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Back In Business

by Jennifer Kelley
Whether South Jersey can expect a strong economic recovery will depend in part on our ability to attract large national and international corporations to build headquarters, manufacturing plants and distribution centers here. Despite our strategic location, high costs and an inhospitable tax climate have dampened investment in the Garden State. But recent news across an array of industries indicates our region’s economy could be showing signs of life.

This February, Gov. Chris Christie braved the bitter cold of a Chicago winter for one reason: New Jersey’s economic recovery depends in no small part on whether large national and international corporations move here and stay, bringing their headquarters, manufacturing plants and distribution centers with them.

Christie is pulling out all the stops to create a business-friendly New Jersey: $185 million in business tax cuts, an overhaul of the state’s corporate tax structure—and direct appeals to companies operating in states not implementing such reforms.

And, that’s why Christie’s voice was heard unabashedly recruiting businesses on radio sta tions all throughout Illinois Gov. Pat Quinn’s domain, following the Democratic leader’s approval of an increase in the state’s corporate income tax. Christie’s brazen pitch (tagline: “New Jersey—We mean business”) was followed by the February visit to the Windy City for a direct tug on the heart- and purse-strings of corporate leaders. Christie outlined recent business-friendly legislation, including changing the burdensome three-factor business-tax formula to a single sales factor, sunsetting the corporate businesstax surcharge, granting loss carry-forwards, and implementing a robust business-attraction strategy.

New Jersey, the governor contended, is rapidly transforming into a leading destination for big businesses looking for big breaks and big opportunities.

But was he right?

So far this year, the recovery of South Jersey’s business sector has been inconsistent at best, according to Philip Kirschner, president of the New Jersey Business and Industry Association. “The first three to four months were terrific for some areas. The last couple of months, however, have not been so great. The volatility is a real challenge,” he explains, “because it keeps interested companies on the sidelines until they see a more prolonged period of month-over-month improvement. It’s definitely a frustrating environment.”

Yet, Kirschner, a Moorestown resident, is quick to point out that South Jersey is particularly well-positioned to take advantage of an eventual economic recovery, even more so than the rest of the state. “The region is drawing a lot of interest from companies checking out the state. There’s more land available for development, a very educated population in the midst of a number of highly regarded universities and research centers, and it costs much less to build in South Jersey,” he says.

All that, however, hinges on the bet that New Jersey is poised for a rebound. As our economy shifts from critical condition toward recovery, there are signs that we may be on the right track.

First, though, the bad news. The “Great Recession” has afflicted the financial health of every state in the union, ravaging job markets, budgets and livelihoods. But signs of recovery are apparent throughout the halls of this fiscal infirmary, with the prognosis pointing to a steady rebound over the next five to seven years, experts contend. There are still a few patients, however, in intensive care—and New Jersey is one of them. The pace of economic healing here is lagging behind the majority of other states, according to a late-April report from Moody’s Investor Service, which points to a lack of business investment as a key factor in that stagnation. This, analysts contend, is what it looks like when decades of unhealthy government regulations, policies and taxes finally catch up to us.

Both statewide and national polls of CEOs and other corporate parties have consistently ranked New Jersey’s business environment as among the worst in the country. Most recently, the Tax Foundation’s State Business Tax Climate Index ranked it No. 48—and that’s up from No. 50 in 2010. CEO Magazine’s latest ranking placed Jersey at 47th for overall business climate, below direct competitors such as Pennsylvania (39th), Delaware (16th) and Connecticut (44th).

But take a deep breath: here comes the good news.

An antidote to New Jersey’s tortured business climate may be well on its way. For the first time in years, CEOs’ outlook on the overall business climate has significantly improved. Some 75 percent of respondents to the Rutgers-led Economic Policy Summit’s latest C-Suite Survey, released in late May, said they believe the government has become more responsive to the needs of the business community over the past six months—up 35 percent from the previous survey, conducted in fall 2009. “Attitudes clearly have gotten better,” says Jim Hughes, dean of Rutgers’ Edward J. Bloustein School of Planning and Public Policy. More importantly, the survey indicates that large companies within the region have a positive outlook for growth over the coming year. “While there is room for improvement, this is good news for New Jersey,” Hughes adds, noting that 32 percent of those polled expect to increase their workforce in the state, and 74 percent anticipate revenue growth in the second half of 2011.

Take, for example, our region’s largest and most prominent mega-corporation: the Campbell Soup Co. The company, which had considered uprooting its world headquarters from Camden, has instead undertaken a $100 million expansion in the city since 2007, growing its facility by 80,000 square feet. In addition, it’s presiding over the transformation of 70 adjacent acres into the Gateway Office Park, which will boast 200,000 square feet of office space, according to company spokesman Anthony Sanzio.

More than 1,700 South Jersey jobs were saved, (though 130 of those local workers are being laid off as part of a company-wide restructuring announced in June). As well, the retention of Campbell resulted in a public-private partnership for $23 million in roadway and other infrastructure improvements.

“When you’re a publicly traded company, you have to think about what’s best for shareholders. In Campbell’s case, it just made financial sense to stay,” Sanzio says, noting the corporation now plans to remain in South Jersey long term.

When it comes down to cost, though, New Jersey can’t always win. But we do have other assets: a strategic location and a touted quality of life.

Those were factors for Verizon, the telecom giant that considered locating in Virginia before settling into New Brunswick. “We couldn’t compete with that state in terms of cost,” recalls New Jersey Sen. Richard Codey (D-Essex), who served as acting governor at the time. “But it came down to: ‘Do employees want to raise their kids in Virginia or New Jersey?’ We showed them the education and income statistics, the quality of life factors, our cultural offerings, etcetera. One thing that really got them,” he adds with a chuckle, “was reminding them Italian restaurants down there are not owned by Italians.”

Another former governor, Jim Florio, concurs with Codey, noting that places such as South Jersey are attractive to large companies considering the needs of their workers despite the higher cost of living. “I think we’re often too critical of our own state. All things considered, this is still a great place to live, raise a family and do business,” he says. “And that’s a big draw to businesses in good times because—at the end of the day—these companies are mostly comprised of families with kids to raise.” Attracting premium talent is easier here than in other, less desirable locations.

“We’re not—nor do we have to be—a state at the top of the list as far as cost structure,” says Dennis Bone, president of Verizon New Jersey and co-chair of Christie’s Economic Development Transition Team. An active player in the effort to market the state to outside businesses, he notes that companies—like, say, call centers—that solely seek out cheap labor and low overhead “are never going to be attracted here.”

“But,” he asks, “Do we even want them?”

Still, such swagger isn’t quite so evident at the county level, where there have been both gains and losses in the business community. In Camden County, they’re cheering victories like the arrival of Sunrise Signs, a national provider of signs and vehicle graphics that moved from West Deptford to a new, larger location in Gloucester City. Another bright spot in the county has been the unfolding Haddon Avenue Transit Village, which will result in 240,000 square feet of retail and office space as well as 250 units of workforce housing between Lourdes Medical Center and the Ferry Avenue PATCO station.

But there have been setbacks as well. LiDestri Foods—maker of Francesco Rinaldi and private-label spaghetti sauces, among other products—shuttered its Pennsauken plant last month, laying off 146 workers. The news, however, did not dampen Camden County Economic Development Director Sandi Kelly’s optimism. “Looking ahead, I think we are in a good position [to draw in significant businesses], because we have a great inventory of available real estate, ready and able workers, and an excellent team of professionals in the county who work closely with our partners in education, workforce development and on the local, state and regional levels,” she says. She notes that emerging patterns of growth have been around retail, health care, logistics, light manufacturing, tourism and administrative service industries.

On the other side of the border, Gloucester County has also seen ups and downs. Freeholder Heather Simmons, liaison to the county’s economic development department, sees economic growth engines in the Paulsboro Marine Terminal and Bridgeport’s 3,000-acre Pureland Industrial complex. The port is expected to welcome 2,500 employees at the end of 2012, while Pureland recently inked a deal with Mapei, an Italian-based adhesive and sealant manufacturer that anticipates hiring 60 people and making what amounts to a $10 million investment in the county. As well, Simmons points to Schar USA Inc., Europe’s leading producer of gluten-free products, which decided in January to locate its first U.S. manufacturing facility in Logan Township. The company’s expandable 50,000-squarefoot facility is expected to be operational in the first quarter of 2012, adding at least 50 new jobs to region. Also on the industrial side, SSM Industries, a manufacturer of custom HVAC ductwork and piping, moved their Philadelphia operations to a 46,142-square-foot building in West Deptford. And just last month, Total Turf Experience broke ground on a 42,000-squarefoot facility on a former brownfield site. The operation, featuring indoor soccer, baseball, softball, arena football, lacrosse and hockey, represents a $6.8 million investment and 53 new jobs.

However, there have been blows as well. Sony, which had been trimming workers from its Pitman plant, announced it would close altogether this year, eliminating hundreds of jobs. That news came after a 2.3 percent decline in jobs countywide last year, largely due to the closings of a Sunoco refinery and a U.S. Postal Services distribution hub.

In Burlington County, there have been promising signs—but also disappointments. “Ocean Spray’s recent decision to relocate from Bordentown to the Lehigh Valley [in Pennsylvania] was clearly a setback,” says Freeholder Joe Donnelly. “That said, we have pledged to work with the company to locate another user for their site and facility, and we have a two year window to do that.”

Recently, AmeriHealth, the insurer based in Mount Laurel and Iselin, decided to consolidate its headquarters up north in Cranbury. And in Florence Township, most crushing has been the collapse of an $8 million deal with a nationally known company, currently based in central Jersey, which opted out of relocating its headquarters to Florence’s long-blighted Roebling Steel site after more than 12 months of negotiations. The company, Florence Mayor Bill Berry says, made “unreasonable and, frankly, absurd” demands of the township, asking for nearly $19 million in service, infrastructure and tax-related investments.

“We did everything we could to secure the deal, but in the end we just couldn’t meet their demands,” he says. “They were so over the top it was as if [the company] was hoping we’d walk away so they could pull out of talks.”

The sprawling grounds, a Superfund site the size of a small city entering the final stages of federal environmental cleanup, are being redeveloped in the expectation of housing sizable industrial tenants. A new Roebling rail station on the county’s Transit River Line route has already been built. “They will come,” says Mark Remsa, the county’s economic development director.

Elsewhere, Remsa adds, there are more positive signs of the business growth to come. Wrightstown is negotiating with a new developer for a project right outside Joint Base McGuire-Dix-Lakehurst. The plan for offices, a hotel and support services, is expected to have a $1 billion impact on the region.

Donnelly says, “The recovery will not happen overnight, but we feel we are poised to do well for a number of reasons, [including] light rail, which continues to be a catalyst for development and redevelopment in the county. It helps that many of our communities have appropriately zoned land to attract business and commercial activity … and we’ve cut the tax levy four years in a row—which, we believe, is a strong signal to business that we want to be as user-friendly as possible on the economic front.”

All three counties have weathered the economic ailments of recent years by pooling their strengths for the first time, and eschewing the urge to compete with one another. Leading the charge for “cooperation not competition” is Senate President and former Gloucester County Freeholder Director Steve Sweeney. “We are the only counties in the state who join together to encourage economic growth, rather than compete against each other. If a resident from Gloucester County drives over an imaginary boundary to a job in Camden County, it benefits all of us,” he says. “If we compete against each other and lose the jobs to another state, it hurts all of us.” The unprecedented spirit of cooperation first surfaced five years ago when the three counties collaborated on the now-annual Tri-County Economic Development Summit to tout the region, its employers, its workforce and its attractions. This year’s event will be held Sept. 30 in Mount Laurel.

Complementing South Jersey’s regional business marketing effort is a new state agency created last year. Choose New Jersey is a nonprofit operating as a critical prong in the state’s new Partnership for Action initiative. Run by corporate leaders from all along the Turnpike, its aim is to promote New Jersey as a world-class competitor in the global marketplace.

Choose New Jersey chief executive Tracye McDaniel has a soothing bedside manner, speaking assuredly about the state’s fiscal recovery and burgeoning business boom. “There is no doubt in my mind we are heading in the right direction. We’re listening to the needs of corporations inside and outside the state, and we’re acting on them,” she says. “What [each region in the state] will see over time is a healthy influx of new businesses looking to locate in a dramatically improved business climate.”

In other words, while South Jersey may not be recovered just yet, the prognosis is good.

Published (and copyrighted) in South Jersey Biz, Volume 1, Issue 8 (August, 2011).
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