Only a quarter of Empire Zone companies statewide would qualify for the new Excelsior program.
View full sizeThe new Excelsior jobs program wonât include malls like Carousel Center, which collects nearly $10 million a year in Empire Zone credits. Syracuse, NY - New York’s new jobs program is most notable for what it doesn’t include.
What the Excelsior program does not include are tax credits for law firms, shopping malls, power plants and other businesses that are unlikely to leave the state. It also will not help companies that fail to create promised jobs.
In other words, it won’t make the same mistakes made by the much-maligned Empire Zone program, the program it is replacing. That’s a promise from the man in charge.
“We’ve got a solid program, a lot different than the one we had before,” said Dennis Mullen, chairman and CEO of Empire State Development Corp., the state’s economic development agency.
The Empire Zone gave tax credits to just about any business that promised to create jobs. Excelsior will give tax credits only in targeted industries, such as biotechnology, pharmaceuticals, high technology, clean technology, green technology, financial services, agriculture and manufacturing, Mullen said.
According to Empire State Development, 6,154 of the 8,556 companies in Empire Zones — or 72 percent — are “anchored industries,” companies such as retailers and service providers that are not likely to leave the state. Many of them are Syracuse area businesses.
Carousel Center Co., owner of the shopping mall in Syracuse, collects nearly $10 million a year in zone credits, according to state records.
The Bond Schoeneck & King law firm receives $1.57 million a year on its offices in Syracuse, Albany, Buffalo and Oswego.
The landlords of the AXA Towers office building in downtown Syracuse take more than $1 million a year.
NRG Energy Inc. collects $8.6 million a year on a steam station in Oswego that operates only a few days a year.
Only 2,402 of the zone companies statewide — 28 percent — are in strategic industries such as finance and manufacturing, industries for which tax credits can determine where they locate, according to Empire State Development.
Knocking out nearly three-quarters of the potential companies is just the start of the differences between the two programs. Excelsior reflects several lessons learned from the Empire Zone debacle — a job-creation effort begun in 2000 that has been continuously modified since to try to weed out questionable tax breaks claimed by companies with clever accountants.
The more-focused Excelsior program will give companies up to $5,000 in credits for every job they create in the targeted industries. The greater the pay, the greater the credits.
Companies can receive tax credits equal of 2 percent for investments in facilities. Research spending can be eligible for a 10 percent credit.
The state will provide property tax reimbursements to companies locating in 48 distressed areas and to companies with major growth. Unlike the 100 percent, 10-year property tax credit provided by the Empire Zone, the Excelsior program will limit the credit to 50 percent in the first year then reduce it.
Companies will have to compete. Each deal will be negotiated with Empire State Development. The law limits the agency to giving $50 million in new credits each year for the next five years, with the program sunsetting after that.
The limit on new credits caps the program’s total cost to the state to $1.25 billion from 2011 through 2019. The Empire Zones had no caps and cost the state $600 million a year. Though no companies can join the Empire Zone program anymore, those already in it will continue receiving credits until their benefit terms run out.
Mullen said companies in the Excelsior program will be audited each year by his agency to make sure they have created the promised number of jobs or invested the required amount.
View full sizeThe new program wonât include properties like the AXA Towers building, in Syracuse, which collects more than $1 million a year in Empire Zone credits. If they have not met the requirements, the companies will be booted from the program and required to reapply, Mullen said. The agency will have some leeway, but the agency will not reward underperformance, he said.
“Shirt changers” need not apply, Mullen said. The Empire Zone was heavily criticized for a loophole that allowed companies to reincorporate and then claim that all of their existing employees were new hires, so they could claim millions of dollars in tax credits.
Companies will be required to provide financial and payroll information and, if necessary, tax records each year to prove they have met the program’s job creation and investment thresholds, he said. “They cannot deny us access to their tax forms if we request it,” he said.
Unlike the Empire Zone, the administration of which was split among local communities, the state tax department and Empire State Development, the Excelsior program will be run entirely by Empire State Development. There will be no doubt who is accountable for its success or failure, Mullen said.
“We will have much greater rigor in the administration of the program,” he said.
Not everyone in the business community is happy.
Ken Pokalsky, senior director of government affairs for the state Business Council, said the council agrees with the program’s focus on strategic industries. But he said its limit of $50 million in new tax credits each year is not enough. That’s less than half the new credits issued each year of the Empire Zone program after it was amended to limit abuses, he said.
Pokalsky said the program’s property tax credit, in particular, is too limited. High property taxes are among the most pressing problems for businesses in New York, so greater relief is necessary, he said.
The Business Council also objects to the program’s prohibition against “double dipping.” A company that is receiving Empire Zone benefits will not be allowed into the Excelsior program. Pokalsky said companies should be allowed to collect tax credits under either program for separate facilities. As the law is written, a company that has a facility in an Empire Zone cannot receive benefits for a different facility under the Excelsior program, he said.
An Empire Zone critic — Frank Mauro, executive director of the labor-backed Fiscal Policy Institute — said Excelsior is clearly an improvement.
“This fixes the accountability problem,” he said. “Responsibility for the Empire Zone was fragmented. This clearly fixes accountability with the commissioner of economic development.”
Mauro said critics who say the new program does not offer enough tax credits to be effective are wrong. The new program’s focus on strategic industries will make its credits go further than those in the Empire Zone program, he said.
“It’s hard to argue that all of the EZ program money was spent well,” he said.
Contact Rick Moriarty at rmoriarty@syracuse.com or (315) 470-3148.