U.S. 1 — via Richard K. Rein’s editorial, “How New York & Arlington ‘Lost’ Amazon HQ2” (November 21, 2018); Dan Aubrey’s feature article in the May 1, 2019, issue (“Hope for a Wasteland, Dashed by Politics”); and Ellen Saxon’s letter to the editor in the May 8, 2019, issue (“When Trenton Makes a Big Mistake”) — has given excellent recent coverage to economic development in New Jersey.
As anyone who watches NJTV news knows, economic development has taken center stage in New Jersey politics — based on recent news headlines the state government may have three task forces studying tax incentives. Meanwhile, as a growing number of community-based groups indicate, whatever the value of recent and current economic development programs — and this letter does not suggest there has been none — the impact has not trickled down to local residents caught on the wrong side of the inequality gap.
New Jersey is not alone in this dilemma. Escalating wealth and opportunity gaps and intractable inequality exist in sub-affluent communities across the county.
Tax incentives are not an either-or decision. Virtually all states and geographic regions provide them. When properly applied, tax incentives produce extremely positive results for individual states and communities. They are a vital, integral part of the increasingly intense competition for new economic development opportunities.
But tax incentives are only part of effective economic development. Companies expand because of business development opportunities, not because of access to tax incentives. Large companies like Amazon expand because of internal growth — and, as recent events demonstrate, competition for their expanded facilities is extremely intense. Companies already doing business within a specific state or region (e.g., Prudential or Broadridge) may expand due tax incentives, but often with little or no new job creation and zero-sum-gain results — one community’s gain is another community’s loss.
The BEX Network, an informal Princeton-based group of concerned current and former senior executives, consultants, technologists, academicians, public sector officials, investment bankers, and other financial intermediaries, has designed a Business Development Laboratory (BDL) that addresses the issues listed above.
Most new job creation comes from emerging and middle-market companies (annual revenue from $10 million to $1 billion). These companies expand geographically because of access to new business development opportunities — innovative business models that attract new customers and generate new revenue, profits, R&D opportunities, technology, intellectual capital, and productivity — not because of access to tax incentives or generic advertisements about location, talent, or workforce development alone.
Tax incentives and access to a central location, talent, or workforce development help — again, it is not an either-or selection process — but these items are secondary. They support innovative business models, but they do not represent a substitute. Incentives and other attributes follow business development opportunities, not the other way around.
BDLs create business models (new, previously unidentified, metric-centric business development opportunities) that attract (pull) emerging and middle-market companies to specific geographic regions — companies with formal expansion plans but no geographic preference or previous commitment (i.e., open to new proposals) and under-the-radar companies with an open mind towards new opportunities that offer metric-centric results.
BDLs include hands-on workforce development programs (including, but not limited to, interface with academic institutions) that address wealth and opportunity gaps and attack escalating inequality. New job creation does not trickle down to sub-affluent communities. Instead, it trickles up — it begins with hands-on skills development, jobs (career paths), and equity ownership opportunities for local residents.
BDLs expand, enrich, and increase the appeal of existing economic development programs. They do not replace or compete with these programs. BEX has developed opportunities to work with emerging and middle-market companies on a hands-on basis. We encourage representatives from state government, local governments, academic institutions, and grassroots organizations to evaluate these opportunities; participate in future activities; and help us implement, refine, and manage a BDL in New Jersey — a program tailored to the unique needs and objectives of individual communities. Working together, with an open mind towards new ideas and alternative programs, New Jersey can become a model for community-based economic development.
During the next few months BEX will reach out to grassroots organizations and other New Jersey stakeholders. We encourage all interested parties to become involved in future conversations and working sessions. Community-wide input and participation is vital to future success.
Willis Drive, Ewing
Richards is a former partner at KPMG Consulting and Gemini Consulting and a past international investment development officer for the Ontario Ministry of Economic Development.