Seven Subsidy Stories You Might Have Missed This Week

1. $10 billion in unaccountable slush funds in the Governor’s proposed budget is a “major corruption risk,” Reinvent Albany said in testimony to the NYS Legislature this week on the Public Protection and General Government budget bill.

Reinvent Albany asked the Legislature to require Comptroller pre-audit review of the $10B COVID emergency funding programs instead of exempting them from it. Pre-audit review is a crucial safeguard that prevents corruption and waste like the 2015 Buffalo Billion bid-rigging scandal. We also asked the Legislature to specifically restrict how these these COVID emergency funds can be spent. Looks to us like $8B in funds could be spent on most anything. (The authorizing legislation uses the term “including, but not limited to.”)

Exempting the $2B COVID Public Health Response Fund and two pots of $2B and $6B each in Special Public Health Emergency Funds (among others) from Comptroller pre-audit review invites corruption and waste … The Comptroller’s pre-audit process takes on average less than six days. Contracts that take longer for the Comptroller to approve have incomplete paperwork or problems.

2. Reinvent Albany also released a memo of support for a bill in the State Legislature that would end certain subsidies for horseracing.

There is no evidence that the horse racing industry deserves millions in public funding instead of government services like battling the COVID epidemic, providing clean water, better schools or reducing the overall tax burden.

3. Real estate is optimistic about Governor Hochul’s proposal to replace 421-a, but advocates have attacked the plan as “reform in name only” (Commercial Observer). Senator Liz Krueger and NYC Comptroller Brad Lander also came out against the proposal.

City Comptroller Brad Lander opposes 421a and Hochul’s changes, saying the adjustments are a poor and financially wasteful fix for the city’s broken property tax codes, which would be better served by property tax reform and affordable housing subsidies, not tax breaks.

4. Governor Hochul said that Onondaga County’s chances of getting a new chip fab are “better than a long shot,” and the state is offering a substantial incentive package (Syracuse Post-Standard). New York has a history of investing hundreds of millions of dollars in semiconductor plants that produce relatively few jobs.

The governor said she has personally engaged in negotiations with the undisclosed company that would build a multibillion-dollar chip plant at the 1,250-acre White Pine Commerce Park owned by Onondaga County … Hochul confirmed the incentive offer Tuesday at an editorial board meeting of syracuse [dot] com | The Post-Standard. She declined to disclose details of the incentive package or the name of the company.

5. At Boondoggle, Pat Garofalo writes about a common, convoluted proposal in Kentucky that gives tax credits to corporations that invest in small businesses. Audits have repeatedly found that this type of program, which also exists in New York, does next to nothing to boost the economy.

These programs suffer from many of the same flaws the federal Opportunity Zone program has: Filtering taxpayer money through investors is simply less efficient and productive than making public investments in those places directly. (Remember, rural areas pay a huge premium for receiving far less under most corporate incentive programs.) Where, in theory, there should be some sort of multiplier effect, because investors bring more of their own dollars to a project than the amount in tax credits they receive, in practice that effect is blunted by money leaving the community as various parties take their cut.

6. General Motors will receive $5.65 million in Excelsior Jobs credits for investing $154 million in its Western New York Lockport Components plant. It’s not clear why General Motors would need the subsidy – in 2020, the company made over $120 billion in revenue.

7. The NYC Economic Development Corporation approved $62 million in new City ferry funds, most of which will go to Hornblower Cruises, the private company that runs the service (The City). Budget experts have criticized the current funding structure as inefficient and wasteful. NYC’s private ferries carry about 45,000 people a day, versus the Citibike bikeshare system, which does not receive public funds and carries 54,000 people a day.

“It’s really expensive to operate, it requires pretty significant subsidies, and this doesn’t really fix that problem,” said Sean Campion, a senior research associate for the budget watchdog group [Citizens Budget Commission] who has studied the ferries and their subsidies … Of the possible addition of city funds to the pool, Campion said: “Instead of pursuing options to make it more financially sustainable like increasing fare or cutting service on lower ridership routes, this sort of shifts the problem.”

If you got this from a friend, sign up here. Subsidy Sheet is written by Tom Speaker, Policy Analyst at Reinvent Albany. Please send questions and tips to tom [at] reinventalbany.org. We look forward to hearing from you!