Current benefits also include a break on energy taxes, a subsidy for unemployment insurance, a business-to-business tax exemption and tax credits for hiring and investing.
The bill that cleared the Senate, primarily sponsored by state Sens. Shirley Turner, D-Mercer, and Nilsa Cruz-Perez, D-Camden, is supported by the New Jersey State League of Municipalities, the New Jersey Chamber of Commerce and the New Jersey Business and Industry Association.
Andrew Musick, NJBIA vice president of taxation and economic development, said, “Small businesses still need the help that the UEZ program provides, so we should keep it in place until more effective alternatives can be found.”
With UEZ now more of a mainten-ance than growth program, everyone seems to want a better method to promote urban redevelopment.
Murphy has signaled he favors economic-development initiatives beyond attempts to lure or keep major corporations. In January, his transition team’s report on urban-growth issues called for a study of what has worked for other states.
That’s a good start. A look at other states is likely to show economic growth results not from government programs, but from easing the tax and regulatory barriers to private investment and development.
Murphy and his administration have been noncommittal about the UEZ program. Perhaps his budget proposal next week will make clear whether he will support another extension for it.
Even if he wants to, the budget numbers may make it difficult. His predecessor figured that once the UEZ tax break was ended, the state would get an additional $2.3 billion in sales tax revenue per decade. Murphy may need that money elsewhere.