In Testimony to Legislature, Reinvent Albany Urges State to Reform Business Subsidies
Reinvent Albany testified at today’s Joint Legislative Hearing on Economic Development, urging the legislature to do the following:
- Hold an oversight hearing on business subsidies featuring independent experts.
- Establish a Database of Deals.
- Pass the Opportunity Zone Tax Break Elimination Act in the budget.
- End $330M a year in oil and gas subsidies by passing S4816 (Krueger) in the budget.
- Increase the budget of the Authorities Budget Office (ABO), a crucial subsidy watchdog, to over $3 million.
- Reduce the number of Industrial Development Agencies (IDAs) and Local Development Corporations (LDCs) and make them more accountable.
ESD Tells Legislature Database of Deals coming “in a matter of weeks”
Also at the hearing, Senator John Liu asked a question at the top of many subsidy watchdogs’ minds: Where is the Database of Deals?
Empire State Development President Eric Gertler answered: It will be here “in a matter of weeks.”
It has been two years now since Governor Cuomo allocated $500,000 for Empire State Development to create a database of subsidies each business receives from New York State – whether through various tax abatements or direct grants. At last year’s testimony, Gertler said it would be here “by the end of the year.” The end of the year came and went, and there is still no database.
ESD offered some expected excuses for not publishing the database – “we’ve been stretched,” “these things take time” – but why couldn’t ESD set up the database before the pandemic? Shouldn’t the agency have had all of the data ready to go? How long did it take to find a contractor? Why is it taking the contractor so long to produce the database?
Regardless of whether we ever hear the answers, we hope that ESD keeps its word – and that we and the legislature will not be back here again next year, asking the exact same questions.
New York State subsidizes defense contractor in Suffolk
State subsidy wars continue, and the military industrial complex is one of the battlegrounds: State officials announced last week they are giving defense contractor CPI Aerostructures $3.75M to add 85 jobs in the Suffolk County town of Edgewood (Newsday).
Buried deep in the piece is gossip about state subsidy wars: Kevin Law, president of the business group Long Island Association, said he was aware of efforts to lure the contractor out of the state. CPI Aero CEO Douglas McCrosson himself seemed to acknowledge this, saying that other states could have saved on operating costs, but that New York offers talent that can’t be found elsewhere.
It’s a sobering reminder of how state competition fuels high tax subsidies for business – CPI Aero was already receiving substantial assistance, but ESD may have decided to give even more after seeing offers from other states. But if we take McCrosson at his word, it’s possible that the subsidies never mattered: New York had resources that other states lacked, and as Tim Bartik has pointed out, subsidies only affect business location decisions 2 to 25 percent of the time.
In 2019, legislators across the country joined a bipartisan effort to get states to agree to subsidy ceasefires, but no progress has yet been made in New York.
Upstate Revitalization Initiative Subsidies Average $61,000 per job in Suffolk
Governor Cuomo announced last week that HYZON Motors will receive up to $1.6M in Excelsior Credits for 100 jobs – that’s $16,000 per job, not a poor performance by national standards. But scroll all the way down to the bottom of the article for far less encouraging numbers: The Governor has committed $500M to his Upstate Revitalization Initiative for “up to” 8,200 jobs. That’s $61,000 per job.
As we have noted, the state’s projected jobs often fall short of their goals. As an audit by Comptroller Tom DiNapoli put it, “Despite millions of dollars of State funding, selected high-tech projects have yet to create the expected number of jobs.” The audit highlighted the inadequate evaluation of some high-tech projects and opaque and contradictory progress reports.
DiNapoli’s audit hasn’t stopped the state from painting a rosy picture of its subsidy programs: The Governor’s office puts out a press release championing the state’s economic development projects virtually every week. Without a Database of Deals, we might never know whether the projections reflect reality.
What we’re reading
- City and State’s Annie McDonough has a great summary of the subsidies that Amazon has received since 2000 – more than $3.7B across the country, according to Good Jobs First.
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