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NJBIA'S AGENDA FOR ECONOMIC GROWTH
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INTRODUCTION
ABOUT THE NJBIA AGENDA FOR ECONOMIC GROWTH
The New Jersey Business & Industry Association’s Agenda for Economic Growth is a blueprint for building a strong private-sector economy in New Jersey, creating jobs, strengthening the State’s business climate, and improving its economic competitiveness. These are specific NJBIA recommendations in the areas of Business Taxes, Education, Economic Development, Energy, Environment, Healthcare and Manufacturing. A common theme running through the recommendations in the Agenda for Economic Growth is the need to reduce New Jersey’s high cost of doing business. Some factors impacting the high cost of doing business are predominately outside state government influence – the globalization of the economy, for example – but other factors are directly affected by State Government actions. New Jersey is in fierce competition with Pennsylvania, New York, Delaware and Maryland to retain and attract jobs. Today we are lagging the region in job growth and one of the worst national performers. Reducing the high cost of doing business in our state must be a top priority.
You can also view a list of introduced legislation implementing the Agenda for Economic Growth.
ABOUT NJBIA
The New Jersey Business & Industry Association was founded in 1910 as the New Jersey Manufacturers Association. Today, it is the largest state-level employer association in the nation. NJBIA represents 23,000 member companies that collectively employ an estimated 1.2 million people. NJBIA members span a wide spectrum of industries and are located throughout the State. The overwhelming majority of NJBIA member companies are small businesses with fewer than 25 employees. In fact, only 7 percent of NJBIA’s membership is comprised of businesses with more than 100 employees.
NJBIA provides a wide range of services to its members through its publications, seminars and special events. NJBIA has several affiliates, including New Jersey Manufacturers Insurance Company, the New Jersey Public Research Organization (NJPRO) Foundation, and New Jersey Business magazine.
CONTACT
If you have any questions about the NJBIA Economic Growth Agenda, please contact Senior Vice President at 609-393-7707, ext. 205.
OVERVIEW
NJBIA’S AGENDA FOR LEGISLATIVE AND REGULATORY ACTION
• A healthcare system that emphasizes affordability, quality, transparency and
accessibility.
• A business tax structure that is fair and competitive with other states.
• Conservative spending of State resources with an emphasis on eliminating redundant and ineffective programs.
• An annual cap on spending increases to recurring annual revenue growth.
• Employee benefits programs that do not exceed those imposed by competing states, like paid family leave.
• Cost-effective environmental regulations and programs that are consistent, flexible, balanced and job friendly.
• A competitive energy market that is reliable, affordable and balances conservation, renewable and current sources of energy.
• Economic development programs that meet employers’ needs and complement and supplement business job creation and retention efforts.
• Unemployment compensation and workers’ compensation systems that are fair, reasonable and competitive with other states.
• A public education system that establishes clear accountability and provides every child with the opportunity to receive a quality education at reasonable cost to taxpayers.
• A legal system that promotes fairness, common sense and personal responsibility.
• More reforms to make sure government is conducted in a transparent and open process and contracts are provided solely on merit.
TABLE OF CONTENTS
ECONOMIC DEVELOPMENT
Establish a Preference Program for New Jersey
Manufacturers for Government Contracts
Reform the BEIP Job Incentive Program to Spur
Greater Economic Growth
EDUCATION
Controlling Costs & Increasing Accountability
Expanding Education Options & Innovation
Increasing Standards & Expectations for Students
Maintaining, Expanding and Promoting Workforce Training
ENERGY
Allocate Additional Societal Benefit Charge (SBC)
Dollars to Business Ratepayers
Business Going Green – Keep it Voluntary and Accessible
Energy Audits & Incentives – Helping Businesses
Lower Their Energy Costs
Reduce Manufacturing Energy Costs by Eliminating the
11 Percent Energy Tax/Surcharge and Promoting Efficiency
Return CIEP Retail Adder Funds to CIEP Customers
ENVIRONMENT
Eminent Domain Reform
Impact of DEP Regulations on Development
and Investment in New Jersey
Legislature’s Oversight Responsibility
to Ensure DEP Accountability
Proposed Regulatory and Legislative Changes
to Overhaul the State’s Site Remediation Program
HEALTHCARE
Increase the Use of Electronic Health Records to
Increase Quality and Reduce Unnecessary Costs
Keep Health Insurance Affordable by Not
Enacting More Healthcare Mandates
Reform the State-Regulated Health Insurance Market
LABOR
Restore the Fiscal Integrity of Dedicated Payroll
Funds before They Become Insolvent
LEGAL
New Jersey’s Wrongful Death Act Should Remain Unchanged
TAXATION
Conform New Jersey’s “Net Operating Loss”
Tax Policies to National Standards
Create a New Manufacturing Investment Tax Credit
Enact Single Sales Factor Business Tax Reform for Manufacturers
Make Existing Business Tax Credits Available to Non-Corporate Entities
Reforming the BRRAG Tax Credit Program
Continue to Repeal Unfair Business Tax Policies:
Repeal the Throw-Out Rule Tax on Out-Of-State Income
ECONOMIC DEVELOPMENT
ESTABLISH A PREFERENCE PROGRAM FOR NJ MANUFACTURERS UNDER GOVERNMENT CONTRACTS DESCRIPTION
Authorize the NJ Commerce & Economic Growth Commission to establish a limited preference system for State and local government purchasing goods from New Jersey manufacturers. The commission would determine the percentage of contracts for goods that could be awarded to qualified New Jersey based manufacturers, defined as a for-profit business that produces goods or products.
BACKGROUND
Currently, New Jersey state government has contract set asides for small businesses. However, there are no specific contract preferences for New Jersey manufacturers.
The State small business set-aside is 25 percent. For goods and service contracts, small businesses must register within three categories based on annual gross revenues: less than $500,000; less than $5 million; less than $12 million. Individual contract procurements will specify applicable small business set-aside ranges being sought. Half the states provide a limited government purchasing preference for certain instate manufactured goods, including Pennsylvania, New York, Maryland, Massachusetts and Connecticut.
NJBIA POSITION
NJBIA supports this issue as an attempt to assist New Jersey’s manufacturers. It provides appropriate recognition of the State’s manufacturing community and the challenges it faces competing with foreign manufacturers. Additionally, it recognizes the important role the State of New Jersey and its political
subdivisions play in purchasing goods.
ARGUMENTS IN SUPPORT OF MANUFACTURER CONTRACT
PREFERENCES
Manufacturing remains an important industry sector in New Jersey, but is experiencing across-the-board job declines – 23 percent (96,200) of
manufacturing jobs lost since 2001. With 320,000 manufacturing jobs remaining in New Jersey and another 170,000 jobs dependent on manufacturing, a public policy imperative should be to construct incentives to help retain the manufacturing jobs we have by encouraging use of New Jersey manufactured products. Manufacturing jobs pay above average wages and benefits, do not usually require a college degree and are often located in urban areas.
Currently, New Jersey State and local governments have contract set asides for small businesses. However, there are no specific contract preferences for New Jersey manufacturers.
Half the states provide a limited government purchasing preference for certain instate manufactured goods, including Pennsylvania, New York, Maryland,
Massachusetts and Connecticut. Creating a New Jersey government purchasing preference for the State’s manufacturing community would be an important benefit to our manufacturing sector.
COST
The anticipated cost would be minimal, depending on the preference system established by the commerce commission. Additionally, any costs would be offset by taxpayer savings derived from retaining manufacturing sector
employment.
LEGISLATIVE HISTORY
Assembly Bill 1479 was introduced in the 2008-2009 legislative session. It was reported out of the Assembly Commerce and Economic Growth Committee on February 25 and is awaiting action in the full Assembly.
CONTACT
First Vice President, Economic Development & Taxation at
609-393-7707, ext. 247.
REFORM THE BEIP JOB INCENTIVE PROGRAM TO SPUR GREATER ECONOMIC GROWTH DESCRIPTION
Eliminating recently imposed restrictions on Business Employment Incentive Program (BEIP) participation can spur urban economic growth. In urban areas that desperately need job creation, the program should be restored to its original and more successful form. Specifically, caps on new employee salaries (approximately $160,000) and excess job creation requirements (limited to 120 percent of the original job creation goal) should be rescinded for urban businesses. And, the 10-year term limit on participation should be extended, at the discretion of the NJ Economic Development Authority (EDA), with lowered grant amounts and increased job retention mandates.
BACKGROUND
The BEIP program works as follows: Employers that create new jobs receive a portion of new employees’ income tax payments (ranging from 10 to 80 percent) in the form of an annual grant for a period of 10 years. The employer promises to maintain minimum new employment levels for at least 15 years. Incentive grants are based on actual jobs created, not promised, and paid only after new employees have worked the full year. The employers must demonstrate that the BEIP grant is a materially important factor in their decision to relocate or expand in New Jersey.
Legislation enacted in 2003 capped the total amount of a BEIP grant any one applicant can receive over the life of the grant at $50,000 per new employee (or an annual salary of approximately $160,000 per employee). In 2005, EDA adopted regulations limiting the amount of additional jobs qualifying for grant payment to 20 percent above the originally contracted new jobs target. Regardless of the measure used—employment, economic activity or tax generation—BEIP is without question a New Jersey economic development success story. For the past decade, BEIP has served as the primary incentive to encourage new employers to locate in New Jersey.
The statistics speak for themselves. According to program administrators at the EDA, BEIP’S 369 employer participants have created a total of 70,116 jobs and generated $11.9 billion in public-private investment since the program’s inception in 1996.
Economists at Rutgers University’s Bloustein School reviewed BEIP impacts in a 2005 report that looked at projects through February 2005. They found that BEIP grants:
• Have an Annual Economic Impact of $8.4 Billion. Each year, the operations of the BEIP projects add approximately $8.4 billion to New Jersey’s gross State product. This equates to an annual increase of approximately $88 for each tax dollar spent to fund the program.
• Generate $349 Million in Additional Tax Revenues Annually. The 183 BEIP projects generate approximately $349 million in additional State tax revenue each year. In other words, for each tax dollar spent on the BEIP program, the State receives approximately $3.70 in revenues.
• Lead to More Than 100,000 New Jobs. The 183 BEIP projects have created approximately 51,665 permanent jobs. The economic activity generated by the BEIP projects leads indirectly to the creation of another 58,089 jobs, for a total of 109,754 jobs.
• Are Cost-Effective Across Many Sectors. The annual grant expenditures made on the BEIP program are approximately $95.1 million, or about $1,841 per job created by the BEIP projects. The financial activities sector had the highest expenditure per job created ($3,119), followed by the professional and business services sector ($1,661) and the manufacturing sector ($1,422).
• Impact Major Business Sectors: The 88 BEIP projects approved in fiscal year 2005 are estimated to create approximately 12,318 jobs. Like the 183 approved and executed projects, the majority of the 88 projects are in the manufacturing (40.9 percent), professional and business services (20.5 percent), and financial activities (15.9 percent) sectors.
• Help Small and Mid-Sized Businesses. The majority of BEIP awards examined (55.7 percent) have been extended to small to mid-sized projects creating fewer than 200 jobs each, while 49.3 percent of the jobs directly generated by the BEIP projects have come from those that created 500 jobs or more.
• Attract Out-of-State Companies. Over 50 percent of the BEIP awards analyzed (100 out of 183) have been made to companies relocating their facilities from other states, with 42 percent (77 awards) going to companies expanding their existing operations in New Jersey and very few (6 awards) going to new businesses. The majority of the relocations (69 percent) have come from New York.
• Go to Companies in Almost Every County. BEIP grants have been made to companies in almost every county in the State. The largest shares of the awards have gone to companies in Hudson (25.1 percent), Middlesex (12 percent) and Morris (9.8 percent) counties. The largest percentages of the total jobs created by BEIP projects have been in Hudson (34.7 percent), Somerset (11.6 percent) and Middlesex (7.6 percent) counties.
NJBIA POSITION
NJBIA supports legislation designed to expand BEIP benefits and eligibility. Specifically, caps on new employee salary (approximately $160,000) and excess job creation (limited to 120 percent of the original job creation goal) should be rescinded for urban businesses. Additionally, the 10-year term limit on participation should be extended, at the discretion of the EDA, with lowered grant amounts and increased job retention mandates.
ARGUMENTS IN SUPPORT OF ELIMINATING BEIP PROGRAM
RESTRICTIONS IN URBAN AREAS
The BEIP is the most successful job creation and economic stimulus program in New Jersey’s history. Since its inception in 1996, 369 businesses have directly created a total of 70,116 jobs, indirectly created another 75,000 jobs and generated $11.9 billion in public-private investment.
BEIP is attractive because it positively impacts on one of the most onerous costs of doing business facing New Jersey employers—our high personnel costs. BEIP grants are directly linked to payrolls—the higher the payroll, the higher the BEIP grant.
Unlike many stimulus programs, BEIP is a model of fiscal responsibility. Incentive grants are based on actual jobs created (not promised) and paid only after new employees have worked for the full year. Grant amounts are calculated as a percentage of personal income taxes generated by the new employees; hence, unlike other State programs, State government makes money from BEIP. In fact, every $1 spent on BEIP generates $3.70 in State tax revenues.
Legislative and regulatory changes made to BEIP these past five years were designed to limit the growth of the program. Specifically, these changes effectively capped the new employee salary and limited the number of jobs an applicant can create under the program.
The initial group of BEIP recipients from the late 1990s is reaching its 10-year limit on participation in the program. There is no discretionary ability to continue the BEIP grant past the 10-year limit. BEIP is a proven urban job generator. The largest shares of participants have come from Hudson County, and 22 projects have been generated in Newark, Elizabeth, Trenton, Camden, Perth Amboy, Vineland, Millville and Bridgeton alone.
LEGISLATION
Legislation enacted in 2003 capped the total amount of a BEIP grant any one applicant can receive over the life of the grant at $50,000 per new employee (or an annual salary of approximately $160,000 per employee). In 2005 the EDA adopted regulations limiting the amount of additional jobs qualifying for grant payment to 20 percent above the originally contracted new jobs target.
COST
In 2007 BEIP grants totaled $152 million, out of $562 million in new State tax revenues generated by the program. Removing program limitations in urban areas, while permitting contract extension beyond ten years, will create no new
costs.
CONTACT
First Vice President, Economic Development & Taxation at
609-393-7707, ext. 247.
EDUCATION
CONTROLLING COSTS & INCREASING ACCOUNTABILITY
DESCRIPTION
To increase education quality and to save taxpayer dollars, accountability needs to be a bigger part of New Jersey’s K-12 education system. To properly hold schools and districts accountable, New Jersey needs better data to assess their effectiveness and efficiency. In addition, the State has recently instituted several promising accountability mechanisms that should be enforced to the fullest extent possible. Also to promote effectiveness and efficiency, New Jersey should aggressively promote consolidation of school districts and school services.
BACKGROUND
From the summer of 2006 through June of 2007, the State Legislature and its four special session joint committees on property taxes examined many of the reasons for and potential solutions to New Jersey’s exorbitant property tax system. Education costs were at the heart of many of the issues that were explored, and greater education accountability was part of the solution. The NJ Department of Education (DOE) is also in the process of updating its education data management system, dubbed NJSMART. It is a comprehensive data warehouse with student level data reporting and a unique statewide student identification system. Governor Corzine, the State Legislature and Education Commissioner Lucille Davy have indicated that it is a crucial need and top priority for the State. Aspects of it are complete and now in use, but other more simple school statistics, like graduation and drop out rates, are still not uniformly reported in New Jersey. More comprehensive data can be used to better tailor instruction to make schools more effective and efficient.
The DOE recently updated its system for monitoring and evaluating public school districts. It implemented the NJ Quality Single Accountability Continuum (QSAC) in 2005. The new system shifts the focus from compliance to assistance, capacity-building and improvement. It uses a single unified accountability system that incorporates instruction, personnel, fiscal management, operations and governance.
The DOE also has new powers to intervene in a school district to correct fiscal and budget problems with the enactment of the School District Fiscal Accountability Act, and county school superintendents were given greater authority to push local districts for more accountability and efficiency with Assembly Speaker Joseph Roberts’ CORE bill, which became law in 2007.
Currently, there are 612 local school districts in New Jersey, more than
Pennsylvania, Maryland and Delaware combined. There are some districts with no students, many more with fewer than 100 students and many that do not offer a full K-12 education.
NJBIA POSITION
To more efficiently and effectively use taxpayer dollars in education, New Jersey should improve the data collection, reporting and use in its education system.
The DOE should fully enforce NJQSAC, the School District Fiscal Accountability Act, the CORE bill and other NJDOE powers to provide greater oversight over school districts’ efficiency and effectiveness. Small school districts with few students should be consolidated to improve the chances for accountability, efficiency and effectiveness.
ARGUMENTS IN SUPPORT OF CONTROLLING COSTS AND INCREASING ACCOUNTABILITY
Property taxes are the number one issue for New Jersey residents, education costs are the largest component of property taxes and these reforms can help reduce or control those costs.
NJSMART is already a top priority for New Jersey, and properly implementing it would correct the State’s worst grade on the recent US Chamber of Commerce State report card on education. NJSMART and other uniform education data reporting are easy ways to improve education policy. They can show what works and what does not; which high schools need help and which are performing well; and which teachers and administrators deserve credit and which ones deserve blame.
NJQSAC, the School District Fiscal Accountability Act and the Executive County Superintendent have recently become law, and they need to be optimally utilized to provide further reform and strengthening of the schools. New Jersey is like no other state in terms of the delivery of local government and educational services. The high number of small, inefficient school districts is part of the reason for New Jersey’s highest-in-the-nation property taxes. Larger
school districts can lead to lower per pupil costs because of economies of scale, less redundancy, more collective bargaining power and a host of other improvements. Quality should also improve because more students will have access to more resources when they are shared in a larger school district.
CONTACT
Director of Education & Workforce Development Policy at 609-393-7707, ext. 201.
EXPANDING EDUCATION OPTIONS & INNOVATION
DESCRIPTION
Expanding educational alternatives within New Jersey’s school system is critical to better prepare students for the specialization, diversity and complexity of today’s and tomorrow’s workforce. Educational alternatives and innovations currently exist in New Jersey, but are not sufficiently promoted and financially supported, especially given their value in workforce development. Strengthening education options allows schools to better shape instruction and the learning environment to meet students’ needs.
Producing students with diverse interests and greater awareness of the number of real world options and career opportunities is beneficial to the business community and its diverse personnel demands, as well as all students. Augmenting public and private school choice, curriculum innovations and education partnerships should be a goal.
BACKGROUND
Choice within the public school system has been expanding. There has been movement in many school districts to create smaller schools, more specialized schools and schools-within-schools. Examples of this trend are career academies, magnet schools and smaller learning communities within larger schools. These trends can be seen in many larger urban school districts like New York City as an attempt to reform the schools. This approach allows for more individual attention and a more focused education to fit individual student needs.
Public school choice also includes vocational schools and charter schools. New Jersey has 60 schools in 21 county vocational-technical school districts that educate approximately 30,000 students. They have 44 full-time career academies and 800 approved career and technical programs that have contributed to New Jersey’s workforce. They have even garnered national attention. Eighteen of the 36 New Jersey high schools named to the top 500 in the nation are county vocational-technical schools. Vocational schools are fast becoming models in preparing high school students and adults for college and the careers of the 21st century. Charter schools are public schools operated independently of local school districts. They educate approximately 15,000 New Jersey schoolchildren with roughly two-thirds of them qualifying for free or reduced-price lunch. They are subject to most regulations and laws as traditional public schools, except for certain facility and leadership requirements. They are also founded on the core concepts of accountability, choice and innovation.
Private school choice on the other hand, is being threatened. Existing non-public schools have been closing in urban areas at an alarming rate, and recently they have begun closing and consolidating in suburban areas as well. These schools have operating costs one-third to one-half that of their comparable public schools and cost the State very little compared to public schools.
Options within school curricula and programs also have a history in New Jersey. From 1995 through 2003, NJBIA fought for technology education because it is an important part of workforce development, and in 2003, succeeded in making technology education part of the core curriculum content standards detailing the subjects that are taught to all public school students. Employers asked for this change because they needed greater technology and analytical skills in their employees. Employers have also recently collaborated with teachers to create a middle school curriculum that infuses business skills and awareness into the classroom. It was published and disseminated to educators across the State by the New Jersey Policy Research Organization Foundation, the research affiliate of NJBIA. Again employers asked for this curriculum because there was a lack of real world skills and business and career awareness in the classroom. Another recent example of curricula innovation in New Jersey is the 12th Grade Option initiative, where partnerships between high school, higher education, the community and business were created to make the senior year of high school more meaningful. NJBIA and the NJ Department of Education developed a Career Internship Resource Packet for this program. It could serve as a model for a similar program to promote partnerships.
NJBIA POSITION
To better prepare for the jobs of the future, New Jersey must strengthen educational options through legislation and regulation. New Jersey should expand public school choice by authorizing more charter schools, vocational-technical schools, schools-within-schools, magnet schools and academies. It should also increase enrollment capacity at county vocationaltechnical schools to increase the effective workforce preparation opportunities they provide.
New Jersey should also create a non-public school choice program in New Jersey by providing financial resources to attend a private school, such as a State-supported urban scholarships program.
New Jersey’s Department of Education should provide for innovation and flexibility within the curriculum by supporting subjects such as technology education, financial literacy and entrepreneurship. And the State should increase the use of programs like partnerships and internships that bring business and schools together.
ARGUMENTS IN SUPPORT OF EXPANDING OPTIONS
New Jersey’s vocational-technical high schools work. Collectively, they have a 96 percent success rate in placing their graduates in either work or higher education. Data from NJBIA’s 2006 Business Outlook Survey indicates that employers’ satisfaction level with entry-level employees from public vocationaltechnical high schools is more than 50 percent higher than their satisfaction with employees from traditional public high schools. Vocational schools do not have the capacity to meet the demand for their education. Two students apply to a vocational school for every one open seat.
Expanding these schools and their available seats will generate more students with a clear linkage to business and the future workforce. Non-public schools offer an important option for New Jersey students that need to be preserved. The continued closing of non-public schools will force more students into public schools that have higher per pupil costs for the State, require new school buildings and often have inferior achievement levels in urban areas.
Funding non-public schools through scholarships for example can save the nonpublic schools and save the State money because it would still be less expensive than educating the student in a public school. Targeting non-public school scholarships to urban students would offer them more alternatives to better prepare for the workforce. More importantly these schools provide another quality education option to students.
Businesses and State and national business groups have stepped forward to infuse business and technology skills into the curriculum. Technology education, which has a history of business support in New Jersey, must be strengthened.
CONTACT
Director of Education & Workforce Development Policy at 609-393-7707, ext. 201.
INCREASING STANDARDS & EXPECTATIONS
FOR STUDENTS
DESCRIPTION
New Jersey businesses need a skilled and trained workforce to maintain a high level of productivity, yet many businesses struggle to find workers with the skills they need. Furthermore, even traditionally blue-collar jobs will require increased skill levels in the future.
Increasing our expectations for New Jersey’s educators and students is the single biggest reform that the State can undertake to increase achievement, give the high school diploma more meaning and produce graduates better prepared for the workforce.
To prepare our workforce for the 21st century, New Jersey must increase high school standards and expectations. The State should increase the difficulty of the High School Proficiency Assessment (HSPA) to more accurately reflect a quality high school education as well as the needs of the workforce. New Jersey should limit the use of alternatives to the HSPA, such as the Special Review Assessment (SRA) to only truly special needs students. And high school coursework should include more rigor and more advanced math and science classes.
BACKGROUND
Currently New Jersey mandates that a high school student take four years of language arts and health and physical education; three years of mathematics, science and social studies; and one year each of world language, visual and performing arts and practical arts. Specific courses are not required in these disciplines, allowing different districts to meet these standards through more or
less rigorous means. In 1996 the State established Core Curriculum Content Standards (CCCS) to guide student achievement and assessment, but schools are largely left with no responsibility to cover all the standards. To graduate high school, students must either pass the HSPA, a test in the junior year linked to the CCCS, or pass the SRA, often described as easier and a backdoor way to graduation. This coursework, curricula and graduation flexibility allows for a wide spectrum in terms of the rigor demanded of high school students in different high schools and school districts.
NJBIA POSITION
To prepare students for the 21st century, New Jersey should establish more uniform standards among different high schools and set higher standards for all high school students. The HSPA should be made more thorough and challenging for New Jersey high school diplomas to have more meaning for employers. Graduating high school without passing the HSPA, such as with the SRA, should be rare and limited to those students with true special needs, not just those who do not pass the HSPA.
The New Jersey high school experience should be reformed to promote higher level coursework, including more advanced mathematics and science. When reforming high school coursework and assessments, flexibility should be provided for students already preparing for the workforce through a licensed career and technical education (CTE) program.
ARGUMENTS IN SUPPORT OF HIGHER STANDARDS
Research has shown that challenging, high-level coursework leads to increased SAT scores, less remediation in college, higher college graduation rates and increased workplace earnings. Research shows additional classes in Algebra I and II, Geometry, Trigonometry, pre-Calculus and Calculus increase a student’s chances of completing college by as much as 62 percent.
Indications are that demanding coursework is even a better predictor of success than grades. Achievement does not matter as much as the fact that student expectations are raised and students are challenged. More challenging high school coursework has also shown itself to be a potential solution to the achievement gap between white students and minority students. A more thorough and challenging HSPA would make New Jersey high school diplomas more meaningful for employers. Currently, the HSPA tests students graduating high school at only an 8th grade level and yet it stands as the indicator of a successful high school education.
Reducing the use of the SRA is also important as overuse of the SRA can skew graduation rates. In Newark during the 2006-2007 school year, for example, three of the four largest public high schools had more students using the SRA to graduate than the HSPA.
The mindset of high expectations is also a critical part of increasing standards. The education association Phi Delta Kappa points out that high expectations among principals is an essential aspect to turning around many failing schools. Teach For America, a national education reform organization, believe that higher expectations for teachers is the main reform needed so that low-income urban and rural schools can be improved. Businesses struggle to find workers, particularly entry-level workers, with the skills they need. In 2006 NJBIA’s Business Outlook Survey indicated that only one-third of employers view New Jersey’s high school graduates as good or excellent, and less than one-third report that the verbal communication skills, math and science skills, critical thinking skills and written communication skills of their entry level workers are good or excellent. Postsecondary institutions, employers and young people spend more than $17 billion per year on remedial classes so students can gain the knowledge and skills they should have acquired in high school.
Two-thirds of new jobs created between the years 2000 and 2010 will require more than a high school degree, and many traditionally blue-collar jobs will require some high-level skills in the future. More rigorous schoolwork leads to a 13 percent increase in entry-level wages, while more advanced math classes can lead to an increase in the chances of completing college.
CONTACT
Director of Education & Workforce Development Policy at 609-393-7707, ext. 201.
MAINTAINING, EXPANDING AND PROMOTING
WORKFORCE TRAINING
DESCRIPTION
New Jersey has a workforce training program with great potential that should be maintained, expanded and promoted. Public workforce development resources need to be better utilized by employers and employees. Training adults and incumbent workers through county colleges, NJ Department of Labor and Workforce Development (DOL) programs and county vocational-technical schools must be a component of New Jersey’s economic development efforts. The DOL should maintain its existing workforce training programs, add flexibility to them to fit employer needs and better promote them. New Jersey also needs to preserve its other adult education opportunities through preserving county vocational-technical school adult education aid and adult high school aid.
BACKGROUND
The mission of New Jersey’s 19 community colleges includes providing occupational programs and business support services in response to local and statewide needs. There are 63 New Jersey county college campuses, one within 30 minutes of every resident of the State. In 2004, the 19 county colleges organized to form the NJ Community College Consortium for Workforce & Economic Development to provide even more effective and streamlined training services, saving resources and improving the delivery of training. Currently DOL offers approximately $10 million in literacy grants and $25 million in customized training grants every year so businesses can provide training to their employees. The training is funded by business taxes to the unemployment insurance fund. In the 2008 fiscal year, the $25 million in customized training grants serves 53,000 employees at 240 companies. Often, however, some of this funding goes unused.
Historically, businesses have had difficulty applying for these grants because they have had to provide a minimum of ten workers to fill a class. The program also required them to pay for a share of the training and fill out onerous
paperwork. In 2007 NJBIA joined with the DOL and county colleges in a partnership to overcome these difficulties. Under this partnership small businesses that have similar training needs can be grouped together to meet the ten-worker minimum. It also waived a lot of the previous cumbersome paperwork requirements. Today, the $1.88 million grant provides training in computer applications, English as a second language, communications and mathematics. The grant allows for 440 classes to provide training to 5,000 employees at about 1,000 businesses.
As of spring 2008, more than 56,000 adults were enrolled in New Jersey’s county vocational-technical school districts for training and continuing education, and more than 10,000 adults are enrolled in adult high schools in eight county vocational-technical school districts and 35 other school districts. These adult high schools provide a second chance for dropouts, recent immigrants and disadvantaged New Jersey adults. The future of adult high schools has been in jeopardy since 2004, when the State budget shifted $18.4 million from adult high school programs into the generic “consolidated aid” category. Although the school districts that previously received aid for adult high schools were “held harmless” from losing funds, adult high school programs no longer generate per pupil funding ($1,443) specifically designated for these second chance school students. Since the shift, the consolidated aid can be used for any purpose, which often means that it is not used for adult high schools.
NJBIA POSITION
To maintain and improve New Jersey’s workforce, the State must effectively utilize its public workforce development resources. New Jersey should preserve and promote DOL’s training grant programs to more businesses. The DOL should provide more flexibility in the application and administration of grants so that more employers and employees can benefit from them. A portion of existing school funding should be dedicated to adult education and adult high schools.
ARGUMENTS IN SUPPORT OF TRAINING PROGRAMS
NJBIA surveys indicate that most of the workforce lacks some skills deemed desirable by their employer. This is especially true for manufacturers, two-thirds of which report difficulty finding skilled workers. Twenty-six percent indicated that this lack of skilled workers is one of their most significant problems. New Jersey’s 19 county colleges and their recently formed New Jersey Community College Consortium for Workforce and Economic Development are an essential part of the State’s workforce development system, with basic skills being part of their core mission. The Consortium’s success in working with NJBIA, the NJ Utilities Association and NJ Biotech Council demonstrate the effectiveness of a flexible approach working with a group of employers being trained by a consortium with funds from the DOL.
Flexibility is the key to making the most out of New Jersey’s workforce development programs. Increased flexibility means more businesses can participate and more employees, especially low-skill and low-income workers, will improve their skills in the workforce. Maintaining these training dollars and expanding them with flexibility is a win-win for everyone. Adult education and adult high schools provide a critical second chance to many New Jerseyans, yet their enrollment has declined due to lack of dedicated funding. Many urban communities have a high percentage of adults without a high school diploma, including Atlantic, Cumberland, Essex, Hudson, Passaic, Salem and Union counties, all of which are above 20 percent. Adult high schools are also cost-effective because they use existing facilities and staff.
CONTACT
Director of Education & Workforce Development Policy at 609-393-7707, ext. 201.
ENERGY
ALLOCATE ADDITIONAL SOCIETAL BENEFIT
CHARGE DOLLARS TO BUSINESS-RELATED
ENERGY PROGRAMS
DESCRIPTION
Funds collected for energy efficiency, clean energy and renewable energy programs under the Societal Benefits Charge (SBC) should be allocated to three categories of ratepayer—residential, small commercial, and large commercial and industrial—in the same proportion as they contribute to it. In other words the SBC paid by business ratepayers should be used by business ratepayers. The State should establish a credit against a business’ SBC equal to the cost of certain energy efficient or renewable energy products or services. This credit would encourage businesses to purchase and install energy-saving products and services by allowing the businesses to claim a credit against the SBC.
BACKGROUND
The SBC is paid by all electricity consumers in New Jersey. Because commercial and industrial (C&I) ratepayers consume 64 percent of the State’s electricity, they pay significantly more money under the SBC. SBC funds are then distributed among six policy initiatives, one of which falls under the State’s Clean Energy Program. Currently, the Board of Public Utilities (BPU) administers the program and decides the funding allocation between residential and C&I customers. Within the C&I money, there is also funding for schools and other public buildings. Recently, the rebates for solar energy projects have been eliminated for larger C&I ratepayers and are only available for residential and small businesses.
Furthermore the backlog and paperwork at the BPU has left many projects in limbo for months. A renewable project that is submitted today is not guaranteed funding. Combined Heat and Power (CHP) grant programs have almost a year wait from submission to approval as well.
NJBIA POSITION
The BPU should strive for a more balanced ratio in funding C&I energy conservation projects. Money should be divided between different ratepayer classes based on their share of SBC contributions. The Legislature should enact a tax credit to encourage additional efficiencies and renewable energy projects by businesses. The backlog and uncertainty in the application process for energy related grants and tax credits must be reduced in order to help businesses invest in energy efficiency programs and help the State achieve its overall energy goals.
LEGISLATIVE HISTORY
A-616 was introduced January 8, 2008 and referred to the Assembly Telecommunications and Utilities Committee. The bill would more equally allocate the SBC funds among residential, small commercial and large C&I utility customers. It would also establish a credit against the SBC for energy efficiency projects and provide for certain energy assistance grants.
CONTACT
Assistant Vice President, Energy & Federal Affairs at 609-393-7707, ext. 204.
BUSINESS GOING GREEN- KEEP IT VOLUNTARY AND ACCESSIBLE DESCRIPTION
Over the past year there has been a variety of policy initiatives related to “going green” on the residential, business, municipal and State level. However, there has been little education or assistance for many of these sectors on how to actually go green. As a result, many businesses are left to their own devices to sort through issues like so-called “green building codes” (constructing buildings to be more energy efficient), solar panels and other renewable energy sources, and conservation programs. Additionally, some policy advocates want to mandate the use of these programs. Usually there is a large additional cost for building green. NJBIA feels it is important to encourage companies to voluntarily undertake more energy-efficient building but to stop short of forcing these additional costs on the private sector.
BACKGROUND
The Clean Energy Program within the NJ Board of Public Utilities (BPU) is the main source of business incentives and information related to energy efficiency and renewables. While the program has existed since deregulation, there has been little emphasis on helping the business customer understand ways to go green and programs to offset the cost. Information as simple as how to conduct an energy audit is not currently available for a business ratepayer. Additionally, businesses are capped by the Clean Energy Fund at $200,000 for energy efficiency rebates and incentives, while residential customers have no limitations. Building green can add as much as 20 percent to the cost of a new building, but for many companies in New Jersey, it is the cost of retrofitting an old building that adds unexpected costs to a budget. This is a perfect opportunity to encourage companies through rebates and incentives to consider implementing green practices and help meet the bottom line.
Within the Clean Energy Program is funding for the SmartStart Building program.
This program assists businesses located in smart growth areas designated by the State Plan with different aspects of construction and retrofitting of buildings. A business must submit an application before any equipment is purchased or work begins. There is a limit of $200,000 per customer utility account for rebates or incentives. The New Jersey Building Code currently does not feature a green subcode. The Clean Energy Program sets voluntary standards for products that meet the $200,000 rebate or incentive level.
NJBIA POSITION
NJBIA supports policies that provide guidance and financial incentives to businesses that implement green strategies on a voluntary basis. Because all business ratepayers contribute to the Clean Energy Fund, this is an ideal place to provide educational materials to help companies pursue strategies to go green. Understanding ways to incorporate green thinking is a first step in planning for a voluntary change in the company. NJBIA believes that the $200,000 cap on business should be lifted and would encourage legislation to eliminate this provision. However, the State must resist the urge to make green building standards mandatory. These standards have a high initial cost that could have a negative economic effect on businesses that are struggling in a weak economy.
LEGISLATIVE HISTORY
Legislation that encourages the private sector to voluntarily embark on green strategies includes: A-843 which requires that all ratepayers are eligible for rebates or incentives regardless of geographic location, and ACS-1612-385-1781/S-241 which exempts certain renewable energy systems from real property taxation and from fees for municipal permits. A-1629/S-702 however would change the State Uniform Construction Code’s energy subcode to more stringent standards that could be costly to business.
CONTACT
Assistant Vice President, Energy & Federal Affairs at 609-393-7707, ext. 204.
ENERGY AUDITS & INCENTIVES HELPING
BUSINESSES LOWER THEIR ENERGY
COSTS
DESCRIPTION
Commercial and industrial ratepayers consume 64 percent of the State’s electricity, making them the largest financial contributor to the State’s Clean Energy Fund. Yet New Jersey’s policies skew funding for clean energy projects towards residential projects that yield substantially less in pollution reduction. In order to attain its energy efficiency goals, the State should invest more in energy efficiency programs for commercial and industrial ratepayers because these investments return greater energy savings and greater reductions in pollution than investments in residential projects. The State should remove the cap on energy efficiency rebates and engage in energy audits for commercial and industrial energy users. Investing more in commercial and industrial clean energy projects will also help New Jersey’s economic competitiveness. New Jersey’s commercial and industrial electricity consumers pay some of the highest rates in the country. Increasing energy efficiency would help them reduce a key cost of doing business in the Garden State. In short, greater clean energy incentives for business will pay off in greater pollution reduction for the tax dollar and make our private-sector more
competitive.
BACKGROUND
The Board of Public Utilities (BPU) administers the Clean Energy Program, which is funded by ratepayers through the Societal Benefits Charge (SBC). The SBC was created as part of the 1999 energy deregulation initiative and is divided amongst six policy initiatives. One of these is the State’s Clean Energy Program, which operates the Clean Energy Fund. The Clean Energy Fund provides incentives, usually in the form of rebates or grants, for homeowners and businesses to engage in energy efficiency projects. These include renewable energy projects, such as solar energy and wind power, and conservation projects such as energy efficiency audits and upgrades. The BPU decides how to divide Clean Energy Fund monies between residential customers and commercial and industrial customers. Recently, the solar energy program rebates have been eliminated for larger commercial and industrial ratepayers, and residential and small business projects are only funded through 2012.
The Board limits the amount of energy efficiency rebates for a commercial or industrial ratepayer to $200,000 per entity. Currently the Clean Energy program does not have an energy audit program or educational assistance aimed at commercial and industrial ratepayers, while there is audit assistance for residential and municipal ratepayers.
NJBIA POSITION
The State should encourage more commercial and industrial energy efficiency programs by removing the $200,000 cap on commercial and industrial ratepayers regarding energy efficiency rebates and incentives. The State should direct more resources toward commercial and industrial ratepayers for energy audits and education programs aimed at increased energy efficiency. The State should not mandate energy efficiency or renewable projects on businesses, but maintain a system that encourages them to voluntarily undertake such projects by providing financial incentives.
ARGUMENTS FOR SUPPORTING MORE COMMERCIAL AND INDUSTRIAL ENERGY EFFICIENCY PROJECTS
New Jersey’s commercial and industrial energy consumers pay some of the highest electricity rates in the nation. According to the federal Energy Information Agency, New Jersey’s industrial users pay the 7th highest electric rates in the nation and commercial users pay the 11th highest. Commercial and industrial users consume 64 percent of all electricity sold in New Jersey. Therefore, they contributed the most to the Clean Energy Fund through the SBC yet receive the least of the benefits. Investments in commercial and industrial energy efficiency projects yield much greater public benefits than investments in residential projects. While the State invested much less in commercial and industrial projects in 2006, these projects yielded three times the reduction in carbon emissions than residential projects.
Commercial and Industrial efficiency projects often cost more than $200,000 but yield a significantly larger bang for the buck in terms of KWh saved. For the 2008 year the BPU has budgeted over $57 million for these projects. In prior years there has been carry over money, which could be attributed to the low rebate levels.
COST
BPU records show that investments in commercial and industrial energy efficiency projects provide greater pollution reduction for the dollar than investments in residential projects. In 2006, the Clean Energy Program budgeted over $79 million for residential efficiency programs, while only $39 million was budgeted for commercial and industrial programming. The Clean Energy Program Report for 2006 showed that commercial and industrial programs reduced carbon emissions by 67,969 metric tons, compared to residential programs, which reduced them by only 19,032 metric tons. In other words, commercial and industrial projects achieved nearly three times the benefit at half of the costs.
CONTACT
Assistant Vice President, Energy & Federal Affairs at 609-393-7707, ext. 204.
REDUCE MANUFACTURING ENERGY
COSTS BY ELIMINATING THE 11 PERCENT ENERGY TAX/SURCHARGE AND PROMOTING
EFFICIENCY
DESCRIPTION
NJBIA recommends an 11 percent reduction in manufacturer’s (defined as a business location where at least 50 percent of equipment and machinery is used in the production of goods) electric costs by exempting them from the 7 percent sales tax and the “temporary” 4 percent “Transitional Energy Facilities Assessment (TEFA).” Manufacturers should also be exempt from the sales tax on natural gas. The Department of Environmental Protection (DEP) should amend its industrial permit regulations to achieve maximum energy grid stability and demand-side management.
BACKGROUND
Taxes and Deregulation
New Jersey Commercial and Industrial (C&I) electricity customers comprise 64 percent of the State’s electricity load. According to the US Energy Information Administration, New Jersey’s industrial electricity prices are the seventh highest in the nation. Skyrocketing energy prices have impacted the ability of New Jersey companies to compete with other facilities around the nation and around the world. As part of electric industry deregulation in 1997, the 13 percent “gross receipts and franchise tax” was scheduled to be reduced to eight percent over five years, such that users would pay only the then 6 percent sales tax and a 2 percent Corporation Business Tax assessment. Instead the phase-down was stopped at 10 percent with the increase in the sales tax, this has been increased to 11 percent. This is an additional cost on companies not imposed in other states.
Demand-Side Management
The Board of Public Utilities (BPU), PJM (the electric grid operator) and energy utilities encourage commercial and industrial customers to participate in demandside management programs designed to curb power usage during emergency and high-demand periods. This involves private sector companies generating their own electricity to prevent blackouts, brownouts or restore the grid. However, the DEP’s permitting process discourages participation in the program. Anyone with a DEP air permit is limited in the amount of emissions their operation can produce and the number of hours it can produce them. If a facility engages in onsite electricity generation, those emissions are going to increase. If the additional emissions exceed what is allowed under the permit, the facility faces fines and penalties for an environmental violation even though the facility is operating normally.
Societal Benefits Charge
All energy consumers pay a Societal Benefits Charge which funds an annual $140 million program of subsidies for alternative energy sources, such as solar and wind energy projects, as well as energy efficiency upgrades in lighting, building structure and equipment. Commercial and industrial (C&I) consumers pay the bulk of the money into the fund. BPU regulations, however, cap payments for efficiency upgrades to businesses at $200,000 per customer utility account. And BPU has allocated the majority of the Societal Benefits Charge for energy efficiency to the residential sector.
NJBIA POSITION
Legislators should lower energy costs and encourage companies to conserve energy and maintain reliability in New Jersey’s power grid with concrete financial incentives. Legislators should stop delaying the phase-out of TEFA and exempt manufacturers from the 7 percent sales tax on electricity and natural gas. The State should provide greater conservation incentives by lifting the $200,000 cap on energy efficiency projects for C&I energy users. DEP should revamp its air permitting process so it does not punish businesses that engage in on-site electricity generation as part of PJM’s Demand-Side Management Program. DEP air permits should be more flexible to allow those participating in demand-side management to increase emissions during an energy demand emergency.
ARGUMENTS IN SUPPORT OF ENERGY COST REDUCTIONS AND INCENTIVES
Manufacturing remains an important industry sector in New Jersey, but is experiencing across-the-board job declines. Just since 2001, New Jersey has experienced a 23 percent decrease in manufacturing employment, representing 92,600 jobs lost. Despite these job declines, manufacturers will relocate/expand operations in New Jersey if economic development incentives help reduce their cost of doing business. With 308,600 manufacturing jobs remaining in New Jersey and another 170,000 jobs dependent on manufacturing, a public policy imperative should be to construct incentives to help retain manufacturing jobs. Manufacturers are among the largest users of electricity and natural gas. High energy costs are continually cited as a major obstacle to manufacturing success in New Jersey. By eliminating the 11 percent energy tax/surcharge, manufacturers will realize significant production savings.
When TEFA was imposed in 1997, it was intended as a temporary surcharge to help the industry transition to a deregulated market. Delaying the intended phase-out is effectively increasing taxes on energy users. A comprehensive energy efficiency upgrade at a manufacturing facility typically costs more than $1 million. Capping energy efficiency grants at $200,000 prevents the program from providing a meaningful incentive to promote efficiency. It is in the public interest for companies to generate electricity on-site during periods of unusually high demand. It takes pressure off of the power grid and helps prevent brownout and blackouts. DEP should not punish companies with higher fees and fines for engaging in demand-side reduction activities.
COST
Previously, the Office of Legislative Services had estimated that the complete elimination of the then energy tax/surcharge on manufacturers would reduce State budget revenues at most by $80 million annually. No estimate was provided for counter-balancing revenue increases due to preserved jobs and manufacturing operations.
LEGISLATIVE HISTORY
A-1085 was introduced January 8, 2008 and referred to the Assembly Appropriations Committee. S-1032 was introduced January 28, 2008 and referred to the Senate Economic Growth Commission. Both measures would reduce taxes on the consumption of energy. Previous versions of the bills were endorsed by the New Jersey Sales and Use Tax Review Commission.
CONTACT
Assistant Vice President, Energy & Federal Affairs at 609-393-7707, ext. 204.
RETURN COMMERCIAL AND INDUSTRIAL ENERGY PRICE RETAIL ADDER FUNDS TO COMMERICAL & INDUSTRIAL CUSTOMERS DESCRIPTION
The State has collected an additional tax on the largest commercial and industrial electricity customers within the Commercial and Industrial Energy Price (CIEP) rate class who have remained with their traditional electric utility. The balance of the fund, currently more than $70 million, should be returned to CIEP ratepayers and the tax should be eliminated.
BACKGROUND
In order to encourage market competition, the Board of Public Utilities (BPU) mandated that certain customers within the CIEP rate class purchase electricity from a third party supplier (TPS). Industrial and commercial customers with a peak load of greater than 750 kW who remain with their traditional electric distribution company (EDC) are subject to the retail margin adder surcharge of 0.005 cents per kWh. It was intended to be an incentive for businesses to shop for electricity. The most recent CIEP data shows that almost 65 percent of businesses Statewide have shopped for competitive supply.
CIEP Switching Data
However, this means that 35 percent of all eligible customers have not switched and are paying the additional surcharge on a monthly basis. The BPU has collected over $70 million in penalties and is currently debating what to do with these excess funds. For over two years, customers subject to the Retail Adder provision have been awaiting the release of retail adder funds to fund needed energy projects. In February 2006 the BPU directed that $23.1 million of retail margin funds be used to fund load management, building operator certification and energy audits. This money has yet to be released.
NJBIA POSITION
NJBIA opposes the continuation of the retail margin adder surcharge. It has long ceased to be an incentive for competition and now stands as simply another tax on business. The Legislature should abolish this surcharge. The Association’s suggestions for the spending of the over $70 million already collected are:
• return the money to CIEP ratepayers in the form of a rate rebate;
• develop and implement a CIEP customer education program with a written guidebook on best practices to save energy costs;
• provide a consultant to help businesses design requests for proposals for third party supply and target customers who have yet to shop and develop onsite training for those companies that wish to shop;
• update the Small Manufacturers Guide to Saving Energy which was created by the Department of Environmental Protection in 2000;
• add funding for the Center for Advanced Energy Systems for energy audits of manufacturing facilities;
• provide additional rebates/incentives specifically for CIEP ratepayers for energy efficiency upgrades;
• develop marketing and awareness campaign for demand side management for CIEP customers; and provide building automation system rebates.
BPU HISTORY
In theory the Retail Margin Adder surcharge sunsets every May. However, the BPU consistently reauthorizes it with the Board Order related to the Basic Generation Service (BGS) auction. The BGS Auction is the annual procurement by the electric distribution companies of electricity supply. The BPU approves the auction prices and tariffs that form the basis of the electric price. The law creating the Office of the Business Ombudsman authorized the BPU to allocate funds from the Retail Margin Adder fund to create the position. In addition to this, the BPU has used monies for CIEP consumer education programs. Yet the Board Order from February 2006, which authorized over $23 million in programs to assist CIEP customers, has not been implemented or allocated.
CONTACT
Assistant Vice President, Energy & Federal Affairs at 609-393-7707, ext. 204.
ENVIRONMENT
EMINENT DOMAIN REFORM IN NEW JERSEY DESCRIPTION
NJBIA believes there are appropriate uses of eminent domain for redevelopment purposes. However, in using this power, the rights of property owners must be protected, owners must be compensated for lost property and the standards for what constitutes “blight” must be appropriately applied. There also must be transparency in the process that offers an opportunity for property owners to be heard. As such, NJBIA supports legislation that would move toward achieving those goals.
BACKGROUND
NJBIA became involved in the eminent domain debate shortly after the 2005 US Supreme Court decision in Kelo v. New London CT. The Kelo decision supported the concept that local governments had the right to use the power of eminent domain for redevelopment purposes. The case brought nationwide attention to the use of eminent domain, and what constituted a “public purpose.” However, the court’s decision did not materially affect the practice of eminent domain in New Jersey because New Jersey’s constitution and statutes already authorize the use of eminent domain to redevelop “blighted” areas. Even so, it sparked a debate between municipalities, small business owners and residents over what constituted the appropriate use of eminent domain and what standards should apply.
In early 2006 the New Jersey Legislature took up the issue of eminent domain reform. NJBIA participated in a number of legislative hearings aimed at fixing New Jersey’s eminent domain structure. During those hearings, business owners came forward telling personal stories about how their business properties had been taken under eminent domain, changing their lives forever. Despite these hearings, the Legislature was unable to reach a consensus on how to reform New Jersey’s eminent domain laws. In June 2007 a NJ State Supreme Court decision, Gallenthin Realty Development, Inc. v. Borough of Paulsboro, more narrowly defined what is meant by “blight,” making it more difficult for municipalities to condemn and take private property for redevelopment. In this decision, the Court had to determine whether the municipality properly interpreted the New Jersey State Constitution and Local Redevelopment and Housing Law (LRHL). The high court’s stricter interpretation of “blight” raised the bar for many municipalities that had previously used a more liberal interpretation. Specifically, municipalities believed that property was eligible to be taken via eminent domain merely because it was stagnant or not fully productive. The court stated that “blight” must be characterized by “a deterioration or stagnation that negatively affects surrounding properties.” This means that if a property has deteriorated but does not affect the surrounding areas, it can no longer be designated as blighted. This stricter definition offers more protection to businesses and other property owners seeking to prevent the condemnation of their properties for redevelopment purposes.
NJBIA POSITION
The New Jersey Business & Industry Association is encouraged by the high court’s decision in Gallenthin. It would appear to accomplish one of the Association’s goals, namely to more fully protect business property owners from takings that are based more on a municipality’s desire to redevelop a property than to remove blight. Even so, the Legislature still needs to address the outstanding issues in New Jersey’s eminent domain process. NJBIA looks forward to working with the Legislature on real reform measures that strike a balance between property rights and the tools necessary for redevelopment.
LEGISLATIVE HISTORY
There were several bills introduced that attempted to address the use of eminent domain for redevelopment purposes. Some called for an outright ban. Others tried to address concerns without mandating an outright prohibition. NJBIA worked with sponsors of two pieces of legislation that attempted to strike a balance between the use of eminent domain for economic development and the rights of property owners, both residential and corporate. A-3257 was introduced on June 8, 2006 and passed the Assembly on June 22, 2006 by a vote of 58-18- 11. A competing bill, S-1975, was introduced on June 12, 2006, but stalled in the Senate Community and Urban Affairs Committee. A-3257 changed the LRHL to provide more notice and transparency in the process. The bill increased relocation assistance and compensation. The bill also specifically gave business owners compensation for their business, separate and distinct from the land on which the business is located. This was modeled after a California law where businesses are compensated for “goodwill.”
Under the bill "goodwill" means the benefits that accrue to a business as a result of its location, reputation for dependability, skill or quality, and any other circumstances resulting in probable retention of old or acquisition of new patronage.” S-1975 changed the LRHL by creating a bifurcated system whereby different standards were established for areas in need of rehabilitation and areas in need of redevelopment. The former describes an area where eminent domain would not be used, but rather, incentives would be provided to rehabilitate the problem sites. The latter is the language used to describe what is commonly referred to as a blighted area that will be taken using eminent domain.
The bill also specifically gave business owners compensation for their location. It should be noted that these changes were in proposed amendments that were never actually incorporated into the bill because it was never released from committee.
CONTACT
Vice President, Environmental Policy at 609-393-7707, ext. 236.
IMPACT OF DEP REGULATIONS ON DEVELOPMENT AND INVESTMENT IN NEW JERSEY DESCRIPTION
The regulations promulgated by the New Jersey Department of Environmental Protection (DEP) have a negative impact on the economic viability of our State. Many DEP regulations provide little or no environmental benefit. There is no balance between economic viability and environmental protection. NJBIA’s goal is to raise the awareness of decision makers on these issues and bring balance back to the process.
BACKGROUND
In 2007, the DEP proposed over 2,000 pages of land use regulations, almost all of which will have a negative impact on economic growth in the State of New Jersey. The rules cover site remediation, public access to tidally flowed waterways, flood hazard, wetlands protection, and limiting development along designated waterways. In addressing these issues, DEP fails to take into consideration the impact on economic growth. Furthermore, DEP fails to consider the ability of the department to actually implement such rules, given its current staffing constraints. Below you will find a brief overview of some of the regulations:
Public Notification Rules
The public notification rules are an attempt to provide information to the public about site clean-ups. The rules require anyone performing a remediation to provide notice, via sign or letter, to everyone who works, lives or avails themselves of recreation within 200 feet of the property boundary. The notification includes notifying non-English speakers in their native language. These regulations unnecessarily delay site remediation projects. They apply equally to site each remediation project, regardless of the level of risk to the public. They create another level of approval by an already understaffed DEP, as the DEP would have to review and approve all notification plans. Furthermore, there are literally thousands of languages. The expectation that a developer would have the resources to ascertain the native language of every person within a 200-foot radius goes beyond the pale. The requirements under these rules are costly and irrational, and could ultimately force investment out of the State.
Public Access Rule
Under the guise of providing “beach access,” this rule requires 24-hour public access to any tidally flowed waterway, including beaches, rivers, and tributaries. This rule impacts municipalities, individual property owners, businesses and industrial facilities. For industrial facilities, the rule would require 24 hour access to tidally flowed waterways by either providing such access on-site or paying the DEP for that access to be provided off-site. This proposal sends the wrong message to those companies that have called NJ home for decades by forcing them to pay a hidden tax through this regulatory requirement. Furthermore, the increased costs to municipalities will undoubtedly increase property taxes.
Category One
Creates unnecessary “no development” buffers around 910 miles of rivers, lakes, reservoirs and tributaries in the State, which will severely impact development of new facilities and expansion of existing facilities. The rule effectively bans development within 300 feet, on either side of waterways that are now being designated as Category 1 (C-1).
Water Quality Management Planning Rules
Water Quality Management Plans (WQMPs) take into consideration both potable water and wastewater capacities, and constraints within a specific planning area. Under this rule, development could be stalled or prevented if such projects do not comport with a county’s WQMP. Currently, all WQMPs must also be approved by DEP before they can be implemented, which can take up to two years. Any changes to a WQMP—known as a plan amendment—must also be approved by DEP. The proposed rules require all planning agencies to submit their WQMPs within nine months of adoption of the rule, which we expect will overwhelm the DEP staff and make timely review and approval impossible. This will force development projects into a state of limbo until those plans or plan amendments are approved.
Soil Standards
The new soil standards will directly impact remediation and redevelopment of brownfields. DEP considers all water as potable (drinkable), and their standards treat it as such. A majority of the cleanup standards have changed dramatically and are simply unattainable. The rule will make remediations more difficult and costly, and raises justifiable concerns for those who have cleaned up their properties to standards that were once acceptable. The focus should be on exposure pathways to humans and impact to human health, not simply creating new standards for the sake of creating standards. (For more information, see the SRP Legislative Changes Economic Growth Paper)
Flood Hazard Rules
DEP has proposed 768 pages of regulations that create new buffers around a large number of waterways throughout the State. There are no grandfathering provisions for older facilities in flood plains or riparian corridors. The rule will negatively impact development, redevelopment and facility expansions throughout the State.
New Wetlands Rule Proposal
These regulations force companies to obtain individual permits for construction and maintenance near freshwater wetlands anywhere in the State. Many of these activities are currently covered under general permits. General permits can be approved as quickly as 90 days, while individual permits could take years. Many of these activities are routine, such as trimming branches off of trees around power lines that happen to be located along wetlands, and have no impact on the environment. Therefore, there is no justification for requiring individual permits for such activities. Once again, this sends the wrong message to companies that have made New Jersey their home for decades.
NJBIA POSITION
Finding balance between environmental protection and economic growth is imperative. Keeping companies here and attracting new companies can be done while we continue to protect the environment and human health. While the Department has a job to do, it seems that the idea of balance no longer exists. Furthermore, the internal vetting of rules fails to take into consideration the impact on economic growth and ultimately stops the DEP from implementing these rules in a fair and efficient manner. Legislation is only a part of the process. Legislators and key decision makers should take a greater interest in how environmental laws are implemented by DEP. Legislators should use their oversight responsibilities to ensure that regulations provide for a fair and balanced approach to environmental protection. NJBIA has submitted comments on all proposals in which the comment period has ended. Copies are available on line at the following website. http://www.njbia.org/issues_environ.asp
COST
The cost of these proposals cannot be accurately derived due to the fact that costs associated with specific projects and activities vary greatly. The cost of compliance for each specific company is based on their specific business operations and permitted activities. But there is a hidden cost to these regulations—the cost in lost ratables and economic activity from businesses that decide these regulations are too much. These costs take the form of brownfield sites that do not get cleaned up and brought back to productive use; of New Jersey businesses that decide to move out of New Jersey; in the form of the company that doesn’t relocate to New Jersey because the regulatory burdens are just too great. There is also the matter of administrative costs. The department is already understaffed and faces a backlog on review of its existing submissions. Yet it has proposed a series of regulations that will dramatically expand its workload.
Given the fiscal challenges facing New Jersey, increased staffing is highly unlikely. We expect that hundreds of environmentally sound projects will be delayed indefinitely simply because DEP is unable to review them in a timely fashion. Every department has to operate within a budget, and that means it cannot implement every program or regulation it would like. DEP has plunged ahead with new and expanded environmental programs when it clearly does not have the resources to implement them.
CONTACT
Vice President, Environmental Policy at 609-393-7707, ext. 236.
LEGISLATURE’S OVERSIGHT RESPONSIBILITY
TO ENSURE DEP ACCOUNTABILITY DESCRIPTION
The Department of Environmental Protection (DEP) regulates some business activities in an effort to protect the environment and human health, and NJBIA understands their role. However, we have seen the department push its own agenda forward in a manner that we believe will have a detrimental impact on the economic viability of the State. In recent years, the department has proposed unreasonable regulations that make compliance more difficult and make it more costly to operate businesses in this State. The regulations also create disincentives for businesses to stay in New Jersey and make it less attractive to those businesses contemplating New Jersey as a viable option for relocation. This benefits no one. While legislators pass legislation to protect the environment and human health, they generally do not look at how they are implemented by the DEP. Legislators should consider the regulatory impacts of their legislation before it gets signed into law, and also should require more accountability and transparency from the department in how laws are implemented.
BACKGROUND
Over the past 10 years, legislation which provides the DEP with the authority to propose and adopt rules has been so broadly drafted that the DEP has had unchecked power. Under the authority of current statutes, the department has tripled air permit fees, nearly doubled site remediation fees, raised fines dramatically and created disincentives toward development and economic growth in the State.
NJBIA POSITION
NJBIA understands the DEP’s role to protect the environment and human health. However, the DEP has gone unchecked with regard to the administration of funds and the implementation of regulations. NJBIA believes that more scrutiny over the expenditure of funds will provide the Legislature with a better understanding of the programs that the DEP administers. Furthermore, providing a forum in the Legislature to publicly vet concerns with the overall regulatory process will ensure that regulations are being adopted with the interests of all impacted parties in mind and are in line with legislative intent.
ARGUMENTS IN SUPPORT OF DEP ACCOUNTABILITY
Below, are concepts we believe the Legislature should embrace to ensure that the intent of the law is adhered to through the regulatory process. NJBIA urges the Legislature to:
• Hold DEP financially accountable for the funds it administers by requiring annual reports on fund balances and progress reports on expenditures. DEP oversees a variety of different funds from bond act monies, constitutionally dedicated funds, federal funds, and revolving accounts for a variety of different loan programs. In the aggregate, these funds contain over $1 billion dollars. Whether or not the funds have dedicated purposes, the DEP should inform the Legislature on the status of these accounts, and how these funds are being spent.
• Hold open legislative hearings to provide a forum for the regulated community to air concerns with the regulatory process and provide the opportunity for legislators to ask questions on regulations impacting their constituents. Under the current Administrative Procedures Act, DEP is required to have hearings for the public to comment on their proposed regulations. In many cases, these are one-sided forums where questions are not answered and concerns go unaddressed. Legislative hearings would provide a much-needed oversight of DEP’s rule-making activities and provide a forum for legislators to inquire if programs established through statutes are being implemented in line with the Legislature’s intent.
• Expand the Regulatory Flexibility Act to require DEP and other departments to consider the impact regulations have on small businesses. Provide adequate time for the DEP to develop regulations. Many times the department is given only three or six months to develop regulations. Providing more time may allow for more input from the regulated community.
• Use unambiguous language that clearly spells out the intent of the bill and provides specific boundaries within which the department can implement it. Many times, the department’s interpretation of legislative intent and its authority under such acts is much broader than was originally envisioned by the Legislature.
LEGISLATIVE HISTORY
A-741 was introduced on January 8, 2008 and referred to the Assembly Environment and Solid Waste Committee. It would require the DEP to submit an annual financial report on status of certain fund balances. NJBIA would recommend amending the bill to require the DEP to give a progress report of expenditures from these funds.
A-832 was voted out of the General Assembly by a vote of 75-1-1 on March 17, 2008. The bill would expand New Jersey’s Regulatory Flexibility Act to require the DEP, and other departments, to consider the impact regulations have on small businesses.
CONTACT
Vice President, Environmental Policy at 609-393-7707, ext. 236.
PROPOSED REGULATORY AND LEGISLATIVE CHANGES TO OVERHAUL THE STATE’S SITE REMEDIATION
PROGRAM DESCRIPTION
Site remediation, the clean-up of contaminated properties to bring them back to beneficial use, plays an important role in economic development and is an essential component of any economic growth strategy. There are over 18,000 known contaminated sites in New Jersey. These are sites that lay fallow and unused, often for decades, because no private-sector company is ready to assume the cost and risk of cleaning it up. This leaves sites abandoned and the public continually exposed to the contamination lurking below the ground. The scope of the problem and the number of sites far outstrips the ability of the State to pay for these clean-ups.
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