State audit faults ESD on ‘Open for Business’ campaign
A new audit report from the state comptroller”™s office on the Cuomo administration”™s “New York Open for Business” advertising campaign could bolster critics of the governor”™s Start-Up NY program, who recently called for a halt to the initiative to attract businesses to college campuses with state tax exemptions as a $53 million waste of  taxpayers”™ money.
The report this month by the Division of State Government Accountability in the office of Comptroller Thomas P. DiNapoli criticized Empire State Development, the state”™s chief economic development agency, for failing to quantify results of its Open for Business marketing campaign to spur business investment, job creation and travel and tourism in New York.
The report, which includes a 12-page response from Empire State Development, shows a rift between the two state agencies over how to gauge the effectiveness of the costly ad campaign, whose critics have included Cuomo”™s election opponent last November, Westchester County Executive Robert P. Astorino.
The comptroller”™s office wants ESD to measure the bang for what DiNapoli called “the considerable investment of public funds” in order to evaluate the campaign”™s cost-effectiveness. ESD, though, claims the marketing is all about changing perceptions of New York as a place to visit and do business and should not be measured as a direct producer of jobs and business investments.
The ad campaign, conducted for ESD by BBDO USA LLC, is in its fourth year. As of September, ESD had contracted to spend $211.5 million for the campaign, according to the Comptroller”™s report. The governor”™s 2015 executive budget included an additional $50 million to fund the Open for Business campaign this year.
Empire State Development last month said the state had spent $46 million on Start-Up NY ads, a prominent feature of the BBDO campaign, and a total of $53 million when production expenses and other promotional efforts were included.
Auditors found that ESD”™s system of internal controls over BBDO”™s contractual services focused on specific services provided rather than on achieved results.
“ESD has not quantified what it expects to achieve from its advertising efforts,” auditors wrote, “except in the broadest terms like ”˜increasing tourism” or ”˜creating jobs.”™ As a result, ESD does not have an appropriate system to monitor, measure and evaluate the extent to which any accomplishments or outcomes resulting from these efforts compare to expectations.”
The comptroller”™s office made three key recommendations to ESD officials:
_ Develop strategic plans that include performance measures for monitoring the extent to which marketing efforts have a positive impact on desired outcomes, such as ESD”™s stated goal of improving the perceptions of New York as a good place to visit and for business development.
_ Set specific targets, goals, and benchmarks for evaluating performance outcomes and use those measures to monitor program performance.
_ Regularly evaluate the program outcomes associated with marketing efforts and use this information to periodically adjust program goals, strategies and resource allocations.
ESD officials in their response to the comptroller”™s office said the agency in fact measures advertising performance based on whether the ads build website traffic to encourage people to learn more about the state, change perceptions of the state as measured by improved survey ratings of New York as a tourism destination or place to operate a business, and increase consideration of the state as a place to visit or to move or expand a business.
ESD officials claimed the marketing campaigns have shown “clear success” in meeting those criteria. Citing an example, they said the StartUpNY.gov website had a 530 percent increase in visitor traffic when program ads were aired on television compared with periods in the same year when the state did not run ads.
ESD officials also noted a “strong positive shift” in perceptions of the state”™s business climate one year after the launch of the Open for Business campaign, with 50 percent of professionals surveyed saying the state is moving in the right direction, a 72 percent increase from a year earlier.
“We do not believe that our marketing program can directly produce jobs or investments,” Elizabeth R. Fine, general counsel at ESD, wrote in reply to the auditors”™ report. “Instead, it is intended to change perceptions, in the mold of brand marketing, and is akin to marketing costly or complex products or services.”
Fine said the comptroller”™s office “has expectations for the marketing program that do not match the goals for our campaign or for any campaign that is seeking to build a brand and change perceptions. Advertising cannot close a deal or change general economic circumstances that impact corporate job creation, What ESD”™s marketing efforts can accomplish is to create interest and openness on the part of business owners to do business in New York.”
The ESD attorney said the agency is confident the Open for Business marketing “has helped drive New York state to its lowest level of unemployment, the success of programs like Start-Up NY and the ongoing growth in the tourism industry.”
Critics, however, claim that ESD”™s report last month on the first year of operation of Start-Up NY show the Cuomo program is a decided failure. The program, which offers 10-year exemptions on state taxes to employees and eligible companies relocating or starting businesses on or near college and university campuses statewide, in 2014 approved 54 businesses that pledged to create 2,085 jobs and invest $91 million over five years.
The 30 companies that opened for business last year in Start-Up NY tax-free zones reported 76 net new jobs created and a total first-year investment of about $1.68 million.
The low first-year job creation number for a program on which ESD spent $53 million to promote served to unite political parties across the political spectrum, several business groups and elected officials in calling for a halt to Start-Up NY until DiNapoli audits the program”™s finances. The coalition includes the Working Families Party, the Conservative Party of New York, the Fiscal Policy Institute and the New York chapter of the National Federation of Independent Business.
“Start-Up NY has wasted $53 million of taxpayer”™s money to garner 76 jobs,” said Assemblyman Thomas J. Abinanti, a Westchester Democrat. “Fifty-three million dollars could fill a lot of potholes, restore the budget we cut for people with disabilities or do a lot of other good things for our communities.”