How *Not* To Do Economic Development

Camden is one of the most distressed cities in the United States, and if any city needs state help to build its economy, it’s Camden. While the state of New Jersey has responded, the way it has done so adds up to one of the most egregious examples of misuse of economic development incentives in recent memory. At the same time, it offers some useful lessons for thinking about urban economic development, especially about a concept that people working in this field don’t think about enough—opportunity costs.

New Jersey has created what it calls the Grow NJ program, a suite of incentives to encourage corporations to move into or stay in the state. It targets certain areas, with the most generous incentives offered for companies to stay in or move to the state’s four poorest major cities: Camden, Trenton, Paterson, and Passaic. So far so good.

Under this program, New Jersey has given out $1.1 billion in tax incentives to 16 companies in the city of Camden since late 2013. Five account for $900 million of this total, as shown in the table below. All are major, well-heeled corporations. With the exception of EMR, which is a scrap metal facility already located in Camden, all of the companies were already operating in nearby suburbs. The businesses are being paid nearly $400,000 per job, on average, to move operations 5 or 10 miles into new buildings in Camden, along with creating a few additional jobs once the companies relocate.

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