Corporate-welfare critics find just 24% met job targets.
New York state’s tax-subsidy agencies have been swinging and missing, with not even a quarter of agreements delivering the jobs they were supposed to, according to a new analysis. The data, compiled by a watchdog group often critical of subsidies, shows New York City has been the most profligate, pouring hundreds of millions of dollars into deals that consistently failed to add jobs.
Although a Bloomberg administration spokeswoman said the findings present “a skewed picture,” they could be used to justify Mayor-elect Bill de Blasio’s promised war on corporate giveaways.
The report, to be released Monday by the Alliance for a Greater New York, examined the $7 billion in annual subsidies doled out by regional economic-development agencies across the state and attempted to quantify their effect on job creation. It found that for deals whose subsidies concluded in 2011, the average success rate of seven of the state’s industrial-development agencies was 24%.
ALIGN counted as failures agreements lacking job-creation targets, as well as those for which targets were not reached. Eight of the state’s industrial-development agencies were excluded from the analysis because they did not disclose enough data to be fairly assessed.
The best success rate, in the Finger Lakes region, was still only 48%. New York City’s was 20%, tied for second lowest, in part because subsidies went to the financial-services sector, which has been shedding jobs in recent years.
“What’s remarkable about New York City is not only the amounts it spends, but also that its failure rate is so much higher than other regions,” said ALIGN spokeswoman Kristi Barnes.
One infamous deal that the union-run group has carped about for years involves Merrill Lynch. In 1997, the financial-services giant received $28 million in subsidies, including a $12.3 million tax break from the city, to expand its lower Manhattan headquarters. The company agreed to retain 9,000 jobs and add 2,000 more by June 2012. Instead, it cut 3,901, nearly collapsing in the 2008 financial crisis and being acquired by Bank of America.
Still, Merrill was allowed to keep almost all of the subsidies, even after leaving lower Manhattan for another heavily subsidized space—the Bank of America Tower in midtown. Bank of America had received $50 million in tax breaks to build its tower in a deal that calls for the Charlotte, N.C.-based bank to create 2,896 local jobs by the end of 2029. Through 2012, it had added 352.
“Merrill Lynch was subsidized for 15 years while bleeding jobs,” said Ms. Barnes. “That’s unfortunately been emblematic of the city’s corporate subsidies overall.” Bank of America did not respond to an inquiry.
City scales back
Mr. de Blasio has pledged to scale back so-called corporate-¬welfare programs, especially for Wall Street. He declined to comment for this story, but throughout the campaign made his stance on subsidies quite clear. “Instead of taking money away from small businesses that can’t afford it,” he said in a May speech, “we must refocus tax subsidies away from those who don’t need them, and strategically invest in jobs that lift all New Yorkers.”
While ALIGN agrees with Mr. de Blasio, its report noted that the Bloomberg administration has already reduced its economic-development spending substantially.
The analysis found that from 2009 to 2011, the city’s development agency reduced its subsidies by 64%, a figure that the agency officials say not only exemplifies a better policy approach to job growth but also points to a major flaw in ALIGN’s methodology.
Nonetheless, the city’s subsidy policy remains in flux, offering an opportunity for groups like ALIGN to change its direction. Whether or not Mr. de Blasio sticks to his rhetoric as Wall Street is courted with growing intensity by states like New Jersey—past mayors have made similar vows, only to back down when major employers threatened to skip town—ALIGN’s report suggests he should be wary of investing in the shrinking securities business.
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