For weeks, I have been talking about how Albany pushed through a budget that was negotiated behind closed doors and increased state spending by nearly 10%. I have also mentioned that this year’s budget will increase taxes and fees and eliminate important tax relief programs like the STAR rebate program. One issue that has not been highlighted to the degree of other aspects of this year’s budget is the detrimental changes made to New York’s Empire Zone program.

New York is notorious for being a high-cost-of-doing-business state. Compared with other parts of the country, our energy costs, workers’ compensation costs, healthcare costs and taxes are making us uncompetitive. In an effort to combat this problem, New York’s Empire Zone program was created to help stimulate economic growth, especially throughout Upstate. The Empire Zone program uses a variety of tax incentives aimed at attracting new businesses and also enabling existing businesses to expand and, thus, create more jobs. Last year, there were nearly 9,000 businesses statewide receiving Empire Zone tax benefits, many of which are in Central New York.

As with many government programs, the Empire Zone program had its problems. As was widely reported, numerous companies in the past received benefits that, under the original intent of the program, should not have been receiving such benefits. Realizing that this was a problem, in 2005, the legislature passed several reforms to the Empire Zone program. These reforms were successful in that they closed several loopholes in the program but, at the same time, allowed the program to continue to provide the tax benefits which are critical to allowing participating companies to compete.

Unfortunately, even after these reforms, many legislators, particularly from downstate, continued to criticize the Empire Zone program. While they had some valid points as far as the lack of appropriate reporting on the benefits of the program, too often they underestimated the program’s strengths and failed to realize just how uncompetitive New York’s business climate is. In this year’s budget process, those who advocated doing away with the Empire Zone program apparently won out and the enacted budget contains changes to the Empire Zone program that most in the economic development community feel will make the program unworkable.

One of the changes to the program contained in this year’s budget is the requirement that the Commissioner of Economic Development review every certified entity receiving Empire Zone benefits to determine whether they should continue to receive benefits. This may appear to be innocuous, but it will create a bureaucratic nightmare. Each of the 9,000 businesses receiving benefits will need to be reviewed. Further, there is a moratorium on receiving any future benefits until it has been determined that the company should continue as a certified Empire Zone business. This could take six months to a year to determine. Meanwhile, companies that have been playing by the rules and have been relying on their Empire Zone benefits to remain solvent will be severely impacted. Further, this year’s budget changes the rules as far as to what companies will need to show in order to remain certified. Essentially, the state is changing the rules in the middle of the game. This makes economic development in New York even harder, because companies that may be considering moving to New York based on an economic development program now will think twice out of concern that the program will be changed and the benefits they were relying on when making the decision to move to New York will be taken away.

These are just a few of the negative changes to the Empire Zone program. Unfortunately, until Albany implements policies that will make our state business-friendly, we need to rely on programs like the Empire Zone program in order to attract and retain jobs. Now, as a result of this year’s budget, not only has Albany made the business climate worse, it has taken away one of the major tools that has been relied upon for economic development. Nevertheless, I will continue to work to convince my colleagues that we need to reverse these misguided policies.

If you have any questions, comments or concerns regarding this or any other state matter, I can be reached by mail at 200 North Second Street, Fulton, 13069, by e-mail at barclayw@assembly.state.ny.us, or by phone at (315) 598-5185.