Watchdog questions transparency for $10B NY economic development spending

New York spent $9.9 billion on state and local economic development efforts last year, up 17 percent from the $8.5 billion spent in 2016, according to an independent report.

The report, “10 Billion Reasons to Rethink Economic Development in New York,” from the Citizens Budget Commission, a nonprofit civic watchdog, argues that state and local municipalities have spent more on economic development initiatives without enacting meaningful transparency reforms around grants and tax breaks.

The state’s economic development spending has drawn increased scrutiny since Amazon  announced its plan to open an office for 25,000 employees in Long Island City, lured in part by a series of tax breaks and incentives from the state. The deal has drawn scrutiny from New York City elected officials, residents and even among Gov. Andrew Cuomo’s fellow state Democrats. Amazon said last week it is reconsidering the deal in light of the pushback.

Last year, projects in Westchester County received $16 million in state grants as part of $87 million in grants directed to the Hudson Valley region. The December awards announcement represented grants and incentives provided through the state regional economic development councils, which doesn’t cover all state and local incentives that projects are eligible to receive.

New York state spent $4.4 billion total last year on economic development initiatives, an increase of nearly 30 percent since the Citizens Budget Commission last measured the spending in 2016. Incentives from local municipalities and county government grew about 10 percent to $5.6 billion last year, the organization found.

Cuomo’s office has said it would introduce a database to better track economic development deals and incentives. The commission’s report recommended that effort be codified into law, while also adding standardized metrics for tracking different programs. It also recommended the state develop a unified economic development budget that explains costs of all economic development programs for the coming year.

The report noted spending growth was not spread evenly across each state economic development program. Spending by the state’s main economic development arm, Empire State Development, reached $1.2 billion in 2018, up 63 percent from 2016 totals. The total included large appropriations from the state Legislature for projects overseen by Empire State Development, including the $700 million Moynihan Station in Manhattan, part of the Penn Station renovation, and an additional $400 million investment in the Buffalo Billion.

Spending decreased, meanwhile, in the state’s Startup-NY program, from a projected $105 million value in 2016 to just $7 million in 2018. The program offers tax-free space to companies that operate in designated areas, but has struggled since its outset to attract businesses. State expenditures in the ReCharge NY program, through which the New York Power Authority offers discounted hydropower rates to designated businesses, have fallen to zero, the commission reported. The report said market rates for electricity have fallen faster than the rates NYPA offers through the program.

Read the full report here.