Op Ed Economic Development

New York needs better return on economic investments

Albany Times Union

January 17, 2018

albany times union

Read the original op-ed here.

Next week public corruption trials begin, alleging "pay-to-play" schemes related to one of the state's largest economic development projects, the construction of a factory for Tesla/Panasonic. While the trials may provide a revealing behind the scenes look at how this project came about, they should not distract from the pressing need to reform the state's approach to economic development in this legislative session.

New York state allocates more than $4 billion annually, including tax benefits, to economic development. Some programs have well established criteria and offer incentives to businesses that relocate or expand in New York. However, the state also has a history of funding "silver-bullet" projects without statutory or regulatory criteria in hopes of jump-starting regional economies. Examples include the Buffalo-Billion TESLA factory, a film hub in Syracuse, and a chip fab plant in Utica. More than $1 billion of taxpayer money was allocated to these projects before a single new job was created and subsequent employment gains have been well below initial projections.

Recently it was disclosed that an attempt to lure an LED light company to DeWitt failed even after the state invested $83 million in a factory for the business. Another company was found, but it will cost taxpayers an additional $15 million to properly equip the building for the new tenant. The new company has promised to create 290 jobs, meaning New York will have spent $337,931 per job. Even if those jobs last for 10 years, this is still an annual subsidy of more than $30,000 per job per year. According to media reports, the full details of the agreement will not be available until after the agreement is completed. This is another example of the state's veiled and unstructured approach to economic development.

Despite the $4 billion commitment, the state does not present a unified economic development budget. (The Citizens Budget Commission calculates this number annually.) There is no systematic reporting of each economic development subsidy listing the beneficiary and private commitments for job creation or capital investment. Programs such as Excelsior Jobs are subject to job creation and reporting requirements, while other benefits are awarded to companies based on the promise of future jobs without specific, publicly available commitments or mechanisms to recover incentives. Simple concepts, such as the definition of a job, differ across programs, making comparisons difficult.

As they discuss the 2018-19 budget, the Legislature and Gov. Andrew Cuomo should review and adopt the five recommendations in CBC's "Blueprint for Economic Development Reform": Establish a unified economic development budget; standardize metrics across all economic development initiatives; establish a database of deals outlining every economic development incentive; improve program design so that incentives are only provided after an employer has fulfilled its promises; and adopt administrative reforms to ensure procurement integrity.

Administrative changes to the procurement process and adopting pay-for performance criteria would enhance public confidence in state economic development spending, addressing issues that are likely to be raised during the trial. With New York facing a deficit of at least $4 billion, taxpayers deserve to know if the state's investments are worth the return.