Critics Blast IDA's, Empire Zones
Wednesday, May 9, 2007(May 9, 2007) — ALBANY — Critics ripped two of the state's largest economic development programs Tuesday, calling them expensive failures that haven't generated significant numbers of new jobs.
The programs under attack are industrial development agencies, local organizations that grant tax breaks for businesses that promise to create jobs or make community improvements, and Empire Zones, a state-run program that supplies a wide range of tax breaks and other incentives to draw businesses to run-down areas. A key assemblyman said the Empire Zones program is so flawed it should be halted immediately.
According to an activist group, IDA tax exemptions cost local governments $266 million in 2005. But while the businesses that got the breaks said they would create 217,000 jobs in that year, they actually produced only 79,000.
"IDAs have no mechanism for oversight or accountability and will continue to waste tax dollars on failed projects unless comprehensive reforms are enacted," said Adrianne Shropshire, executive director of New York Jobs With Justice, a labor-backed research group.
The IDA critics want the state Legislature to pass a bill requiring that IDA-financed projects pay prevailing (typically union-scale) wages, adhere to high environmental standards and repay subsidies when they don't meet job-development targets. They also want to make it easier for the public to get information about projects.
Assembly Local Governments Committee Chairman Sam Hoyt, D-Buffalo, said he would introduce a bill later this year that includes many of the group's recommendations.
"We need genuine reform," he
said.
In contrast, the head
of a statewide economic development group said
many of the proposed
changes would hurt the business climate.
Requiring the payment of prevailing wages "would make New York even more uncompetitive," said Brian McMahon of the state Economic Development Council, by adding between 15 percent and 30 percent to the costs of IDA-backed projects.
He added that many IDAs, including New York City's, already have "clawback" provisions to recover subsidies from firms that don't meet job projections or other goals. And he said local officials should make the decision whether to add such clauses to the deals.
The effectiveness of the Empire Zone
program was also called into question Tuesday
at an Assembly hearing.
"We
need to stop them right now," said Assemblyman
Richard Brodsky,
D-Greenburgh, Westchester County. "They are a
catastrophe. They are a
scandal. They are ineffective. They have been
corrupt. The minimum is
to stop them."
The program costs $600 million a year and has failed to generate a significant number of new jobs, Brodsky said, while often providing unneeded subsidies to firms or individuals with political connections.
It has also been scarred by incidents of businesses reincorporating under a new name to get the tax breaks while not actually creating any new jobs — a practice known as "shirt-changing."
Brodsky said a report reviewing all of the activities of the state's chief economic development organization, the Empire State Development Corp., will help him decide whether to submit a bill later this year to abolish the zones program.
But the state's chief economic
development official said stopping the program
would be a mistake.
"We
can't close the economic development window in
this state," said
Patrick Foye, co-chairman of the Empire State
Development Corp. "The
answer is we have to figure out ways now to
make the programs work
better. We're committed to doing that."