LESIGLATIVE MEMO
PARTNERSHIP FOR NEW YORK CITY
New York, New York
February 1, 2010
Excelsior Jobs Program
The Partnership for New York City is committed to maintaining New York’s status as a world capital of business and finance. Our members are international and regional businesses that currently employ 1.3 million people throughout New York State and contribute $201 billion a year to the state GDP.
There is only one acceptable solution to New York State's budget crisis: we must expand our tax base by growing the economy and creating more private sector jobs. This requires that we adopt a new approach to economic development. For nearly three decades, the state has relied on Empire Zones as the centerpiece of its economic development activity. This is a program that was administered with no guiding strategy and disappointing results, despite the investment of billions of dollars of public money. A 2008 study by international consulting firm A.T. Kearney confirmed that the Empire Zones failed to produce significant private sector jobs or attract high-tech growth sector industries to New York. Last year, the legislature wisely decided to sunset the program in 2010.
Empire Zones were originally designed as a geographically targeted community revitalization tool, intended to induce virtually any kind of economic activity in the state's poorest communities. Empire Zones were never the best way to stimulate creation of new, high-paying jobs or to strengthen the state's competitive position in the global marketplace. There have been some instances (notably the IBM-SUNY sponsored nanotech cluster) where Empire Zone subsidies have supported good projects, but at enormous cost and with far less efficiency than would have been possible with a better-designed and managed program. The failure to revitalize Western and Central New York and to establish technology-enabled industry clusters in all regions of the state is a consequence of continually modifying and expanding, rather than replacing, the obsolete Empire Zone program.
Along with other local and regional economic development groups, the Partnership helped design the Excelsior Jobs Program that is included in the Executive Budget as a replacement for Empire Zones. Input from employers, investors and industry leaders confirmed that the incentives included in the Excelsior Jobs Program are what is needed to encourage creation of high quality jobs throughout New York State. Unlike the Empire Zone Program, a business can realize benefits from the Excelsior Jobs Program only AFTER jobs are created and these benefits are commensurate with the quality of jobs and the extent of private investment.
Furthermore, unlike Empire Zones, the Excelsior Jobs Program will target subsidies exclusively to industries and companies that generate economic growth -- not to speculative real estate development, utilities, retail or professional services firms. No business will be able to get subsidies by simply relocating the same jobs within New York State. Excelsior will focus the state's energies and resources on productive activities that offer the biggest return on state investment.
Excelsior is budgeted at $250 million over five years. We feel it needs to be bigger in order to attract significant interest and send a strong message that New York is back in business. Excelsior offers incentives to companies that create a minimum of fifty new jobs, which seems like the right number for attracting businesses that will anchor or contribute meaningfully to building new industry clusters.
The Partnership recognizes the importance of creating other complementary economic development programs to deal with early stage and small business, on the one hand, and older manufacturing companies on the other. There are proposals in the Executive Budget and elsewhere that would direct state funds to public-private partnerships in support of university-business partnerships, micro-enterprise funds, and small business loan funds. All are preferable to the current practice of funding such projects as local, one-off initiatives or through member items, where critical mass and optimal value to the state are never realized. When it comes to job retention, particularly in the manufacturing sector and back office functions, the allocation of low cost power is a valuable commodity. Currently, the state provides cheap power for residential and government uses rather than targeting it exclusively for job retention and attraction. These allocations should be reconsidered.
Finally, reform of New York's economic development programs must also include establishing a process through which the Legislature and the Executive can work together to plan, set priorities for resource allocation, and measure results.
The Partnership is available to assist New York State as it seeks to transform its economy. We urge you to enact the Excelsior Jobs Program, which is a critical step in the right direction.