Gov. George Pataki has modified his budget to eliminate a requirement that municipalities pay half the cost of new property tax breaks offered in Empire Zones.

The Business Council strongly supports this change to the Governor's Executive Budget, which the Governor proposed in his 30-day amendments.

In his Executive Budget released in January, the Governor estimated that the state could save $4 million each year by shifting the burden of those tax cuts to local governments.

The state Senate and Assembly both opposed The Governor's proposal, and The Business Council, the New York State Economic Development Council, and other advocacy groups also expressed reservations.

In testimony before the state Legislature Feb. 26, Business Council President Daniel B. Walsh urged lawmakers to preserve and expand the state's successful Empire Zone program, with new acreage to be distributed statewide at the discretion of Empire State Development (ESD).

Given the program's effectiveness in promoting job growth and investment, Walsh testified, "we should avoid imposing disincentives against its expanded use by municipalities. Likewise, we believe that the state budget should assure that municipalities have adequate resources to implement the zone program."

To maximize the effectiveness of the program, the state could take a number of steps, including expanding the availability of zone benefits to all counties and reassessing eligibility criteria to assure that zone benefits support real economic growth, giving more flexibility in setting zone boundaries back to municipalities, and making zone benefits available for significant capital investments necessary to retain existing jobs.

Empire Zones are areas in the state that have been made eligible for special incentives to encourage economic development. Empire Zones can become virtual tax-free areas for start-ups and newly attracted businesses to New York State.

In Empire Zones, communities can offer new and existing businesses a variety of benefits to encourage plant sitings and expansion and job creation. These benefits can include reductions in tax liability, tax credits for local real property taxes paid, and exemption from the state sales tax for the creation of new jobs over a 10- to 15-year period.

Empire Zones were created in 2000 when the state decided to upgrade the former economic development zones and enhance the benefits. This decision was prompted by the success of the former economic development zones in fostering economic growth.