Schenectady County

Report: $7M results in few jobs

More than $7 million in state taxpayer money was used over the course of one year to add just 31 job
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More than $7 million in state taxpayer money was used over the course of one year to add just 31 jobs in Schenectady County, according to the 2007 Empire Zone annual report.

The Empire Zone businesses, which are primarily located in the city, spent $54 million to expand or start new companies in exchange for $7.2 million in tax reimbusements and sales tax exemptions, the report said. It refers to activity from 2006; the next report is expected this summer.

The report makes it clear that Empire Zone benefits successfully encouraged some businesses to relocate and invest in this area. But the report also calls into question the other goal of the program — job growth, particularly among residents in the city’s “economically distressed” areas of Hamilton Hill, Vale and Central State Street. Very few zone businesses are located in that area and in the zone as a whole, almost none of the businesses offered statistics on how many area residents they employed.

The Empire Zone businesses do employ many people: Countywide they had a total employment of 5,364 workers at 167 companies in 2006, according to the report. But state officials have questioned whether such figures are accurate after discovering widespread misstatements in other cities’ reports, and have criticized the statewide program for not fueling enough job growth each year.

In Schenectady County, there was an increase of just 31 workers over the previous year, despite the addition of many new businesses with goals of regular job growth. Some of those businesses apparently never even opened, including Camelo Donuts. Others quickly closed — including Sushiart Japanese Restaurant — and still others never met their development goals. Among the latter is the Minority Contractors Technical Assistance Program, MCTAP, which still employs just two people and has yet to open its training center after five years in the program.

OUTLOOK IMPROVING

There may be better news on the jobs front in the next report, because several zone businesses that were in construction in 2006 — including the Hampton Inn and Movieland — will be able to point to job creation in 2007. Movieland, which opened in May 2007, employs five full-timers and 10 part-timers. The Hampton Inn, which opened in June 2007, has hired about 24 full-timers and six part-timers. In Rotterdam, Railex has opened with Empire Zone benefits and has about 140 employees. Each business pays its taxes, which are then reimbursed by the state.

“There are a lot of people,” said county economic development chief Ray Gillen, who chairs the Metroplex Development Authority. He expects the 2008 report to show many more jobs.

He argued the 2007 report at least showed that developers are investing in the area.

“The investment numbers are pretty good,” he said, noting that $54 million was spent for $7.2 million in tax credits and exemptions. “It confirms the level of investment we’ve been saying. There’s substantial new investment.”

But the report also lists several new additions to the zone that didn’t expand or add any jobs. Among them are Acme Press, which is 85 years old and has nine full-time workers now — but was listed as having 11 when it was added to the zone in 2006.

Sepsa North America, which relocated to Schenectady in 2006, has 33 workers now, one less than it lists as having when it came to the city. It had promised to employ 100 workers by the first quarter of 2008.

One success story could be Villa Italia, which moved to Schenectady from Rotterdam partly because of the Empire Zone benefits. Walk-in business has increased by more than 60 percent since the move to the city’s downtown.

As business grew, so did the jobs. The pastry bakery had 37 full- and part-time employees when it opened in 2005. Now it has 52 employees, of which roughly half are part-time, owner Bob Mallozzi said.

He spoke highly of the tax credit program, in which the state reimburses him for the local taxes he pays.

“It’s been really beneficial,” he said. “It was definitely part of our decision to move here … We exceeded the amount we needed to hire by a lot.”

He is also one of the few employers who tracked the number of employees from the city’s distressed area. Two of his workers live in the Hill-Vale neighborhoods.

ORIGINAL PLAN

The original purpose of the state’s Empire Zone program was to encourage job creation and business growth in economically distressed areas. The goal was for businesses to relocate to such areas and hire employees who lived there.

But the Empire Zone philosophy has changed. According to the state’s development department, the zones are now supposed to “attract new businesses to New York State and to enable existing businesses to expand and create more jobs.” The zones have been widely expanded; in Schenectady County, businesses can now locate in Glenville and Rotterdam as well as the city.

In response to criticism about the effectiveness of the program, legislators have recently tried to rein in the Empire Zone program in many ways.

Mayor Brian U. Stratton has tried to push through a rule that would require Empire Zone businesses in Rotterdam and Glenville to hire a percentage of their workers from Schenectady’s distressed areas.

State legislators also tightened the geographic rules for the program to stop municipalities from extending their zone well beyond the distressed areas. Now there can be just three non-adjacant zones in each area. The change forced Schenectady to jettison some of its zone areas — the city had extended its zone to virtually every commercial property in Schenectady, although businesses could not claim the benefits unless they projected substantial investment or job growth.

Most recently, state Comptroller Thomas DiNapoli said such reforms were not enough.

He said the program isn’t monitored closely enough to determine whether it’s effective at retaining and attracting jobs.

“New York should take another look at the Empire Zone program,” DiNapoli said in February. “We need to know if we’re getting a bang for the taxpayers’ buck.”

A spokesman for the comptroller’s office reiterated that this week, saying the taxpayers need to closely review the Empire Zone reports to decide whether their money is being well spent by the state.

“We have advocated for increased transparency and accountability so that public policy makers, local officials and most importantly the taxpayers can understand and determine whether the benefits provided are cost-effective,” said spokesman William Reynolds.

Benefits breakdown

2006 Empire Zone benefits in Schenectady County:

u $3.6 million in real property tax credits

u $1.08 million in wage tax credits

u $956,000 in tax reduction credits

u $935,000 in investment tax credits

u $650,000 in sales tax exemptions

u $15,500 in employment incentive tax credits

Source: The 2007 Schenectady Empire Zone report

Categories: Schenectady County

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