TRENTON — With Camden’s barren waterfront as a backdrop, Gov. Thomas H. Kean signed a bill in 1983 that created one of the nation’s first Urban Enterprise Zone programs, calling it "the most significant step toward the economic revitalization of our cities in our state’s history." The plan: To attract commerce and reduce blight, allow businesses to charge half...
Some of the stores lining Main Street in East Orange. The area is part of the state's Urban Enterprise Zone program, which is expected to be debated today as the state budget comes up for a vote.TRENTON — With Camden’s barren waterfront as a backdrop, Gov. Thomas H. Kean signed a bill in 1983 that created one of the nation’s first Urban Enterprise Zone programs, calling it "the most significant step toward the economic revitalization of our cities in our state’s history."
The plan: To attract commerce and reduce blight, allow businesses to charge half the sales tax to entice shoppers, and offer companies tax breaks if they agree to build and hire workers. Then return the remaining sales tax revenue to the zones so they can be turned into attractive commercial strips and spark the local economy.
But what began as a modest effort grew into a big bucks enterprise for the 37 cities and towns that now host Urban Enterprise Zones. When fully funded, they split $90 million in revenue each year, part of the $952.8 million in sales tax dollars diverted to the program since it started.
Now the very fate of the Urban Enterprise Zone program is part of a tug-of-war between Gov. Chris Christie and Democratic lawmakers that will play out in today’s state budget votes.
Christie says the program is out of control and local officials spent millions as they pleased — often not on economic development.
Local officials counter that the zones revamped downtowns across New Jersey and fear the governor is trying to eventually kill the whole program.
A Star-Ledger review of thousands of records shows spending has deviated wildly from the initial UEZ plan, expanding the definition of economic development beyond what was envisioned in 1983.
The review shows local officials often used Urban Enterprise Zone dollars as just another form of municipal aid, paying for everything from firefighter salaries to buying a jaws of life, things that may have benefited cities but did not necessarily help the zones themselves. Money also went to consultants, lawyers and administrators, and to pay for carnivals, car shows and even Elvis impersonators to lure customers.
A view of Main Street in East Orange, an area designated as an Urban Enterprise Zone.Since 1983, $84.6 million was spent on local administrative salaries and benefits. There are 99 staffers in the zones collecting a combined $8.3 million in salary and benefits. It was all done with the approval of an authority in the state Department of Community Affairs
"The idea was simple: We wanted businesses to relocate to cities that needed it the most," said Kean. "It was about tax breaks, not these other things."
The 1983 law created 10 zones that were supposed to last no more than 20 years each. That more than tripled because "every lawmaker wanted one in their district," Kean said.
Chrisie complains the plan veered off course because the state never kept track of where the money actually went. He says UEZ zone sales tax breaks should remain, but the state should take the $90 million usually sent to towns.
The Democratic-dominated Legislature will vote today on a state budget that would allow towns and cities to keep $45 million for economic development.
DCA Commissioner Lori Grifa said the zones were designed to end after downtowns improved. "Cities were supposed to graduate from the program," she said. "But in nearly 30 years, no one has, and you have to wonder why."
SUCCESS STORIES
Supporters say the zones were critical for projects such as the Goldman Sachs building in Jersey City and the Jersey Gardens Mall in Elizabeth, along with revitalization in downtowns like Plainfield and Vineland.
Sid Sheth, owner of Maple Liquors in East Orange, is one of the business owners who has benefitted from the Urban Enterprise Zone program.Sid Sheth opened a liquor store on the 300 block of Main Street in East Orange in 1987. The then-struggling commercial district suffered from high vacancy rates and was habitually littered with debris, he said. Business owners feared the corridor had gasped its last breath after a series of fires.
But in 1996 the cash-strapped city was granted an enterprise zone and Main Street got a boost. From 2000 to 2004, it pumped $2.58 million in UEZ dollars into Main Street, repaving sidewalks, adding lighting, removing graffiti, installing trash cans and improving facades. "The money helped stabilize and revitalize the block," Sheth said.
In Newark, UEZ dollars are providing the last part of financing for developer Samer Hanini’s $23 million Hotel Indigo near the Prudential Center, which was also partially built with UEZ dollars. "Without the UEZ program, this project would have never happened," Hanini said.
FILLING BUDGET HOLES, MARKETING
The percentage of UEZ money spent on municipal services has nearly doubled since 1983.
Since 1993, Jersey City spent nearly $16.4 million in UEZ funds on police and other salaries, such as street sweepers. In Vineland, part of $128 million pumped into its zone helped fund 22 police cars, 10 fire trucks, a jaws of life and salaries of 19 police officers — all in the name of economic development.
Newark spent all its UEZ funds — $12.8 million — on police salaries and equipment from 1992 to 1998. DCA records show it was one of several cities that exceeded the program’s limit of spending no more than 35 percent of its UEZ dollars on municipal services. Newark officials declined comment.
Grifa said there’s no proof those paid with UEZ funds functioned exclusively within the zones, as required by law.
Elizabeth Mayor J. Christian Bollwage said governors who cut municipal aid "gave a wink and a nod" for mayors to use UEZ dollars to offset the loss. "I don’t have a letter or documents to prove it, but that’s what happened," he said.
UEZ money also went to marketing. In dozens of applications to the state, towns pitched carnivals, car shows, commercials, magazine and newspaper ads. The state once approved $8,800 for Bayonne to hire look-a-like entertainers that included Elvis impersonators as part of a $44,000 free carnival.
City leaders say advertising promotes the zones and attracts investment, and events draw shoppers and new businesses. Grifa, however, said with some ads, politics mix with marketing. "Why does it have to have the mayor’s image on it?" she asked.
Even the UEZ’s most ardent supporters agree the program needs to be revamped.
Sen. Jeff Van Drew (D-Cape May) said he pushed to include $45 million in the Democratic budget in the hopes he can buy time to work with the administration to retain the program. He has introduced a bill to tighten spending requirements and set rules to determine which towns can keep their zones. "If you’re performing well, you should remain (in the program) But if you’re not, then you shouldn’t," he said.
By Jarrett Renshaw and Megan DeMarco/The Star-Ledger
Previous coverage:
• N.J. urged to drop Urban Enterprise Zone sales-tax break
• N.J. consultant report calls for elimination of Urban Enterprise Zone program
• N.J. urban enterprise zone cuts cause budget woes for 37 towns