Corporate executives looking to cut costs in the wake of the recession are more likely than ever to flee or avoid New Jersey, according to Princeton firm that specializes in helping companies relocate.
The Boyd Co. Inc. on Monday released a study that found North Jersey is the fifth most expensive place to site a corporate headquarters, costing $27.9 million a year to operate.
New York City topped the list, followed by San Francisco, Stamford, Conn. and San Jose, Calif.
John Boyd Jr., a company vice president, who compiled the report, said New Jersey’s high costs have deterred companies from expanding in the state for years. But the recession has significantly heightened the competition between states, to the detriment of those with a high cost of doing business, he said.
“The corporate headquarters arena is the next big frontier for corporate cost cutting,” said Boyd. “And that’s big news for New Jersey.”
Much of the focus for New Jersey’s local government leaders at their annual conference in Atlantic City this week is on spending money — despite property tax bills that are at an all-time high.
Attendees are greeted inside the convention center by a sea of booths advertising products and services that are being offered by vendors who feed off taxpayer-funded contracts.
And the agenda for the convention, organized every year by the New Jersey League of Municipalities, is filled with workshops that teach local officials different ways to use their budgets for everything from crime prevention and green energy to transportation infrastructure and "emerging video technologies."
"You see a lot of ways to spend money," Senate Majority Leader Steve Sweeney (D-Gloucester) said. "What you don’t see is how to regionalize and save money."
About 20,000 people are expected to attend this year’s event, which runs through Friday. Many are billing their communities for meals and lodging, and most are in a public pension system that is teetering toward collapse, one that was the subject of a conference session held on Tuesday.
Other seminars are geared toward better collecting tax money. One is scheduled for Thursday afternoon that will offer ways local officials can fight their residents’ property tax assessment appeals in an effort to maintain their current budgets.
Another workshop scheduled for Friday will teach ways to use digital technology to improve tax maps.
The agenda includes a number of workshops focused on budget savings, including several discussions on consolidation and shared services, two themes that were often heard during the recent gubernatorial election, which saw voters side with Republican Chris Christie, the candidate who most aggressively called for tax cuts and reduced corruption.
Others seminars talk about ways to find savings through auditing, energy conservation and the use of new technologies.
"I think everyone here is focused on how we’re going to have more efficient government," said Senate Minority Leader Tom Kean Jr. (R-Union). "They’re the ones people are stopping in the grocery stores." But only a handful of workshops will directly take on local property tax bills that are at an all-time statewide average high of $7,045.
Kean and Sweeney participated in a well-attended legislative forum this afternoon, where state mandates and other state policies were blamed.
The lawmakers were challenged by Tenafly Mayor Peter Rustin to do a better job of checking state spending.
"The government can’t be all things to everybody," he said.
But when asked what he would cut, Rustin replied: "My budget isn’t as bad as yours."
Sweeney said there has to be a focus on sharing services and overcoming a tradition of home rule that is celebrated at the conference.
"It’s not always the answer, but a lot of times it is the answer," said Sweeney, who also serves on the Freeholder Board in Gloucester County.
The conference agenda, meanwhile, is offering only a few sessions on ethics and pay-to-play — the practice of financing elections with contributions from regular government contractors — despite recent high-profile corruption busts that resulted in the arrests of several officials.
One of those local representatives in trouble, former Secaucus Mayor Dennis Elwell, was indicted on corruption charges earlier this week.
Ingrid Reed, director of Rutgers’ New Jersey project and the chair of the state’s Local Government Ethics Task Force, led a session today she said served as an introduction.
Citizens are demanding more transparency from their local governments when it comes to budgeting, competitive bidding of government work and conflicts of interest, she said.
"I think that’s really what people are concerned about," Reed said. "It’s not just bribery that they’re dealing with, it’s relationships that are built up over time that are not examined."
Christie inherits a state that's in arguably the worst financial condition in its 233- year history. Last year's $7 billion shortfall, closed with stimulus dollars and tax hikes, has resurfaced at an even larger $8 billion for 2010. Residents face crippling property taxes (an average of $7,000 per capita), high income and sales taxes, $45 billion in debt and the net loss of 400,000 people since 2000.
Metropolitan Area / Q3 Year over Year Price Decline
Allentown-Bethlehem-Easton, PA-NJ / Down 6.1%
Atlantic City, NJ / Down 10.4%
New York-Northern New Jersey-Long Island, NY-NJ-PA / Down 14.1%
New York-Wayne-White Plains, NY-NJ / Down 13.9%
NY: Edison, NJ -/ Down 8.9%
NY: Nassau-Suffolk, NY / Down 9.2%
NY: Newark-Union, NJ-PA / Down 14.8%
Trenton-Ewing, NJ / Down 15.0%
This article in the City Journal titled "The Big-Spending, High-Taxing, Lousy-Services Paradigm" is about California. But the author's conclusions apply equally to New Jersey.
William Voegeli makes the same point that I have been making for years: Don't believe politicians when they get up on their hind legs and tell you your state has high taxes because it provides a high level of services.
Those services don't exist. Every time I hear a Trenton pol tell me that I'm getting a high level of services in return for the extortionate level of taxes I pay, I ask that pol to name a single service provided today that wasn't provided before this state got an income tax in 1976.
I've yet to get an answer. The roads, libraries, schools, police services, fire services, etc. are all about the same as they were back then. And when I went to Rutgers in the early '70s, I paid about a tenth the tuition that it now costs to send my daughter there.
So where's the big improvement?
I don't see it. I'm sure you don't either. The improvement is enjoyed entirely by public employees, not the public. They have good salaries and great retirement benefits, and some can retire in their '40s. Meanwhile the rest of us will be working into our 80s to pay their pensions.
And it's the same in California, as Voegeli writes in comparing that state to Texas, which has much lower taxes but an equal level of service:
"What is surprising is the growing evidence that the low-benefit, low-tax alternative succeeds not only on its own terms but also according to the criteria used by defenders of high benefits and high taxes. Whatever theoretical claims are made for imposing high taxes to provide generous government benefits, the practical reality is that these public goods are, increasingly, neither public nor good: their beneficiaries are mostly the service providers themselves, and their quality is poor."
This is the problem here in Jersey, and as Voegeli notes, it is almost impossible to fix. Creating commissions to study efficiency and consolidation, as Chris Christie proposes, was tried in California and failed miserably. It won't work here either.
Anyway, read Voegeli's entire article if you wish to comment.
The newest installment of the Happiness Index has arrived and residents of the Midwest will be happy to learn that their strangle-hold on the top spots remains intact. There have been some big moves however. Vermont made a big leap, and New Jersey and Lousiana took serious tumbles. There’s also been some movement at the bottom and residents of the Sunshine State may be unhappy to learn that, well, they’re the least happy state in the nation, when it comes to money matters.
Here’s how the index works:
The Happiness Index, which analyzes household income, non-mortgage debt, employment and foreclosures, is a fresh take on the old and tired Misery Index, made popular in the 1970s. The Misery Index takes into account unemployment and inflation rates and seeks to identify the most financially miserable places to live.
Spotted this in a reply to a Wall Street Journal article detailing out migration from New York.
Outmigration is also a problem for New Jersey. Rutgers economists James Hughes and Joseph Seneca calculate the Garden State lost nearly a quarter of a million people between 2002 and 2006.
People are also leaving the region. New Jersey, once a destination for New Yorkers wanting to move to the suburbs, is now a stretch of turnpike leading to Florida and North Carolina.
The reason they are leaving the region is that the cost of government has increased, but the quality of services has not.
Homes affordable to median-income families: 21.2% Affordable homes in Q2 2004: 15.2% Median home price: $419,000 Median family income: $64,800 Unemployment rate: 9.6%
Manhattan is world famous for its culture and nightlife, but living in or near the city requires most people to stretch their finances. The suburbs include ultra-wealthy Greenwich, Conn.; Alpine, N.J.; and Scarsdale, N.Y. Long commutes are common in the tri-state area because land gets more affordable away from New York.
2. San Francisco-San Mateo-Redwood City, Calif.
Homes affordable to median-income families: 26.9% Affordable homes in Q2 2004: 13.3% Median home price: $580,000 Median family income: $96,800 Unemployment rate: 9.3%
3. San Luis Obispo-Paso Robles, Calif.
Homes affordable to median-income families: 31.8% Affordable homes in Q2 2004: 10.2% Median home price: $364,000 Median family income: $70,800 Unemployment rate: 9.5%
4. Ocean City, N.J.
Homes affordable to median-income families: 32.6% Affordable homes in Q2 2004: N/A Median home price: $350,000 Median family income: $67,200 Unemployment rate: 8.0%
5. Honolulu
Homes affordable to median-income families: 41.8% Affordable homes in Q2 2004: 45.6% Median home price: $395,000 Median family income: $79,300 Unemployment rate: 6.1%
This article is from two years ago. The point, however, still stands and I doubt that the results would be much different if a poll were conducted today. The cost of living is no better and probably worse by many measures, especially considering rising unemployment and wage cuts due to the weakened economy.
The only exception I can think of is that housing costs have come down a bit, making houses more affordable for those buying today. But property taxes certainly are no better and continue to push out both residents as well as businesses.
Even New Jerseyans can't stand living in New Jersey, according to a new poll that said nearly half of adults residing in the Garden State want to pull up stakes.
The Monmouth University/Gannett New Jersey Poll, released Wednesday, found 49 percent of those polled would rather live somewhere else.
New Jersey already is suffering from an image problem and bears the brunt of jokes because of its corruption and pollution problems. But 58 percent of those residents polled said the heavy financial burden of just living in the state is no laughing matter, and that's why they want to leave.
Poll participants cited high property taxes (28 percent), the cost of living (19 percent), state taxes (5 percent) and housing costs (6 percent) as the main reasons they want out. The poll also found that 51 percent of those who expressed a desire to leave planned to do so, with adults under the age of 50 making between $50,000 and $100,000 the most likely to flee.
"If you have the ability to leave and you don't see any possibility for change with the way the state is run — and that's the No. 1 issue here — you have to vote with your feet," said Patrick Murray, director of the Monmouth University Polling Institute. ....
Gilfillan said Corzine also had cut costs by reducing the government workforce, though he noted people would continue to leave New Jersey as baby boomers retired.
"Demographics are only going to accentuate this trend, as the bulk of these folks have yet to leave the workforce," Gilfillan said. ....
But a Rutgers University report released last week found that New Jersey, with nearly 9 million people, is experiencing a population loss and said the number of residents who had left the state more than tripled from 2002 to 2006, with 231,565 people moving elsewhere.
The Rutgers Regional Report, which examined U.S. Census Bureau and Internal Revenue Service data, noted 72,547 people left in 2006, ranking New Jersey fourth — behind California, Louisiana and New York — among states with the highest population losses in the nation.
High prices aren't the only thing driving people out. New Jersey ex-pats headed in droves to warmer climates, with 124,584 moving to Florida and 29,803 moving to North Carolina. Others (42,459) moved to neighboring Pennsylvania.
That migration depleted the state's tax coffers of an estimated $10 billion in personal income and $680 million in sales tax, according to the Rutgers report.
Oftentimes, when discussing the thought of escaping from NJ, folks will throw up a barrage of reasons as to why that's just a very bad idea. Many of these reasons are almost like canned responses, as if they've been programmed into us. I refer to them as The Litany.
Don't get me wrong, many if not most of these points do contain at least some shred of truth, but the weight of that truth varies tremendously depending on what your interests, values, hobbies, and desires are.
One of the most frequent points raised as to why someone wouldn't or shouldn't want to leave NJ is because it's close to NYC. This is true, NJ is close to NYC. But why does that matter? First, allow me to explain why it's not a big deal to me.
NYC is a fascinating and interesting place. It's rich in history and culture and pretty much anything you could ever think of can be found there. Yet, I find myself only going there maybe a few times each year. It's just not where I typically tend to choose to spend my time. I go for the occasional obscure, underground concert, museum visit, auto show, etc. Suffice it to say, NYC just isn't a huge priority for me. Therefore the fact that I live near it is not of great importance to me.
To this, many would say that I'm omitting the fact that NYC is an economic powerhouse and a big part of the reason why there are so many good jobs in NJ. This is true, but it also ignores the cost that being near NYC imposes on living here. Higher taxes, higher cost of living, endless traffic (and the resultant air pollution and road rage), crime, corruption, and a culture which values hyper competitiveness and nearly frowns upon cooperation. To some, this may be a plus. The extreme Type A personality might well thrive here.
Now, I do know some folks for which living near NYC is important, either due to career choice or lifestyle. If you're a Broadway aficionado, then it's understandable. If you want a shot at the Gordon Gekko lifestyle, I understand (though I would argue that that could also be pursued in London, Chicago, Tokyo and many other cities in Asia).
The point I'm trying get at here is that it strikes me that very few people consider what they mean when they say that living in NJ is great because it's close to NYC. It's a meaningless statement without being defined. Its like saying that you're great because your live next to a famous athlete, actor, or other person of renown. Why is it great? Why does it mean so much to you that it would play an active role in your decision either to move or not move out of NJ? If you spend great amounts of time there due to your career, hobbies, or family, then OK, that makes sense. But, if like me, you rarely go there, then what difference does it make? You're in effect, paying the high price of living near NYC for no other reason than that it's nearby.
HOPEWELL TOWNSHIP -- In less than a month, Mike and Victoria Malinics, two lifelong Mercer County residents, will move across the river to Pennsylvania to pay half the property taxes on a bigger house.
"We couldn't sustain the cost of living and provide for (our children)" said Mike Malinics, 37, adding that New Jersey "has become a case of overwhelming taxation without representation."
Wife Victoria, 34, said she feels state legislators have ignored middle class residents like her and her husband, forcing them to make the difficult decision to move across state lines.
New Jersey continues to have the highest property taxes in the nation, according to a recent analysis by The Tax Foundation. After analyzing census figures, the foundation found the median property tax bill was $6,320, with 7 percent of the state homeowners' paychecks going toward property taxes.
Republican 15th District Assembly candidate Werner Graf and Ewing Mayor Jack Ball joined the Malinicses, a Ewing couple, on the New Jersey side of the Washington Crossing Bridge yesterday morning to call on state government officials to stop driving residents out of New Jersey.
"I'm not happy to see them leave, but ... I hope it sends a message to New Jersey politicians about why they're leaving," said Ball, adding that the state's high taxes have drawn away businesses from Ewing.
Graf said a large portion of residents' tax bills goes to schools, and even with a new school funding formula designed to shift some of the spending from urban districts to other districts that have large percentages of children from low-income households, there still is "no accountability" and wasteful spending in districts that are failing. He also said funding for special education should be part of income tax payments instead of being borne by residents when special needs children move from district to district.
Graf said he and running mate Kim Taylor would serve the needs of the residents of the 15th District, which includes Trenton, Ewing, Hopewell Valley, Lawrence, the Princetons and Pennington.
"They're part of the establishment in the Legislature of New Jersey, which has very little regard for middle class tax payer," Graf said of incumbent Democratic Assemblyman Reed Gusciora, D-Princeton Borough, and Bonnie Watson Coleman, D-Ewing.
Graf also cited the nonpartisan Office of Legislative Services' report from this summer which highlights an $8 billion structural deficit for the next fiscal year.
Coleman said she agrees property taxes in the state are high, and has encouraged municipalities and other governing bodies to consolidate. But she said the challenge for New Jersey is to continue to provide a high level of service people expect, such as road improvements and a commitment to open space, yet provide property tax relief.
"Almost half of the budget comes back to taxpayers in the form of services" like tax freezes for senior citizen homeowners, Coleman said, adding, "under this Democratic administration and Legislature, more property tax relief has gone into the hands of residents ... Republicans like my opponents are great to criticise, but they haven't come up with any solutions that work. If they cut services and fired everybody in state government," it still may not be enough to tackle the "huge" budget deficit, Coleman said.
Gusciora, said he has introduced a bill to find alternative methods for funding local government, and that lowering property taxes should be the priority for every elected official. "(Gov. Jon) Corzine should be given credit for increasing property tax rebates in the last four years. ... We've worked on returning more rebate dollars to tax payers," he said.
Pennsylvania ranked third, just behind New York and Florida, in the top 10 destination states for those leaving New Jersey, according to an October 2007 report by the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
According to that report, the state's population started to decline in 2002. New Jersey's 2005 aggregate adjusted gross income was reduced by $7.9 billion, a direct loss to the state economy and state taxes, due to the cumulative net outflows of people since the start of the decade, according to the report.
The report states "high housing costs, and its high overall cost of living" are possible explanations for the out-migration.
