The Assembly passed a bill clarifying what businesses receive loans from the state.
The bipartisan bill would create a standard definition of default across all loan programs to prevent the state from awarding additional subsidies to companies with a history of failing to pay.
“Economic development in New Jersey does not come from doubling down on the mistakes of the past. We need to restore accountability and fairness to the economic subsidy programs in our state,” said Assemblyman Jay Webber (R-Morris).
Current law prohibits the state from awarding a new subsidy when a company is in default on a prior subsidy loan. However, the statute does not explicitly spell out a timeframe of what actually constitutes default on an unpaid loan, so the state has had to find ways to declare defaults in the absence of a definition.
The bill would define default at a period of 24 months.
“Defaulting companies should not get to draw from the well again when they have not lived up to the terms of prior commitments to taxpayers,” stated Weber.
Under the new definition, if a company has not paid principal and interest on an outstanding subsidized loan for a period of two years, that company will be officially and definitively in default and thus ineligible for a new loan or subsidy from the state.
“We should be cautious of an organization that has shown it cannot or will not reliably pay a subsidy back. The point of these loans is to help stimulate economic development in our state,” said Assemblyman Clinton Calabrese (D-Bergen, Passaic).
“We must hold businesses that receive economic subsidies from New Jersey accountable for the loans they are given,” stated Calabrese.
The bill now awaits Senate action.