Business groups to lawmakers: NJ is losing out to other states

The marathon hearing ended with questions about whether the Legislature would act on recommendations or allow longstanding problems to continue.

New Jersey business leaders urged state lawmakers Monday to move faster on permits, reconsider regulations and taxes they say are driving up costs, and do more to keep companies from relocating to other states.

Assembly Commerce and Economic Development Committee Chairman William Spearman, D-Camden, said the hearing was intended to produce legislation and regulatory changes in the future, instead of just being another discussion about the state’s business climate.

During a wide-ranging discussion, representatives of industries ranging from pharmaceuticals and manufacturing to housing, restaurants, and shipping repeatedly returned to the same concerns: New Jersey is expensive, government decisions take too long, and businesses need more certainty about the rules and costs of operating in the state.

Leaders warn that New Jersey’s strategic location, highly educated workforce, and strong transit network are no longer enough to offset its high operating costs, especially as other states like Pennsylvania and North Carolina ramp up the fight for corporate investment.

“We need strategies that are bold, aggressive, collaborative, and probably come with some degree of risk,” New Jersey Chamber of Commerce President and CEO Tom Bracken told lawmakers.

Bracken told lawmakers New Jersey’s economy is not reaching its potential and argued that state government has paid far too little attention to economic growth. He pointed to CNBC’s annual business rankings, saying New Jersey ranked 50th for business friendliness.

Michele Siekerka, president and CEO of the New Jersey Business & Industry Association, said lawmakers could send an immediate signal to employers by revisiting new independent-contractor regulations, reviving legislation aimed at reducing red tape, and committing to let the corporate transit fee expire.

The fee imposes an additional 2.5% tax on corporations with more than $10 million in taxable net income. Combined with the state’s 9% corporate business tax, it brings the rate to 11.5% for affected companies. The fee is scheduled to expire after 2028.

“You know what business needs? Predictability and certainty,” Siekerka said.

The analysis found those decisions involved more than 7,000 jobs paying nearly $675 million in wages and salaries each year.

“We need to stop that bleed right now,” Siekerka said.

Permitting and regulation dominate hearing

Representatives for commercial real estate, home-building, manufacturing and life-sciences groups said permitting delays and uncertainty can make projects more expensive and make other states more attractive for investment.

David Greek of the Commercial Real Estate Development Association said developers have seen improvements at the Department of Environmental Protection under the Sherrill administration, particularly in getting more timely responses.

“Time is money,” Greek said, adding that real estate development requires large amounts of capital that can often be tied up while applicants wait for government decisions.

Dennis Hart, executive director of the Chemistry Council of New Jersey, said speed is particularly important for manufacturers because New Jersey plants often compete with other states that have facilities owned by the same company.

Hart said companies compare how quickly competing states can get projects approved.

“Governor Shapiro says I can have you up and running in six months, and New Jersey says I’ll get back to you in two years,” Hart said.

He also called for greater legislative oversight of state regulations and said lawmakers should examine whether agencies sometimes go beyond what state statutes require.

Environmental rules spark debate

Hart said the Chemistry Council supports the principle of environmental justice but objects to how the Department of Environmental Protection has implemented the law. He said companies can wait years for approvals, even when they are seeking to renew existing permits without increasing emissions.

Other lawmakers pushed back on the suggestion that environmental and worker protections should primarily be viewed as costs to businesses. One committee member pointed to communities in Newark that have long dealt with pollution and elevated asthma rates and asked whether economic development could be pursued without sacrificing protections for residents.

Brian Bergen (R-Morris), who dominated the legislators’ questions during the discussion, argued that the law’s definition of an overburdened community relies heavily on demographics rather than whether an area is actually polluted. He said the definition is based on race, ethnicity, and income rather than air or water quality.

He cited Parsippany as an example, saying an area he described as having clean water and little industry could nevertheless be classified as an environmental-justice community because a large share of its residents are Indian.

Demographics are used to determine which census block groups are considered overburdened communities. A census block group qualifies if at least 35% of households are low-income, at least 40% of residents are minorities or members of a state-recognized tribal community, or at least 40% of households have limited English proficiency. The Department of Environmental Protection evaluates environmental and public-health stressors associated with certain facilities in overburdened communities when reviewing certain permit applications.

Independent-contractor rules draw criticism

New state Department of Labor rules interpreting New Jersey’s ABC test for determining whether a worker is an employee or an independent contractor drew some of the strongest criticism.

Shipping and real estate representatives said the rules could create uncertainty for truck drivers who own their rigs and work as independent contractors.

Siekerka said the new interpretation of the ABC test would disproportionately affect women- and minority-owned small businesses and workers. She acknowledged that some employers misclassify workers, but argued that the state’s new interpretation of the rules could affect far more businesses and independent contractors.

She used the example of a freelance writer who contributes a few articles a year to magazines that also employ staff writers. Under the new interpretation of the rules, she said, those arrangements could come under scrutiny even when the freelancer runs an independent business and does not want to become an employee.

Siekerka urged lawmakers to invalidate the new rules and send them back to the Department of Labor rather than creating exemptions for one occupation after another. She argued that the current approach forces businesses to spend money reviewing contracts and contractors to lobby for individual carve-outs.

“We do not want to come in with every single exemption like California and have to ask for 600 exemptions,” Siekerka said. “Is that how you want to spend your next year, carving out what is really bad law in New Jersey and making us an outlier?”

Business groups urged lawmakers to consider reversing the rules rather than passing occupation-by-occupation exemptions.

Some lawmakers questioned what had actually changed, saying New Jersey’s underlying ABC test already exists in state law.

Business leaders said their concern was how the Department of Labor would interpret and enforce the ABC test as a result of the new rules.

Life sciences and manufacturing compete for investment

Life-sciences representatives warned that the state is increasingly competing to attract companies and persuade businesses already here to make their next major investment in New Jersey.

Kyle Sullender of the HealthCare Institute of New Jersey pointed to expansions in North Carolina and Pennsylvania and called for incentives aimed at helping existing employers grow.

BioNJ President and CEO Debbie Hart urged lawmakers to increase support for the Commission on Science, Innovation and Technology.

She told the committee that the commission awards have created about 1,800 jobs and helped companies attract hundreds of millions of dollars in additional private investment.

A July NJEDA analysis found that companies receiving CSIT grants raised $524.5 million in additional capital, more than 20 times the amount they received through the programs.

Port officials seek statewide supply-chain coordination

Paul Rozenberg of the Shipping Association of New York and New Jersey called for a statewide Supply Chain Coordination Council that would bring together ports, trucking companies, warehouses and the government.

Problems at the port cannot be solved by the terminal operators alone, because each part of the supply chain depends on the others, he said.

About 16,000 trucks enter the port each day, but terminal access for trucks is limited to about 12 hours during the day.

Extending gate hours, Rozenberg said, would not work unless truckers were willing to work later and warehouses stayed open to receive containers.

Small businesses warn that added costs are piling up

Hilary Chebra of the Chamber of Commerce Southern New Jersey said regulations with costs that large employers can absorb may create much greater problems for companies with 15 or 20 workers.

Her organization represents about 1,300 companies in seven South Jersey counties, and about 85% of them are small businesses with fewer than 50 employees.

She urged lawmakers to consider small-business carve-outs where appropriate and said permitting reform would help businesses open and expand more quickly.

Daniel Klim, president and CEO of the New Jersey Restaurant and Hospitality Association, offered a similar argument.

“The restaurants aren’t leaving the state. They’re just closing down,” Klim said.

He told lawmakers that restaurant profit margins average about 2.8% and that about 40% lost money last year.

Housing discussion turns into debate about affordable unit requirements

Representatives for the home-building and apartment industries said regulatory delays and government requirements increase the cost of producing housing.

Rick Van Osten, executive vice president of the Builders League of South Jersey, told lawmakers that regulations account for 26.4% of the cost of a new home. He applied that percentage to New Jersey home prices to illustrate the potential burden on buyers.

The 26.4% figure comes from a National Association of Home Builders study of regulatory costs nationwide. The study estimated that federal, state, and local regulations account for $131,734 of the $499,500 average price of a new single-family home nationally.

Assemblyman Erik Peterson, R-Hunterdon, said developers are required by the state to make about 20% of units affordable. Housing-industry representatives said such set-asides can increase the cost of market-rate units.

Some lawmakers challenged his characterization that all apartment developments of six units or more in New Jersey are required to set aside 20% of the units for affordable housing.

New Jersey does not impose a blanket requirement that every residential development reserve 20% of its units as affordable housing. State law requires set-asides for projects financed in whole or in part with state funds or tax credits. Municipalities can also impose affordable housing requirements through their zoning and affordable-housing plans.

Spearman asked whther a fully private, zoning-compliant project is required to set aside 20% of units for affordable housing.

“If it’s a completely conforming meaning consistent with local zoning and it’s completely private, no,” said Jeff Kolakowski, CEO of the New Jersey Builders Association.

Spearman ended the discussion after several minutes, saying the committee hearing was not the place to litigate New Jersey’s affordable-housing system.

Bergen presses business groups to name names

Assemblyman Brian Bergen, R-Morris, repeatedly challenged business representatives to identify state policies they consider harmful and the lawmakers responsible for advancing them.

He questioned business leaders about the corporate transit fee, family-leave requirements, the Temporary Workers’ Bill of Rights and the new employer Medicaid assessment. He then pressed Bracken on whether Assembly Speaker Craig Coughlin had done a good job advancing legislation for businesses. Bracken declined to single out Coughlin, saying the Legislature as a whole had not done enough to help the business community.

Spearman tried several times to steer Bergen toward discussing potential solutions rather than past legislation.

At one point, Bergen called the hearing a farce. By the end, he broadened his criticism and put some of the blame on business organizations themselves.

He said business leaders describe a hostile business climate, yet are not willing to directly confront the legislative leaders who determine which bills get voted on.

Bergen argued that Coughlin and Senate President Nick Scutari control which legislation reaches the floor, yet business groups that criticize New Jersey’s business climate still give legislative leaders awards and invite them to speak at events.

“They all want to be able to get a meeting with the right people to get a little carve-out, a tiny little win,” Bergen said. “Everybody’s got to kiss so much butt that they can’t tell you the truth.”

He called the hearing useless and said he doubted any recommendations would produce meaningful change.

Spearman closed the hearing by saying the committee would work with Gov. Mikie Sherrill’s administration on legislation and regulatory changes.

“If we don’t act now, if we don’t make these changes, we’re going to continue to shed businesses,” Spearman said. “It’s just that simple.”