Democrat & Chronicle, March 26, 2004
Empire Zone Oversight Revisited
State Senator's Measure Would Require Stiffer Rules on Tax Breaks
David Tyler

A proposed state Senate bill calling for stronger oversight of New York’s Empire Zone program is receiving new attention one day after a report strongly criticized the program in Monroe County.

Sen. Liz Krueger, D-Manhattan, introduced legislation two months ago that would tighten regulation of all state economic development incentive programs, including Empire Zones.

Her bill, which was introduced Jan. 14 and has not been acted upon, calls for all projects receiving any state tax breaks to be detailed in the state budget annually and gives the state comptroller more power to audit those projects.

On Wednesday, Richard Brodsky, D-Greenburgh, Westchester County, released a report critical of the Monroe County Empire Zone for giving zone designations to vacant land or buildings without the promise of job creation or increased capital spending on the property.

Brodsky also alleged a “strong correlation” between financial contributions made by developers to Republican campaign committees and inclusions of their properties in the zone.

Earlier this month, state Comptroller Alan Hevesi released an audit that criticized several Empire Zones, including one in the city of Rochester, for failing to create the promised jobs.

Now Krueger is calling for immediate action on her bill, dubbed the “Corporate Accountability for Tax Expenditures Act.”

The state gives away $10 billion worth of tax incentives every year, including $300 million through Empire Zones, Krueger said.

”There’s an endless collection of ways that New York state gives special benefits and tax breaks to companies,” she said.

Krueger wants the state to use a standard form to approve incentive packages. Her bill would also revoke tax incentives if a business fails to create or retain the specified number of jobs. The legislation would also call for some agreements to be submitted to the Department of Taxation and Finance for review.

”We would be able to be watching what goes on,” she said.

Local officials send new applications to the state. Empire State Development Corp., the state’s economic development arm, grants approval to a business’ application after a review by the Department of Labor.

Once approved, the state relies on the businesses to submit an annual report detailing their job creation and estimating the amount of tax breaks they should receive.

Rocco DiGiovanni, Monroe County’s zone certification officer, compared the reports to an individual filing an income tax return.

”There’s a certain amount of faith there” on the part of the state, he said. “The company, like an individual, has to recognize that there’s the chance of an audit being done somewhere along the line. It’s an added conscience on your shoulder.”

But Krueger maintains that’s not enough.

”I’m not attacking Monroe County. We have gotten completely out of control with these issues in the state of New York. We need a mechanism to get a handle on this,” she said.

The process can be confusing, even for businesses located in a zone.

Caltronix Inc., a provider of calibration services, is located at 100 Town Centre Drive, Henrietta, a property placed in an Empire Zone last fall to attract Current Link and its promise of 400 jobs. Current Link has since moved to the property.

”Other than reading it in the paper one day … we have no information on it whatsoever,” said Peter Dulmage, chief executive of Caltronix.

”I would think if you’re the state and you’re developing an Empire Zone for the creation of jobs … that they would notify the occupants of the current building. I would think that would be the logical first step.”

Caltronix leases 6,000 square feet from developer Richard LeFrois and hasn’t received any breaks on its monthly lease, to the company’s knowledge, Dulmage said.

Developers have said Brodsky’s claims are misleading. Brodsky criticized Flaum Management Co. Inc. for its 700 Jefferson Road project in Henrietta because the property is vacant. But Flaum’s chief operating officer, Michael Palumbo, said the company has never received any benefits because the project has not created any jobs yet.

In addition, water damage is forcing Flaum to demolish the building.

The Process

There are two ways a business can apply for inclusion in an Empire Zone:

— An existing business that wants to move into a zone, or a business located within a zone that wants to expand, must complete a three-page application and submit it to the local zone certification officer. The application asks if the business intends to create more jobs or invest new capital at the site.

If local officials approves the application, it is sent to the state Department of Economic Development and the state Labor Department for review. Once approved, the state issues a certificate acknowledging the business as a Qualified Empire Zone Enterprise, which local officials then sign and give to the company.

The process can take about a month.

— A business that wants zone boundaries altered so it can be included must go through the same local process but also needs the boundary changes approved by the municipality that governs the Empire Zone. In this area, there are two zones, one for the county and another for the city. Both have been altered to include other properties.

The municipalities must write legal language describing the new zone boundaries, a process that often requires engineering and map work and can take up to a year.