Some rules are meant to be broken.
ย ย ย ย ย ย ย ย ย ย ย The state
recently made an exception to one of its own policies and allowed the Brighton
Town Board to expand the county’s Empire Zone boundaries several months before
schedule. The measure, which was approved during last week’s town board
meeting, redrew the zone’s borders to include an abandoned office building whose
prospective tenants were considering expansion outside of New York State.
ย ย ย ย ย ย ย ย ย ย ย The property in
question, a 59,000 square-foot office complex at 200 Canal View, will soon
house two companies that will be entitled to all the perks available through
the Empire Zone program, courtesy of the state.
ย ย ย ย ย ย ย ย ย ย ย The annual
revisions of the county Empire Zone’s boundaries are not scheduled until at
least July, but lobbyists convinced the state to make a special exemption for
200 Canal View. Incorporating the property as soon as possible, the building’s
owners said, was necessary to thwart a potential loss of business and revenue
from the interested tenants.
ย ย ย ย ย ย ย ย ย ย ย “Collectively,
this made a lot of sense…. The state saw the value in this project,” said
Michael Palumbo, chief operating officer of Flaum Management, at a meeting with
the town’s public works committee last week. His company purchased the
building, which had been vacant for four years, renovated it, and found two
businesses interested in utilizing the office space.
ย ย ย ย ย ย ย ย ย ย ย There was a
catch, though. The companies that wanted to move in have offices in and out New
York, and were being offered incentives to expand at their out-of-state
locations.
ย ย ย ย ย ย ย ย ย ย ย “Our
preference would be to create jobs in Monroe County, and more specifically, in
the Town of Brighton,” said Mark Redding, president of Impact
Technologies, an equipment management firm with 45 Rochester employees that
wants to relocate to 200 Canal View. The company also has an office in
Pennsylvania, which offered him $1 million in incentives to expand in the
Keystone State.
An
Empire Zone designation is a valuable marketing tool for a developer,
Palumbo says, one that allows the building owners to be more competitive and,
in turn, offers positive growth to the neighborhood.
ย ย ย ย ย ย ย ย ย ย ย “You have
people going out, eating, people buying homes, people spending money in your
community,” Palumbo said. “In addition to the creation of jobs, you
have a creation of value.”
ย ย ย ย ย ย ย ย ย ย ย But some people
wonder why the value is created in locations that do not need the help.
ย ย ย ย ย ย ย ย ย ย ย “The Empire
Zone program has deteriorated into a sham of its original purpose,” said
Jon Greenbaum, organizer of the nonprofit group Metro Justice, in a statement
issued April 25 that asks the Governor to kill or reform the program.
ย ย ย ย ย ย ย ย ย ย ย “How is it
possible that our tax money is subsidizing an upscale office park in Pittsford
when there is empty office space all over the county, especially in the
city?”
ย ย ย ย ย ย ย ย ย ย ย Since the median
household income in Pittsford is $88,000, he says, it is not a community in
dire need of financial assistance from the state.
ย ย ย ย ย ย ย ย ย ย ย Critics say the
program was intended to encourage businesses to move into economically
depressed city neighborhoods that are designated Empire Zones. Instead, what is
happening, the critics say, the boundaries of the Empire Zones are being moved
to incorporate the businesses in upscale suburban office parks, bringing no
benefit to the areas that need revitalization. In its April 25 statement, Metro
Justice allied with the Green Party of Monroe County and the Sierra Club to
denounce this use of the program.
ย ย ย ย ย ย ย ย ย ย ย “The city of
Rochester has the highest child poverty rate in the state and the Governor is
okaying extremely deep tax discounts for Empire Zone development in the
plushest of suburban office parks and in greenfields. That bares no relation to
the original intent of the Empire Zone program except that it is the exact
opposite of it,” said Monroe County Green Party Chair David Atias.
“Our number one priority needs to be the revitalization of the areas of
the state that are truly characterized by pervasive poverty, high unemployment,
and economic distress.”
ย ย ย ย ย ย ย ย ย ย ย The Sierra Club
has raised environmental concerns, citing the destruction of open space and the
proliferation of suburban sprawl as an unavoidable consequence of Empire Zone
boundary expansion.
The
Brighton Town Board voted to approve the resolution at 2 a.m.
during a marathon public meeting that began Wednesday night and went through
the early morning hours. The vote came seven hours after the start of the
meeting because the majority of the time was spent on an unrelated issue on the
agenda. The resolution’s passage, along with the county’s 28 to 1 approval last
month, means the application can now be forwarded to the state, which must
finalize the arrangement.
ย ย ย ย ย ย ย ย ย ย ย Greenbaum and
other critics, however, are growing vocal in their condemnation as the
program’s July 31 expiration date approaches. If Governor George Pataki intends
to extend the program through 2009, as he has proposed, it should be reformed
so public money is no longer used to finance incentives for wealthy suburban
corporations, critics say.
ย ย ย ย ย ย ย ย ย ย ย While members of
county and municipal governments who support the program say it does not take a
penny from local coffers, critics point out that, as state taxpayers, the
residents of these communities are still financing the operation.
ย ย ย ย ย ย ย ย ย ย ย “We’re all
New York State taxpayers, so we’re all paying for this,” said Ray Tierney,
the only Brighton councilmember to vote against the resolution.
“Brightonians are paying for this.”
ย ย ย ย ย ย ย ย ย ย ย Before casting
his vote, Tierney praised the companies interested in moving to the location as
exactly the type of businesses the program hopes to attract. His concern, he
said, was that approval would create a rush of applications from other
companies who want the same benefits at similarly desirable locations.
ย ย ย ย ย ย ย ย ย ย ย “Suburban
expansion was never what this was supposed to do…. The program was not designed
to do that,” Tierney said.
ย ย ย ย ย ย ย ย ย ย ย Impact
Technologies has had Empire Zone designation for the past two years at its
current location in the Rochester Institute of Technology High Tech Incubator,
but it has filled its space and no longer has room to grow. Impact Technologies
has doubled its employee base in Rochester since 2002, and Redding estimates
the addition of 10 new jobs a year.
ย ย ย ย ย ย ย ย ย ย ย Unfortunately, he
says, without the enticements presented by the Empire Zone program, and taking
into account Pennsylvania’s offer, it would make more sense from a business
perspective to develop in Pennsylvania.
ย ย ย ย ย ย ย ย ย ย ย That is a point
even Tierney does not argue against. The program is set up in such a way, he
says, that businesses can maximize incentive offerings by playing one state
against another. He is considering the suggestion of federal regulation, since
the program is involved in interstate commerce and competition, to prevent
companies from relocating from state to state every time a new offer is made.
ย ย ย ย ย ย ย ย ย ย ย “I think
Empire Zones are an evolution, and I don’t think you’ve got it yet, but there
are some positives,” Tierney said.
ย ย ย ย ย ย ย ย ย ย ย E-chx
Incorporated, the other company ready to move into 200 Canal View, employs 18
persons at its two Rochester offices, and wants to create an additional 30
positions. The alternative is to expand at its Atlanta location.
ย ย ย ย ย ย ย ย ย ย ย “Right now,
the company is at a crossroads,” said executive vice president John
Zimmer.
ย ย ย ย ย ย ย ย ย ย ย Job growth is
required for a company to receive full benefits of the program. It has been an
issue, however, as the positions are not appearing as quickly as expected. A
recent inquiry by State Comptroller Alan Hevesi shows that 70 percent of
companies granted Empire Zone benefits failed to deliver on job projections.
ย ย ย ย ย ย ย ย ย ย ย Another report,
by State Assemblyman Richard Brodsky, a Democrat from Westchester County, says
there is a correlation between the companies receiving benefits in Monroe
County and their political contributions to the local Republican Party.
ย ย ย ย ย ย ย ย ย ย ย In response to
the concern about job creation, attorney Michael Townsend, who represents the
joint interests of Flaum, E-chx, and Impact Technologies, said his clients have
implemented a contract with the county that guarantees a certain amount of job
growth within two years. If the projections are not met, the county can revoke
the Empire Zone designations of E-chx and Impact Technologies, according to the
contract.
In
a joint statement issued by Metro Justice, the Monroe Greens, and the
Sierra Club, a 10-point plan is offered to reform the Empire Zone program.
Among the changes are a provision that would require each participating
business to make a full, annual disclosure of the benefits received, and the
jobs the company has created. Also, the plan calls for a halt to the current
yearly boundary amendment provision that, the reformers feel, has opened the
administration of the zones to “favoritism and corruption.”
ย ย ย ย ย ย ย ย ย ย ย Empire State Development chairman
Charles Gargano, who is also a top advisor and close friend of Pataki, says the
public should not be dismayed by the program’s failure to deliver on its
predicted job growth, as it is not the only criteria in considering success.
ย ย ย ย ย ย ย ย ย ย ย “What we have to do is not
discount companies that come in to a community and are unable to create jobs
right away,” Gargano said during a brief stop in Rochester last month. He
looked forward to working with Hevesi to make necessary adjustments to the
program, he says.
ย ย ย ย ย ย ย ย ย ย ย “The whole idea is to energize
these zones with business,” Gargano said. This is done mainly through job
creation, he says, but also through other means, including the general
“economic activity that benefits the community.”
ย ย ย ย ย ย ย ย ย ย ย “It’s not true that companies
get benefits without creating jobs,” he said. “Our mission is to keep
these businesses alive during the difficult periods.”
ย ย ย ย ย ย ย ย ย ย ย As of 2002, Gargano said, 257,000
people were employed at zone businesses, and job growth in the state’s Empire
Zones outpaced the national average by 11 percent.
ย ย ย ย ย ย ย ย ย ย ย Gargano is soliciting ideas and
listening to concerns of economic development and business leaders throughout
the state. Asked what kind of feedback he heard from local executives, Gargano
said businesses seem to want more flexibility within the program.
ย ย ย ย ย ย ย ย ย ย ย “Reforms are needed because the
economy changes over time. A hard, fixed program will not work,” Gargano
said. “We have to meet the needs of the times.”
This article appears in May 5-11, 2004.
