NBC Watches As Corzine Cuts Tax Credits

NJBIZ, Nov 19, 2007 by Goldstein, Scott

STATEHOUSE

The media giant wants tax breaks for more jobs

NBC Universal, considering bringing hundreds of new jobs to its facility in Englewood Cliffs, says it's watching the fate of a proposed state business-incentive program that would give tax breaks to digital-media companies.

The bill (S-2526), authorizing $20 million in tax credits, overwhelmingly passed in the Legislature last spring, but was reduced earlier this month to $5 million by Gov. Jon Corzine, who says the state is in no fiscal condition to give more cuts.

This angered the bill's Democratic and Republican sponsors, who were left wondering whether NBC was going to take its jobs elsewhere and whether the state would lose highly sought-after digital-media jobs to states that have already passed more generous tax incentive programs.

"If there ever was a case for an override, this would be the one," said Sen. Paul Sarlo (D-Bergen), a sponsor of the bill that passed 37-0 in the Senate and 71-8 with one abstention in the Assembly.

Sarlo said he would have accepted Corzine cutting the proposed program in half to $10 million, but says the governor's cut to $5 million makes the bill too weak.

An override requires two-thirds of the votes in each house. There has not been an override in New Jersey since 1997, according to the state Office of Legislative Services.

Sarlo would need the support of the legislative leaders to override and said he has not yet decided whether he will pursue that option. The alternative for the Legislature is to accept the governor's amendments and send it back to him to sign.

NBC, which has lobbied on behalf of the bill, would not comment on the effect the governor's actions will have on its decision to locate more workers in New Jersey.

But Bill Pascrell III, a lobbyist with Princeton Affairs that represents NBC, said, "We are remaining optimistic that this could all be worked out."

He said the main issue is the $5 million cap Corzine put on the tax credits. Connecticut, Florida, Texas and Hawaii all have similar tax credit programs with no caps, according to Pascrell.

He expressed surprise that the governor cut the program so drastically considering it is designed to lure attractive jobs. "These jobs are high-wage, high-tech and don't require smoke stacks," Pascrell said. "There's no environmental impact."

The program would give digital-media companies a tax credit equal to 20 percent of the cost to produce digital services. To qualify, companies would have to spend at least $2 million on production expenses in the state-including wages and salaries and facility and equipment-rental costs.

The bill expands an existing $10 million tax credit program for movie and television production companies and, under Corzine's amendment, adds $5 million for the digital-media companies.

Eligible companies are those that create interactive entertainment that is accessible over the Internet, such as streaming video of television programs; music and arcade-like games. Sony Corp., for example, recently announced it would take old television programs and put them into a digital format so they can be watched over the Internet.

Web sites that would not qualify for the tax credits are news sites, chat rooms, retail and wholesale Web sites and those that contain obscene material.

At a news conference last May at which Sarlo and Sen. Joseph Kyrillos (R-Monmouth) proposed $20 million in tax cuts, NBC confirmed it was planning to expand its market in digital content.

NBC chief information officer John Eck said then that the proposed $20 million program would make New Jersey "an inescapable location for companies to invest in their digital futures."

NBC is so supportive of the legislation that it funded and released a report authored by Ernst & Young stating that the proposed tax credit program would add 1,550 jobs in the digital-media industry by 2012, and indirectly create nearly another 3,000 jobs.

The report focused on all new digital media jobs for the state of New Jersey.

In his conditional veto, Corzine cut the size of the program, added a job-creation provision and prohibited companies from combining the tax breaks with other state tax incentives.

Some NBC units already get grants from the state's Business Employment Incentive Program (BEIP). MSNBC received tax rebates from BEIP for 10 years before moving its jobs to New York. Its business channel, CNBC, remains in New Jersey and also receives tax breaks through BEIP.

Kyrillos, the Republican sponsor of the bill, wondered whether $5 million in tax credits were enough. "The state needs to partner with the digital-media industry to attract jobs and wealth," he said. "This industry or any industry can go anywhere they want in the world. People are predisposed to come to New Jersey where there is a talented pool, but it is not essential they come here."

E-mail to sgoldstein@njbiz.com