Two New York state officials say a tentative deal has been struck to replace a long criticized business tax-break program with a smaller, more closely scrutinized economic development incentive for employers to retain and grow jobs.
The officials say that Gov. David Paterson and legislative leaders are expected to announce the landmark change that would do away with the Empire Zone program this week. They spoke on the condition of anonymity because the deal, first reported online Wednesday by The Buffalo News, hasn't been announced.
The 22-year-old Empire Zone program now serving more than 8,000 businesses was marred by scandal in which politically connected companies secured tax breaks despite failing to keep promises to add jobs. In January Paterson called for a new program, rather than another attempt to improve Empire Zone program that had seen several reforms in recent years.
The new program seeks to avoid certain abuses such as situations in which companies receive one tax break, then simply change their name to receive another.
Empire Zones would be replaced by the Excelsior Jobs program that would provide $250 million a year in tax breaks and credits. A senior Paterson administration official, who also spoke on the condition of anonymity because the deal hasn't been announced, said the new program will be aimed at "high growth, high wage industries."
Some of the key provisions include:
—Using a greater variety of tax incentives, including a job tax credit that subsidizes wages, an investment tax credit equal to 2 percent of what companies spend to expand or improve their operations, a research-and-development credit to encourage innovation; and a real property tax credit for "regionally significant projects."
—Targeting the aid for innovation and research companies, manufacturing, agriculture, and distribution firms. The new program would end subsidies to law firms, shopping mall development, utilities already located in New York and taverns that received aid under Empire Zones.
—The program provides contracts for five years with annual reviews over job targets, as opposed to 10-year contacts under Empire Zones.
—The incentives would total $50 million this year and rise to $250 million in the fifth year. By comparison, the Empire Zone program was expected to spend more than $600 million this year, a year of a fiscal crisis in which Paterson and the Legislature are trying to address a $9.2 billion deficit.
Companies now receiving tax breaks and other incentives under the Empire Zone program would continue to benefit until their contract expires.
In 2008, the independent Citizens Budget Commission found in its study that most companies failed to provide promised jobs in exchange for big tax breaks under New York's Empire Zone program. The commission found 59 percent of job promises weren't kept under the $700 million program.
The report also showed 4,959 companies failed to meet their targets for job creation or their own investment by 60 percent or more. Companies receiving Empire Zone tax breaks include some of the nation's wealthiest, such as Wal-Mart, IBM Corp., Home Depot, Target, Lowe's Home Centers, PepsiCo., Lockheed Martin, Coca-Cola, Tiffany company and Dick's Sporting Goods.