TRENTON-People think of AAA as a source of road maps and other driving-related services. But the auto club also is adept at mapping its own route to millions of dollars in tax breaks by playing four states in the region off against each other.

That is the key finding of a new report by New Jersey Policy Perspective, Mapping the Route to Dollars: AAA Mid-Atlantic's Four-State Tour. Written by Policy Analyst Sarah Stecker, the report is the latest from NJPP's Economic Development Accountability Project spotlighting tax breaks for businesses in the name of job creation.

The report details AAA's move of major facilities from Pennsylvania to Delaware; Maryland to Delaware; New Jersey to Delaware; and Pennsylvania to New Jersey. In the process, AAA Mid-Atlantic has received a package of tax breaks from the states of Delaware and New Jersey, and the city of Wilmington, Del., totaling more than $8 million. The auto club created no new jobs in the process. Effectively, it was compensated by taxpayers for shifting personnel from state to state. It moved its headquarters from Pennsylvania to Delaware, moved a technology office from Pennsylvania to South Jersey and moved a call center from Maryland to northern Delaware.

"This report shows how states get caught up in a zero-sum game and taxpayers foot the bill," said NJPP President Jon Shure. "We need more accountability and more debate on how public dollars are spent in these areas. There's no proof that the best way to build an economy is to hand cash to businesses who ask for it just because they know they can get it."

AAA Mid-Atlantic, one of the nation's five largest AAA clubs, operates in a five-state area that includes Delaware, Maryland, Washington DC and parts of New Jersey, Pennsylvania and Virginia. Its new headquarters in Wilmington, Delaware opened in 2005. The auto club had been headquartered in Philadelphia since 1901. Since November 2004, many AAA Mid-Atlantic members who phone for assistance have had their calls answered at facilities near Newark, Delaware; previously the center was in Elkton, Maryland.

Delaware gave AAA a $6 million grant for moving to the state. AAA also got a $1 million job creation grant from the City of Wilmington, plus a five-to-seven-year waiver of a local services tax.

But, as the report notes, the timing of events that led to Delaware giving AAA subsidies raises important questions often involved in moves across state lines. AAA Mid-Atlantic applied to Delaware for a subsidy on January 8, 2004, yet only eight days later AAA announced it was moving to the state. Not until February 23, 2004 did Delaware's Council on Development Finance (CDF) actually okay the aid package at a public meeting. Was the decision to move made independent of the desire for tax breaks-meaning Delaware taxpayers paid for something they might have gotten for free? Would AAA receive subsidies regardless of the contents of its application or what might transpire at a public hearing?

While most of AAA's headquarters staff moved to Wilmington, some headquarters technology jobs in 2005 moved from Philadelphia to Mount Laurel. The new building that AAA occupies, at Route 73 and Howard Boulevard, houses 113 technology workers, according to AAA. The auto club is getting a tax break totaling $785,925 over 10 years from the New Jersey Business Employment Incentive Program (BEIP) for bringing these workers to the state.

When it applied for BEIP funding, AAA tried, under the terms of the tax break program, to get a larger grant by saying it would be working with a university on research and development. But the facility AAA listed-the Burlington County Institute of Technology-is a high school and the request for additional funding was turned down.

Though Wilmington is only 30 miles south of Philadelphia, AAA Mid-Atlantic in public statements cited northern Delaware's more central location in the club's five-state territory as a major factor in its decision to move. AAA also said the business subsidies it was offered were an important factor in its decision to move to Delaware.

But, NJPP's report points out that there appears to be ample reason to believe AAA wanted tax breaks more than it needed them and that it wanted Delaware to think the move would only be made if the state paid. In its application to Delaware for state money, AAA wrote: "without significant state financial assistance, the case to move the operations is not nearly as compelling. This assistance is needed to offset our considerable costs to move both operations, which are in excess of $21 million, much of which will be spent with Delaware businesses. It has not been AAA Mid-Atlantic's practice to leverage debt for its projects, thus the funds will come from capital assets. Thus, the financial assistance from the state enables us to draw less upon our assets, and continue to fuel growth through financing new business initiatives.

Typical of how the subsidy game is played, AAA also said Delaware needed to pay because other states, including New Jersey, had offered money too. But, according to the New Jersey Economic Development Authority and the state Commerce Commission-which administer New Jersey's major tax break programs-AAA did not submit formal applications for state tax breaks for its headquarters or call center. AAA applied only for New Jersey subsidies for its technology office, which it got.

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