Economic Development Overview
SFY 2009-10 Executive Budget Revenue Measures
Staff Contact: Ken Pokalsky
December 22, 2008
New York Governor David Paterson issued his proposed Executive Budget for Fiscal 2010 this week. Overall, the budget claims $369 million in gap closing items within the states economic development program, including retrenchments in the Empire Zones program, significant staff reductions, and other program changes. In addition, the proposal includes two new development incentives.
The following describes the Executive Budgets most significant economic development initiatives. We look forward to your input as we assess these proposals, and hope that you can remain involved in our advocacy efforts in response to these and other budget issues.
Please feel to contact me at any time to discuss these proposals, or for additional information. My contact information is at the end of this summary.
The Executive Budget proposes to require all currently certified QEZEs to recertify. In order to remain eligible for Empire Zone benefits, the business must show a 20:1 ratio of wages, benefits and investments at their QEZE sites versus zone credits used at such sites. For companies certified prior to 4/1/05, this test will apply to all tax years for which the company has been certified since 2001. For companies certified after 4/1/05, the test applies to the first three complete tax years after certification.
Going forward, new QEZE certification will be limited to manufacturing and financial services sectors, and to extraordinary projects, with each category to be defined in regulation. To be newly certified, a company will have show an estimated 20 to 1 ratio of wages/benefits/investments to zone tax credits for the first 3 years after certification, and document achievement of that ratio after three years in the program. Companies in these categories are eligible for benefits regardless of whether they are located within previously designated zone boundaries.
The Administration has said that between one quarter and one half of currently certified QEZEs could be decertified under this proposal. A company that is not recertified would lose both future Empire Zone credits, and any credits that have been carried forward from prior tax years. This proposal would apply to tax years starting on or after 1/1/08. The Administration is projecting $272 million in savings for Fiscal 2010.
The budget would also eliminate local zone boards from the certification process, eliminate state funding for zone boards.
Agency Restructuring/ReductionsThe Executive Budget proposes to restructure major economic development agencies by:
- Merging NYSTAR into Empire State Development Corporation and integrate activities between ESDC and the Department of Economic Development.
- Abolishing 109 positions within these agencies, and eliminating another 117 positions through attrition.
- These steps are expected to produce $11 million in administrative savings.
Other Program/Funding ChangesThe Executive Budget would:
- Modify eligibility for the qualified emerging technology company (QETC)employment credit to extend it to employers of more than 100, if at least 75 percent of all its employees are located within New York State. It would also repeal the QETC capital tax credit for tax years beginning on or after 1/1/09. Bill text for both of these QETC provisions are available in the revenue bill here, see Parts P (page 80) and G (page 32), respectively.
- Create a new 10% research expenditure credit, modeled on Section 41 of the IRC. This would allow a credit of 10% of increased R&D expenditures (compared to previous two years average R&D investments) under Articles 9-A, 22, 32 or 33 of the Tax Law. The credit is limited to a statewide aggregate of $20 million in Fiscal 2010, $33 million for Fiscal 2011, $45 million for Fiscal 2012 and later years (Part O of the revenue bill, link available above.)
- Create a $50 million New York Growth, Achievement and Investment Strategy fund to be administered thru UDC. Funding would be available to businesses in designated strategic sectors - manufacturing, financial services, agribusiness, high technology and biotechnology -. located anywhere in New York, to facilitate job growth. (see Part CC of the Economic Development Article VII bill, S.59/A.159, available here).
- Directs the Governor, Senate and Assembly to identify $375 million in uncommitted economic development capital funds (from a pool of $2 billion uncommitted funds), to be re-directed to new projects and to General Fund relief (see Part DD of S.59/A.159, link available above).
- Charge industrial development agencies for central state government expenses incurred on their behalf ($5 million annual charges), and increase the state bond issuance fees.
- Allow the Center for Applied Research and Technology (CART) program to expire at the end of 2008 ($900,000 savings). CART centers had been established at Marist College and College of Staten Island.
FY 2008-09 Deficit Reduction Plan
The Governor also re-released a set of gap reduction measures for the current fiscal year, ending March 31, 2009. These include the elimination of $8 million in economic development funding under the JOBSNow, technology transfer, facility development and state marketing programs, and for new investments at Albany Nanotech. The Governor is proposing that the FY 2009 deficit reduction measures be adopted by February 1, 2009.