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November 24, 1998 

The following letter from Daniel B. Walsh was delivered to Senate Majority Leader Bruno, Assembly Speaker Silver, Senate Minority Leader Connor and Assembly Minority Leader Faso.

November 23, 1998

Honorable Joseph L. Bruno
President Pro Tem and Majority Leader
New York State Senate
Room 909, LOB
Albany, New York 12247

Dear Senator Bruno:

RE: An Upstate Agenda for Growth, for action in December

A December session of the Legislature would provide an early opportunity to stimulate growth in the single remaining area where New York still lags the nation economically: Upstate. We urge you to adopt an Upstate Agenda for Growth that would pay off quickly in new businesses and jobs.

The changes that the Legislature and Governor Pataki have made in New York's business climate in the last five years are paying off for upstate. Jobs are at a record high, as are new business locations. The key manufacturing sector has stabilized, after years of losses. In every region, we see major new business investment that will result in significant job growth next year and in years to come.

The dramatic tax cuts, reductions in workers' compensation costs, regulatory reforms and other changes you have championed are making a difference upstate. If not for those changes, upstate certainly would not enjoy the 44,000 new jobs it has gained in the last three years. But, as you have said many times, there is more to do, if we are to make sure that the Empire State--and upstate in particular--reaches its shining potential. And clearly, upstate is not doing nearly as well as it should.

Our proposed Upstate Agenda for Growth follows. Each of these items already enjoys significant support in both the Senate and Assembly and could, we believe, be negotiated in time for enactment before the end of this calendar year.

Reduce energy costs further

The Public Service Commission and our investor-owned utilities have agreed on rate-reduction plans that will reduce electric rates for all customers and provide significant savings for large industrial users. In addition, the Power for Jobs program the Legislature created is providing low-cost energy for a number of selected employers.

And yet, our energy costs in general--including those for most businesses-- remain far too high. As of 1997, the average cost per kilowatt-hour in New York was 11.13 cents, fully 62 percent above the national average. A major part of the problem is the heavy tax burden on utility customers.

One immediate step to reduce electric bills for all customers could be to move up the implementation of the gross receipts tax reduction enacted at your initiative in 1997. The 1997 law provided for a .25 percent reduction this past October 1, and a further cut of .75 percent as of January 1, 2000. The latter effective date could be moved up one year, to take effect on January 1, 1999. Such a change would have no impact on the state's long-term financial position. It would reduce revenues in the current and coming fiscal years. Such reduction would, however, be within the range of the additional surplus that we understand is now considered likely to be available at the end of this fiscal year.

Further, we urge that the Legislature and the Governor act now to prevent unlegislated tax increases on energy bills. Because of the PSC-mandated restructuring of the electric industry that is now underway, most of our investor-owned utilities are undertaking certain business activities that would not have taken place in the traditional regulated, vertically integrated industry. For instance, the transfer of assets between utility holding companies and their subsidiaries-- transfers that are required in the new environment created by the PSC--threatens to impose more than $50 million in new taxes on utility customers. We have forwarded several specific proposals to avert such unintended new taxes to Mr. Lackman and his staff.

Property-tax reduction, achieved through the mandate relief mentioned below, will also bring costs down for utilities--they are the largest property taxpayers in dozens of communities throughout the state.

Create jobs through workforce development

The relatively low job growth in most areas of Upstate occurs in a paradox: Some good jobs go begging, because employers cannot find enough skilled workers. Part of this problem is the "hangover" effect of the catastrophe of the late 1980s and early 1990s. Job losses then forced many of our skilled workers to move out of state, in search of opportunity; few of those workers have returned, despite the stabilization of our manufacturing sector. (The lingering effect of those job losses also hurts upstate today through a weakened market base for retail and services jobs.)

If we build an even better workforce, more good jobs will come to upstate. After extensive consultation with employers, economic development experts, regional business associations and others, we believe improving our job training system requires a two-pronged approach:

Cut property taxes by repealing mandates

The accomplishments of the Pataki Administration and the Legislature have already paid off in substantial savings for localities through relief of mandated costs, primarily in the area of social services entitlements. Such savings flow to counties and New York City, and in many cases have prompted those municipalities to take some initial steps to cut taxes.

Further mandate relief will make it possible for both municipalities and school districts to reduce property taxes, the largest single competitive disadvantage now faced by New York State businesses. The latest authoritative data from the U.S. Census Bureau show property taxes in New York are 70 percent above the national average. Business property taxes, in particular, are far out of line with those in competing states.

Enactment of Governor Pataki's mandate-relief proposal made earlier this year (Program Bill 183) would be a major first step toward eliminating the needless costs and inefficiencies imposed by state mandates. That proposal includes significant reform of the outmoded Wicks Law, and authorization for public-sector construction projects involving asbestos to follow the federal safety standards required in the private sector. These steps would save taxpayers hundreds of millions of dollars, while speeding construction projects by eliminating inefficiency. That would be tremendously helpful for school district construction, as well as projects undertaken by other local governments.

Make sites ready-to-go for new jobs

The state is seeking to eliminate red tape for major new business and expansion projects, first with potential sites for computer chip fabrication plants and now for a wider variety of industries.

Every region of the state features sites that already have the essential infrastructure for industrial development--water connections, transportation links and so on. In many cases, these potentially desirable sites are not even considered for redevelopment because they contain solid waste, petroleum-based or hazardous substances, or hazardous wastes.

Turning these sites into new industrial facilities will create new jobs for New Yorkers, and additional tax revenue, while speeding cleanups and reducing taxpayer costs for those cleanups. Senator Marcellino and Assemblyman Aubry have introduced legislation to create significant environmental and economic incentives for remediation and redevelopment of these "brownfield" sites.

We believe passage of the Marcellino/Aubry bill would quickly make dozens of industrial sites in areas such as Buffalo, Syracuse, Rochester and Utica--as well as elsewhere in the state--immediately desirable for economic development.

Tell the world how New York is changing

New York State's recent record of cutting taxes and enacting other improvements to our business climate is truly impressive, thanks in large part to your leadership. But my conversations with business executives both in New York and elsewhere make clear that we've been hiding our light under a barrel. The solution to that problem, we believe, is to undertake a major marketing campaign to make sure that business decision-makers--again, both here and in other states--know the facts about New York.

Such a campaign should operate with extensive involvement of private-sector business leaders, some private funding, and perhaps leadership by the private sector. It should, however, include substantial funding from state government-- $10 million to start.

A marketing campaign would, of course, inform potential investors about all of New York State. We believe it would be especially valuable to upstate regions, which are often completely unknown to business and finance executives in other areas of the country and overseas.

A rare opportunity

Many other changes could help make our upstate communities more attractive for business growth. Thorough reform of our civil justice system and broader reductions in business taxes are just two examples--and, indeed, we hope to work with you during the 1999 session to achieve those goals. The issues identified here are more narrow and, as I said above, achievable within the short timeframe of a December legislative session. The timing of that session, and the widespread agreement that the recovery of upstate is not yet complete, present a rare opportunity for quick and dramatic progress.

There is no need for any upstate-versus-downstate divisiveness as we tackle this issue. Just as the Wall Street boom has been good for the overall state economy and for state revenues, so, too will a stronger upstate economy be good for downstate. And, again, each of the proposals outlined above will help create new business and job growth in every region of New York.

The last four years have brought tremendous changes that are generating new job growth, both upstate and downstate. This Upstate Agenda for Growth will create still more of the new jobs New Yorkers need.

Senator, we look forward to working with you to continue the comeback of New York State's economy.

Sincerely,

Daniel B. Walsh, President
The Business Council of NYS, Inc.

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