A coalition of progressive economic groups are demanding increased accountability in the state's business subsidy programs to remedy a tax incentive system they say is highly flawed and failing to yield results. According to the Alliance for a Greater New York, New York spends $7 billion on economic development projects every year, with many failing to create jobs or set job creation goals.
ALIGN released a report late last year that focused on Industrial Development Agencies, which provide financial incentives, such as tax exemptions, to businesses to facilitate job growth. According to the study, one-third of IDAs assessed failed to create job promise, job growth or replace lost jobs. The coalition is advocating for legislation sponsored by Assemblyman Sean Ryan, they say would remedy some of the flaws surrounding the state's economic development programs.
"We're talking about sensible economic development, we're making these public investments in private corporations and if that's the name of the game today, we're doing a really bad job of it," said Ryan, D-Buffalo. "The IDAs don't work — if they were venture capitalist firms they would've went out of business years ago because they don't deliver what they promise and they squander money."
The proposed legislation would require development projects to set job creation, quality and local hiring goals prior to receiving a subsidy and provide a "money back guarantee" on publicly subsidized projects that fail to meet those goals. The Just and Open Business Subsidies Act (A.08203) would also create a public website to track project performance and increase the involvement of the public and local taxing jurisdiction in the decision making process.
Proponents of reforming the IDA system have also criticized some projects for not only failing to create jobs, but for actually eliminating jobs. For example, after receiving $800 million in tax breaks, IBM cut nearly 4,000 positions, according to ALIGN. Skeptics also take issue with aiding corporations while school districts are forced to cut services, and property taxes continue to burden households.
However, Brian McMahon, executive director of the New York State Economic Development Corporation — an organization representing IDA leadership and economic development professionals — called the report released by ALIGN a "data dump not worth the paper it was printed on" and said it failed to analyze and examine factors facing IDA reporting and job creation.
"The way the [Authority Budget Office] requires the reporting to occur is it requires them to report all jobs for the particular business in the last financing and report zero for all prior phases of financing," McMahon said.
"The ABO and the Comptroller's Office are well aware of the reporting problems that exist, we've had discussions with them and we hope they'll make changes so that reporting can be done more accurately. We want the information to be transparent, understood and reported in a fair manner and that's not happening now."
McMahon added some projects might not create jobs, but may prevent job loss by allowing a struggling business to maintain positions or keep its doors open. He disputed the JOBS Act, saying the legislation would make it impossible to have any type of incentive-based economic development projects in New York. According to him, claw backs should be done on a case-by-case basis, allowing IDAs to address all factors which may be affecting a project's success.
Director of the Authority Budget Office David Kidera agreed IDAs should be allowed to use discretion when determining whether the recapture of funds is necessary. However, he said inaccurate job creation data is due to the inability of some IDAs to gather the information required of them by law.
According to Kidera, IDAs are required to report information on a project-by-project basis, but some misrepresent themselves by filing incorrectly saying, "In many cases those IDAs do not break down by project how many jobs are being created as a result of that project approval. They tend to lump all job numbers for the second phase of the project into the original phase of the project," Kidera said. "When you have multiple projects at the same site it becomes very difficult for them — or they are unwilling — to make the effort to break down the job numbers by each of those projects."
Kidera said several aspects of the JOBS Act are already addressed in law, but statutory action requiring the approval of local taxing jurisdictions and the community before awarding tax breaks may still be necessary. He added, the ABO is working with the Comptroller's Office to clarify the reporting required by IDAs.
Nonetheless, supporters of the legislation say it will provide common sense reform and allow the public to ensure they are seeing results from the investments.
"We believe that there's another way, in fact, that there's a better way to have a vibrant thriving economy and a good place to start is to improve the efficiency and effectiveness of New York state's corporate subsidy programs," Political Director of ALIGN, Tomás Garduño, said.
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