The Business Council of New York State strongly opposes S.1241 (Thompson)/A.3659 (Hoyt), legislation that would significantly change requirements for providing economic development incentives through industrial development agencies.
It is hard to imagine that the legislature could send out a less positive message to prospective investors in New York than by adopting the excessive standards and compliance burdens proposed in this legislation.
On the heels of a budget agreement that adds substantially to the cost of employer-provided health care and electric power - two key competitiveness factors for in-state business – and that limits the availability and value of Empire Zone incentives, this legislation sends the absolutely wrong message to businesses and investors, and will impair the ability of New York State to participate in the national economic recovery.
We agree that the state should require “transparency” in the use of public resources, demand a reasonable return on its investments in economic development, and impose reasonable performance and compliance criteria on recipients of economic development incentives.
However, in provision after provision, this legislation goes well beyond the “reasonableness” test, and imposes excessive, and in some cases unachievable, requirements.
Provisions of greatest concern to The Business Council include:
- Mandating payment of prevailing wages to all construction and repair work related to the project, and requiring payment of prevailing wages to all building service work until five years after IDA financial assistance has expired. Recent research shows that prevailing wage mandates would significantly impair the ability of New York to compete for projects; driving costs for upstate projects 28 percent higher than in comparable out-of-state communities, and driving costs for downstate projects 76 percent higher than in comparable out-of-state communities. (see “Prevailing Wage in NYS: The Impact on Project Costs and Competitiveness,” January 2008 by Center for Governmental Research.)
- Mandating payment of at least the median wage for “all occupations” in the metropolitan statistical area to employees working in IDA-financed buildings, regardless of the actual jobs they perform. In addition, the recipient of IDA financial assistance is obligated to assure compliance with this requirement by any tenants of the IDA financed facility.
- Requiring that “any negative” economic, environmental or social impact be avoided or minimized to the extent possible before IDA financing can be provided to a project. This is an impossibly low threshold for requiring mitigation – applying to negative impacts of any level of significance – and an impossibly high level of mitigation required – any mitigation possible, regardless of its cost or practicality. This mitigation mandate goes far beyond what is required of major projects under the State Environmental Quality Review Act, with uncertain additional benefits.
- Prohibiting IDA financial assistance, and requiring immediate suspension and repayment of such assistance, to any recipient that has a “substantial violation” of a federal, state or local law governing environmental or worker protection, taxation, and other laws. As the bill defines “substantial violation” as one punishable by a civil penalty of at least $100. As illustration of the absurdity of this threshold for withholding or revoking financial assistance, virtually every violation of the state Environmental Conservation Law is subject to civil penalty of $500 or more. Literally, leaking motor oil or hydraulic fluid from a vehicle would trigger this “no benefit” provision.
- Prohibiting IDA financial assistance for projects not located on a “brownfield” site, unless the IDA can demonstrate that there is no viable alternative. This provision ignores consideration of other valid location requirements of the business seeking assistance, and subjects the applicant to the state's brownfield program that is long on administrative and procedural burdens, uncertain with regard to cleanup requirements, and lacking in strong post-remediation liability protection for non-responsible party participants.
- Imposing new “citizen suit” provisions, allowing any resident of the municipality served by the IDA to lodge a complaint alleging violations of these requirements, and mandating a public hearing on any such complaint, regardless of its significance or foundation. This provision would set in motion potentially unlimited procedural burdens on both the agency and recipient business to address complaints regardless of their merit.
While the bill includes several reasonable new procedural, administrative and reporting requirements, its excessive performance requirements would render IDA financing an unviable option for many potential investment and reinvestment projects.
We believe this legislation would take New York in a direction opposite that of other states, which are taking steps to enhance their economic development incentives and business attraction efforts.
The Business Council welcomes to opportunity to work with the Legislature and the Administration in re-crafting the state economic development programs to make them more effective, more efficient, and more transparent. Despite some positive proposals, we believe the overwhelming negative nature of this bill makes it a poor starting point for such negotiations.
For these reasons, The Business Council strongly opposes approval of S.1241/A.3659.