What”™s next for economic development programs in New York state is anyone”™s guess, but the clock is ticking with one year before the state”™s current and beleaguered Empire Zone program expires.
Replacing it effectively requires action starting now, say economic development officials. They say New York cannot afford to go without another program to attract and retain businesses, especially in a global economy where neighboring states have ongoing and effective programs.
The officials have an array of specific suggestions for a new economic development program to be ready to go by the time the current EZ program expires June 30, 2010. The ideas include having Gov. David Patterson promptly appoint a diverse commission of public, private, industry, labor and even environmental interests to develop an effective program with verifiable job creation the desired goal.
Other suggestions include returning economic development program decisions to local control, as opposed to centralized decision making from inside Albany, beefing up safeguards for taxpayers and retaining many tax breaks.         Â
Meanwhile, New York”™s Empire Zone officials grapple with final decisions on expulsion for potentially hundreds of businesses in the program by the June 30, 2009, date on which they originally promised to finalize status of existing EZ companies.
The effects in the Hudson Valley 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 absent 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. More than 200 remain certified. Eight companies were expelled from the EZ at Newburgh-Stewart in Orange County and 26 received notice of possible expulsion.Â
The action started statewide weeks ago when almost 700 companies that were certified in the state”™s current EZ received single-page letters dated May 18 from Randal D. Coburn, director of the Empire Zones program, informing them that due to reforms enacted as part of New York state”™s 2009-2010 budget process, all existing EZ-certified businesses had to verify their performances to stay in the program. The letter said initial reviews indicated their company would not qualify and promised a followup letter by June 19 with “details on our findings and (to) explain the process for appealing.”    Â
As of June 20, that process was not complete, said Katie Krawczyk, upstate director of public affairs for Empire State Development. “Letters are being sent to firms and will start being received in the coming days,” she said in an e-mail response to questions from a reporter.
“Businesses that we requested more information from have until June 30th to respond to our request,” Krawczyk wrote. “We will notify the companies on the ”˜potential decertification”™ list of our final determination by June 30. Companies on the ”˜need more information”™ list will be notified of our final determination some time after June 30.”
She said the commissioner of the state Department of Economic Development will make decisions and can recommend to the Division of Budget that even businesses whose data indicate they are falling short of guidelines can retain certified EZ status in some cases.
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, with the price tag vaulting to $500 million-plus last year.
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. Â
The program has been controversial for years and in December 2008 the nonpartisan Citizen”™s Budget Commission issued a 16-page report saying EZs could not be reformed and should be abolished. The Paterson administration has tried to reform the program short term, but is dumping it effective a year from now.
Krawczyk confirmed EZ is ending but would not discuss what might replace it. “The sunset date on the current EZ program is June 30, 2010,” she wrote. “We are in the process of determining an appropriate successor program once the current EZ program sunsets on this date.”
Ronald Hicks, president and CEO of the Rockland Economic Development Corp., said that any state program for economic development must take into account the diverse nature of New York state, which is ethnically, politically and geographically sprawling. He said that local decision making is critical amid such diversity.
“So I know the answers for the community I”™m in, not the entire state where we all have different situations,” said Hicks. “What I recommended over a year ago and still think we should do is have Gov. Paterson call together the best and brightest from the public and private sectors, from labor, economic development, developers and environmentalists, convene this group of people who really know what they are doing and come up with an economic development plan that will benefit New York.” Â
Theresa M. Kelly, the EZ coordinator for the Dutchess County Development Corp., agreed a diverse commission was a crucial first step and also agreed with Hicks that local control over economic development decisions is necessary.
“We need a program in place that has a degree of local control, with people who understand the needs of localities and the local marketplace,” said Kelly. She said state funding for local administrators must be restored as part of the local involvement.
“I don”™t see how the state can effectively run economic development from Albany,” Kelly said. “They are not going to know what goes on in local communities.”
She said a valuable new economic development program will continue to include tax breaks for new or retained companies, including real property tax relief and sales tax relief. She said the program would ideally have separate and sensible provisions for “Main Street” economic development; “manufacturing and high-tech” economic development; and should look at “benefits for developers.”
Kelly said an often overlooked aspect of economic growth is community development, even if it involves nonprofit groups. She cited St Francis Hospital in Poughkeepsie, which this month cut the ribbon on a $10 million expansion to its emergency room, a project made possible in part by local contributors who received a 25 percent tax credit for their donation. She said such tax credits must be maintained.   Â
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Hicks said a new program needs “across the board, consistent cost benefit” provisions that are drawn for meeting regional needs and norms and also needs “consistent and enforceable” provisions to recapture benefits from companies that don”™t meet their job-creation and investment targets.
“It really needs to be done in a formal way, through statute or in a written policy so businesses understand what they are engaging in,” said Hicks.
He also said an effective program would empower local boards to approve, oversee and “take a piece” of the project, on the grounds that a stake in its outcome improves oversight. “Let the locality make an investment in a project as we do here in Rockland County,” he said. “So if locality fails to enforce provisions it has something to lose.”
He said that such an approach ensures a better project and a better program overall, while protecting taxpayer interests. “This is not corporate welfare,” he said.
