Between the towns of Malta
and Stillwater, just northof Albany,
local developers have been itching to get their hands on an Empire Zone
designation for years. They see a neat set of computer-chip fabrication plants,
or “chip-fabs,” in part of LutherForest.
SaratogaCounty
was granted an Empire Zone in 2001. The zone does not include any of the
privately-owned forest — not yet, says Saratoga Economic Development
Corporation President Ken Green. But once an appropriate client presents plans
for the site, he says, the area will be granted Empire Zone status.
Critics of the tech-park plan say that expanding the Saratoga
zone’s boundaries to include LutherForest
bastardizes the tax-abatement program’s original intent. “They don’t have
the industries yet,” says Rochester
resident Hugh Mitchell, who is conservation chair of New
York’s chapter of the Sierra Club. “They’re just going
to use the lure of Empire Zones to destroy a forest. It’s a total abuse of
Empire Zones.”
The Empire Zone program, which provides substantial tax
relief and other benefits for companies that create new jobs within a zone,
began in 1986 with a goal of revitalizing depressed urban areas. In Rochester,
the program subsidizes businesses in both the city and the county.
There is evidence that the program encourages suburban
sprawl and merely provides incentives for businesses to move from one town to
another within the county. And office parks are consistently being built
despite increased office vacancies in both the city and the suburbs.
There is too little oversight of the program, critics say
— and too much potential for favoritism and corruption.
There’s a lot at
stake with Empire Zones. The program isn’t cheap. While nearly all of the
money for the tax incentives comes out of the state budget, in the end, all New
Yorkers pay the cost — in increased state taxes to make up for those not paid
by Empire Zone businesses, and in decreased state funding for local programs.
This is occurring while the state and local governments throughout New
York are facing major budget problems.
In the long run, if Empire Zones substantially increase
economic development, tax revenue goes up. But records on the zones’ net impact
are sketchy.
There are, however,
estimates of the program’s cost: $291 million in state tax credits for this
year alone. Brighton Town Councilmember Ray Tierney III, who has raised
questions about Empire Zone expansion in his town, did his own calculations:
divide that $291 million by the state’s population of about 19 million, and the
per-capita cost to New Yorkers is $15.80. That means the program will cost the
residents of the Town of Brighton
$520,540 this year. The cost for MonroeCounty residents: more than $11
million.
“MonroeCounty
could do a lot of economic development” with that much money, says Tierney.
The Empire Zone legislation sunsets at the end of this
month. Both the Senate and the Assembly have proposed reform legislation, and
several local lawmakers say they expect Governor Pataki to extend the
expiration date another six weeks while they try to work out an agreement.
Elected officials — Republicans and Democrats alike —
say they realize the program needs major changes. But they say it’s much too
valuable to let expire.
“This is a very important program to us,” says Rochester
Mayor Bill Johnson. “For distressed communities, this has been a very useful
tool. Other communities have found a way to profit from this, if I can use that
term. But these are nice bargaining chips in the poor communities as well. I
don’t think anybody wants to see this program die.”
Republican Senator James Alesi says the Empire Zone program
continues to outperform the expectations of those who initiated it 18 years
ago.
“You can point to a lot of success stories, and you can
show where there have been net jobs created, and you can show where, if nothing
else, there’s been interest where there was no interest before,” Alesi
says. “Without having that magnet, you don’t get the companies that do
locate.”
“It hasn’t hurt,” says Henrietta Town Supervisor
Jim Breese. “Anything that will preserve jobs, keep businesses here, or
bring in businesses from elsewhere is good, and I think the Empire Zone has had
a very positive effect that way, at least in Henrietta.”
Gates Town Supervisor Ralph Esposito, whose town received
the county’s first Empire Zone designation outside the city, agrees that Empire
Zones are “essential.”
“If you travel through any of these other states, you
see their version of Empire Zones literally planted all over the ‘Welcome to…’
signs,” Esposito says. “We need to compete. It’s that simple.”
“Anyone who tells you the program has outlived its
usefulness — frankly, they don’t have a clue as to what economic development
is all about,” Esposito says.
While officials argue
that New York needs Empire Zonesto
be competitive, the zones have developed while Upstate New York’s economy has
been in decline. And so Empire Zones sometimes have a destructive effect.
MonroeCounty
is a good example. Because the county’s population is relatively stagnant,
there isn’t much market demand for commercial development. “A lot of
people in Rochester, because we’re
not experiencing a lot of growth, move from Space A to Space B,” says
Angelo Nole, an executive vice president of the international real-estate
services company CB Richard Ellis.
“We see a lot of movement,” Nole says. “We don’t see a lot
of growth in our economy.”
A fair amount of that movement has been outward, from the
city to the suburbs. “Suburban space has increased over the last 20 years
annually,” says Nole. “If you go back to the early ’80s, there were
really very few suburban office complexes. Corporate Woods, Woodcliff — those
places didn’t exist until the late ’80s.”
According to CB Richard Ellis’s 2004 Rochester Market Index
Report, 1.35 million square feet of office space was constructed in Rochester’s
suburbs between 1999 and 2003. In that same period, the office vacancy rate in
the city nearly tripled.
“The growth of the suburbs came at the expense of
downtown,” Nole says.
At first, the City of Rochester
had the only Empire Zone in MonroeCounty.
But the county was granted an Empire Zone when the former Kodak Elmgrove Plant
became vacant. Since then, the county has amended the boundaries of its zone,
and buildings throughout the county, particularly in the wealthier southeastern
suburbs, have been included. Among them: new suburban office parks.
The office shift from city to suburb is a national trend, of
course, and that trend started before properties in suburban MonroeCounty had Empire Zone status. With
their sparkly new exteriors and modern, energy-efficient interiors — not to
mention their proximity to suburban residences — office parks are an
especially hot trend. The builders keep building them, and the buyers keep
buying.
The office shift has followed the county’s residential
shift. People want convenience, says Nole, and a short commute.
“Everyone’s busy,” he says. “In Rochester,
everything is 20 minutes away, but 20 minutes is 20 minutes. It’s just
basically a shifting of where people are choosing to work.”
A good example: the Harris Beach law firm, which in the mid
1980s made the news for buying and renovating an architecturally significant
building in downtown Rochester. Two
years ago, Harris Beach moved most of its offices to a relatively new building
with a spacious campus in Perinton.
“They basically said it’s more convenient for their
employees,” says Nole. “That’s unfortunate for downtown.”
Unlike the state of Oregon,
where development boundaries and incentives control sprawl, New
YorkState puts the
market in charge.
“You let people grow where they want instead of forcing them
to stay in places they don’t want,” says Nole. “You hope when some people have
moved out of downtown office buildings, it frees up those buildings for alternative
uses.”
With little population growth, however, the owners of those
buildings must struggle to find uses and to compete with the suburbs.
Hugh Mitchell says the reason he and the Sierra Club have
been so focused on reforming or killing the Empire Zone program is because it
nurtures suburban sprawl. “It’s not just the businessmen who are building
an office park, but government support for these guys which causes sprawl to
happen,” Mitchell says. “This is going to be a way to continue to
destroy New YorkState’s
environment.”
The city’s not the
only place experiencing movement. Penfield Town Supervisor George Wiedemersays that the Empire Zone program
“makes sense.” But he believes that it has resulted in shuffling some
businesses around within the county.
“The same thing goes on regionally,” says Wiedemer, with
businesses moving from MonroeCounty
to OntarioCounty.
“All they’re really doing is relocating to Ontario.
Competing.”
“I am concerned a little bit that you’re helping one
community at the expense of another community,” he says. “And I’m not
sure that that’s all positive.”
Henrietta’s Jim Breese thinks he may have lost a business or
two to an out-of-town Empire Zone, but says it hasn’t been a trend. “I think
the businesses affected in Henrietta would have gone out of this county and
probably out of the state,” he says, Empire Zone or no Empire Zone.
“I don’t think Empire Zones should be helping
businesses moving from Greece
to Henrietta and vice versa,” he adds. “I don’t think that’s what the
purpose of the Empire Zone program was. That’s where I draw the line on Empire
Zones.”
Penfield has seen Empire Zone moves work both ways. Before
it was possible to create a zone outside of the city, Miller Sandblasting left
Penfield to move into a zoned property in the city.
Miller Sandblasting’s move wasn’t a problem at the time,
says Jim Costello, the town’s director of developmental services. In fact, he
says, Penfield officials encouraged it. Empire Boulevard was rezoned in 1999,
in hopes of luring restaurants, retail, motels, and hotels to the area in place
of industries and construction companies. So Miller Sandblasting’s move to Lincoln
Avenue, Costello says, was appropriate.
But Penfield’s town board approved the addition of an Empire
Zone to the Linden Oaks North office complex on Hagen
Drive in May. The property was one of 27 recently
presented by County Executive Maggie Brooks to the CountyLegislature for consideration; but
the proposal was later withdrawn, pending state revisions to the Empire Zone
legislation.
“Why in the world would Linden Oaks need to be in an
Empire Zone?” says the CountyLegislature’s
Democratic Minority Leader, Stephanie Aldersley. “It looks to me that they’re
thriving. Our downtown office buildings have more and more vacancies. So why
would we be subsidizing Linden Oaks, when they appear to have a very low
vacancy rate?”
Hugh Mitchell spoke at a public hearing on Empire Zones in April, along with local leaders from the
Green Party and Metro Justice. One of the reforms the groups have suggested is
to make it more difficult to erase and redraw zone boundaries. The current
process, they say, has resulted in a “we bring the zone to you”
approach, and it has “opened the operation of many of the state’s zones to
favoritism and corruption.”
Critics also complain that empty buildings and land are
sometimes given Empire Zone status. But “at some point,” says State Senator Jim
Alesi, owners of vacant property “have to demonstrate that they’re not just
sitting on a piece of property, that they intend to actually locate a business
and to create jobs.” There is, Alesi says, sometimes a chicken-and-egg
problem — adding empty space to an Empire Zone seems counterintuitive, but
developers may say they need the incentive to attract tenants.
Fueling critics’ concern is the lack of hard information
about Empire Zone properties: why they were selected, and how effective they’ve
been. Aldersley says she and her colleagues were particularly concerned that
the county’s most recent request for Empire Zone expansion was submitted to the
legislature as a “Matter of Urgency,” bypassing committee-meeting discussions.
Democrats have asked county officials who owns the properties,
whether the owners owe taxes, and what owners plan for each site, says
Aldersley. She’d like to see supportive documents like deeds and leases in some
cases, she says, and she’s gone so far as to file Freedom of Information
requests.
Her questions, she says, have been met with resistance,
“sneering,” and a lack of paperwork needed to support what she calls
“verbal assurances.” And, she says, she’s been told that some of the
information she wants is “an invasion of the people’s business privacy.”
In his recent report on the state’s Empire Zone program,
Comptroller Alan Hevesi raised the same question. But in fact, some business
financial information is protected by law.
Democratic Assemblywoman Susan John says she would like the
privacy issues inherent in the program to be reformed. She says she looked at
general numbers from the state tax and finance department in preparation for
hearings on the Empire Zone program in Albany,
but couldn’t look at hard data from specific zoned companies because of tax
privacy laws.
“One change that we need to make is that applicants
have to agree to waive their privacy, at least with regard to income generated
and tax credits that are claimed,” John says. “We want to respect
people’s privacy, but we’ve set up this interesting conundrum that the state
legislature can’t figure out who’s getting this money.”
Then there’s the
question of using tax subsidies to encourage a major land-use change:
turning part of a forest into a technology park, for example. In Saratoga
County, while the Luther Forest land is not yet an Empire Zone, the town boards
of both Malta and Stillwater have voted to zone part of the forest for
technology uses, and the Saratoga Economic Development Corporation is promising
Empire Zone status to potential builders.
Another concern of environmentalists: an infrastructure will
need to be built to allow for the pumping of water up from the Hudson
River, to sustain any chip-fab that moves in. Groups like the
Coalition for Responsible Growth say the water line is absurd, considering that
no computer chip industries have expressed solid interest in the site.
It’s natural to want to build chip-fabs in LutherForest, says a website created by a
group called Tech Valley Capital Region Advocates for Intelligent Growth.
“Suburban green campus work environments have become the ‘atmosphere of
choice’ for both engineers and high-tech corporations,” says the website.
“These areas are not haunted by current and mounting urban ills, and the
employees find them desirable places to work for all the same reasons residents
find them desirable places to live.”
Another concern: SaratogaCounty is one of the wealthiest
counties in the state. Unemployment is much lower than the state average, and
population growth is high.
Should New York
offer tax breaks in a rich county, to encourage development of a plant that
spans nearly half of a forest? Does subsidizing the clearing of forestland and
the invasive construction of a water supply system encourage similar
development in other parts of the state?
Mitchell says the Empire Zone program needs to change. He
cites one of the amendments that the Sierra Club has proposed to state
legislators: that Empire Zone designation be limited to areas already served by
sewer and water infrastructure.
“The whole purpose [of the Empire Zone program] was to
help reinforce struggling urban areas with tax benefits for buildings which
could perhaps be rehabbed to attract new jobs for urban people,” Mitchell
says with an edge of frustration in his voice. “We’re lobbying statewide
to ask the state legislature to return to the original intent of the law, which
is to help struggling urban areas.”
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This article appears in Jul 28 – Aug 3, 2004.
