Government Affairs Albany UpdateMarch 12, 2004
- Federal Nuclear Regulators Give Indian Point High Grades
- Senate, Assembly offer Economic Development Plans
- Action on "Offshoring" Study Bill
- Empire Zone Program "Audit"
The committee has a number of items to discuss that day including our on-going legislative and regulatory program. We will hear staff briefings on "Power for Jobs", current energy legislation and the Renewable Portfolio Standard (RPS) case (03-E-0188) currently being deliberated at the DPS. The Business Council has been an active participant in the RPS process, submitting numerous comments, interrogatories, and motions in the case. On March 8th a hearing on the Phase 1 Reliability study prepared by GE/NYSERDA was held on the report. The study stated that almost 3300mws could be absorbed by the system. As we have stated in previous statements, the reliability study did not take into account many of the costs associated with such an undertaking and Phase 2 of the study should concentrate on these issues. Phase 2 is not due out until this fall. A cost study hearing in the case will be held on March 17th in Albany to discuss the recently released DPS Cost Study Phase 2, parts A and B. The Business Council and many of its members companies have submitted motions and comments on the cost study and the hearing process. We will continue to push for a full vetting of the studies prior to a recommended decision and will discuss the case, its status, and next steps at the March 29th Energy Committee meeting.
The Nuclear Regulatory Commission (NRC), the federal regulatory committee that oversees nuclear power, has declared the nuclear reactors at Indian Point 2 and 3 "fit," and changed the plant's level of oversight from "heightened" to "standard." The Committee said safety issues at the plant concerning faulty construction had been resolved, and the plant was now eligible for the NRC's highest rating.
Entergy Nuclear Northeast, which owns and operates Indian Point, spent millions on improvements at the Westchester plant. The Business Council has argued the plant is necessary to help meet the state's energy needs. The Business Council stated in a May 2002 letter to New York City leaders that the plant's power is needed to fuel the City. Likewise, The Business Council testified before the New York City Council in February 2003 that the plant is capable of supplying nearly 20% of the load in New York City.
A February, 2002 report by The Public Policy Institute warned that New York already faces a dangerous energy gap. In that report, The Power to Grow, The Institute concluded that New York must add at least a dozen new power plants with capacity totaling at least 9,200 megawatts in the next five years. Other organizations, including the New York Independent System Operator (ISO), have reached similar conclusions about New York's capacity shortfall. The ISO has said that the city alone will need as much as 3,000 megawatts of new generating capacity by 2005. The Business Council restated its finding in testimony submitted to the New York City Council in February 2004.
Both houses released broad economic development plans this week. The Business Council welcomed these initiatives, but warned that any development plan must address business's main priority: cutting New York's high job-creation costs, including the cost of health care insurance, workers' compensation, energy and other factors.
The Senate plan, "Excell-NY", was based on the work of its "NextGen" Task Force chaired by Senator Skelos, and focused on further promotion of high technology industries. Specific provision would:
- expand the R&D tax credit from 9 to 40 percent, with the credit refundable and available for four years;
- create a local-option property tax rebate to developers that finance costs of outfitting or retrofitting technology parks to accommodate new businesses;
- add Empire Zones in the 11 counties that lack one, and expand zones in Genesee and Orleans counties;
- permit expansion of fully utilized zones if that promotes high-tech growth and attracts out-of-state jobs and investments;
- create five regional centers to offer emerging businesses innovation capital, venture capital, and technical and business expertise;
- create four capital funds to provide matching funds for early-stage companies and federal grants; and
- create a new capital corporation, or CAPCO, that would offer $10 million per year in tax credits to corporate franchise taxpayers to promote new venture capital investments.
The Senate said that the plan would cost $7 million in 2004-05, with costs growing to $50 million when the program is fully effective, the Senate release said. Tax relief would be about $40 million next year, and would grow to $283 million when fully effective.
The Assembly's "NY@Work" plan includes $525 million in new and expanded programs. Specifics include:
- extension of the state's Power for Jobs program;
- Empire Zone program reforms, including additional requirements for tracking and reporting on the performance of local zones;
- a "Make-It-Here" manufacturing initiative that would focus on small manufacturers and niche markets, flexible manufacturing, and R&D;
- investments in high-tech and biotechnology/biomedical research and commercialization projects;
- continued capital support for high-tech research at academic institutions;
- creation of a capital fund to foster investments in business incubators for start-ups and "accelerator" facilities for later-stage companies; and
- a new Economic Policy Coordination Board to develop a strategic plan for state economic development efforts, and replace the Empire State Development Corporation board with a new, three person panel appointed by the Governor, Majority Leader and Speaker.
The first "offshoring" bill to be brought up for committee action this year is S.6338 (Velella), which is on his Senate Labor Committee agenda for next Tuesday, March 16. The bill has no co-sponsors, and has yet to be introduced in the Assembly.
The bill directs the Commissioner of Labor to issue a report on "issues relating to offshore outsourcing of information technology jobs and the future of New York state's job market." Specific requirements of the study include:
- research of the trends in the area of the offshore outsourcing of information technology jobs, including offshore outsourcing of customer services, technical employees, among other industries, as well as by the state of New York;
- identify the major benefits and risks of the offshore outsourcing of information technology jobs including strategies for addressing the risks;
- determine the state and federal government policies regarding the offshore outsourcing of information technology jobs; and
- provide policy recommendations for enhancing New York's competitiveness in this marketplace.
The Business Council's position on this bill is that:
- we welcome the introduction of more data and facts into the political debate on offshoring.
- we also welcome the Senator's focus on making our IT sector, and other economic sectors, more competitive. This discussion will range from assuring adequate job training programs for upgrading skills of incumbent workers, to broader issues like an effective education system, workers comp reform, energy costs and reliability, and other basic job-creation factors.
- The U.S. and New York economy benefit greatly from international trade, especially in services, and we think the political debate, as well as state-level research, should look at the broader service industry, not just the IT component.
Staff Contact: Ken
State Comptroller Alan Hevesi released an audit of eight Empire Zones, which claimed that, while many firms create jobs, most don't meet goals but still receive tax breaks, and that inadequate program oversight means that total program costs and benefits cannot be calculated. The press release and audit can be downloaded at: www.osc.state.ny.us/press/releases/mar04/030904.htm
The eight zones reviewed in the audit were located in Binghamton, Buffalo, Friendship (Allegany County), Islip, Rochester, Syracuse, Tonawanda and Yonkers.
Among its findings:
- 30 percent of businesses receiving zone benefits met or exceeded their job creation targets, another 47 percent increased their employment but fell short of their targets, and 23 percent actually lost jobs.
- Local zones did not evaluate the performance of companies, so firms continue to receive tax breaks for years even if they are not creating jobs and despite the fact that job creation is a criteria for receiving tax breaks.
- There is poor accounting for the amount of tax breaks given out, so it is difficult to quantify how much the program costs, what taxpayers are getting for their investment and which Empire Zones are effective and which are not.
The Comptroller said that this report is part of a comprehensive study of Empire Zones around the State. Additional audits will be released when they are completed.
An initial review of the audit report raises several significant questions:
- It focuses on the failure of some businesses to meet job growth projections, even though the Empire Zone statute does not even consider projected job growth in either zone eligibility or in the calculation of a company's annual zone tax benefits.
- It focused on the cost/benefits of the program as it applied to the 23 percent of businesses that lost jobs during the period audited. However, even though it reports that 77percent of zone businesses either increased employment or exceeded their job growth targets, it makes no attempt to quantify the relationship between tax credits received, and local benefits produced, by these successful businesses. This additional assessment is essential to draw conclusions about the overall success of these audited zones.
The Business Council will continue to review the Comptroller's audit findings and recommendations regarding program reforms, as we also continue to respond to the various Empire Zone reform bills introduced this year. We look forward to receiving any comments on the audit from Business Council members as part of this effort.