The state”™s 82 empire zones were expected to cost taxpayers $600 million last year, up from $12 million in 2000.
Yet, Dutchess County Legislator Joel Tyner”™s attempts to raise awareness of what he characterizes as overly generous tax breaks has gained little attention.
The reason why may lie in the fact that economic development overshadows any shortcomings by companies in the Empire Zone program.
An audit by the Empire State Development Corp. (ESDC), which oversees the Empire Zone program, revealed that about a third of the certified companies in Dutchess in 2005 did not create 60 percent of the number of jobs or amount of investment they had promised.
However, Theresa Kelly, Empire Zone coordinator, said that the problem in some instances was wrong information in the annual reports submitted by the companies, not missed goals. ESDC itself has spent months sorting out the companies that honestly reported the wrong information versus those that are taking the taxpayer for a ride. It has yet to report on the final results.
Tyner and fellow Democratic Legislator Ron Ray twice tried to introduce a resolution calling for taxpayers to be reimbursed for a portion of the tax breaks and incentives they claimed benefited companies that had failed to meet their job creation or investment targets. The proposal didn”™t make it onto the agenda. Tyner then held a press conference highlighting what he alleged were some key abuses of the Empire Zone program, but again failed to raise concern of the majority of his fellow lawmakers.
“I think there”™s a lot of interest in the communities and the state in this as taxes continue to rise,” said Roger Higgins, who is the minority leader in the Dutchess County Legislature. “We want to make sure we are all getting our money”™s worth.” However, he added that certified companies”™ failure to bring in the promised jobs or investment could be affected by the ups and downs of the economy, over which they have little control.
“We have to research and follow up to make sure the investment is paying off. I don”™t know what the magic formula is, but the important thing is to constantly review and revisit the numbers. I believe this has been happening,” Higgins said.
Besides citing the millions of taxpayer dollars that have been spent in the county on the tax breaks, Tyner listed several examples of companies he claimed had unfairly qualified for the perks ”“ such as a real estate company that received $142,000 in tax breaks from 2003 through 2005 but paid out only $97,000 in wages during the same period. He said that corporations that received millions of dollars in benefits in 2005 actually ended the year with a net loss in jobs.
Tyner also questioned the redrawing of the Empire Zone boundary lines at Oakwood Commons, a new complex of office buildings on Route 9, and whether the companies locating there qualified for tax breaks.
Tyner said he obtained his information from newspaper articles and spent hours searching the online database that was the basis of the media coverage. The articles followed the release of previously secret information from ESDC on the amount of credits that were awarded between 2003 and 2005, as the result of a lawsuit by the Syracuse Post-Standard. ESDC itself had numerous criticisms of the program in a report it issued last year and has pledged to make changes.
The Empire Zone program was originally designed to lure businesses to poor urban areas. But 20 years after its inception, it has become a popular source of multiple tax credits to companies that bring in jobs and investment to more broadly defined economic development areas.
One difficulty in determining whether a company properly received benefits is that while the certification process is done locally, awarding of the incentives happens at the state level. Companies that are certified and miss their goals don”™t necessarily receive the benefits, said Anne Conroy, president and CEO of the Dutchess Economic Development Corp., which oversees the county”™s Empire Zones.
“Joel is basing a lot of his information on data that is from the businesses”™ own reports,” she said. “The actual incentive is received from the state”™s taxation and finance department when taxes are filed and computed. A business might think it”™s eligible, but it isn”™t.”
Conroy said that a company”™s performance is measured statewide. While IBM may have laid off employees locally, it could have increased employment elsewhere in the state and would still qualify for the benefits. Also, the employment numbers that qualify a corporation for incentives represent an increase over an average of a base period. Conroy said that IBM”™s base was 8,000. It now employs approximately 11,000, so the numbers are still up.
In addition, Conroy said that some incentives for manufacturers are based on investment, so that even if a company laid off employees, it might still qualify for tax breaks.
Tyner said the economic interests of the county should come first. “My primary concern is the job performance of these companies in Dutchess County itself,” he said. He also said “it”™s been like pulling teeth” to get data from local economic development officials. “I”™ve asked for a lot of information over the years from Empire Zone officials, and they said it was not possible to get it.”
The Dutchess Legislature passed a resolution to amend the boundary line of the Empire Zone for Oakwood Commons, as is required by law. “The change was a small revision of the boundary so that the office buildings are in the zone,” said Conroy. However, a hotel, a restaurant and CVS drugstore will not qualify for certification. Conroy said that if they were located in downtown Poughkeepsie, it would be a different, since locating retailers in a depressed downtown is seen as key to revitalizing the area.
Conroy said that KeyBank, which is moving its headquarters from Newburgh to Oakwood Commons, hasn”™t been certified but it might qualify, depending on whether the bank will expand the number of jobs in the state. Another company locating in the complex, Compensation Risk Management, definitely qualifies. “It started from nothing about five years ago and now employs over 100,” she said.
She said the Empire Zone boundary for downtown Poughkeepsie was also being realigned, to reflect the growth of the city on the north side. The Pawling Empire Zone was the only greenfield office site in the county and was designed to stimulate “some good quality jobs in the eastern part of the county.”
Countywide, the Empire Zone is limited to 1,280 acres, so the acreage can only be realigned, not expanded upon, she said.
Meanwhile, a request by the chairman of the Newburgh-Stewart Empire Zone to establish a new Empire Zone for a site in Goshen where an asphalt company plans to build a new plant was denied by ESDC. The reason: “We felt their location decision was based on a need to be close to their customers and was unaffected by whether they received Empire Zone resources,” ESDC spokesperson A.J. Carter said.
