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Under Governor George Pataki, New York State’s budgets have always been unfair to New York City in painful but obscure ways, from byzantine school funding formulas to stingy subway subsidies. The governor’s proposed budget this year is no exception, with a shameless upstate love letter that kisses off New York City.

Pataki wants to spend $115 million to double the size of 22 “Empire Zones,” economically depressed areas where businesses can get tax credits and other sizeable incentives to stay in the state and grow. But not a single one of the zones Pataki has picked is in New York City. A related initiative extending EZ benefits to developers that clean up industrial brownfields only applies to large tracts, rendering it virtually useless in our urban districts.

There’s no disputing that upstate needs all the help it can get. Unemployment in Buffalo is over 8 percent; Rochester, nearly 7 percent. But tell that to people in the Bronx and Brooklyn, where unemployment rates are comparable.

Advocates for small businesses and manufacturers says that the city’s nine Empire Zones have helped to keep jobs in low-income industrial areas of the city like Sunset Park and Hunts Point. “They’ve been helpful in retaining manufacturing in the city,” said Adam Friedman, executive director of the New York Industrial Retention Network, a trade organization for small manufacturers. “They level the playing field between cost of doing business in New York and other states.”

Local development officials, which promote EZ benefits to local firms, like the programs too. “We have meat markets coming up [to the Bronx] from 14th Street,” points out Dana Robideau, director of economic development programs for the Hunts Point Economic Development Corporation. “They were going to move to New Jersey.” Among other benefits, businesses in the zones get tax credits for each new job they create, an exemption from sales taxes, and discounts on electric bills. Startups or new arrivals from out of state operate virtually tax-free.

Public Advocate and mayoral candidate Mark Green has been making a big stink about Pataki’s lopsided handout, and he’s urging more aggressive efforts to develop outer-borough jobs–including more and larger state EZs. “There are businesses that are leaving New York City in droves,” said Green press secretary Steve Sigmund. “There are tremendous advantages to having companies move across the East River to Brooklyn instead of across the Hudson to Jersey.”

Other downstaters say the expansions are just another Pataki ploy to curry favor for his re-election. Those upstate counties, after all, may have lost Rick Lazio his Senate bid.

And some critics say these giveaways may be more effective at delivering voters than creating jobs. Absent a coordinated state plan for economic development, said James Parrott of the Fiscal Policy Institute, “you just have runaway companies, relocating within the state. It’s a net loss, rewarding companies for something they would have done elsewhere.”

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