The state of New York, which lost 122,000 private sector jobs last decade, has botched its latest attempt to subsidize growth. After months of foot-dragging, the
The report summarized the first year of a program that Cuomo launched in 2014 to create tech clusters in the state, giving tax breaks to tech-related businesses that open near college campuses. The state has already spent $47 million on advertising, and overall public expenditures for the program’s first three years are expected to be $323 million.
“The nine out-of-state companies,” wrote City Journal’s E.J. McMahon, “have pledged to create 451 jobs based on a projected five-year investment of just $4.3 million, or less than 10 percent of the program’s first-year ad expenditure.”
These dismal results are no surprise for anyone who has followed the ESDC. This February, a report by state comptroller Thomas DiNapoli found that the corporation has a longtime record of failed speculation. In 2014, its 50 programs cost taxpayers $1.3 billion (not including the voluminous tax breaks it grants to companies). It has little means for collecting return revenue, outside of bond interest and a hotel tax, but instead relies on local, state and federal grants. It helped create or retain 14,779 jobs, at a cost to taxpayers of $87,962 per job. That year, the agency increased its debt by 20% to $10.7 billion, with interest payments now accounting for 37% of expenses.
The reason for the failure, says the report, is that the ESDC runs programs without checking whether they “have succeeded or failed at creating good jobs for New Yorkers or whether its investments are reasonable." Instead, these programs are an alphabet soup of bureaucracies that advance popular political causes, without worrying about returns. These range from START-UP NY, to the Minority and Women Revolving Loan Trust Fund Program, to the Healthy Food & Healthy Communities Fund, which encourages grocery stores for poor areas, to the Better Buffalo Fund, which subsidizes new development in a city with an overcapacity of housing. Other times, the ESDC subsidizes upscale development, for example by providing rent reduction at the World Trade Center and streamlining private property condemnations at Brooklyn’s Atlantic Yards. The report also notes that the ESDC, whose board is appointed by the governor, is a bastion of political patronage, with almost a quarter of the 290 employees making six-figure salaries.
The corporation thus mirrors other public development agencies with records of waste and cronyism. In neighboring New Jersey, Governor Chris Christie has used redevelopment money to lure businesses into struggling cities. This has included money for a Philadelphia 76ers practice facility in Camden that doesn’t even generate revenue; a ‘vertical farm’ company in Newark that has never reported profits; and an Atlantic City casino that went bankrupt in under two years. Typical investments by economic development corporations elsewhere include notoriously underperforming projects like stadiums, convention centers, and luxury hotels and condos, many of which are plopped into hollowed-out inner-city areas where no real demand for them exists.
If Cuomo wants to grow jobs in New York, he should expand upon his mild efforts to reduce the state’s tax burden, which is the nation’s highest when combining state and local rates. The ESDC contributes to this over-taxation by adding to statewide debt and expenditures, and thus carries its “economic development” label ironically, since it is a net loss to taxpayers. The first year of START-UP NY only added to the agency's status as a boondoggle.
