When the lights went out on the Empire Zone program June 30, so ended a pro-business experiment that became a poster child for programs run amok.
What began as a $60 million statewide effort in 2000 to rehabilitate old downtown factories with jobs in mind had become nine years later a must-have benefit costing taxpayers $600 million per year.
Now comes Excelsior, the leaner version that, under former Gov. David Paterson, was expected to provide $250 million in credits to be authorized each year and allocated over five years, totaling $1.25 billion over the program”™s lifetime, according to Empire State Development (ESD), the agency that oversees the plan.
“While we cannot directly compare the Excelsior Jobs Program to the Empire Zones (EZ) program because they are different programs, we can tell you that the EZ Program ballooned to over $600 million annually,” the ESD responded to written questions. “By comparison, the Excelsior Jobs Program is capped at $250 million, but is more strategically focused.”
ESD has received applications from 35 companies since launching the Excelsior Jobs program in September. Five of these applications are from the Mid-Hudson and Westchester region. ESD did not name the applicants, saying the information would be forthcoming when the t”™s are crossed, the i”™s dotted.
“The major difference between the two programs is that the Excelsior Jobs program is strategically focused on firms in high-growth, high-yield industries such as biotechnology, pharmaceutical, high-tech, green tech, financial services, manufacturing and agriculture,” the ESD said. “The Excelsior Jobs program was designed to better enable New York state to compete with other states for the expansion or relocation projects undertaken by firms in these strategic industries.
“In contrast, after an extensive evaluation of the $600 million spent annually in the Empire Zones program, it became apparent that two-thirds of the firms in the program, or some $300 million in state spending, was directed at ”˜anchored”™ or ”˜captive”™ businesses, meaning those businesses that were likely to have located in a community or region even without the benefit of taxpayer support (e.g.: retail, restaurants, law firms, etc.).
“Also,” the ESD continued, “businesses seeking participation in the Excelsior Jobs program can locate anywhere in New York state and are not limited to the geographic constraints of the Empire Zone program.”
Excelsior looks to be more jobs-centric, offering tax credits between $2,500 and $5,000 for each new hire, up from a cap of $1,500 under the Empire Zones program.
The EZ program endured withering criticism for its lack of job production. Its flaws included a practice called “shirt changing” where viable businesses closed and then reopened under new names with full EZ benefits, but no new jobs. The real estate tax break for participating businesses under Excelsior was expected to be chopped from 75 percent (under EZ) to 50 percent and then decreasing annually after the first year.
Programs under the Excelsior umbrella include:
”¢ Excelsior Jobs Tax Credit ”“ for increasing employment;
”¢ Excelsior Investment Tax Credit ”“ for investments in property;
”¢ Excelsior R&D Tax Credit ”“ based on the federal R&D credit; and
”¢ The Excelsior Real Property Tax Credit ”“ real property credits for significant projects (as defined by statute) or for businesses in economically depressed areas.
The state seeks businesses predominantly engaged in the following categories and that meet employment thresholds (though there are exceptions, the ESD reports):
financial services data centers or back-office operations; manufacturing; software development and new media; scientific research and development; agriculture; the creation or expansion of back office operations; or distribution centers.
Gov. Andrew Cuomo has promised all programs are under scrutiny, but, tacitly acknowledging the devil is in the details, the state”™s information page on the Excelsior program remained under construction last week. Requests for comment or coming changes from the governor”™s office were not returned by press time.
