Reboot N.Y. economic development now
Who doesn’t love an old-fashioned ribbon cutting? The cameras, the big smiles, the bigger pair of scissors. Our disgraced former governor, Andrew Cuomo certainly did. He and his administration artfully squandered taxpayer money for the sole purpose of holding the big scissors, taking the credit and basking in praise. But as we turn the page on Cuomo’s tenure, we must also move on from his administration’s so-called economic development practices.
Economic development in New York has long been a game best played with greasy palms: buoyed by state and local agencies with bloated discretionary funding and little strategic clarity, economic development as we know it is little more than a form of corporate welfare. Here’s how this looks in practice:
Step 1: Large corporation chooses a locale for its next facility. Step 2: Corporation asks New York to foot some of the bill or offer a massive tax break, even though they’ve already decided to relocate here, and/or broken ground. Step 3: Taxpayers cough up millions for said business so the governor can slap their name on a press release and suit up for the photo opp.
When LEGOLAND, a $500 million project, put down roots in Orange County, they did so knowing they’d need to improve local infrastructure to accommodate an influx of traffic. They publicly acknowledged this need and admitted they’d pay for the upgrades in full. Why, then, would New York State knowingly pump $10 million in public funds into said improvements? Simple: It gave Cuomo the ability to claim credit for the project. That’s one expensive taxpayer-funded pair of scissors.
As part of a 2019 state Senate investigation, legislators obtained emails that demonstrate how reckless state incentives can be. In one example, the Orange County Industrial Development Agency (IDA) advised a corporation set to meet with Empire State Development (ESD), the state’s economic development arm. In the email, an IDA official advised the corporation, Medline, to “please use this sentence today”: “Medline has interest in retaining and expanding operations in Orange County pending competitive NYS incentives and IDA PILOT. The company has competing interest from [New Jersey] though Wallkill could be our first choice contingent on NYS incentives.”
The intended message here — a superficial prerequisite to get state funding — was: But for the state incentives, this project can’t happen.
In other words, companies are handed a script by their consultants and voila. (Predictably, Medline got the state tax breaks they were looking for.)
On the rare occasion when ESD-funded projects are scrutinized, it’s clear they’ve fallen short of promises made to local communities. This has certainly been the case for the Buffalo IT Hub. When it first launched in 2016, fueled by tens of millions in public dollars, ESD boasted the project would create 1,806 jobs. Five years later, only about 200 jobs have materialized, without any consequences for the project’s developer or partners. The now-infamous “Buffalo Billion” project, which recently resulted in a new round of convictions for those involved in bid-rigging, is a whole other story.
The New York Times highlighted a scheme whereby 12 companies in New Jersey pocketed $100 million in tax breaks and incentives by threatening to move to a single office park in Rockland County. In actuality, a call to the park’s property manager would have revealed that none of the 12 ever took so much as a tour of the space. Yet when New York’s ESD officials were questioned at a 2020 legislative hearing as to whether their office undertakes basic investigations to ensure corporations aren’t doling out lies for incentives, they responded with non-answers.
We believe being pro-business and pro-taxpayer aren’t mutually exclusive. With that in mind, here are simple steps the Hochul administration can take to protect public dollars and rebuild taxpayer trust:
Work with states throughout the Northeast to sign a non-aggression pact, discouraging the sort of deceit and race-to-the-bottom tactics those corporations in New Jersey employed.
Bar development agencies from incentivizing companies to abandon one part of the state for another, and consolidate the hundreds of existing local agencies.
Require members of the state’s Regional Economic Development Councils to disclose financial ties and conflicts of interest.
Most importantly, the Legislature needs to enact a top-to-bottom audit of every tax deduction, credit and incentive in order to determine what works and what doesn’t. Billions of economic development dollars are blindly reauthorized in the state budget annually without this proper accounting.
In Albany, the age-old justification for continuing failed programs is often “because we’ve always done it this way.” “This way,” however, is unsustainable, unaffordable, unethical and anti-taxpayer. It has to end, but it only will if Gov. Hochul prioritizes an overhaul.