With the stroke of a pen, a new era began for Newark and another came to an end in Secaucus.
In what some are calling a precedent-setting test case of economic development policy in New Jersey, Panasonic on Wednesday signed a 15-year lease to move to Two Riverfront Center in downtown Newark when its lease at its current U.S. headquarters in Secaucus expires at the end of next year.
The company’s decision to move to Newark comes just months after the New Jersey Economic Development Authority (EDA) approved a package of tax incentives worth $102.4 million under the state’s Urban Transit Hub Tax Credit program if Panasonic – which had been in the market for a new corporate home in the U.S. – stayed in-state but moved to a city covered under the program.
“This case has set a bad precedent.” – Allen Magrini
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Arguing that this was an unfair misuse of the Urban Transit Hub Tax Credit, Secaucus officials and Hartz Mountain Industries, Panasonic’s current landlord in Secaucus, have joined forces to block the move. Together they have lobbied the EDA to rescind the $102.4 million tax credit package offered to Panasonic and earlier this month they filed suit with the Appellate Division of the Superior Court of New Jersey to vacate the tax package.
The program gives tax credits to certain companies that employ at least 250 full-time workers and build or rent office space in or near nine designated urban transit communities, one of which is Newark. Secaucus is not covered under the program.
Hartz also tried to keep its tenant by offering to renovate its current facility and offering competitive rent for its office space in Secaucus.
These efforts have apparently had little impact on Panasonic’s ongoing negotiations with the EDA, the City of Newark, and developers working on a new facility for the company.
On Wednesday, Panasonic officials said that SJP Properties and Matrix Development Group will begin construction on a new 280,000-square foot sustainable high rise facility this summer. The company expects to move from Secaucus to what will be known as Two Riverfront Center before April 2013.
“I am saddened and disappointed that Panasonic has decided to move forward with a move to Newark. Hartz made a terrific counter offer to keep them in Secaucus, which they’ve obviously chosen to turn down. But I think the state made it pretty difficult for us to compete with Newark,” said Secaucus Mayor Michael Gonnelli last Tuesday, on the eve of Panasonic’s announcement and lease signing. “It’s pretty hard to compete with $102 million in tax breaks…I wish them well.”
For Secaucus, Panasonic’s departure means the loss of a “good corporate neighbor,” Gonnelli said, that has over years donated thousands of dollars to municipal charities and programs.
It could also mean a drop in tax revenue. According to the Office of the Secaucus Tax Collector, Hartz paid a total of $1.4 million in real estate taxes last year for the Meadowlands Parkway site currently occupied by Panasonic. (This figure includes property taxes paid to Hudson County, the local school district, and the municipality.)
Should Hartz have a hard time finding a new tenant after Panasonic’s move to Newark, it’s possible the real estate company could appeal its annual tax bill and fight for a tax reduction until it lands a new tenant.
One mayor’s loss is another’s gain
While Secaucus licked its wounds last week, Panasonic and Newark ran victory laps around each other at a press event held to publically sign the company’s lease agreement with SJP.
Joseph M. Taylor, chairman and chief executive officer of Panasonic North America used the opportunity to state why the company chose to leave Secaucus.
“Our chairman has said that by our 100 anniversary in 2018 we will be the No. 1 green innovations company in the electronics industry in the world…With that aim in mind we examined our current facilities [in Secaucus]. We found that in those facilities we could not possibly achieve our long-term business goals. To be the company we want to become…we need a mass transit system so our employees can get to work, and we need a facility designed completely from the environmental perspective…We couldn’t possibly demonstrate our commitment to being a green company and ask 1,000 people to drive their car to work everyday. It doesn’t match.”
At the new facility being built in Newark, Taylor said the company expects to reduce its carbon footprint by an additional 50 percent. “Nothing compares to the mass transit system in Newark,” Taylor, who took mass transit to Wednesday’s event, said later.
The company already has the financing it needs to begin building, Taylor told the Reporter.
Contrary to previous reports, Taylor said the company will move 1,000 jobs – not 800 – from Secaucus to Newark, and “our anticipation is the jobs will grow as our business grows.” He said he expects hundreds of other jobs to be created through the multiplier effect once Panasonic employees begin working at Two Riverfront Center.
Temporary construction jobs will also be created during the building of the facility, although no estimates were provided by city or company officials.
“This is an historic, game-changing moment for the City of Newark…This day marks what will be the beginning of a profound partnership. This day marks what will be incredible growth for Newark…It is a partnership that I believe will continue the momentum that Newark has been having,” said Newark Mayor Cory Booker at Wednesday’s lease signing.
Calling Panasonic’s move to Newark “the single greatest economic development accomplishment of my administration,” he added, “this company choosing Newark, New Jersey, for us means that we know now that we can compete as equals with New York, with Los Angeles, with the [San Francisco] Bay area, and Silicon Valley. Newark has come of age.”
When asked specifically whether the EDA’s decision had pitted Newark against Secaucus Booker stated, “This is not a zero sum game where their pie gets smaller and ours gets larger. It’s really about us as a state making a larger play to keep a corporation that was being wooed by [other cities]. This should not be seen as a slight against Secaucus. It’s a great city.”
Booker and Taylor insisted the North American division of Panasonic had to fight its own corporate leadership in Japan to stay in New Jersey. Corporate leaders had, they claimed, pushed for a move to California.
Bad precedent?
Since the EDA’s decision to offer tax credits to Panasonic, at least three other companies have applied for similar credits under the Urban Transit Hub Tax Credit program, according to a legal document supplied to Hartz by the EDA.
Those companies have not been publically identified.
Thus, Allen Magrini, senior vice president of Hartz, said, “This case has set a bad precedent. It’s bad public policy. It’s bad economic development policy when you’re, essentially, paying companies not to leave the state.”
Magrini also questioned how Panasonic can move forward with its plans to move to Newark when the Appellate Court has yet to rule on the Hartz-Secaucus appeal filed earlier this month.
Taylor is barred from discussing the case and could not answer a query Wednesday.
Lt. Gov. Kim Guadagno, who was at the lease signing event and who heads Gov. Christopher Christie’s business initiative, said, “We think it’s a baseless lawsuit. It will have no bearing on the timeline or completion of this project.”
E-mail E. Assata Wright at awright@hudsonreporter.com.