Sunday, August 5, 2007

Empire Zone or Twilight Zone?

In late 2006, portions of Schoharie County were awarded Empire Zone status by the Empire State Development Corporation, New York State’s industrial development agency. Areas designated as Empire Zones enjoy tax benefits for companies to set up or expand their business and therefore increase local employment. Ever since, county leaders have been excitedly hailing the program as a panacea for Upstate’s economic woes.

However, across the state, a growing number of critics of the Empire Zone program are suggesting drastic changes to the current system, some going as far as to urge getting rid of it. One major criticism is the use of Empire Zone exemptions to attract retail businesses, which seldom make decisions about where to locate based on tax benefits. Many of these businesses would choose a location regardless of the Empire Zone benefits it receives. Further, retail businesses often take business away from existing businesses, thereby reducing the net creation of jobs.

Further, there are no conditions or requirements associated with the awarding of Empire Zone benefits. There is nothing to stop a company from taking advantage of the program and then cutting jobs. A report released by the New York State Initiative for Development Accountability in May, 2007 claimed that in 2005, of the nearly $400 million in tax exemptions created by the program, 70 percent went to companies that cut jobs!

However, the biggest problem with this program is that it only reinforces the inter-municipal competition for development (also known as the race to the bottom) throughout the state. Upstate’s major cities (Albany, Syracuse, Rochester and Buffalo) are actually a patchwork of numerous municipalities that each must compete for industry for its own small tax base. Doing away with this fragmented system of municipal government would create multiple benefits for economic development. First, Upstate’s regions would experience less duplication of services which would enable them to lower taxes. Secondly, region-wide planning and development agencies could create a unified and coherent vision, which would eliminate the need for each town, village and city to fight over every tax ratable that comes along. Incidentally, companies facing such a unified front might be a lot less inclined to request outrageous benefits packages if they couldn’t pack up and move to the neighboring town and village.

In the face of all these fragmented municipal governments, perhaps creating even more “zones” to intensify inter-municipal competition is not the smartest policy, especially if we’re going to be handing out tax exemptions like candy with no strings attached.

And while New York State is focusing all this effort on a program to create tax exemptions for companies, they are nearly ignoring other strategies for economic development. Companies don’t just look at the tax rate when looking for a location. Many companies instead want a steady supply of college graduates from which they can draw qualified and talented employees. Upstate NY has plenty of colleges, but it presently doesn’t have the resources and attractions necessary to keeping students here once they graduate. Cities like Albany and Rochester have made strides recently with their own efforts to create a vibrant nightlife in their cities, some projects have even utilized Empire Zone designations. But right now, Upstate cities can’t compete with places like Manhattan/Brooklyn, Boston, or San Francisco. This can change, and it must.

9 comments:

Anonymous said...

I think that the EZs are a weird form of corporate welfare. Check out www.lizkrueger.com/pressreleases/ESDCreformnov06.html It's my understanding, however, that the practice of communities selling off EZ acreage to private interests was ended effective January 1, 2006...not sure tho.

Anonymous said...

There is a cable public access channel in Schoharie County (Channel 16, 17?) called Schopeg. I do not know if their archived programming (assuming there are archives) is accessible to the public. If so, hopefully, one can see the tape of the August 2005, County Board of (Town) Supervisors Meeting; it makes for interesting viewing. Take a gander at the speakers/audience! Wonder, at one point, what their real agendas are?!? Respect the teremity of one Supervisor to venture a question (if you watch this taping every month, betcha already know who he is, bless his plain-spoken, honorable heart). See the apparent surprise of his questionee; that somebody dared to ? him. Wonder about the lack of questions from any other Supervisor. LOL and yet squirm uneasily in one's seat (well, that was my experience, anyway) at the obsequious blathering of another Supervisor to the questionee. Try to comprehend fully what you saw (and maybe not wanting to.)

Anonymous said...

Oopsie! Guess I was in "The Twilight Zone" yesterday. Just want to say 1. that meeting contained the formal finalizing of the application for the Schoharie EZs. and 2. the questionee's name is Kevin Doh...couldn't remember it yesterday.

Anonymous said...

And, now, For Something Completely Dfferent...(not really.) The..."outlookzone"! www.daily gazette.com/news/2008/feb/24/0224_outlookzone/ Hopefully, you get a lookie B4 it's "archived", and then U have to pay (not 4 me, of course, I'm not, well, "upscale".)Thank goodness for public libraries...

Anonymous said...

Typo DOH! "Different". Now...back to the Daily Gazette article...my biggest guffaw of the week was courtesy of the following curiously arch statement: "'I'm not interested in a handout from the government,' Galasso said." !?!?!?Hey, since when? Poor Emil. He probably all but turns the color of early summer grass whenever he thinks of "that Bouvier woman". Tee-hee. On a much more serious note, here's another Emil quote: "If the Empire Zone comes into play at all at the Howe Caverns quarry, Galasso said, it would likely come from attracting additional businesses to locate there because of the high-grade limestone's potential for use in pharmaceutical products." (Sigh) Dude, you obviously called it 100% right re this particular oinker. I want to also thank you for providing me with a forum for my anxiety driven agenda. Schoharie County needs your blog...I hope to be checking in (albeit from a new, considerable distance) on what you, and others, have to say on County matters. Adieu!

Anonymous said...

Yet again...I heart the Daily Gazette. - Scholette grrrl

Anonymous said...

WILL MR ZAKREVSKY STOP THE SHAMELESS BRAYING/BOOSTING UP OF HIMSELF TO ANY OUT-OF-COUNTY REPORTER WILLING TO LEND HIM AN EAR. IT WILL TRULY DRAW ATTENTION AND COMMENTING TO THE REALITY OF OUR AGENDA ADN POSSIBLY PUT IT DOWN. REMEMBER WHO WILL HAVE TO BE ANSWERED TO IN THIS SITUATION SO SHUT UP ALREADY!!!

Anonymous said...

Actually, upon further reflection, had the "another supervisor" been given what, timely, ACCURATE reporting/analysis in the preeminate local newsmedia outlet?!?!, he would NOT have have been overflowing with gratitude...not by a long shot.

Anonymous said...

Hi K-FED. Ouch...that "have have"...read "have". Sorry, yet another dumb typo. Should have capped the "S" in "supervisor", too. It's a need for accuracy thing. Toodles.