TRENTON - Even before the state's new tax increment financing (TIF) program is fully operational with rules and regulations, the New Jersey Economic Development Authority (EDA) has made a preliminary award for the first TIF grant - $14.6 million to the Depository Trust & Clearing Corporation (DTCC). Tax increment financing is based on the idea that when new development or renovations occur at a site, increased property, sales and other tax revenues will be generated. But rather than divide the increased revenues among taxing entities, such as municipalities, school districts and the state, a portion of the taxes generated are returned to the company.

New Jersey's new TIF program, called the Economic Redevelopment and Growth (ERG) Grant, is part of the New Jersey Economic Stimulus Act of 2009. The stimulus bill was passed and signed hurriedly last summer and includes several generous business subsidies.

Under the TIF law, as much as 75 percent of 22 taxes and fees, including property, sales and corporate taxes, can support a TIF project. The TIF to DTCC only includes corporation business taxes. A portion of the corporation business taxes DTCC will pay to the state will be returned to the company to help pay for renovations to the Jersey City office where it plans to move 1,600 workers from Manhattan. This is money that would have gone to the state treasury.

"The idea that this grant is the only reason DTCC has decided to move to Jersey City ignores many of the advantages New Jersey has such as lower real estate costs, access to the state's high-caliber workforce and proximity to many businesses' customers and suppliers," said NJPP Policy Analyst Sarah Stecker. "Don't take our word for it. Some of these advantages were cited by DTCC's CEO when he announced the move." In a company press release, DTCC Chairman and CEO Donald F. Donahue said, "New Jersey offers us convenient access to our customers in the greater metropolitan area. We are also excited to tap into New Jersey's skilled workforce as our business grows in the future."

New Jersey has already subsidized DTCC. The company was approved for a $74.6 million Business Employment Incentive Program (BEIP) grant in February to move jobs to Jersey City from New York. That is one of the largest BEIP grants ever awarded. Despite this, DTCC told New Jersey officials the state was still not pulling ahead in competition with New York and Connecticut. "The approval of a TIF grant to a company that has already shown strong interest in moving to New Jersey before official rules have been established and approved for the awarding of those grants is startling," said NJPP Policy Analyst Naomi Bressler.

In a memo about DTCC, the EDA wrote: "Since the rules are not completed at this time and since the applicant has not submitted an application (it has not yet been made available by the Authority); a full review of project eligibility cannot be completed."

The EDA is scheduled to vote on TIF rules at its November board meeting. The rules will still have to be approved by the New Jersey Office of Administrative Law and the New Jersey Attorney General's Office.