The Legislature on June 10 passed legislation severely restricting development in the 1,000-square-mile Highlands region. The bill now heads to the desk of Governor James E. McGreevey, who is expected to sign it.

The Highlands region stretches across 88 municipalities in seven counties along the northernmost portion of New Jersey and is a prime source of drinking water for the State. The Highlands Preservation Act, S-1 (Smith, Martin)/ A-2635 (McKeon, Manzo), would virtually eliminate development in what the bill designates as the Highlands preservation area and would strictly regulate development in the planning area.

The final version of the bill contains NJBIA-backed amendments designed to protect existing businesses. Specifically, the bill allows for the reconstruction of any building or structure for any reason within 125 percent of the existing footprint, provided that it does not increase the size of the structure by one-quarter of an acre or more. This provides some flexibility for small businesses that want to re-build or change the business use of their operations.

The bill would also require the State to pay fair market value for regulatory "takings," thus compensating landowners for diminished property values. The measure also provides for incentives encouraging municipalities in the planning area to accept more development.

NJBIA remains opposed to the Highlands bill. The measure would impose unreasonable restrictions on new development, create a new level of bureaucracy, and could reduce property values. For more information, contact Jim Sinclair at ext. 236 or jsinclair@njbia.org.

The bill, S-1368 SCS (Sweeney/Codey/Madden)/A-3008 (Sires/McKeon), is one of the most significant regulatory reform bills to pass the Legislature in the last few years. It would help address one of the most persistent problems plaguing employers-the drawn out permit process required by the NJ Department of Environmental Protection and other agencies.

Not only would the bill place deadlines on permit approvals, but it also would allow third parties to certify applications and provide for arbitration where the applicant and the government agency have a dispute.

This is a key measure that helps developers by telling them where they can build, instead of where they can't.

The measure would also create a Smart Growth Ombudsman in the NJ Department of Community Affairs, who would have the power to change or eliminate regulations that inconsistent with building in designated smart growth areas and would facilitate economic development projects in older suburban and urban areas.

For more information, contact Jim Sinclair at ext. 236 or jsinclair@njbia.org.

The bill, A-2444 (Bateman, McKeon), would ensure that purchasers who are not responsible for causing pollution at a site would not have to conduct expensive off-site cleanups.

The NJ Department of Environmental Protect (DEP) is suing companies for NRDs if contamination at their sites has caused environmental harm to natural areas. Similarly, other property owners can seek cleanup costs from their neighbors if it can be proven that contamination has migrated from one site to another. Properties purchased before 1997 are already exempt under the statute of limitations.

NJBIA supports this common sense measure. Property owners who purchased their property in good faith should not be penalized for the actions of the previous owners. For more information, contact Jim Sinclair at ext. 236 or jsinclair@njbia.org.

The bill would end all existing State and local financial assistance to current recipients at the end of 2004, reneging on agreements that businesses and governments have already made. This would apply to tax abatements, workforce training grants, Economic Development Authority loans, Business Incentive Employment grants, and dozens of other programs.

If an employer receives even one dollar of government assistance thereafter, it would then have to meet a series of costly conditions on any future agreements, including:

• a convoluted formula that could force businesses to pay an average annual salary of as much as $59,600 to every worker they employ;
• a mandate that total company employment could not drop below 90 percent of the pre-assistance level for at least five years; and
• a five-year limit on assistance.

For more information, contact Art Maurice at amaurice@njbia.org or ext. 247.

• a deduction of up to 50 percent of net operating losses (NOLs), instead of none as originally proposed. This is worth $138 million to employers. The NOL proposal would allow businesses to deduct losses incurred in unprofitable years from income realized in future profitable years. Many companies rely on these deductions to spread out their tough financial times over several years. The Governor and legislators sus-pended NOL deductions in 2002, but pledged to restore them in 2004. NJBIA believes that 100 percent of the deduction should have been restored this year and will continue to work toward this goal.
• elimination of a proposed $150 million tax increase on petroleum-products that would have increased the cost of gasoline and petroleum products.
• an increase in the manufacturing equipment and employment investment tax credit from 2 percent to 4 percent for manufacturers with fewer than 50 employees.
• a tax incentive program for manufacturers who relocate within New Jersey and employ 250 or more people. NJBIA believes this program should also be applied to small manufacturers.

However, several other measures will increase taxes on employers. They are:

• a one-year increase in the tax on HMO insurance premiums of 1 percent. For employers providing health benefits to their employees through HMOs, this will increase premiums by about $45 to $70 per employee, an unconscionable tax hike when health insurance costs are exploding.
• a 41 percent increase in the top income tax rate on those making more than $500,000 per year. The top State income tax rate will rise from 6.37 percent to 8.97 percent. This will impact many partnerships, LLCs and S Corporations.
• a 90-cent-per-month tax on every telephone, fax or modem line, and cellular phone line.

In addition, the Legislature voted to continue to deny employers the ability to take advantage of federal increases in deductions for bonus depreciation on their State tax returns. While this deduction is not currently permitted to be deducted on State tax returns, NJBIA believes employers that invested in their companies should be rewarded. For more information, contact Art Maurice at amaurice@njbia.org or ext. 247.

The bill, S-1452 (Bryant, Sweeney)/A-2617 (Watson Coleman), would change the Department of Labor to the Department of Labor and Workforce Development, which would be responsible for promoting an overall strategy to ensure that New Jersey employers can find the skilled workers they need.

NJBIA believes that by consolidating and streamlining programs under the reorganization, the Department of Labor and Workforce Development will be better equipped to administer programs and grants for worker training programs statewide. For more information, contact Libby Vinson at ext. 201 or lvinson@njbia.org.

They spoke on June 16 at NJBIA's first-ever Manufacturing Summit, held in Newark. The Summit was the kickoff event for NJBIA's Campaign for Manufacturing Renewal, an ongoing effort to educate policymakers about the contributions manufacturers make to the New Jersey economy and the obstacles that stand in the way of their success.

NJBIA also unveiled its Agenda for Manufacturing Renewal, which contains 31 good ideas to keep manufacturing jobs in the State.

New Jersey manufacturers have lost 77,000 jobs over the last three and a half years. Nevertheless, nearly 12,000 manufacturers remain in New Jersey, employing 345,000 people and supporting nearly 200,000 jobs in other industries. These manufacturers pay an above average wage of more than $53,000, and typically provide good benefits.

Manufacturers also account for 90 percent of the State's foreign exports and 12 percent of the State's economic output. Manufacturing often provides employment opportunities for the minority and immigrant communities, and manufacturing facilities are likely to be located in urban or older suburban communities.

"If that's not worth saving, I don't know what is," NJBIA President Philip Kirschner told manufacturers in his welcoming remarks. "We have to make people understand what it is that you contribute to this State. It's time to shine a bright light on the contributions of manufacturers and to remove the obstacles that stand in the way of your success."

John McCormac, representing Governor James E. McGreevey, pledged to work with business to improve the State economy. He maintained that strengthening the manufacturing sector was a key goal of the administration.

"The true measure of the Governor's resolve to strengthen the State's economy is a commitment of attitude. Our attitude is simple and direct. We will fight for every job in every company at every turn and in every way possible."

Many attendees, however, expressed frustration at the views of some of those in government who seem more interested in scoring political points with the public than pursuing meaningful job-producing, pro-manufacturing policies.

"The thing about attitude that sums it up the easiest is I am tired of being the bad guy," said Fred Barre´, chairman and CEO of The Barre´ Company, Inc. "Because that's what we are (treated like) in New Jersey."

Barre´ participated in a panel discussion with Lisa Hirsh, president and CEO of Accurate Box Company, and Clifford F. Lindholm III, president of Falstrom Company. McCormac spoke for 20 minutes and took questions for another half hour. Kirschner also presented the Association's Agenda for Manufacturing Renewal, which contains 31 recommendations for legislative and regulatory action to improve the State's manufacturing climate. The Summit culminated with a panel of legislators featuring State Senators Nia H. Gill and Joseph M. Kyrillos and Assembly representatives Guy Gregg, Linda Stender, and John S. Wisniewski.

Lindholm echoed the feelings of many of the manufacturers when he said it's not just taxes that are too high, but the rising costs of individual fees and surcharges as well. Last year at Falstrom, he explained, the life hazard use fee increased 20 percent, the pollution discharge (NJPDES) fee went up 25 percent, partnership fees tripled, and the ability to deduct net operating losses on State tax returns was suspended.

"When you start adding (the fees) up one on top of the other, the burden becomes unbearable," Lindholm said. "And it's very difficult for anyone to operate when you have all these fees coming down on you."

Hirsh pointed out that manufacturers are not always able to pass these costs to consumers. Customers are constantly putting pressure on suppliers to reduce the costs of their goods, forcing the companies that make those goods to absorb rising costs.

"It goes all the way down the line to the manufacturers like us," said Hirsh, whose company specializes in making the boxes and packages in which many products are sold. "We have to continually cut costs. And yet every time, it seems to me, that government gets involved or puts something forth, it's about increasing costs. So that's where I think we need to have our voices heard."

Healthcare costs remain one of the biggest obstacles to manufacturers success in New Jersey. During the question and answer session with Treasurer McCormac, Kathi Johnson, of Hexacon Electric Co. of Roselle Park, questioned the mandated coverages that drive up the cost of health insurance she provides for her employees. Her workforce is older, yet she must still pay for fertility coverage for her employees.

"Can you tell me why I have to provide fertility coverage for a work force with an average age of 57?" she asked.

Johnson did praise a number of the State programs she has participated in, including the State's Manufacturing Extension Program and Economic Development Authority financing, two pro-manufacturing initiatives McCormac addressed in his speech. "I just wanted to say thank you," Johnson said.

The legislators invited business leaders to educate them about the issues that are essential to their survival. "You need to bring a legislator in (to your place of business) and show them what you do," Wisniewski advised. ".having them actually see the people who work there and how the problems effect the business is a valuable way to lobby us, to make us aware first hand of the problems that exist because of some of the policies we enact in Trenton."

Fred Barre´ , Chairman and CEO of The Barre´ Company, Inc., during the NJBIA Manufacturing Summit

Health Insurance
Manufacturers are anxious to find ways to stop the rapidly rising cost of health insurance. They believe the State Legislature should do its part to lower insurance costs by utilizing the new Mandated Health Benefits Commission to scrutinize costly new health coverage mandates before they are enacted into law. Likewise, they believe the Commission should review all existing mandates, which add about 20 percent to the cost of health insurance policies, about $1,300 per policy. Finally, they would like the State to offer tax incentives to employers who provide employee health insurance.

Overall Cost of Doing Business in New Jersey
The high cost of doing business in New Jersey is a great concern to New Jersey manufacturers.

A key cost is workplace mandates, many of which impose rules that are more onerous and costly than those found in other states. Legislators should resist efforts to enact a paid-family-leave mandate.

To offset the high cost of doing business, manufacturers also favor a manufacturing retention tax credit. This would be available to any New Jersey manufacturing company that invests in capital equipment, plant renovation, modernization or expansion.

Property Taxes
High property taxes, already among the very highest in the nation, are a burden to business property owners as well as homeowners. Manufacturers would like to salvage a protection against even higher property taxes. The State's Business Retention Act states that the property tax should not be levied on a business's machinery and equipment. This exemption was overturned by a State Tax Court decision. The Legislature must reaffirm this exemption. If it is not affirmed, manufacturers could become subject to tens of millions of dollars in higher property taxes.

Energy Costs
High energy costs are a particular burden to manufacturers, who pay some of the highest energy rates in the nation. New Jersey can cut these costs by exempting manufacturers from the 10 percent energy tax.

State Regulations
New Jersey's costs of environmental compliance are among the highest in the nation, primarily because the State has a history of enacting strictest-in-the-nation regulations. Its fees and penalties are among the highest in the nation. The NJ Department of Environmental Protection (DEP) should stick to federal standards used by most states and reduce its fees and fines.

State Taxes
Two years ago, the State doubled corporate taxes in the middle of a recession. The alternative minimum tax, which forces companies to pay taxes even when they lose money, should be repealed. Employees should be allowed to take net operating loss deductions, which were suspended two years ago with a promise that they would be fully restored in 2004.

Skilled Labor
Even in a weak economy, manufacturers often have difficulty finding the workers with the skills they need to run their businesses. In addition to bolstering workforce training programs, the State should expand internships linking high school students to manufacturing career opportunities and expand its apprenticeship program for manufacturers.