PhillyDeals: Is N.J. moving ahead of Pa. in hunt for new business?

Posted: October 15, 2013

The few U.S. companies that have been hiring lots of people in this part of the world in recent years - like and Wal-Mart, with their busy shipping warehouses - have picked Pennsylvania and its green fields along free interstates, over New Jersey's aging turnpike industrial parks.

Is traffic now going the other way?

In September, fast-growing Destination Maternity Corp. said it is leaving its Philadelphia office and warehouse for larger quarters in Burlington County. And Philadelphia's BK Specialty Foods moved its office and warehouse to Swedesboro.

Suddenly the momentum seems to favor South Jersey, just as two larger employers, FMC Corp., of Philadelphia, and Cherry Hill-based Subaru of America, are scouting new headquarters on both sides of the Delaware.

"Is this the start of something?" asks William Burns, managing partner at the Philadelphia office of the accounting and consulting firm BDO USA, and point man for explaining Pennsylvania taxes to companies for Gov. Corbett's "Action Team" and the recruitment group Select Greater Philadelphia.

Jason M. Wolf, boss at Wolf Commercial Real Estate in Voorhees, credits Gov. Christie's Economic Opportunity Act of 2013, signed last month, with "attracting new business to the Garden State - particularly the southern counties."

New Jersey was already lavishing cash on employers. But the new law, Wolf says, combined disparate efforts into two simpler, bigger programs: Grow New Jersey and ERG (Economic Redevelopment and Growth). Benefits were extended to smaller firms, and amplified for urban and auto projects. And tax credits increased for employers in eight South Jersey counties. That brought in Destination Maternity, and made it easier to pitch Subaru, Wolf says.

But Burns, of BDO, says New Jersey isn't running ahead. "Pennsylvania has made strides to make the tax environment more business-friendly," he told me. Scaling down the state's capital-stock tax helped. So does a new tax-apportionment scheme that taxes companies more on sales, and less on the jobs or properties they own in the state.

Result: Pennsylvania corporate taxes are

now "in line with a

lot of other states, especially New Jersey," Burns said.

So why are some firms moving east? Burns notes Destination Maternity and BK have this in common: They were in Philadelphia, with its extra business sales and profits taxes, and wage taxes.

Taxed enough?

When opened its first warehouse and mailing center in 1997, it chose Delaware, "Home of Tax-Free Shopping."

Today, Amazon employs more than 2,000 in Delaware - some in New Castle, most at its new $90 million Middletown, distribution center, which draws workers from nearby Elkton, Md., and Oxford, Pa.

You'd think Middletown, which has courted employers with incentives and improvements, would be prospering with its Amazon-led growth.

But last week,

Moody's Investors Service cut Middletown's debt credit, to A2

from A1, and threatened to cut it again, citing Middletown's

"challenged financial position."

Years of borrowing to fund employer-friendly projects have left Middletown owing $43 million. That's a lot for 19,000 residents, squeezed between "significant population growth" and a "limited tax base," wrote Moody's analyst Vanessa Youngs.

Business giveaways can attract employers. But that alone won't make your town healthy.



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