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ISSUE IN BRIEF:
Empire Zone Reform
The Empire Zone
program is one of the most significant state-level incentive packages
available nationwide, and has been successfully used to create and save
thousands of jobs and promote major new investments to New York State. At
the same time, there is considerable interest in program "reform."
The FY 2006 Executive
Budget includes proposals that would reduce benefits for some existing "qualified
empire zone enterprises" (QEZEs); place new limits on all prospective
QEZEs; modify zone designation criteria; require more extensive Empire
Zone development plans; and enhance annual reporting requirements for
zones. The Governor is also proposing two new zone categories, "flex
acreage zones," which would be designated by the state to support significant
development projects, and agribusiness zones, which would support the
agricultural production and processing activities. The budget would
also extend the program five years to March 31, 2010.
The Assembly has
introduced legislation (A.6) that would re-shape existing zones and change
how future zone acreage is designated; create a new, three person panel
to oversee the Empire Zones program; require adoption of new regulations
governing the Empire Zones program; adopt more stringent provisions for
disqualifying QEZEs that fail to meet job criteria; and adopt new, annual
reporting requirements.
Our Priorities - The
Business Council sees Empire Zones as a major component of the state's
economic development program. We also represent many businesses that
participate in the Zones program, and many local business organizations
with an interest in how the Zones program is administered. Based on
considerable input from our membership, The Business Council's priorities
regarding Empire Zone reform include the following:
- Assure
that the program remains affordable in terms of overall
tax expenditures, and make the program more
efficient in
terms of economic benefits derived by the state. These goals should
be achieved largely through prospective changes that give the program
better focus, and that tie benefits more appropriately to the level
of jobs created or retained and/or levels of capital investments. Specifically,
we support the Governor's call for zone-specific development plans,
and a ten year limit on property tax benefits for newly certified QEZEs.
- It
is essential that the state maintain full QEZE benefits for those
businesses certified prior to 2005 and that have made significant investments
to expand or upgrade facilities, and/or have added or retained a significant
number of jobs. The Business Council believes that New York would
do long-term damage to its economic development efforts by reducing tax
credits for businesses already in the Empire Zones program.
- New
York needs
to make retention of manufacturing jobs one of its economic priorities.
Unfortunately, by basing its eligibility and benefits primarily on
job creation,
the Empire Zones program is not a particularly useful tool for sustaining
the state's manufacturing
sector. We recommend that the Zones program include alternative eligibility
criteria based on capital investments by manufacturers. This approach
would require scaled criteria in order to accommodate small, mid-sized
and larger manufacturers. We would also like to see this manufacturing
specific incentive available statewide, similar to the Governor's "flex
acreage" proposal.
- We
support an expansion of the Empire Zones program to include all counties
that currently do not have Empire Zones. This is important to assure
that all parts of the state are able to participate equally in this
significant development incentive program.
- We
believe that local officials should retain sufficient flexibility in
designating zones to allow them to meet local development priorities.
Toward this goal, The Business Council supports the Governor's proposal
for 40% discretionary acreage for county-level zones. We believe similar
discretion should also be given to "census tract" zones.
- We
agree that enhanced program monitoring and reporting is essential
to the long-term sustainability of this program. We support enhanced zone-specific
performance reports, and publicly available reports on both local
zones and the overall state program.
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