Our economic development strategy needs an overhaul

New York’s high-dollar economic development strategy is a ham-fisted approach consistently shown to be inefficient at best and fraudulent at worst. A recent report from the state comptroller confirms what those who have followed the Buffalo Billion and other projects have known for some time:

Marc Molinaro is the Dutchess County executive and was the 2018 Republican candidate for governor.

Goals are rarely met, and the money spent amounts to little more than corporate handouts.

The measure of the success of any investment is the return it provides to investors — in this case, taxpayers. The comptroller’s report noted that Empire State Development’s own analysis of the Riverbend Project

“indicated only $0.54 in economic benefits per $1 spent.” To put this project’s failure in perspective, it was awarded nearly $960 million.

From the inception of the state’s massive economic binge in 2012, expectations have been managed by pushing out completion dates and reducing jobcreation targets. This was despite years of experts pointing out the failures of these types of heavy-handed incentive-based approaches. Tax incentive expert Timothy Bartik found that “the typical incentive package in the typical state has benefits and costs of almost the same

size” and “jobs are created, but only in a minority of incented firms.”

Standardizing performance metrics across all projects, requiring publicly available outcome tracking data, unifying the state’s economic development budget, requiring comprehensive assessments of risks and benefits, and retroactively providing benefits after outcomes are met are steps in the right direction. However, with the challenges we face today, we need a new approach. We need to scrap the current system and create a new model that is more accountable, transparent, effective and sustainable.

First, we must focus on improving our 49th-ranked business climate and investing directly in the places and people of our state. In 2018, I called for a broad set of policies aimed at creating a more pro-growth environment by reducing the tax and regulatory burden on manufacturers, small businesses and individuals. Many of those policies, such as reducing unfunded mandates, lowering property and energy taxes and reforming occupational licensing, are even more critical today.

Yet improving the climate alone will not solve our problem. We need evidence-based people-and-place-centric policies to catalyze economic development, especially in distressed communities. And we don’t have to rely on billions in tax incentives. As New York was lining up billions in tax incentives to lure Amazon’s HQ2, Virginia was taking a different approach — an approach that, though imperfect, was both successful and better for its residents. Virginia offered $550 million in grants tied to creating 25,000 jobs and payable only when that goal is met. Further, to sweeten the pot, $1 billion in support was offered to double the tech-talent pipeline and improve transportation infrastructure — funding, as Amy Liu of the Brookings Institute, pointed out, that “will not go directly into Amazon’s pockets but into Virginia schools, universities, and local agencies.”

At the same time, New York must also focus on growing small- to medium-sized firms, which can contribute to up to 80 percent of job creation. A 2018 report from the W.E. Upjohn Institute found that supporting small- to medium-sized local businesses with the potential to grow is one of the most cost-efficient means to increase employment and grow the economy. Providing these types of firms with customized job training or advice on improving technology, product design and marketing are “10 times as effective as tax incentives in creating local jobs.”

Our economic development efforts should put employees, small-business owners, educators, job-seekers and communities at the center. A company can leave, but a newly built bridge, a welleducated workforce or an expansive career-training apparatus are stable assets capable of generating sustained economic growth. By focusing on people and places, rather than on feeding corporate coffers, we can build an economy that is more diverse, resilient, fairer and stronger than ever before.