State soliciting suggestions to replace Empire Zones

How would you improve economic development efforts in New York state now that one of the biggest incentives you were offering is dying?

That is the question being posed by the Empire State Development Corp., as it seeks to replace the Empire Zone programs being eliminated effective July 1 next year.

There appears to be consensus incentives are needed to compete against other states.

The controversial EZ program grew from a program providing $30 million in tax breaks annually in 2000 to currently costing taxpayers over $600 million annually in tax breaks and other considerations. The benefits are supposed to be tied to job creation but in reality, there is often little linkage between the actual number of jobs created and the tax benefits received.

Faced with continuing controversy about the program, which originated in 1986 and was heavily modified in 2000, Gov. David Paterson announced early this year the EZ program would sunset June 30, 2010.

But state officials for months gave no indication of how they would replace it as the leading program to attract and retain jobs in New York. On Sept. 3, the Empire State Development Corp. (ESD) quietly released an announcement saying it hoped to have a package of recommendations ready for the governor by November. The ESD is soliciting input, but offered no indication of the most viable options.

“It is too preliminary to discuss which options are being considered,” said Katie Krawczyk,Â upstate director of public affairs for ESD. “We have sent letters to statewide and regional advocates and set up a special email address dedicated to this initiative.Â From those responses, we will follow-up with more detailed discussions and conversations.”

She said the state economic authorities made the choices about who to include in their fact-finding and for receiving suggestions. “The ESD regional offices played a significant role in selecting local stakeholders from an array of economic development interests to participate in the regional focus groups,” said Krawczyk. “We hope to receive input from government partners at The Division of the Budget, Department of Labor, NYSERDA, NYSTAR, Tax and Finance, SUNY/CUNY, and from the various statewide and regional economic development stakeholders.”

New York State has 82 Empire Zones, which prior to the ongoing expulsion program involved some 9,200 businesses employing some 380,000 people. There are EZs in Ulster, Dutchess, Orange, Rockland and Westchester counties.

Suggestions for improving the program start with an oft-stated belief that New York is in dire need of effective programs to attract and retain businesses. Lance Matteson, president and CEO of the Ulster County Development Corp., said that competitive plans to attract business are needed to wage economic combat with neighboring New Jersey, which has an extensive program to attract businesses.

“They are comprehensive and pretty simple, unlike New York,” said Matteson, who said he would urge policymakers to simplify the process and regulations from the complications that snarled the EZ program.

He said such programs should include “wage incentives,” that give greater benefits for higher paid workers. “We need jobs that get us ahead, that allow workers to have disposable income to stoke the local economy,” Matteson said.

Other economic development officials have spoken about the need for provisions that would allow localities to recoup tax benefits from companies that fail to achieve their job creation schedules. Some officials also call for focusing on clean technologies as opposed to smokestack industries.

Another important facet for job growth would be keeping existing companies and helping them expand, said Matteson. “There has got to be funding for job retention,” he said. “It”™s a lot cheaper for taxpayers” to keep existing businesses than to attract new ones.

But even the best economic development programs are rendered ineffective if other factors combine to undercut them, said Jonathan Drapkin, president and CEO of Pattern for Progress.

“Unfortunately the state of New York”™s economy is a sick patient,” said Drapkin. He said he would leave prescriptions on how to fix economic development programs to specialists in the field, although he, too, espoused the need for “a well thought out attraction and retention program.

“But that is only one component of what we need for the state”™s economy,” said Drapkin. “The bigger problem is structural and requires a multifaceted solution, including reduction of property taxes, creation of affordable housing and the solving of our transportation problems. These are among the multitude of issues that need to be solved to convince businesses that they should be located in New York.”