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Strengthen controls on business tax breaks

Strengthen controls on business tax breaks

Comptroller's audit of Excelsior jobs program spotlights flaws with all economic development program

A state comptroller's report issued Thursday that rips into yet another flawed state economic development program should serve as the template for reform into how tax money is used to support business.

Less than a week after it was reported that the state's highly touted Start-Up NY program had produced only a paltry 408 jobs over the past two years, Comptroller Thomas DiNapoli's office released a scathing assessment of another incentive effort, the Excelsior Jobs program.

Under the program, created in 2010, the state offers four different types of tax credits for "strategic businesses" like tech companies and manufacturers.

The comptroller's office, in a year-long audit of the program, found giant gaps in accountability allowed by the program's administrator, Empire State Development (ESD).

In particular, the comptroller chastised ESD for accepting without question the job creation numbers self-reported by the companies and for not independently verifying whether the companies met the job-creation goals for which they received the tax breaks.

In some cases when companies didn't meet their threshold, ESD simply went back and lowered the job creation goals to the actual number of jobs created.

Of 25 companies sampled by the comptroller's office, ESD authorized $4.84 million for 39 tax credits. Of those, ESD couldn't support the job creation and investment benchmarks 13 percent of the time, costing taxpayers $214,000. In four cases, ESD realigned the job creation standards downward, costing taxpayers more than $358,000 in lost tax revenue. One company whose job numbers were revised downward closed after receiving $556,000 in tax credits.

That's over $1.1 million in wasted tax credits.And the 25 companies reviewed by the comptroller's office only represents a small sample of the 434 companies in the program. Imagine how much more tax money is being wasted.

Agencies accept the company's numbers, don't challenge or verify the numbers, don’t provide accurate or updated numbers in public reports, and don't aggressively attempt to recoup the tax credits from companies that don't meet their quotas.

This kind of thing seems to go on in every aspect of economic development in New York, including with industrial development agencies and economic development corporations.

Locally, the comptroller has in the past levied some of the same criticisms regarding oversight and transparency at the Metroplex Development Authority, Schenectady County’s most significant economic development agency.

DiNapoli’s office has recommended changes for Empire State Development that must be adopted by all county and municipal organizations that grant business tax exemptions or grants.

They must demand documentation that corroborates the job and investment claims before issuing the tax breaks. They must ensure the tax calculations are correct before authorizing the breaks. And they must apply standards to modify tax breaks when a business' circumstances change.

For each dollar of a tax break the state gives out, it must collect another dollar from somebody else. Guess who pays. The rest of us.

This is our money. Government officials must do a much better job safeguarding it.

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