Zone changes could cut NNY businesses
Many of the north country's 165 businesses that receive Empire Zone tax breaks could lose the benefit under the state's new budget agreement.
State officials say the Empire Zone program is being abused by companies that are getting tax breaks without generating new jobs. But local economic development officials worry the changes in the program will hamper their efforts to bring more business to the north country.
"My fear is that they're tossing out the baby with the bath water," said Donald C. Alexander, chief executive officer of the Jefferson County Industrial Development Agency.
Overall, the changes would increase state taxes for up to 1,000 businesses statewide. Staff for the Empire State Development Corp. is trying to determine the exact fallout of the changes.
"It's very early in the process," corporation spokesman Warner Johnston said. "In the changes for the program, we'll review each business one at a time."
According to a database developed by The Post-Standard, Syracuse, there are 94 businesses in the Empire Development Zone of the city and town of Watertown. Those businesses, with a total of 4,124 employees, expected to file for $6,778,119 in tax breaks in 2007.
Lewis County has 32 businesses with 1,024 employees expecting $11,496,043 in tax breaks. Potsdam has 27 businesses with 531 employees that expected to file for $9,729,187 in breaks and Ogdensburg has 12 businesses with 415 employees that expected to file for $5,750,513 in breaks.
The largest north country recipients of tax benefits are Erie Boulevard Hydropower in Potsdam at $9,035,000 and Flat Rock Wind Power LLC in Lewis County at $7,197,197. Lewis County officials lobbied state officials, hoping to keep certification for the developer of Maple Ridge Wind Farm. If the wind project lost certification, the developer has said, the payments-in-lieu-of-taxes would decrease from $8 million to less than $2 million for taxing jurisdictions.
The Empire Zone program also faces changes in how it operates.
Potsdam Economic Developer James A. Murphy said the information he has received so far indicates Zone administration would mostly be centralized in Albany, with local officials receiving no funding and having a smaller role in the process, according to a memo sent to zone coordinators by the New York State Economic Development Council.
Potsdam's economic development office has not received state funding for Empire Zone administration for the past two years.
Officials were able to cobble together a 2009-10 budget to cover salaries for the office's three employees using grant funds, but they're not sure what will happen after that.
"We're still waiting to hear something official," Mr. Murphy said. "As to the effectiveness of how this is going to work in the future, we've been talking that out, frankly. We're not sure what our role is going to be."
In the new regulations, a measure is included to kick out businesses that have not matched dollar-for-dollar wages and capital investments with the tax breaks they received. The reworking of the Empire Zone tax breaks also excludes "shirt-changers": companies reincorporated as different entities that claimed they created jobs when, in reality, they transferred employees from one entity to the other.
Budget officials believe the changes will save the state $90 million during the 2009-10 fiscal year. The program changes were laid out in the state Senate's Finance Committee budget fact sheets.
In other changes to the program, the property tax credit to eligible companies will be reduced from 100 to 75 percent of their property tax liability and sales and use tax exemption granted to eligible companies will be eliminated. Beginning in the 2010-11 fiscal year, those changes will save the state $20 million.
The program also will be harder to enter. The cost-benefit ratio test will be increased from 15 to 1 to 20 to 1, with an exemption for manufacturers at 10 to 1. The companies must show how the business will generate $20 in wages and capital investment for every dollar given out in tax credits. And the sunset date for the program was moved up a year to June 30, 2010.
Some north country businesses have been trying to enter the program. Mr. Murphy said he and his colleagues "remain hopeful" that Potsdam Specialty Paper Inc. soon will be certified.
The company has turned the former MeadWestVaco plant in Unionville into a more entrepreneurial export operation. The company employs 80 people and has a payroll of $5 million. Its benefit-cost ratio was estimated to be 14 to 1 in its zone application.
Last week, Mr. Murphy traveled with town Supervisor Marie C. Regan and other Potsdam officials to Albany to lobby on Potsdam Specialty Paper's behalf.
"We believe this is a model of the type of business that this program is supposed to support. This is an American company that exports 100 percent of its product to China, which doesn't happen very often," Mr. Murphy said. "Look at Alcoa East and Corning, the problems we're seeing with every major manufacturing industry in the north country. We need any kind of support we can find for them."
Economic development officials said this could be another lost tool for bringing businesses to the north country.
"A 20-to-1 ratio is going to be, in my view, nearly impossible, if not impossible, to meet up here," Mr. Alexander said.
The bill including changes for the Empire Zone benefits has not yet passed the state Senate, but was approved in the Assembly.
Times staff writer Alex Jacobs contributed to this report.
