New Plan for Economic Development Gets Mixed Reaction

With the state's Empire Zone business incentive program getting set to expire June 30, Gov. David A. Paterson has proposed a replacement job-creation program that is being met with mixed reaction.

Paterson last week sent to the state Legislature a bill creating the Excelsior Jobs program, which Paterson calls the centerpiece of his job-creation agenda. The Excelsior Jobs program would replace the Empire Zones program and provide tax credits to targeted industries. Paterson said Exceslsior Jobs would implement stringent accountability standards and cap program spending to ensure prudent use of taxpayer dollars.

Paterson's proposal was submitted to the Legislature as part of the Transportation, Economic Development and Environmental Conservation budget bill.

"New York needs a job creation program that uses taxpayer dollars responsibly, delivers results and helps grow the New Economy industries that will lead the State to fiscal recovery. The Excelsior Jobs Program is the right initiative at the right time," Paterson said. "In reaching out to hundreds of businesses and communities across our state over the last year, we were able to build the best possible program to facilitate job creation and economic growth, and I am pleased to submit this proposal as part of agreed upon legislation."

Paterson contends the Excelsior Jobs Program will provide job creation and investment incentives to firms in targeted industries such as high tech, biotech, financial services, and manufacturing. Under this program, Paterson said firms in those industries that create new jobs or make a substantial new investment in New York for five years would be eligible for up to four tax credits, each of which is fully refundable. These tax credits include:

• The Excelsior New Jobs tax credit of between $2,500 and $5,000 per new job to cover a portion of the associated payroll cost.
• The Excelsior Investment Tax Credit valued at two percent of total qualified investments.
• The Excelsior Research and Development tax credit providing a ten percent credit for new investments based on the Federal Research and Development credit.
• The Excelsior Real Property Tax Credit (RPTC) valued at 50 percent in the first year, decreasing to ten percent in the fifth year for regionally significant projects and/or businesses in targeted industries which locate to distressed areas.

Empire State Development, which currently oversees the Empire Zone program, would administer the Excelsior Jobs Program. Eligible firms will be designated for program benefits in accordance with rules and regulations announced by ESD, and will be held to stringent accountability standards which will guarantee that businesses deliver on job and economic development commitments, according to Paterson.

The cost of the program is capped at $50 million per year for new entrants and $250 million annually when the program is fully phased in over a five-year period. Capping the program's costs maintains fiscal affordability and ensures that New Yorkers will realize a positive return on their investment.

"Benefits from the Excelsior program are directly tied to job creation, investment and research and development," said Empire State Development Chairman and CEO Dennis M. Mullen. "During difficult economic and financial times like these, the Excelsior Jobs Program is designed to ensure accountability measures are in place, as well as yield viable, tangible results for taxpayers and the State of New York. Not one dollar of benefit will be granted to a firm until it has met its individual commitments. I applaud Governor Paterson and the Legislature for reaching this consensus, knowing it will help strengthen New York State's economy and build the New Economy jobs of tomorrow."

Paterson critized the Empire Zone program as hampered by abuses, lack of results and skyrocketing costs. Despite annual Empire Zone expenditures in excess of $550 million, Paterson says the state's returns of investment have been difficult to quantify, and businesses participating in the programs have not been held accountable.

Ron Hicks, president of the Rockland Economic Development Corp., said he has not seen the full version of the Excelsior Jobs proposal, but that he believes the program will be beneficial to Rockland County in its efforts to attract and keep jobs.

Hicks, whose organization administers the Empire Zone program in Rockland, said a key issue to be resolved is whether there will be enough money available in the new Excelsior Jobs program. Hicks said he is pleased that Empire State Development would oversee Excelsior Jobs, explaining that the organization is already experienced at operating economic development programs.

A statewide business group doesn't think there is enough money in the program.

"The economic development program agreed to by the Governor and legislature will limit New York's ability to compete in the race to create and retain jobs as the nation moves out of the recession," said Ken Pokalsky, senior director of government affairs for The Business Council of New York State Inc.

"The new Excelsior Jobs program is capped at $50 million dollars in credits per year, significantly lower than the previous Empire Zone program," Pokalsky said.  "This is a very modest program that is likely to fall short in promoting new investment and new jobs, particularly upstate. The Business Council agrees that Empire Zones needed further reforms, and understood that the state's commitment to the program would be reduced, but this is a huge reduction in resources at a time when New York needs to invest in job growth."

The Business Council supports some elements of the new program, including the program's targeting of industrial sectors and the inclusion of a capital investment-based eligibility criteria.

However, in addition to the overall cap, The Business Council is concerned that the real property tax credits in the new program will be inadequate to offset the adverse impact of New York's high property taxes on potential development. New York's local tax burden, largely driven by the property tax, is 78 percent above the national average, according to the counci

Assemblyman Kenneth Zebrowski, D-New City, said he too would prefer we keep the Empire Zone program, and amend it to make it more effective and efficient.

"Although I am not thrilled with the (Excelsior Jobs) program and believe we could do more," said Zebrowski, "I fought for a few items that were included in the final package: first, every business currently in the Empire Zone program will receive the credits they were promised.  Therefore, although there will be no new businesses accepted into the program after the expiration date, the program will continue to provide credits through the year 2020 for current businesses (an investment of $4.3 billion)."

Zebrowski said the new program would also include a small business revolving loan fund, which will provide low interest loans to small businesses that generate economic growth and job creation.  Also, he said the package includes manufacturing and scientific research and development as a "strategic industry," to ensure the Pfizer Pharmaceuticals property in Pearl River is available for this program.

"I am also hopeful that with a new governor and a better economy we can build upon this program, or create an additional program that will be more effective," Zebrowski said. "We have to remember these incentive programs are government 'spending' at a time when significant cuts are being made across the board."