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.