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Empire Zone gets ready for makeover

By Dan Hust
MONTICELLO — February 8, 2008 — It’s a brand new day for the Sullivan County Empire Zone Program.
Then again, when a written history is nonexistent, it can’t be anything but.
“We inherited a program that did not have all its records in place,” affirmed Susan Jaffe, the Empire Zone’s (EZ) local zone coordinator and Sullivan County’s commissioner of the Division of Community and Economic Development.
As in… no minutes of meetings, no evidence that some of the Zone Administrative Board (ZAB) members had been properly appointed, and in some cases no documents showing how or why certain businesses received the EZ’s much-coveted tax benefits.
And with former Zone Coordinator George Bucci out of the picture (his $50,000 contract was not renewed by the county in 2006), Jaffe herself has had to reconstruct much of the needed documentation surrounding the 138 businesses within Sullivan County’s Empire Zone.
She can thank Summitville resident Eileen Haworth Weil.
Well-known for her activism in her home township of Mamakating, Weil began checking into the EZ status of the controversial Yukiguni Maitake mushroom factory proposed just down the road, and she soon discovered that its application for EZ benefits was about the only item state or county officials had on hand.
Benefits had been approved based on that application, yet there were no records as to how or why this occurred. (Yukiguni, however, has yet to start taking advantage of any benefits, as construction of the plant has not commenced.)
Further research showed that the missing documents weren’t unique to Yukiguni – they were missing for numerous businesses that received EZ benefits under Bucci’s watch.
On top of that, the ZAB’s meetings were supposed to be open to the public but had not been properly publicized through required legal notices and press releases, and appointments to the board had not always been routed through the Legislature, which county law demands.
Weil brought her concerns to legislators and Sullivan County Manager David Fanslau, who concurred with her findings. Thus began a laborious but sweeping process to rebuild the Sullivan County Empire Zone.
“It was a Herculean task,” Fanslau recalled of Jaffe’s early efforts to piece together what he called a “1,000-piece jigsaw puzzle.” “Susan has painstakingly and systematically reviewed the files of the EZ Program.”
With the help of state EZ officials, Jaffe has recovered missing applications, but she remains without years of meeting minutes and other information that would not have been forwarded to the state.
County officials blame Bucci for the problems.
“He failed at his duties,” Assistant County Attorney Tom Cawley recently told legislators in a public meeting. “That’s part of why he’s no longer employed here.”
Bucci could not be located for comment.
But there also was a nine-member ZAB – consisting of local officials, business owners, zone residents, and community and labor representatives – who apparently did not realize what was required of them, surmised Weil and Fanslau.
Only three of those county-appointed members remain, and legislators – without her knowledge – decided Weil herself would be a perfect appointee on their newly reconfigured ZAB.
On January 31, she joined fellow new members James Goldfarb, Larry Steiger and Mike Weiner in the first meeting of this new ZAB.
The beginning wasn’t exactly as planned – while state EZ leaders provided a full presentation on how EZs operate, none of the other members could make it, and Fanslau, the chair of the ZAB, had to leave halfway through the meeting, which prohibited any further business since a quorum could not be maintained.
Weil hopes for a better showing at the next meeting, tentatively scheduled for Thursday, February 28 at 4 p.m. at the Government Center in Monticello (and open to the public). There’s a lot of work to do.
“The Sullivan County Empire Zone Program needs to be evaluated,” she said, echoing a call for such evaluations statewide.
Indeed, following an audit that showed more than 3,000 EZ businesses throughout New York did not meet at least 60 percent of their jobs and/or investment promises, the state began reformulating the EZ Program.
How that will ultimately turn out remains to be seen, but already the state has changed the application form from a one-page brief to a four-page document detailing a business’ history, principals and goals.
The state is also requiring cost/benefit analyses on any EZ business approved after 2005, with a 20:1 ratio as the goal.
“The state should be getting back $20 for every benefit a business gets,” explained NYS Deputy EZ Director Carol Bolam at last week’s meeting, referring to a formula used to calculate a business’ job creation and investment return over a five-year period.
The state is also demanding that EZ businesses must make at least some progress on the goals they’ve filed with the state within two years, or they face decertification and the complete loss of EZ benefits.
(In the case of businesses “grandfathered” into a zone – in other words, they exist outside the current boundaries of the zone but were included in the original zone set up in 2001 – the acreage they sit on would also be decertified, permanently.)
Unless the state initiates the process on its own, the decertification process isn’t quick, however. Even after the local ZAB approves such, it must be agreed to by local Zone Certification Officer Josh Potosek (who is the county’s Management and Budget commissioner) and then by the state commissioners of Labor and Economic Development.
Out of 85 Empire Zones spanning every county in the state, EZ Director Randal Coburn told local officials that only one business has ever been involuntarily decertified. (A host of others have voluntarily left the program due to a move or closure, among many other reasons.)
The rules get a little complicated from there, and even if a business is successfully decertified, it can sue to be reinstated.
That said, Jaffe’s more worried about struggling businesses being axed by a state eager to take a more stringent, accountable stance on the oft-criticized Empire Zones. Indeed, the state has sent out dozens of letters to businesses around New York that are not meeting at least 60 percent of their stated job creation and investment goals.
“The priority for me is I have businesses [like] the Villa Roma on that list,” said Jaffe.
The Villa has not met its goals for good reason, she pointed out: a series of floods and a devastating fire that took out the main building in 2006.
So she’s targeting 55 area businesses that aren’t meeting such goals to find out why they aren’t where they want to be. And while some may be decertified, others may be revived so as to fulfill the Zone’s primary goal – to stimulate the local economy.
“Ultimately I want to visit every business out there,” said Jaffe, who recently hosted an EZ seminar for involved and interested companies. “My role is to ensure that these folks get the resources they need.”
With the past a mystery and the present a bit of a mess, that will no doubt be difficult, but those involved in the EZ Program are confident its future is bright.
“I don’t think anybody can say definitively… that this program has done wonders for Sullivan County, [but] I think it can be effective with oversight and transparency,” remarked Weil, who affirmed that her role will not be to bedevil any business but to ensure it is validly receiving benefits and helping the economy.
“I will certainly do my best to make this program the best it can be for everybody in the county,” she added.
There already have been several success stories, according to Fanslau and Jaffe, from the much-praised Southern Tier Title Agency building on Broadway in Monticello (which now houses 11 separate businesses) to M&M Auto (which expanded not only its Liberty dealership but added staff and equipment).
“In terms of our capital investment in 2005,” said Jaffe, “Sullivan County businesses contributed a little under $41 million.”
Due in part to the investment in equipment after the floods, that figure jumped to $66.1 million in 2006, costing taxpayers just $7 million in the process, for a net benefit of $59 million.
With increased funding from the state, Jaffe is looking forward to hiring an administrative assistant for EZ activities (including helping to file the required annual report to the state), and she’s intent on not repeating the mistakes of the past, as is Fanslau.
“The EZ Program is a much-needed tool in the toolbox for economic development,” he affirmed.

What the heck is an Empire Zone, anyway?

Operational since July 30, 2001, the Sullivan County Empire Zone comprises four separate areas in Fallsburg, Liberty and Monticello, chosen because of census data indicating particular economic distress in those spots.
There are also approximately 85 non-contiguous areas (like Kohl’s and Yukiguni in Wurtsboro), having been “grandfathered” into – or more simply, kept in – the local Empire Zone when the boundaries were redrawn in 2005.
In all, these areas comprise 1,280 acres and encompass 138 businesses.
Businesses seeking to be included in the Zone must file an application with the county, gain approval locally and at the state level, be located within the Zone boundaries and file a business annual report (termed a BAR) with the Zone Coordinator. They must also fit within a state-required development plan, being formulated right now by the county.
As a result of Zone acceptance and involvement, businesses can receive the following benefits and incentives (with certain restrictions):
• A wage tax credit up to $3,500 per employee
• An investment tax credit up to 10 percent of the investment
• A Zone Capital Credit of 25 percent for each investment and/or a contribution to a nonprofit community development program
• A state sales tax refund on building materials purchased specifically for a Zone-located business
• A state sales tax exemption of 50-100 percent on services and goods used predominantly or exclusively within the Zone
• A real property tax credit based on job creation, wages, benefits and investments
• A credit against tax equal to a percentage of income taxes attributable to the Zone enterprise based on its employment growth in the Zone, with the potential to eliminate a company’s entire tax liability
• Most of these credits, if unused, can be cashed in with the state, and local municipalities can offer their own incentives as well.
While Zone Coordinator Susan Jaffe attends to the day-to-day business and Zone Certifying Officer Josh Potosek signs off on any applications to be included in the Zone, the Zone Administrative Board (ZAB) is charged with keeping an eye on the program, creating initiatives and policies conducive to stimulating development (especially with minorities and small businesses) and making recommendations about the local Empire Zone to the county and state.
Members, however, do not have the power to legislate or enforce policy. Those powers remain vested in the county and state legislatures, to which the ZAB is considered an advisory committee.
The ZAB’s meetings are open to the public and are currently being held the fourth Thursday of every month at 4 p.m. at the Government Center in Monticello.
Board members include, by state statute, people representing local government, education, labor, community organizations, financial institutions, businesspeople and residents.
ZAB membership consists of:
• Chair David Fanslau (Sullivan County Manager, since a county official is required by law to serve as chairman)
• Business Rep. Ted Pilonero, president of Innovative Metal Products and the Joseph Group, businesses located in Monticello
• Organized Labor Rep. Jim Bertholf
• Community Group Rep. James Goldfarb, Sullivan County Community College Campus Activities Director
• Financial Institution Rep. Steve Drobysh, Vice President of Provident Bank
• Education Rep. Mike Weiner, Fallsburg Central School teacher and Fallsburg Town Board member
• Zone Rep. Guy Jollie, CPA with Kaplow and Jollie in Monticello
• Zone Resident Eileen Haworth Weil of Summitville
• Zone Resident Larry Steiger of Liberty
For more information, contact Susan Jaffe at 794-3000, ext. 3500.

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