Beyond Empire Zones

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In these trying times, employing smart and effective policies to stimulate economic development is more important than ever. That's why the New York State Senate is revamping a key economic development incentive program to make it work better for New Yorkers across the state by launching the "Beyond Empire Zones" Task Force.

The Empire Zone program was changed significantly in 1999 to improve tax benefits for business development.  The current program includes real property tax credits, wage tax credits, sales tax credits and potential utility rate reductions to catalyze entrepreneurs and business. However, it also has serious shortcomings that must be addressed, including basic issues like accountability and ease-of-use.

The Senate is introducing legislation that will "reboot" the Empire Zone program by keeping in place the elements that made it so successful, but also address the problems.  A new "Beyond Empire Zones" task force will develop a revised or replacement program that will effectively target state support for growing businesses, ensure stability in program administration, and ensure effective use of public money for taxpayers.

The Task Force will consist of 29 members with appointments from the Governor, the Majority and Minority from both the Senate and the Assembly, as well as relevant state agencies. These leaders will in turn recommend the best way for the State to funnel resources to the front lines of our economy: the businesses, unions, universities, business organizations, non-profits and business improvement districts. Senator Darrell J. Aubertine (D-Cape VIncent), chair of the Upstate Democratic Caucus, said, "As the primary tool for economic development in the state, we need the Empire Zone program to be more open and effective so it can provide businesses with the support they need to thrive, but also keep them accountable."

The formation of this task force follows on the heels of a new sunset date for the current Empire Zone program put in place during the 2009 budget. This sunset date pushes the Legislature and Executive to work together to tackle this issue now. The "Beyond Empire Zones" Task Force will submit their recommendations by the end of this year, giving officials time to incorporate them into the foundation for next year's budget.

The Senate is taking the lead on this issue by recognizing that New Yorkers cannot afford to delay conversations on the future of this important program. As Senate Majority Leader Malcolm A. Smith said, "Creating jobs during times of economic distress is our top priority. The Empire Zones program has always had the potential to be a valuable economic development program, but it has not always met our expectations."

New Yorkers deserve an Empire Zone program that is straightforward, transparent and effective; one that will encourage real business growth and job creation throughout the state. The "Beyond Empire Zone" task force would be the first step towards making that goal a reality.

Your Comments

The Empire Zones program surely needs work, as does economic development policy generally in NYS.  One key issue to remember is that the typical incentive offered-- tax reductions-- may have less value to growing businesses than other things that the State government may be in a position to change.  For instance, at a forum held last week in my County, our IDA Director spoke very convincingly about the high cost of electric power being a much larger disincentive to do business in NYS than taxes-- he cited both a survey of businesses, and also an anecdotal example of a local manufacturer whose cost for power at its Tompkins County facility was *3 times* the cost per killowatt hour for their plant location in a Southern state.  Our PSC would appear to be more lapdog than watchdog-- is this an instance of regulatory capture?  Do we need to address that if we are going to actually allow businesses to grow jobs in NY?  Sometimes it is not about the lulu or tax reduction that government dangles, but, rather, about the cost of doing business-- hard for NYS taxpayers to make up a big differential in basic costs like electric.

Now, some questions about the task force itself: there is a tendency when looking for "leaders" in the realm of economic development to lean very heavily on those who are the CEOs of existing large businesses.  Any empirically-oriented observer of NYS economic development will note that this has, in fact, been a very big part of the problem-- NY's Fortune 500 companies were again and again and agian incentivized to produce new jobs, while they were in the process of automating existing jobs out of existenceor moving them elsewhere-- first to the US South, then overseas (i.e., Kodak's China strategy).  Sometimes, we were even incentivizing our Big Businesses to build capacity in one part of NY while they were closing it down in another part (IBM in Fishkill and Endicott).  To make matters worse, the typical upstate IDA Director had a background..... in middle management at one of the Fortune 500 companies.  Will we turn to the same (white, upper-class, older, male) blue-blazer stock characters again when composing this committee? 

Recent blog posts at Politicker and Buffalo Pundit point toward a NY Observer article-- http://www.observer.com/2009/real-estate/wtf-esdc-recession-twists-state... --that describes an ESDC under the Chairmanship of M&T Bank CEO Bob Wilmers.  Of course, when Wilmers first agreed to volunteer, at no pay, to take charge, we didn't know that his bank was boarding the Failboat with the rest of the money-bubble crew.  Arguably, these folks are better at predatory lending than economic development.  And, we sure can't build the NYS economy anymore by scamming more poor old black people out of their home equity.  Last I looked, the banks had run out of losers to fleece.

So, is the CEO of a big business really the right person to design effective economic development programs?  I don't think so.  At the very least, I hope that the task force appointed will include a range of expertise-- some from academia (but NOT the self-serving "my area of research is the future, so the State must invest!" types-- economic generalists, like, say Robert H. Frank), some in-the-trenches experienced local economic developers, some out-of-state community or economic developers that have experience implementing other models.

And, IMHO, anybody who gave a large campaign contribution to one of those making appointments.... or, worse, whose spouse or parent gave a large contribution...... should be disqualified.  This task force should make a bold, innovative statement about NYS economic development, one entirely unprecedented: it should *not* be a murky group of well-connected power-brokers and pay-to-play lobbyists.

And, if that happens, AND there is some way for an ordinary citizen to contact them to give them a brilliant idea they happened to have.... well, NY will have really changed.