According to a new report from the Alliance for a Greater New York, Target Corporation currently takes advantage of 14 business subsidies throughout the state. The report analyzed seven different subsidy programs that report their data regionally, and said big businesses are able to take advantage of an uncoordinated system.
A coalition of public policy experts, government watchdogs, labor unions, community and religious organizations, and concerned small business owners is calling for more accountability and transparency in New York's pro-business subsidy programs, and urging the state to pass legislation to track their effectiveness.
The Alliance for a Greater New York released Regional Review: A Closer Look at New York's $7 Billion Subsidy System, which calls the programs "uncoordinated" and says they are "largely failing to create jobs."
According to the report, only seven of the state's major economic development programs report their data regionally, and many of them do not report with enough detail to assess performance. The report focused on Industrial Development Agencies, which provide financial incentives, such as tax exemptions, to businesses to facilitate job growth. Regional Review found one-third of IDAs assessed failed to create job promise, job growth or lost jobs. The report also indicates 72 percent of IDA projects ending in 2011 failed to create jobs, meet their job creation goals, or failed to set job creation goals.
"The problem is there is no standard across all subsidy programs, let alone all IDAs," said Tomás Garduño, political director of ALIGN. "What we found is that of the little bit of reporting that is done, even of the [IDAs] that have higher levels of transparency and accountability, they're really not working. If you're to measure a guess as to the rest of the programs, we're essentially losing about $2.3 billion a year out of our $7 billion investment when it comes to subsidies."
ALIGN also reports subsidy programs have been increasing rapidly despite any indication of their success. For example, 20 percent of all Local Development Corporations were incorporated in the last two years. According to Garduño, a more thorough and transparent reporting system must be put in place to assess the effectiveness of subsidies before the state decides to increase or decrease the number of programs available.
"We don't want to say without sufficient information whether or not these subsidy programs work, and we want to give them a chance to work," Garduño said. "The problem is we have no way to determine whether or not they're working. At this point we don't feel like its responsible or fair to say get rid of them or increase them because we don't know one way or the other."
However, Brian McMahon, executive director of the New York State Economic Development Council — an organization that represents IDA leadership and other economic development professionals — said Industrial Development Agencies are the most highly regulated public entities in the state.
According to McMahon, the data used by ALIGN for the report is outdated and does not reflect the current state of IDA activity. He said because many businesses are involved in multiple IDA projects, the reporting requirements set forth by the Authorities Budget Office leads to a misrepresentation of jobs created.
"The way the ABO requires reporting is the reporting of new jobs for the latest projects and zero jobs for prior projects," McMahon said. "We have indicated to them that that results in very significant underreporting and I think that's part of what ALIGN found also. So many of these projects that they found to have zero employment is inaccurate because that's the way the ABO requires IDAs to report."
The Authorities Budget Office was created in 2009 as part of the Public Authorities Reform Act. Its mission is to make public authorities such as IDAs more accountable and transparent, and to act in the public interest consistent with their intended purpose.
McMahon added that a report from the Comptroller's Office issued last year indicates the program is highly efficient and effective. According to him, IDA projects provide significant revenue to local taxing jurisdictions by improving the value of a property, and contributing payments in lieu of taxes for the public good. The IDA report issued by DiNapoli indicates IDA projects provided $900 million in payments in lieu of taxes in 2011.
However, DiNapoli's report suggests the state establish provisions for the recapture of funds if a project does not meet goals, and recommends a uniform application and assessment process to enhance accountability. The comptroller's report also states information reported by IDAs does not reflect goals other than job creation, which limits a statewide analysis.
ALIGN suggests the state pass the Just and Open Businesses Subsidy Act (A.08203), sponsored by Assemblyman Sean Ryan, D-Buffalo. The legislation would set requirements for public input in business subsidy decisions, create a public website to track all state subsidies and disqualify individuals from being appointed to an IDA board if they are determined to have an ethical conflict or a conflict of interest.
According to Ryan, an important component of the JOBS Act is the creation of a uniform application process, which would require those applying for subsidies to set annual job creation targets. If a project fails to meet the benchmarks they set, the legislation would allow for the recapture of funds.
"Every comptroller for the last 20 years has reported on this — Democrat, Republican, conservative and liberal — and every one has come to the same conclusion and that is that IDA projects routinely, and with distressing regularity, fail," Ryan said. "IDAs are unique in that they are an unelected body that has this power to give away taxpayer dollars, the local taxing jurisdictions have very little say in what they do and they're just not a transparent bunch."
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