An astute reader brought to my attention an article in The New York Times, “State Warns Companies in Tax Deals“:
ALBANY, July 30 — Officials alerted about 3,000 companies on Monday that they could lose the tax breaks they received under the state’s enterprise zone program because they had failed to create jobs or invest in their areas as promised.
Warning letters sent to the companies reflected the first significant auditing and enforcement effort in the two-decade history of the program, the Empire Zones. During that period, the program has transformed from an effort aimed at pockets of extreme urban poverty to an all-purpose business program offering tax breaks to companies statewide, costing taxpayers $3 billion since 2000 alone.
Nearly 10,000 businesses are certified to participate in the program, according to officials at the Empire State Development Corporation, the public benefit corporation that oversees the program. Three thousand of those businesses were issued letters indicating that they had met less than 60 percent of their job creation or investment goals.
The New York Empire Zone program differs from the California Enterprise Zone program in that business must qualify and commit to certain benchmarks for investment or job creation. In California it is the zone itself that makes commitments and sets goals. It seems that no matter how these kinds of programs are designed, they are inherently difficult to measure:
A 2004 audit by the state comptroller of three New York City zones found that administrators had routinely failed to analyze whether the tax credits provided under the program were cost effective, or whether the businesses receiving them had supplied accurate information to state officials.
The New York program certainly has some detractors, “‘The program is corrupt and ineffective,’ said Richard L. Brodsky, a Westchester County assemblyman who has called for it to be temporarily shut down.” Brodsky went on to say, “This is a program that socialists would be embarrassed about.” Does he mean to promote socialism as New York’s economic development policy?
