NJ Business Matters: The Blog of the CIANJ

Closing Shop

In the past five weeks, NJ Business Matters has added many new readers who have been following our coverage of the Lame Duck Session.

As of today, the session is officially over, as Governor Corzine has either signed, vetoed, or pocket vetoed all remaining bills. Therefore, we will stop posting under Lame Duck Watch, but don't fret.

While many of you have been going directly to http://www.njbusinessmatters.org/lame_duck_watch/index.html, you have actually been visiting a subsection of our overall blog and missing out on some of the great prose we've been writing about all legislative topics in Jersey.

So here's a quick post reminding you to point your browsers to http://www.njbusinessmatters.org. The first year of this blog has been a tremendous success, and we look forward to continuing the conversation with you over on the main page.

Wrongful Death Bill (Pocket) Vetoed

The Governor's Office just issued a press statement announcing he has "pocket vetoed" the trial-lawyer supported expansion of New Jersey's Wrongful Death Act. We'll spare you the repetition of the reasons we opposed to the bill, such as higher insurance premiums, (sorry, couldn't help myself), but see previous posts here and here.

The Governor did not veto the legislation, he simply refused to sign it by today's noon deadline. The net result is the same: the bill will not become a law. In his statement, Governor Corzine noted about S-176,

Unfortunately, I do not believe that this bill in its current form strikes a fair balance that would avoid using a strict monetary valuation of a person’s life while also addressing the adverse effect of allowing unlimited and unpredictable damages.

Thanks are in order for the Governor, who recognized flaws in the bill and took appropriate action.

Update: Star-Ledger coverage is now available complete with a quote from CIANJ President John Galandak. Our press release on the issue is available here.

Haste Makes Electronic Waste 2.0

It's 8:36 a.m. and Governor Corzine still has not announced the signing of the electronic waste bill, the troubles of which are detailed in a previous post.

In short, CIANJ agrees with the concept of developing a program to recycle electronic waste. The debate surrounds who should pay for it. We supported a program whereby computer manufacturers would pay the Department of Environmental Protection a $5,000 registration fee and then either let the DEP run the program (and charge manufacturers their "fair share" of the cost) or allow manufacturers to recycle their own products (with DEP approval). Television recycling would be paid via a $10 point of sale fee.

The reason for the different methods is differences in industries. Some television manufacturers have no manufacturing or corporate presence in New Jersey or the United States. The DEP's ability to bill those overseas companies for a NJ recycling program is minimal...at best. That means companies that create jobs in the United States would be forced to shoulder more of the burden.

That compromise was jettisoned during the final hours of the legislative session.

Just so we're clear, it is the environmentalist movement that has adopted the absolutist position while the industry was willing to compromise. Because of that and inadequate protections for NJ manufacturers, CIANJ has withdrawn its support for the bill and called on the Governor not to sign it.

The Governor has until noon today to either sign or veto all legislation remaining from 2007. If he does neither, they still fail to become law based on a "pocket veto".

Wrongful Death Bill Still Sits on Gov's Desk; Trial Attorneys Fret

The Governor signed more than eighty pieces of legislation into law over the weekend, and nowhere on that list is the trial-lawyer supported expansion of the state's Wrongful Death Act. Any legislation not signed by noon tomorrow fails to become law.

The Association of Trial Lawyers of America (whose national organization recently decided to remove the words "trial lawyers" from their title, going instead with the PR friendly and superhero-like "American Association for Justice") staged a press conference this afternoon seeking the governor's signature.

Regular blog readers know this all by heart. Allowing for unlimited damages to be collected for emotional grief is going to drive insurance premiums higher because insurance companies will be forced to protect themselves from unlimited suit. That protection will most likely come from increasing cash reserves.

The bill (S-176) would also make NJ a destination for trial attorneys because we would be one of only eight states with such a system. 

Click here to check out CIANJ's Business Beat regarding the issue and here to e-mail the governor and express your concerns.

Star Ledger Urges Gov. To Reject Wrongful Death Bill

A bill expanding New Jersey's Wrongful Death Act sits on the Governor's desk and the Star-Ledger has now joined with the business community's position urging Governor Corzine not to sign it.

The bill would allow families of wrongful death victims to collect unlimited damages for emotional grief. Current law already allows damages for economic loss, including the loss of household services, counseling and advice. CIANJ has objected to the bill since its introduction on two grounds.

1. It will lead to higher medical malpractice and other insurance premiums. If insurance companies must protect themselves from a suit for an unlimited amount of money, they will need to increase their reserves to compensate. That means higher insurance and healthcare costs for us.
2. It will make NJ a destination state for plaintiff attorneys. The state's plaintiff-friendly system has already caused class action asbestos and pharmaceutical suits to be filed here. Out of state victims and their attorneys should not clog the courts while New Jerseyans with legitimate claims wait. Presently, only eight states allow for unlimited damages to be collected for Wrongful Death.

The Star-Ledger succinctly puts it,

Most states either don't allow compensation for emotional distress in wrongful death cases or cap the amount a family can receive. The New Jersey statute would allow unlimited compensation. That doesn't make sense.

Without a cap, the ability of insurance companies, hospitals and other employers to predict liability becomes more difficult, further hurting New Jersey's already shaky business climate. A cap between $250,000 to $500,000 at least would allow business some yardstick to anticipate litigation expenses.

Money cannot replace a loved one. Yet it is the way courts punish wrongdoing and provides a measure of compen sation to a family that has suf fered a tremendous loss. It is not and should not be akin to winning the lottery.

Coincidentally, S-176 was the lead story in CIANJ's e-newsletter. To read the Business Beat and contact the governor voicing your concerns, click here.

The Last Waddlers

Today is reorganization day in Trenton. Everyone who won election in November is sworn in, the Governor greets them with his State of the State Address (much more on that later) and the slate of posted bills is wiped clean. It has all the chaos of a high school graduation with almost the same level of excitement.

The boss and I will be in Trenton congratulating everyone and wishing them well. Before we can fully turn attention toward what's ahead in 2008, here's a recap of what happened in the previous legislature's final hours - which ended late last night.

S-2491/A-3938 broadens the state's Urban Enterprise Zone program for small businesses. As you know, UEZs try to generate economic growth by offering 50% off the state sales tax within the UEZ. However, businesses actually pay the full tax and then apply for a rebate. The paperwork of managing so many (often times low-dollar amount) sales has lessened the program's effectiveness. This legislation would change that and allow the rebate to take place at the point-of-sale. CIANJ Position: Support
Status: Passed Both Houses

S-80 expands the state's Business Retention and Relocation Assistance Grants (BRRAG) to benefit smaller companies. Presently, grants are open to companies that expand within or relocate to New Jersey and will create at least 250 jobs. BRRAG grants offer tax credits up to $1,500 per job created. S-80 would make more companies eligible by lowering the threshold to 50 jobs created for eligibility. CIANJ Position: Support
Status: Passed Both Houses

S-176 would fundamentally alter NJ's Wrongful Death Act by allowing victims' families to sue for unlimited damages for emotional grief. The present system allows suit to be brought for financial loss (including damages such as the loss of parental guidance, household services etc.), but not for emotional pain and suffering. Only six states allow for such suits, and S-176 would make NJ a destination for trial lawyers while driving insurance premiums higher as companies must protect themselves from lawsuits with no dollar limit by increasing reserves. CIANJ Position: Oppose
Status: Passed Both Houses

S-3043 would provide tax incentives up to $75 million for a company choosing to locate around NJ's mass transit hubs. To be eligible for the tax credit, a company would need to invest at least $75 million in capital and create at least 250 jobs within a half-mile of transit stations in eight NJ cities. CIANJ Position: Support
Status: Passed Both Houses

S-554 would create an electronic waste recycling program. We've dedicated a whole post to this just below. In short, CIANJ was willing to support a compromise version of the bill. Unfortunately, that compromise was jettisoned on Thursday and CIANJ has withdrawn its support.
Status: Passed Both Houses

We'd Like to Introduce the Star-Ledger to Themselves

Back in October, the Star-Ledger editorialized that NJ was driving businesses out in droves and that the state needed to create policies designed to attract business. Who could disagree with such a common-sense statement as,

More than anything, the Hughes-Seneca report is proof that papering over problems from one election to another doesn't work. Eventually, steps must be taken to make New Jersey a place where businesses want to locate and ordinary people can afford to live.

So naturally, Thursday the paper decides to demand that legislators pass the most anti-business piece of legislation to be seriously considered this year. The Ledger has called for Paid Family Leave to be passed during the lame duck session.

Regular readers know this all by heart. Paid leave would put New Jersey at a competitive disadvantage as only NJ and California would mandate that every company provide this time off. We only wish the editorial board at the Ledger agreed with itself when they wrote,

In a global economy, location alone isn't enough. Companies look for equitable, stable tax policies as well as a diverse and skilled work force.

The advantages of opining. 

AARP Joins Big Labor In Support of Paid Leave Mandate

The AARP, and organized labor yesterday announced they were joining together in the hopes of pushing a paid family leave mandate on all employers by the end of this legislative session.

"Paid family leave is a win-win for all in a decent, caring society," Marilyn Askin of AARP New Jersey said at a news conference in Trenton.

Nothing like taking the moral high ground against the 48 other states which must be something other than caring and decent, eh?

Remember, if S-2249 would pass the New Jersey government would mandate a benefit be given to employees unlike any place else in America. Add that to a business tax climate ranked 49th by the Tax Foundation and a population that lost 72,000 residents last year and half the remaining population wishing to follow them and you set yourself up for a situation whereby NJ starts to lose the prosperity and jobs it has built over generations.

Those facts must remain prevalent as proponents of paid leave have a compulsion to not put the discussion in context of NJ's overall business climate.

Let's Not Make The Housing Slump Worse

Jersey's papers are abuzz this morning with figures on slumping home sales, especially in New Jersey's urban cores. Yesterday, the Star-Ledger reported that urban home sales in New Jersey dropped an astounding 34% during the first six months of the year. There were plenty of suspected culprits, including lending practices and a natural downswing in the market.

That being said, when the legislature reconvenes they will consider legislation that could actually make the problem worse in New Jersey's largest cities.

In the spring A3190/S2643 was introduced in the New Jersey legislature, which would allow some of New Jersey's large cities to place an additional tax on the sale or transfer of real estate, providing a disincentive to invest in the cities of Newark and Jersey City. In effect the legislation would allow municipalities to impose a 0.1% tax on the sale of property in two cities with some of the highest property taxes in New Jersey. Government should, in an effort to spur investment, be taking active steps to reduce taxes in these urban areas.

0.1% may seem insignificant, but increases in realty transfer fees do reduce home sales. A February 2006 study conducted by the Rutgers Economic Advisory Service and Center for Urban Policy Research found that a 10 percent increase in the realty transfer fee would yield a reduction in home sales by 0.42%.

The tax increase implemented by A3190, $.50 per $500 of the sale price, represents a price increase of greater than 10% for homes sold for up to $850,000.

Driving up price higher than the natural intersection of supply and demand will weaken sales. It's not something government should be engaging in knowing what the results will be. This legislation should not even be considered during the Lame Duck Session. 

Lame Duck Watch: Making New Jersey A Home For Trial Lawyers

Welcome to the latest installment of Lame Duck Watch, where we introduce CIANJ members to legislation that is likely to threaten the business community in the final days of this legislative session.

Reforming New Jersey's litigative climate remains a priority for NJ's business community. Lost productivity and revenue defending oneself from overbearing or frivolous lawsuits has increased the cost of American healthcare by more than $120 billion annually. That lessens the likelihood that employers will be able to offer coverage and that workers will be able to afford it. This December, trial lawyers in New Jersey are looking to expand the state's wrongful death statute to make NJ an even more expensive place to live and do business.

Presently, the state allows for lawsuits in wrongful death cases for those with very specific relationships to the victim. Suits are allowed to recover not only the loss of a bread winner, but the loss of companionship, parental guidance etc. What you cannot sue for is emotional grief. In state's that allow suit for grief, a cap is always in place to ensure predictability and fairness within the system.

A-1511 would change the New Jersey law to allow for unlimited recovery by a much larger pool than is currently allowed. Our opposition to this, and the insistence on a cap has been described as heartless in that we would cap how much money someone's grief is worth.

Juries will do that anyway when they assign monetary damages. Juries will also determine that one person's grief is worth more than someone else's and that disparity will be even greater if no cap exists. To keep a sense of fairness and predictability in a state increasingly becoming a destination for America's trial lawyers, this expansion cannot become law. Our own citizens are already delayed justice because out-of-staters decide to sue here based on our legal climate. It's time to improve that system, not make it more burdensome.   

Hope On The Way?

Assembly Speaker Joe Roberts is promising action on the largest share of our property tax bills – a school funding formula that targets demographics and not students. The Speaker told the Associated Press that he expects to see movement on a new funding formula either during the upcoming Lame Duck session or during the opening months of the next legislature.

Whether it's done in the lame-duck session or whether it's done at the very early part of the year remains to be seen, but rest assured it's something we're going to be talking about and working on through November and December," said Roberts, D-Camden.

If you are a suburban property taxpayer, most of your property tax bill goes to fund public schools with the remainder paying for services such as police, fire and municipal government. A portion of suburban property taxes are also sent to Trenton to be redistributed to 31 urban school districts (the so-called Abbott districts) including Newark, Camden and Hoboken.

NJ is under a state supreme court mandate to spend as much per pupil in the 31 poorest districts as are spent in the wealthiest. As we have seen, increased dollars has not produced the best possible results, but it has produced America's highest property taxes. To fix the formula, funding levels for all children, especially special needs children, must be targeted to individual students regardless of their zip code. Without that control, towns have mandatory spending costs that have become unsustainable.

While CIANJ pushed for a new funding formula to be introduced before this year's budget, election season lessened political will to take what may be a controversial step.

Update at 10:05 a.m. - The Garden State Coalition of Schools is holding a press conference later this morning on the need for an updated formula.

Lame Duck Watch: Higher Realty Transfer Fees in NJ's Biggest Cities?

In the spring A3190/S2643 was introduced in the New Jersey legislature, which would allow some of New Jersey's large cities to place an additional tax on the sale or transfer of real estate, providing a disincentive to invest in the cities of Newark and Jersey City. In effect the legislation would allow municipalities to impose a 0.1% tax on the sale of property in two cities with some of the highest property taxes in New Jersey. Government should, in an effort to spur investment, be taking active steps to reduce taxes in these urban areas.

0.1% may seem insignificant, but increases in realty transfer fees do reduce home sales. A February 2006 study conducted by the Rutgers Economic Advisory Service and Center for Urban Policy Research found that a 10 percent increase in the realty transfer fee would yield a reduction in home sales by 0.42%.

The tax increase implemented by A3190, $.50 per $500 of the sale price, represents a price increase of greater than 10% for homes sold for up to $850,000.

In short, the tax increase would price a definable percentage of homebuyers out of the market – something that stands in opposition to the principles for building and sustaining a healthy and vibrant economy.

The CIANJ opposes this measure as it will discourage a segment of the market from purchasing land in Newark and Jersey City, harming economic development in those cities. 

Lame Duck Watch: Right to Repair Bill Threatens an Owners Right to Intellectual Property

A theme regular blog readers know is the way in which innocuous-sounding legislation can inflict damage to businesses and how quickly it can remove incentives to create the modern technology that has become part of our everyday lives. The second installment of Lame Duck Watch highlights such a bill.

A931/S2533 would require auto manufacturers to deliver virtually unfettered access to their technology to auto repair shops. Consumer advocacy groups would have you believe the legislation will give you a wider variety of choices and reduce costs. Unfortunately, the bill uses auto manufacturers as a test case for violating intellectual property rights and removes the present, inherent requirements for repair shops to remain updated on all the technologies and changes to modern cars. All this to create a solution where there is not yet a problem.

According to Consumer Reports, only about 0.2% to 1.2% of the nearly 400 million automobile repairs performed last year encountered a problem gaining access to information to complete the job. One of the reasons for this is that the Automotive Service Association-Automaker Agreement is in place to provide independent repairers access to service, tool and training information. Remember that with 400 million annual repairs, auto manufacturers rely on independent repair shops, meaning it is in their best interest to ensure the repair shops remain up to speed on changes and advancements. One of the best forums to communicate and ensure cooperation between the service industry and automakers is the National Automotive Service Task Force (NASTF).

NASTF is a cooperative effort among the automotive service industry, the equipment and tool industry, and automotive manufacturers to ensure that service professionals have the information, training and tools needed to properly diagnose and repair today’s high-tech vehicles. By investing in proper equipment and subscribing to available web-based information services, legitimate repair shops can gain access to nearly all information. The only information to which repair shops cannot gain access relates to vehicle security systems, smart codes and engine immobilizer overrides.

In addition, there are legitimate concerns that this legislation is an effort by aftermarket part manufacturers to gain access to proprietary vehicle information that will enable them to more readily build cheap, knock-off parts. The legislation requires manufactures to forfeit intellectual property (without compensation) to “any vehicle owner or repairer” including all “information necessary to diagnosis, service or repair a motor vehicle.” Through NASTF, manufacturers already provide this information. This bill goes much further by also requiring manufacturers to provide information “necessary to integrate replacement equipment in the vehicle.” This exposes the intellectual property and integrity of automobile parts.

Congress already considered this legislation and said no way. Now, advocates are attempting to – once again – put an additional requirement on businesses operating within New Jersey. The General Assembly and Senate would be wise to follow the lead of Congress and dismiss this bill in high gear.

Lame Duck Watch: Jeopardizing NJ's Most Successful Job Creation Program

Legislators and wannabee legislators are out touting their accomplishments and telling you why they deserve a(nother) term in office. Campaign rhetoric about creating more jobs is great and demonstrates that candidates understand the importance of a healthy economy - or, at the very least, they understand that YOU want a strong economy and to see your taxes reduced. When they arrive in Trenton, they'll have to grapple with sometimes boring bill language that has not-so-boring reverberations across the business community.

In a new series, Lame Duck Watch, NJ Business Matters will introduce or re-introduce you to bills that you should be prepared to monitor and contact legislators about once the General Assembly and Senate re-convene after the November Elections. In today's Lame Duck Watch, we introduce you to A4001/S2247, which would expand prevailing wage requirements to the PRIVATE sector and for PRIVATE jobs, thus increasing construction costs on non-government job sites.

A4001/S2247 would also alter New Jersey’s most successful job creation program – the Business Employment Incentive Program (BEIP). The legislation would require BEIP grant recipients to pay the prevailing union wage on construction projects related to their move to or expansion within New Jersey.

Since its inception BEIP has generated more than 67,000 jobs and $11 billion in investment. The program’s success is directly related to its structure, which would be significantly altered should this legislation pass. BEIP grants utilize incentives and accountability tied to actual job creation and wages. The program exists to reduce the cost of doing business in the state and make New Jersey more attractive to companies considering expanding operations in or locating to the state. Unfortunately, this legislation would make BEIP grants less attractive to these companies.

Prevailing wages increase the cost of construction projects by up to 25%. CIANJ believes it is self-defeating for the State to have a program in place for the purpose of reducing costs while simultaneously mandating cost increases.

CIANJ is also concerned about the effect the legislation would have on third parties. As currently written, A4001/S2247 would mandate prevailing wage rates to be paid by a landlord or developer for construction projects if a BEIP company occupies at least 55% of a property. A BEIP recipient could be responsible for ensuring a landlord paid the prevailing wage on a project or jeopardize their grant. Companies considering taking advantage of the program would now have to take into account that an unrelated or quasi-related third party would have the ability to jeopardize their grant. It's hard to imagine participating in a program with that string attached.

The increased construction costs and administrative difficulties created by A-4001/S-2247 would nullify the benefits of BEIP grants for many companies, and the CIANJ urges legislators to vote "NO" in the Fall.