Sullivan County Democrat
Callicoon, New York
January 22, 2010 Issue
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Say goodbye to
the Empire Zone

By Dan Hust
MONTICELLO — The Empire Zone program is headed for extinction faster than previously thought – and some local businesses may be out of it within the next few months.
Thanks to changes to the tax law within the new state budget, the entire program will disappear not in June 2011 but in June of next year, local Program Coordinator Susan Jaffe told legislators Thursday.
And the local Zone Administrative Board (ZAB) now no longer has the power to approve or disapprove the entrance of a business into the tax-break program. That responsibility lies solely with the commissioner of the state Department of Economic Development.
“The ZAB will be like a sponsor of local programs,” Jaffe said, explaining that the board will simply make recommendations to the state.
There are other changes, too. Businesses that reincorporated prior to August 1, 2002 in order to maximize the program’s tax benefits will soon be automatically dropped from the Empire Zone, as will any businesses that have participated in the program for at least three years and have not realized a benefit-cost ratio of 1:1 (i.e., creating a dollar in wages, employee benefits and/or investment for every dollar they get in program benefits).
And if a business changes owners, the Empire Zone benefits won’t be able to be transferred.
Standards for acceptance into the program are higher, as well, and tax credits are being reduced in certain areas.
The changes, some of which were expected, came about as a result of widespread abuses of the program statewide, but Sullivan County Partnership for Economic Development President Tim McCausland told legislators he expects these changes will be appealed, possibly holding up their enactment.
Regardless, the program is likely to disappear in just over a year.
“So what’s the purpose of doing all this work?” pondered Legislator Leni Binder, who didn’t like the seeming removal of home-rule power through the ZAB.
“That’s a good question,” replied McCausland.
Jaffe said a letter of support for the Empire Zone program may be asked of legislators in the future.
Jaffe, who is also the vice president of the Partnership, is worried that the state “is sending a bad message to businesses out there. ... That’s not good, in any economy.”
She expects the majority of Sullivan County’s approximately 130 businesses in the Empire Zone will be impacted by these new rules, though she’s not yet sure to what extent.
She hopes that the State Legislature includes input from “all of the stakeholders” – accountants, planners, businesspeople, etc.
“We all have a role to play,” she said. “... I want to be sure New York remains a place to do business.”
Jaffe pointed out that in 2007 – the most recent year for which figures are available – the local businesses in the Empire Zone generated more than 2,700 full-time-equivalent jobs, 313 more than the year before. Investment by those businesses totalled $29.5 million, compared to $7 million given to them in tax credits and benefits from the state.
“We, the taxpayers, came out ahead,” she said. “... While the program, as we all agree, has had a number of challenges, in Sullivan County it has yielded a positive return for taxpayers.”
However, not everyone will be sorry to see the program go – and plans are evidently afoot to create a replacement.
“Although the Empire Zone program was created to assist economically distressed areas, it became a vehicle for giving tax breaks to corporations, with no clear, consistent, verifiable justification for the public investment. And that was true in Sullivan County,” said ZAB member Eileen Haworth Weil.
“But watchdog groups like the Citizens Budget Commission and state legislators whose job it was to assess this program finally concluded that the program was too broken to fix,” she added. “Hopefully, a new incentive program will be designed that has fewer loopholes and, thus, is less costly to NYS taxpayers.”

 
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