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EMPIRE ZONE REFORM
2004 Priority Issue

Staff Contact: Ken Pokalsky

Issue:

The legislature is considering both an extension of the Empire Zone proposal (authority to designate zone and certify businesses expires on 7/31/04) as well as significant amendments to the program that would affect the location of zones, eligibility criteria for certifying businesses, and the calculation and duration of zone benefits.

The Business Council's primary goals include: permanent extension of the zone program; no reduction in benefits for existing zone businesses that have made significant capital investments and/or increased employment within zones; assure that the zone program can be used to address statewide development goals, and not just urban redevelopment efforts; make the program more applicable to manufacturers, by adopting capital investment/job retention criteria; improving program accountability and oversight by broadening business- and zone-level reporting requirements; and making the program more cost affective by making future benefit criteria more directly tied to actual job creation, salaries and capital investments.

Under current law, Empire Zone designations will expire on July 31, 2004. If allowed to expire, Zones would lose their ability to designate additional zone acreage, the state would not be able to certify any additional zone businesses, and certified businesses would lose their non-QEZE Empire Zone benefits.

Status:
8/12/04

Both houses approved budget legislation that will extend the sunset date of the Empire Zones program from 9/13/04 to 3/31/05. This legislation extends the EZ program as is; it makes no other changes or reforms to the Empire Zone program.

8/2/04 Today's six week budget extender (S.7701/A.11776, Chapter 262) extends the Empire Zone program until September 13, 2004 (the duration of the overall budget extender). Under pre-existing law, the Empire Zone program was due to sunset on July 31. If the Empire Zone authorization law was allowed to lapse, the state would not able to certified additional Zone businesses, nor approve extensions of existing Empire Zones. Likewise, certified businesses would not be able to take advantage of non-QEZE zone benefits.

7/22/04 The legislature passed S.7687/A.11761, which addressed the potential expiration of QEZE benefits. When the Empire Zone program was extended by one day in the June 22 budget extender, it rendered inoperable the provision of Section 14 of the Tax Law which protected QEZE benefits in the event of expiration of the zone program. Section 14 of the Tax Law specifically provided that QEZE benefits would remain available in the event that the July 31, 2004 expiration date of the zone program was not extended. Since S.7636/A.11711 extended the expiration date— albeit by one day — QEZE benefits would have lapsed as well come August 1. Under S.7687/A.11761, zone certified businesses will retain access to QEZE benefits even if the overall zone program is allowed to expire. This is a significant provisions for QEZE beneficiaries. The Business Council had urged the Administration to address this issue in its next budget extender proposal, and also raised the issue with both houses of the legislature.

6/22/04 Part C of S. 7636/A. 11711, today's six week budget extender, also extends the Empire Zone program by one day (to August 1, 2004) to coincide with the legislature's expected return to Albany.

The Assembly did not take final action on either A.9021 or A.11640.

6/21/04 The Senate has introduced and passed a limited Empire Zone extender/reform bill. S.7619 extends the program by one year (7/1/05); retroactively limits QEZE real property tax benefits for already-certified electric utility facilities; prospectively limits the duration of benefits for newly certified businesses to 10 years; modifies the employment test for QEZE benefits to consider statewide job levels, rather than statewide, non-zone job levels; establishes new planning requirements for zone administrators and new zone designation and business certification criteria; and imposes additional annual reporting requirements on zone-certified businesses.

The Assembly introduced A.11640 (Rules) which would extend the Empire Zone program as is through February 1, 2005. If approved, the bill would have an effective date of July 31, even if it were passed after that date, which would assure no gap in Empire Zone benefits for currently certified businesses.

6/11/04 The Governor proposed Empire Zone reforms in the Executive Budget (see Part T beginning on page 60); the Assembly has proposed an alternative zone reform bill A09021, which is opposed by The Business Council (TBC's memo in opposition). The Assembly EZ bill was passed in 2003; it has not yet come to a vote in the 2004 session.

Contact:

For more information, contact Ken Pokalsky via e-mail ken.pokalsky@bcnys.org or phone at (518) 465-7511.