NJ lures Long Island businesses with millions in tax breaks

Advertisements on commuter train lines, like this one

Advertisements on commuter train lines, like this one on an LIRR platform at the Hicksville station on April 21, 2014, and talk radio this spring promoted Grow NJ, an economic development initiative that Christie rolled out last fall. Photo Credit: Howard Schnapp

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Long Island companies are being offered millions of dollars in tax breaks to move to New Jersey. And in the case of one of the Island's best-known businesses, Gov. Chris Christie made the pitch personally.

Advertisements on commuter train lines and talk radio this spring promoted Grow NJ, an economic development initiative that Christie rolled out last fall. The program significantly boosts the tax credits New Jersey gives to companies that move jobs to the state, and requires less investment in buildings and equipment than an earlier program.

Some businesses are heeding the Garden State's call.

Wenner Bakery of Bayport recently chose New Brunswick, New Jersey, over Suffolk County for a new factory. It plans to shift some production lines, which will create 253 jobs in New Jersey and dozens of pink slips here, at least initially.

Forbes magazine and VF Sportswear, the manufacturer of Nautica clothing, are relocating from Manhattan to Jersey City.

"I'm less concerned about the South, the Midwest and the West than I am about New Jersey," said Joseph J. Kearney, executive director of the Nassau County Industrial Development Agency. "New Jersey is the dominant competitor, they're very aggressive."

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Christie intensely wooed the Hain Celestial Group, then based in Melville, to move across the Hudson River. The governor first met chief executive Irwin D. Simon at a fundraiser about two years ago and the two spoke "three or four times" on the telephone, the businessman recalled recently.

Spokesmen for Christie did not respond to multiple requests for comment.

Hain, which makes Celestial Seasonings teas and other natural foods, was founded in 1993 on Long Island. But by 2010, Simon wanted to move the company's headquarters west. Hain already was producing Terra Chips in New Jersey.

Simon, who has a photograph of himself with Christie on his office windowsill, said New Jersey offered more money than New York State and Nassau. However, the executive said he kept Hain's corporate office on Long Island -- moving it to Lake Success -- because he didn't want to risk losing employees, and because he had fallen for a historic office building that once housed the United Nations.

"As much as I'm a fan of Chris Christie . . . I'm very, very happy we stayed," Simon said during a tour of his sleek headquarters. "This was the building for us. There's good karma here and I think it's a better location than New Jersey, in terms of attracting the employees we need."


NY's incentives help

He called Nassau Executive Edward Mangano "our cheerleader" for asking the administration of Gov. Andrew M. Cuomo for more incentives.

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In 2012, Hain won $4.5 million from New York State, a $850,000 sales-tax exemption on building materials and equipment purchases, and a 16-year freeze of property taxes -- the latter two from Nassau. In return, the public company agreed to spend $10 million in building renovations and add 122 people to its local payroll of 250.

Officials from Christie's office courted another Long Island public company, Broadridge Financial Solutions Inc., in a bid for its factories in Edgewood and Brentwood, according to knowledgeable sources who requested anonymity because they weren't authorized to speak about the matter.

Christie was among at least three out-of-state governors who coveted the operations, where proxy statements, annual reports and other investor documents are processed.

Broadridge, which is based in Lake Success, decided to stay put in 2012 for $39 million in tax breaks and electric bill reductions from New York State, Suffolk, Islip Town and local utilities. In exchange, the company pledged to invest $77 million, mainly in machinery, and retain its local payroll of 1,906.

Nassau and Suffolk counties vied with New Jersey for at least 15 business expansions from 2011 through 2013, according to a Newsday survey of state agencies and the eight local industrial development agencies.

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Long Island prevailed in most instances. Ten companies that mulled relocating to New Jersey ended up staying on the Island for tax breaks and other incentives. Two more moved here from New York City, while another actually moved to Deer Park from New Jersey.

The development deals accepted by these businesses saved nearly 4,000 local jobs and will create another 843, according to agency data compiled by Newsday. The businesses also will spend more than $303 million on construction and equipment.

And yet the competition from New Jersey and other states is driving up the cost of development aid, officials said.

On the Island, the Newsday survey showed incentives to companies that considered relocating to New Jersey will total well over $70 million in the next 10 to 20 years.

More robust aid from other states "definitely has had an impact," said Bruce E. Ferguson, who spent 27 years as executive director of the Suffolk IDA before becoming a consultant. He said some local IDAs have changed their policies "where they now will reduce existing real property taxes . . . the packages are for a longer period of time, and they are being made more generous."

Asked who makes up for the revenue lost when current property taxes are reduced, Ferguson said, "it's the other commercial property owners. There's no way to get around it."


Wenner's decision

New Jersey development officials hope other Long Island businesses will follow Wenner Bakery across the Hudson River.

The maker of bread, rolls and frozen dough used by supermarket bakeries and restaurants wasn't looking to expand out of state when it drew up plans for a fourth factory.

But then chief executive Jeff Montie heard from another company about the Grow NJ program, which eventually offered Wenner Bakery $30.3 million in tax credits over 10 years, or about $12,000 per year for every job created.

"It was just a lot of money for us," he said. "The decision really came down to economics."

Montie said Wenner Bakery would spend "well north of $10 million" to convert a warehouse in a poor neighborhood of New Brunswick to food production. He also said he has no intention of closing operations in Suffolk, the company's home since 1961 and where it now employs about 600 workers at plants in Bayport and Ronkonkoma.

Jobs will be lost as the New Jersey factory ramps up, but Montie said he hopes to resume hiring on Long Island as sales grow.

Still, it's taking tax breaks from Suffolk to maintain Wenner Bakery's local operations. The county's industrial development agency is providing $504,000 in tax breaks over 10 years in return for Wenner Bakery retaining 170 workers in Ronkonkoma and $1 million in improvements there, said Anthony Manetta, the IDA's former executive director.

Manetta, who now works as a development and government affairs consultant, said when he joined the IDA in June 2012 he underestimated the "ferocity" of business recruitment efforts by states such as New Jersey.

The Garden State isn't limiting its courtship to Long Island or even New York State.

"We're interested in companies anywhere on the globe . . . I wouldn't say we have a special target for Long Island," said Timothy J. Lizura, president of the New Jersey Economic Development Authority.

Since the Grow NJ program, and another for developers, began late last year, the authority has nearly doubled the number of incentive offers it makes each month.

"We're having conversations with companies that weren't looking at New Jersey before Grow NJ," including Wenner Bakery, Lizura said. "You have to make the offer -- the financial economics -- compelling to create the momentum to get the company to move."

Grow NJ reduced the amount of cash that businesses are required, in some instances, to invest in buildings and machines. It also made eligible for tax breaks small companies promising to hire 10 to 35 workers or retain between 25 and 50 workers; before the minimum was 100 jobs, either created or retained.


Albany takes steps

Kenneth Adams, Cuomo's economic development czar, said the "new New Jersey incentives can be very compelling . . . [but] New York has a more attractive business climate for all companies. We have lower taxes."

The state budget that went into effect April 1 cut the corporate income tax rate from 7.1 percent to the 1968 level of 6.5 percent. It eliminated the corporate tax altogether for most manufacturers and cut their property taxes, and exempted many small-business owners from New York's estate tax.

The changes led the Tax Foundation, a nonpartisan think tank in Washington, to move New York last month from 50th to 48th in a ranking of state business tax climates; New Jersey is now 50th. A new ranking will be released in October.

"We do everything we can to address those factors that are leading them to think about moving," Adams said, referring to businesses.

Tom Stringer, who leads a group at the tax services firm Ryan LLC that helps companies decide where to expand, worked on the Hain deal and others. He said local IDAs, together with New York State, have improved their response to the poaching of employers.

However, Stringer said Albany needs to do more to help Long Island address the reasons for its high costs: too many local governments, inadequate electric supply, transportation gridlock and local opposition to big development projects.

"We have to come up with some very creative strategies in a high-cost jurisdiction," said the Brightwaters resident, "so that we can start going on the offense, and not just play aggressive defense against other regions."




The Hain Celestial Group (Lake Success)

What they do: natural foods

Project: $10 million new headquarters, product labs

Competing locales: New Jersey, Colorado

Decision in 2012: moved to larger space in Lake Success in return for more than $5.4 million in tax breaks from New York State and Nassau County

Jobs: Retain 250; create 122

Average wages: $131,333**

Wenner Bakery (Bayport)

What they do: bread, frozen dough

Projects: factory expansion of more than $10 million; $1 million headquarters move

Competing locale: New Jersey

Decision in 2013: Open plant in New Brunswick, New Jersey, for $30.3 million in Grow NJ tax breaks; move HQ to Ronkonkoma factory, make improvements there for $502,000 in tax breaks from Suffolk County

Jobs: Create 253 in New Jersey; retain about 370 in Ronkonkoma and Bayport, along with undetermined number of layoffs as some production shifts to New Jersey

Average wages: $35,882-$42,664**

Sysco (Houston)

What they do: food service

Project: new warehouse costing more than $75 million

Competing locales: New Jersey, Connecticut.

Decision in 2011: built warehouse in Central Islip for $7.2 million in tax breaks from Islip Town

Jobs: Create 185*

Average wages: $63,152**

Broadridge Financial Solutions (Lake Success)

What they do: investor document delivery

Project: $77 million in factory improvements

Competing locales: New Jersey, Florida, Virginia, Ohio, Texas.

Decision in 2012: Upgrade Edgewood, Brentwood factories for $39 million in tax breaks, utility bill reductions from New York State, Suffolk County and Islip Town

Jobs: Retain 1,906*

Average wages: $74,500**

Notes: *Some companies have surpassed their employment promises in return for aid, **figures are from the year the company applied for aid

Compiled by James T. Madore

SOURCES: Empire State Development, Nassau County IDA, Suffolk County IDA, Islip IDA, Newsday research

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