SUNY Purchase President Thomas J. Schwarz might have his summer homework cut out for him after a bills-cramming session in Albany last month gave Gov. Andrew Cuomo his aggressively pursued tax incentives program for businesses, START-UP NY.
That”™s the short title for the governor”™s campus-focused jobs initiative and hurriedly enacted legislation, SUNY Tax-Free Areas to Revitalize and Transform Upstate New York.
Schwarz, as well as Westchester Community College President Joseph Hankin and other academic leaders across the state, have a challenging task ahead this year: How do you hang out the “Welcome to Our Tax-Free Zone” sign on your campus for profit-seeking partners when a “Sorry, No Vacancies” sign would not be out of place there?
With 120 million square feet of space eligible for the tax-free zones statewide, it”™s a potential office-space dilemma and opportunity that commercial real estate brokers and business groups in Westchester and across the state are studying.
Businesses found eligible for the START-UP NY program will pay no state taxes for 10 years. Their employees will pay no state personal incomes taxes for the first five years. For the second five years, workers will pay no state taxes on annual income up to $200,000 for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return.
Statewide, the number of new jobs eligible for personal tax exemptions will be capped at 10,000 per year.
Schwarz hosted Cuomo”™s June 27 visit to Purchase College, where the governor posed for a ceremonial signing of the START-UP NY bill and cited a long list of successes in what he termed “a really, really great legislative session” this year and in his first 2 1/2 years in office.
Cuomo said the tax-free zones are designed to stop the brain drain of graduates from SUNY and private schools leaving for jobs outside New York.
“We have great schools and we have great minds,” he said. “We just can”™t keep the jobs here.” He said 75 percent of new jobs created in New York leave the state within one year.
“What I think the governor gets, which the others didn”™t get,” said Schwarz, “(is that) if you look at this from a national perspective, we (in New York) still have an enormous strength in higher education. If you can tie higher education directly into job creation ”¦ then you can really begin to revive our economy.”
Schwarz said Cuomo”™s campus focus separates this tax incentives plan for businesses with the oft-criticized Empire Zone program that preceded it. Designating special tax-credit zones in communities to attract and retain jobs “was a good idea, but it wasn”™t tied to anything in particular,” Schwarz said of the Empire zones. START-UP NY instead yokes a company”™s business mission and activities with the academic mission of the school sponsoring the tax-free zone.
The new law excludes certain businesses from participating in the program. They include retail and wholesale businesses, restaurants, real estate brokers and real estate management companies, law firms, medical and dental practices, hospitality, finance and financial services, personal services companies, providers of business administrative or support services, accounting firms, utility companies and electricity and natural gas generation or distribution companies.
State officials have further limited operations in tax-free zones in the metropolitan New York area to “high-tech business.”
In Westchester, Nassau and Suffolk counties and in New York City, eligible businesses must be in the formative stage of development or engaged in the design, development and introduction of new biotechnology, information technology, remanufacturing, advanced materials processing, engineering or electronic technology products or innovative manufacturing processes.
Schwarz said SUNY Purchase will look to partner with two industries, new media and film and biotechnology, as it plans its tax-free zone. New media companies and arts technology development foster the college”™s artistic mission, while biotechnology, a growing industry in Westchester and the lower Hudson Valley, is linked to its liberal arts curriculum, he said.
Schwarz noted the law encourages businesses to move from state-certified business incubators to the tax-free zones. He said SUNY Purchase could find zone partners in conjunction with the state-funded biotech business incubator being started at New York Medical College in Valhalla.
Available space that meets the law”™s requirements could be scarce, Schwarz indicated.
“On the campus itself, it”™s not like you can walk down and find empty spaces,” he said. “On the other hand, there is vacant land” on the campus.
“We have plenty of land. I don”™t know in Westchester, given the (office) vacancy rates along 287, that it makes a lot of sense to build new space,” he said.
Schwarz was referring to office parks along Interstate 287, where municipal officials, commercial brokers and landlords are exploring and implementing new commercial and residential uses for vacant and underutilized buildings.
Schwarz said the college”™s original president”™s house, on Purchase Street next to the Purchase post office, could possibly serve as an off-campus tax-free site. The law, though, restricts off-campus start-up zones of up to 200,000 square feet of space to SUNY schools north and west of Westchester.
Schwarz said he heard no opposition on the Purchase campus as the governor and state cabinet officials in recent weeks campaigned to enlist a broad base of supporters for the tax-free zones.
In Albany, though, community, labor and student groups rallied last month to protest the plan. They claimed that designated tax free zones have been tried repeatedly over the past three decades by other governors and have all failed.
The Empire Zone program and others that preceded it “were ripe with waste, fraud and abuse and never created the jobs that were promised,” said Ron Deutsch, executive director of New Yorkers for Fiscal Fairness. “Simply renaming the program and putting it on steroids will not change the outcome.”
Frank Mauro, executive director of The Fiscal Policy Institute, said the tax-free program “is likely to reduce the market share of some existing New York businesses that do not receive this favored treatment. This, in turn, will reduce the profitability of those existing businesses and, thus, their tax liability.” The result, he said, will be “a costly, downward spiral” of tax increases and service cuts “rather than a no-cost nirvana.”
State officials said businesses that would compete with other local businesses outside the tax-free area will not be eligible to participate in START-UP NY.
Schwarz said he expected the partnership program will not start at SUNY Purchase until next winter.
“Whether it works or not, we”™ll see,” he said.
