June 24, 2013
A new study raises questions about the oversight of the roughly $7 billion the state spends annually on economic development, characterizing the process more as a gamble than an investment.
The report from the left-leaning Alliance for a Greater New York (ALIGN) says there’s a lack of transparency and accountability across New York’s economic development agencies.
Executive director Matt Ryan says cost-benefit analysis is difficult because of the lack of evaluation requirements for many programs.
“New York really has no way right now to analyze whether we’re getting our money’s worth. And when you’re talking about at least $7 billion being allocated every year in the name of job creation, it stands to reason, why would we not be able to measure whether or not these are effective investments.”
Excelsior Jobs Program
Ryan says only four of the state’s 15 biggest development programs do any reporting on job creation.
Of those four, Ryan says the Excelsior Jobs Program provides the best model for reform.
He says the Excelsior model includes common sense checks and balances such as making subsidies effectively a rebate, and only paying them to a company after jobs and economic targets are reached.
“In our eyes it sort of begs the question, why wouldn’t we apply these same good policies to the full $7 billion worth of incentives programs that are out there?”
Commissioner of the state department of economic development, Ken Adams says transparency and accountability are vital in economic development agencies.
But, he says the state doesn’t have ultimate control over all of those programs.
“When they’re talking about $7 billion, and it is indeed quite a hefty sum, the truth is a large portion of that is economic development investment that happens at the local level, a level that the state doesn’t necessarily control.”
Adams concedes reform is needed to streamline reporting at all levels.
He says a baseline set of reporting requirements makes sense, and the state could do more to enforce those benchmarks at the local level.
“There’s a better alignment than that report may admit, but the overall goal remains the same. Let’s do as much as we can through reforming these programs, reforming reporting requirements, to at least have a minimum set of performance standards for the allocation of economic development benefits in the state.”
ALIGN’s Matt Ryan says even the model Excelsior Jobs Program has its problems.
He says a baseline set of reporting requirements is needed, but reform needs to go beyond that.
“What you start to see are programs that turn into runaway trains, and pretty quickly people figure out ways to game the programs, they become very costly, and we have job creation programs that don’t often create jobs.”
Co-author of the ALIGN report, Kristi Barnes says the lack of a streamlined reporting system means it’s difficult for people to understand how much money is being spent on projects, and what the benefits are.
She says quite often agencies at the local and state level overlap in their incentives.
“We always think that if there’s a company that’s highly subsidized with one program it’s likely that they’re getting tax breaks from other programs as well.”
Barnes says most times, they're right.
Case in point: she says two upstate Excelsior projects are receiving the highest level of tax credits.
The Southern Tier’s Agro-Farma project owned by Greek yogurt giant, Chobani. And in the Finger Lakes, a Xerox operation called ACS Commercial solutions.
Barnes says in both instances money is coming in from several agencies.
Barnes says overlap of economic development incentives is not always a bad thing, but without any way for it to be monitored, overlap could be abused.
“One hand should know what the other hand is doing. There should be some amount of coordination or rationale between different subsidy programs to decide, what kind of companies are they investing in.”
Barnes says the length of the subsidy agreements also need to be looked at. She says companies can have deals that span decades, and this means job creation doesn't always receive the highest priority.
Now more than ever, she says, there need to be reforms on all levels to make sure much needed jobs and economic development are actually being created.