Create jobs or give back your tax breaks.
That's the directive coming from the office of State Comptroller Thomas DiNapoli. He said it's time local economic development agencies that trade tax breaks for promises of jobs make employers more accountable for their benefits.
Companies that don't fulfill their obligation to create jobs should be made to compensate local and state government, as well as school districts, for the taxes they didn't pay under the deal, he says.
The above diagram provided by New York State Comptroller Thomas DiNapoli’s office shows the distribution of Industrial Development Agency projects statewide, ranked by size, while the diagram below shows the distribution of exemptions in 2009.
DiNapoli's latest annual report shows little connection between the tax breaks provided by the county, city and town agencies to employers on the promise of retaining and growing jobs. The cost of the taxes avoided by those selected companies, some with strong political connections, is picked up by other taxpayers.
"The concept is sound and valid, but with every concept, there's good sides and down sides," said Jim Mraz, director of the Fulton County Industrial Development Agency. "The good sides are if the company says it will create 30 jobs and only creates 10, you can hold it accountable. On the flip side, we don't live in a perfect world, because if there's a sudden downturn in the economy, gas prices rise, the cost of borrowing goes up, that could impact the number of jobs filled."
The breaks can involve exemptions from sales tax, property and mortgage recording taxes and allow low-interest borrowing.
In 2009, 10 projects involving local development agencies were counted in Fulton County with an estimated 282 jobs to be created. According to the report from the comptroller's office, there was a net increase of 518 full-time equivalent jobs in the county and $226,091 in tax exemptions. Montgomery County had 18 projects, which created a net job change of 1,273 full-time equivalencies and $4,152,231 in tax exemptions.
"The concept has value, just like a property tax cap," Mraz said. "There are challenges and often are significant challenges to try to enforce that fairly or appropriately. In the end, the result could be that the company we're trying to attract doesn't want to buy into that headache."
There are 115 industrial development agencies and local development corporations in the state, as of the 2009 count. There are at least five in Fulton and Montgomery counties. DiNapoli wants greater transparency from the local agencies run by politically appointed boards, an end to overlapping jurisdictions and a guarantee that the tax breaks are worthwhile.
He said Gov. Andrew Cuomo's plan for regional economic development councils to operate state job-growth programs could help make local development agencies more efficient and accountable.
"The comptroller doesn't review the results of our activities through the Economic Development Corporation," Fulton County EDC President Michael Reese said.
News broke in May 2010 that Internal Revenue Service 990 forms indicated Jeff Bray, EDC senior vice president at the time, and Peter A. Sciocchetti, then-executive vice president of the Crossroads Incubator Corp., were paid more than $3 million in bonuses from 2007 to 2009. The Authorities and Budget Office has been looking into whether the Fulton County EDC is a public or private agency.
Mraz said there have been examples of companies that have promised to create local jobs, but have had no intention of fulfilling that promise, a "handful that ruins it for the masses."
"We certainly need to deal with those companies that promised but had no intentions," he said. "But it's difficult to try to establish who had the intention to create jobs and who didn't."
Mike Zummo is the business editor. He can be reached at firstname.lastname@example.org. Information from The Associated Press contributed to this report.