Hundreds of companies statewide have been informed they have lost their Empire Zone certification and scores more could lose it in coming weeks, according to lists issued by the state Economic Development Corp. But like many matters connected with the controversial EZ development program, details are murky, with even those under scrutiny unsure as to what”™s happening.
Dozens of companies regionally are affected and economic development officials and company spokespersons say they are awaiting more information regarding the data used to expel them from the program. They also await an appeals process.
Final decisions on expulsion from the program, or even the reasons behind the decisions, will not be known until follow-up letters are exchanged between state officials and EZ benefit recipients. State officials stress that of about 8,000 EZ certified companies, more than 6,400 will retain their benefits. Final decisions should be made by mid-July.
Almost 700 companies that have been certified in the EZ received single-page letters dated May 18 from Randal D. Coburn, director of the Empire Zones program, informing them that as a result of “certain statutory reforms” enacted as part of the state”™s 2009-2010 budget, all existing EZ-certified businesses had to verify they “qualify for continued participation based on new statutory requirements.”
Coburn wrote that “specifically” development officials sought to determine if companies restructured or transferred workers from one property to another to “maximize their EZ benefits” and “whether a business is providing economic returns to the state that exceed the tax benefits it is receiving.”   Â
Coburn wrote: “Based on our initial review ”¦ it appears your business does not meet the qualifications for continued certification,” adding that additional information will be provided by June 19 “that will provide details on our findings and explain the process for appealing.”    Â
A similar letter was sent to about a thousand companies statewide informing them they were being considered for expulsion. Those companies, too, were promised more information by June 19.Â
The EZ program offers a variety of tax breaks to businesses based on the number of new jobs and/or capital investments that occur in the various regions of the state. Originated in 1986 as Economic Development Zones, the program was modified and its name changed to Empire Zones in 2000. It has remained a potent source of economic activity and controversy ever since.
New York State has 82 Empire Zones, involving some 9,200 businesses employing some 380,000 people. There are EZs in Ulster, Dutchess, Orange, Rockland and Westchester counties in the Hudson Valley. Â
The program has been controversial for some time but came under renewed fire in December 2008 when the non-partisan Citizen”™s Budget Commission issued a 16 page report saying the program was so flawed it could not be reformed and should be abolished. Instead, the Paterson administration has tried to temporarily reform the program and currently plans to end it as of June 30, 2010. No details are available on what economic development program would replace it.     Â
If a company is decertified, it would not have to pay back any tax credits taken from earlier tax years, according to Katie Krawczyk, upstate director of public affairs for ?Empire State Development. If a certified business filed a 2008 tax return this year, claiming Empire Zone tax credits, and is eventually decertified, there would be interest charged for any underpayment of taxes, but no penalties.
Krawczyk said that the commissioner of the state Department of Economic Development will make the expulsion decision with appeals being decided before the EZ Designation Board. She said state officials expect to make final decisions on expulsion and retentions “shortly after the June 30 deadline,” the end of this month, for providing additional information to the state.Â
The results of the immediate changes could be far reaching. In Kingston, for example, 42 companies received notice of possible expulsion from the EZ program, while 10 were notified they were expelled pending a successful appeal. About 200 businesses are currently EZ certified in Kingston. In Dutchess County, 23 business received notices of expulsion and 48 businesses received notice of possible expulsion. Over 200 remain certified. Eight companies were expelled from the EZ at Newburgh-Stewart in Orange County and 26 received notice of possible expulsion.Â
“What the state is now in the process of exploring is part of a normal process for the Poughkeepsie/Dutchess Empire Zone Administrative Board,” said John MacEnroe, president of the Dutchess County Economic Development Corp. “The Board routinely looked at companies that are claiming credit and not producing according to state requirements. We also want to be sure that any bad actors do not remain certified and that deserving businesses receive the credits that are due them.”
Stephen M. Finkle, economic director for the city of Kingston, said there has been no solid information presented on the matter thus far. “What we are going to be doing is going through the list trying to figure out what basis they were judged by. We will see if there are people on the decertification list that have some reason they shouldn”™t lose their assistance and then we go from there.”
But state records are not the only problematic aspect of the situation. A company that is being decertified is called Edgewater Development Company L.L.C. It took EZ tax breaks of $469,000 in 2005, the last year for which figures could be obtained. But Finkle could not identify what the company had done to receive the money, beyond providing unspecified assistance to Huck International, nor provide contact information for the company.   Â
Businesses seemed reluctant to discuss the matter in any detail. The Poughkeepsie Grand Hotel was among those businesses that received an expulsion letter. Maureen Kangas, general manager of the hotel said she was unaware of the expulsion and said she would seek more information from the hotel ownership.
The Northeast Center for Special Care, a facility serving and housing individuals with traumatic brain injury, garnered $117,000 in tax breaks in 2005. The facility did not return calls to comment on their pending expulsion from the EZ program.Â
AG Properties L.L.C., the land on which Ulster County”™s Tech City sits, took $1.432 million in tax breaks in 2005 and received a decertification notice. Daniel E. Wieneke, Tech City president, said that the company believes it is in good standing and plans on using the appeals process. “So our intention now is, we received the notice, we”™ll compare the data and we”™ll go ask the question why we were decertified,” he said.Â
He noted that Tech City is not AG Properties and said that companies within the 27 building Tech City complex could retain their EZ certification even if AG Properties is decertified.Â
And Wieneke said the state must move swiftly to replace the EZ program before it expires at the end of June next year. “This vehicle was truly the vehicle New York state used to compete in the world of economic development,” Wieneke said. “All our neighboring states have tremendous programs.”
