Surprise! The Empire Zone Is A Scam We Can No Longer Afford

by: phillip anderson

Thu Dec 04, 2008 at 13:21:43 PM EST

Brodsky, D-Greenburgh, wants to place a six-month moratorium on the approval of any new Empire Zone projects while the state performs a "thorough audit" of the program. He called the program a corrupt "special-interest feeding trough" that no longer serves its original purpose - to create jobs and stimulate local economies.

"The program, which was intended to jump-start urban economies, has turned into a scandalous, corruption-ridden giveaway," Brodsky said. "I've recently wondered if the entire program should be repealed, but for now we need to stop it and review it."

Brodsky has repeatedly criticized Empire Zones, which grant tax breaks and other benefits to companies that settle in economically distressed areas. The cost of the program jumped from $30 million in 2000 to $600 million last year, with more than $3 billion in taxpayer money spent overall, he said.

We knew 18 months ago that the program was an expensive, throughly corrupt charade that not only did not achieve what it was created to do, but actively hampered job creation in many ways by throwing tax credits at companies like big box retailers Wal-Mart and Target, effectively killing off locally owned businesses. We knew that a large portion of companies participating in the program never reached their job creation goals, but still collected the goodies for doing so. We knew that some companies were simply making employees up and in some cases companies were collecting hundreds of thousands of credits and benefits for the program for every $30,000 dead end job they created.

And that was all back when many still figured we could afford well over half a billion dollars a year on corporate pork. Things have certainly changed in the last year and a half as we face a rather severe economic crisis, one that is probably only really just beginning, and are seriously considering significant cuts to services used by, ya know, actual people.

Now comes a new report by Citizen's Budget Commission. Crain's has a rundown and it isn't pretty.

Report calls for ending Empire Zone tax breaks

The state's Empire Zone program, a $500 million economic development initiative launched in 1986, should be scrapped, according to a report published Tuesday.

The report, released by the Citizens Budget Commission, a business-backed watchdog group, says the Empire Zone program has become bloated and counterproductive. The group says the program should be a "prime target for elimination."

According to the study, 58% of Empire Zone participants fail to meet either their job creation or investment goals. Moreover, it states that most of the tax benefits actually go to large companies and end up hurting the smaller, grassroots firms it was intended to help.

Roughly 76% of the benefits claimed in 2006 went to just 500 companies, out of 5,000 program participants. One-fifth of the credits went to just 10 companies, a list that includes IBM, Geico General Insurance and NRG Energy.

And just why are we subsidizing the operations of big box, low wage retailers like Wal-Mart?

The program was designed to encourage businesses to maintain operations in New York. However, critics point out that credits often go toward helping large companies expand into new locations. Big-box retail chains like Wal-Mart, Lowe's and Target have all received credits. Home Depot received over $4 million in credits in 2006 for eight locations statewide, including two in Brooklyn and Staten Island.

"A lot of these larger companies would locate where they are in any event," said Elizabeth Lynam, deputy research director at CBC. "So the program is harmful for the large swathes of smaller businesses that are trying to compete."

The entire program is bloated, corrupt, expensive, ineffective and actually counterproductive to many of the aims it was created to achieve.

Last June I said that we should Reform the Empire Zones or simply kill them. Given the new fiscal realities we find ourselves in and even more data on what a complete and thorough boondoggle the program is, I now think the answer is simply to scarp the whole thing. I'm not saying we shouldn't be doing all that we can to encourage businesses to stay in New York or to make our state attractive to businesses looking to relocate here. But I am saying that the Empire Zones have proven to be an absolute disaster at doing either. The time for reforming the program has come and gone.

It's time to turn out the lights on the whole shebang.

Senate Republicans: More Tax Breaks For Companies, No Tax Breaks For You

by: robert.harding

Wed Sep 17, 2008 at 13:18:59 PM EDT

State Senate Republicans this morning unveiled a sweeping package of tax breaks and changes to the state's Empire Zone program in an effort to spur job growth and make New York businesses more competitive.

The program would reduce state taxes on manufacturers by $130 million a year by providing tax credits for new jobs that are created. It also would offer tax credits for job training and new investments, and provide tax credits to technology firms that create new jobs.

The plan "will reward businesses that create good jobs in New York state," said Dean G. Skelos, the Senate majority leader, who announced at the annual meeting of the Business Council of New York State being held in Buffalo. "It will help New York compete with other states that are doing the same thing."

My fellow New Yorkers, we need to look at this for what it is. The Republicans are saying that they "will reward businesses that create good jobs in New York state" by giving them tax breaks in return. But that's exactly what we are doing now. The problem is that there is no accountability. The idea behind the Empire Zone is a noble one: Reward companies who bring jobs to New York with tax breaks. Not only is there no accountability, but politicians (including some of our Republican state senators pushing this "plan") have received campaign contributions from individuals and businesses who come into New York, reap the Empire Zone rewards, and then leave the state. Talk about a conflict of interest.

I believe Democratic state senate candidate Dave Nachbar, who is running against Republican Jim Alesi in the 55th Senate District, put it best when he said during our interview with him the following:

The fact of the matter is that these were ideas. I don't think they were bad ideas in their inception to create pockets of activity and zones in which you can focus on and concentrate on. That's a good thing and having development agencies that likewise have focus and attention. But here's the missing ingredient and it's very straightforward: There is no accountability and accountability you achieve in various ways. One is that you demand a return on the invested dollar. That is very simple. How many jobs were created? Did the business actually get established? What was the need for the building of the business in the first place? There has been some recent analysis about some of the IDAs here in Monroe County in particular that IDA money was going to companies that would have expanded or developed here anyway. But of course a company is not going to be foolish and turn it down. And then you have companies that accepted Empire Zone or IDA funding who had within their business plans the creation of certain numbers of jobs and in fact have gone the other way. They have actually reduced force.

That best sums up these Empire Zones and IDAs. Can the Empire Zones be a good thing? Yes, but with accountability and oversight. The Republican state senators cannot deny that we have had companies take advantage of the Empire Zone program only to leave after their benefits were over. You can see all the companies that have benefited from Empire Zones here. Some of them are companies that were already here in New York but still have reaped the rewards of Empire Zones.

New York just started closing Empire Zone loopholes earlier this year. As the Post-Standard documented, 180 companies were notified that they risk not receiving Empire Zone benefits because they didn't create the jobs or meet the goals they said they would. Thus the problem with Empire Zones. This money has been handed over to these companies but they have not returned the favor.

So what do the Democrats need to do? The Democrats need to cut taxes. But they shouldn't cut taxes for corporations that can afford them. They need to implement a series of middle class tax cuts that target the hardworking citizens of New York. For example, an older friend of mine is retired from Delphi and has been working a seasonal job every year. He recently paid $3,800 in school taxes. He isn't the only one.

While the Republicans here in New York play to their friends in business and put corporations before the hardworking citizens of New York, the Democrats should be coming out with their own plan that cuts taxes for the majority of New Yorkers who need them. Property taxes need to be addressed here in New York. The Republicans voted on a cap and think a cap is a solution. A cap is not a solution. We need tax cuts, not tax caps.

The people of New York need someone to step up to the plate for them. The Republicans are standing up for business. Who are the Democrats going to stand up for? That's what millions of New Yorkers need to know.  

ESDC Decertifies 26 Companies Regarding Empire Zones

by: robert.harding

Thu Apr 10, 2008 at 16:37:38 PM EDT

The 26 companies notified that the decertification process has begun have not responded to ESD's request for information and have fallen substantially short of the jobs or investment projections made in return for receiving Empire Zone benefits. The companies now have 30 days to request an administrative hearing and, if a hearing is not requested, the company will then be decertified.

"We must ensure that public resources are invested wisely," stated Upstate Empire State Development Chairman Daniel C. Gundersen. "Elected leaders and the citizens of New York state expect that there are accountability measures in place whenever public funds are disbursed. Empire State Development is doing its job today by moving forward with decertification of non-compliant companies."

"The tax benefits Empire Zone companies enjoy come in return for commitments that the companies will invest in the state and create jobs. These reforms demonstrate our resolve to ensure that state tax dollars are spent wisely to achieve the maximum economic development returns to benefit all New Yorkers," said ESDC President Avi Schick.

Here is another interesting fact for you:

The notification is part of a review process that began in July 2007.  It is the first time in the program's history that Empire Zone certified companies were informed that they were out of compliance with the jobs or investment projections they made when applying for participation in the Program.

Based on the review of 2006 Business Annual Reports provided by firms in the EZ program, nearly 2,400 businesses have failed to meet at least 60 percent of their goals.

That's right: Close to 2,400 businesses haven't even reached 60 percent of their goals. That is terrible and unacceptable.

Here's what the Syracuse Post-Standard had to say:

Former Gov. Eliot Spitzer made Empire Zone reform a part of his 2008 budget proposal, suggesting that the state could save $50 million by getting rid of the non-productive companies in the program.

Gov. David Paterson and state lawmakers should do the same, while aggressively pursuing the recovery of funds from businesses that have not met the qualifications. To do otherwise is to sanction an ineffective, unproductive, costly program.

Besides, would the state let New Yorkers get tax refunds for money they didn't earn and just let it go once the state Tax Department discovered the error? Hardly.

Reforming the Empire Zones is something that a lot of Democratic candidates should be stressing because Republicans are very much pro-Empire Zones.  

New York starts closing Empire Zone loopholes

by: robert.harding

Sun Feb 17, 2008 at 10:49:49 AM EST

But in today's newspaper, the Post-Standard has an article on New York starting to close Empire Zone loopholes. This has been something Darrel Aubertine is mentioning on the campaign trail in New York's 48th Senate District. Republican Will Barclay has voted against closing such loopholes.

Some details on the state closing these loopholes:

Recently, the state's tax department denied $1.7 million in Empire Zone tax credits to five businesses for 2005. That crackdown for the first time targeted so-called shirt-changers, companies that changed their names to qualify for tax breaks intended for true start-ups.

Because businesses can claim the tax breaks for up to 13 years, the audits will eventually save New York a projected $17 million, said Tom Bergin, tax department spokesman.

The tax department is auditing the returns of 19 more businesses that may have received big Empire Zone tax breaks by simply changing their corporate names, and it plans to audit 150, Bergin said. Meanwhile, this month Empire State Development Corp., which runs the program, notified 180 businesses -- including 39 in five counties surrounding Syracuse -- that the state may kick them out of the program.

"Unfortunately, some of these businesses have been taking advantage of a system that needs to be fixed," agency co-chairman Patrick Foye testified Monday in Albany at a state budget hearing.

The 180 businesses missed by at least 60 percent the job creation or investment projections they made to qualify for the program. Those businesses, which the agency would not identify, were given 10 days to explain to the state why they should not be expelled, said A.J. Carter, an Empire State Development Corp. spokesman.

All good moves, I must say. The Empire Zone program has lost its way. It needs either a complete overhaul or it needs to be shut down. It has not lived up to its intended purpose and several companies have taken advantage of the Empire Zone benefits when they shouldn't be.  

Empire Zones under fire

by: Hudson

Fri Aug 03, 2007 at 17:12:30 PM EDT

That's almost one-third of all businesses who have joined the Empire Zones roster, which was a pet project of Pataki and the once-powerful Charles Gargano.

Reform the Empire Zones...or Kill Them

by: phillip anderson

Fri Jun 08, 2007 at 09:37:49 AM EDT

Brodsky aims to overhaul state's Empire Zones program

Westchester Assemblyman Richard Brodsky unveiled a proposal yesterday to temporarily halt and eventually overhaul the state's Empire Zones program, one of the state's most widely used economic-development tools.

Brodsky, D-Greenburgh, wants to place a six-month moratorium on the approval of any new Empire Zone projects while the state performs a "thorough audit" of the program. He called the program a corrupt "special-interest feeding trough" that no longer serves its original purpose - to create jobs and stimulate local economies.

"The program, which was intended to jump-start urban economies, has turned into a scandalous, corruption-ridden giveaway," Brodsky said. "I've recently wondered if the entire program should be repealed, but for now we need to stop it and review it."

Brodsky has repeatedly criticized Empire Zones, which grant tax breaks and other benefits to companies that settle in economically distressed areas. The cost of the program jumped from $30 million in 2000 to $600 million last year, with more than $3 billion in taxpayer money spent overall, he said.

His plan would change the makeup of the local boards that approve Empire Zone projects to ensure broad support and prevent conflicts of interest, he said, and would subject companies to greater environmental and labor standards.

A six month pause while we audit the program and work to prevent conflicts of interest, cronyism and such sounds pretty reasonable, right?

Defending de facto corruption on the flip...

Empire Zones: Nice Work If You Can Get It

by: phillip anderson

Sun Apr 29, 2007 at 13:04:45 PM EDT

State jobs program doles out millions to companies with few workers

New York calls its Empire Zones a job-creation tool, but the program gives $102 million a year in tax breaks to companies with three or fewer workers.

Many are commercial landlords. Owners of some of the most visible buildings in the Syracuse skyline pull in hundreds of thousands per year in zone breaks -- often just for hiring a janitor or security guard.

An Illinois real estate group expected $1.3 million a year in zone tax breaks for five Syracuse office buildings. It had 3.75 employees there, records show. American Landmark Properties' executives managed to get by without such breaks in Chicago, where they partially own the Sears Tower, the tallest building in America.

The owner of AXA Towers (formerly MONY Towers) in Syracuse, another out-of-state landlord, expects more than $1 million per year in zone tax breaks. Employees: two $10-an-hour maintenance workers.

More than one-fifth of Empire Zone incentives flow to companies with three or fewer workers. On average, these employers receive more than $47,000 a year in tax breaks for each employee. Many of the companies reported paying their employees less than half that amount.

Where to start?

More on the flip...

Revisiting Empire Zones

by: MattK D1

Mon Apr 02, 2007 at 22:33:19 PM EDT

Huron Real Estate Associates in Endicott received $20.2 million in Empire Zone tax breaks... Yet the company created 17 jobs during the period, equating to about $1.2 million for each new hire. Endicott Interconnect Technologies  (note:Huron's tenants at the old IBM site where they are both housed--MK) received $8.8 million in tax credits and created 83 jobs.

Why They Hide Stuff

by: phillip anderson

Sun Mar 18, 2007 at 11:43:47 AM EDT

Benefits of Empire Zone tax breaks in question
State hands out millions in credits, but what's the return?

Owners of The Mall at Greece Ridge paid $99,398 in wages while claiming $3.3 million in state tax credits in 2005 - topping off a three-year stretch in which tax breaks exceeded wages by $8.8 million.

At the Corporate Woods of Brighton office park, meanwhile, tax breaks surpassed wages by more than $900,000 in 2005.

In all, nearly one in three suburban Monroe County businesses that received incentives through the state's Empire Zone economic development program in 2005 got more in state tax credits than they paid in total wages, according to a Democrat and Chronicle analysis of state records.

That ratio is second statewide only to Yonkers, where two in every five businesses received similar benefits.

"It may be oversimplifying, but the numbers don't lie," said Assemblyman Joseph Morelle, D-Irondequoit. "If you receive credits more than your payroll, then it's fair to say the state has covered your payroll.

"The question then becomes whether that is legitimate public policy, are these strategic industries?"

...

The court-ordered disclosure of the Empire Zone records came after the state lost a court battle with The Post Standard in Syracuse, which sued for the data. So far, records have been released for 2003-05. Data for 2006 likely will not be ready until next fall, officials said.

Go read the whole thing...