Following the lead of my two colleagues, Garry Douglas of the North Country Chamber of Commerce and Michael Tucker of the Center for Economic Growth, I also would like to add my support for the recently enacted Excelsior Jobs Program.
Admittedly, there have been some grumblings surrounding the program. The purpose of this letter is to speak to a couple of these issues and to suggest that we should take some time to allow for the roll-out and impact before casting judgment.
Most of the information on Excelsior that we collectively have gleaned to date comes from the series of commendable presentations provided by Empire State Development's CEO, Dennis Mullen, to various business and economic development audiences held in various locales throughout the state. In the two sessions that I attended, I felt that Dennis and the ESD regional staff went out of their way to present an honest assessment of the old program and an overview of the particulars of the new program, and defended well the rationale for change.
Most agree that the Empire Zone program needed change. I applaud that it was scrapped rather than tweaked. Over the years, it is fair to say that there had been some abuse of the Empire Zone by certain sectors. Although in certain cases the program may have been the key linchpin in landing a business location decision, I tend to side with those who suggest that roughly 60 percent of the projects that received benefit from the Empire Zone Program would have happened anyway. What a terrible waste of taxpayer money! If the project would have gone forward without the subsidy, then every dollar that is unjustifiably provided as a tax credit, abated or granted, comes from somewhere. All it means is that it must be offset by the taxes that other folks pay, in order to attempt to balance the budget.
So under the Empire Zone we had a business incentive program which had limited effectiveness, a gerrymandered coverage pattern, was administratively cumbersome, tended to pit New York communities against each other and conceivably may have paid out more than it brought in.
Out of this backdrop comes the Excelsior Jobs Program. It appears to have left behind its predecessor's weaknesses. And I suggest that in this economy, and from a sound public policy standpoint, it does make sense to narrow the scope ($), refocus the lens (geographic) and lower the bar (jobs).
Here are some key aspects of the Excelsior program that suggest to me that it can be an impactful economic development tool in the ESD toolkit and promote sound economic development policy.
1. Wider geographic footprint: The program has statewide application; thus, certain areas are not automatically excluded from the program.
2. Monetization of tax credits: Businesses that receive tax credits under the program will be allowed to refund unused credits for cash. This is a huge benefit to emerging high-technology companies that have negative tax liability and tax loss-carry forwards.
3. Lower thresholds: The program reduces the high job creation and investment requirements that existed under the Empire Zone program. This feature has clear benefit to the more rural regions of New York state and recognizes that all capital investment made is not inherently job-creative.
As Michael Tucker has said in an earlier op-ed piece, the Excelsior program is much more technology oriented in its approach. Clearly that is a good thing for the North Country as we begin to build out the broadband capacity of the Internet through our region.
When it comes to business attraction, let's remember we are competing with the world. Our incentive programs should be competitive with other states, relatively easy to understand and administer and not break the budget. In an interesting twist, Garry Douglas has earlier pointed out that in his experience, the high job-creation thresholds in the Empire Zone actually acted as a disincentive to Canadian investment across the border in the U.S.! Thankfully, the Excelsior thresholds are lower.
The comments that strike home a little deeper are coming from those who say the Excelsior program will have marginal impact on business development in the towns and villages or other permitted areas within the Adirondack Park. In all honesty, I tend to agree. But I think we would all agree that the rules of the new (or the old) incentive program are not the core issue here. This is a broader topic of discussion. Having said that, let's instead focus on what we can use. I suggest we look at a tool in the ESD belt that has the potential for immediate impact and fits the fabric of the Adirondack economy perfectly.
As part of this year's budget approval, New York state created the new Small Business Revolving Loan Fund. The Revolving Loan Fund is a direct result of Governor Paterson's Small Business Task Force, which I and other practitioners and business people served on, hoping to address the needs of the small business community and promote the growth and development of small businesses in New York. Out of this grew the small business loan fund. This fund, which is supported by $25 million in state funds, will leverage a minimum of $25 million in private matching funds from selected lending institutions. We feel this fund will provide capital to the state's small businesses that may otherwise be having difficulty accessing the regular credit markets. We also feel that here in the North Country the fund should be administered by an agency based in the Adirondacks which has administrative capacity, a demonstrated track record of deploying capital and technical assistance and understands the unique challenges of the Adirondack Park economy.
As I wrote earlier, let's give the ESD Excelsior programs a fair chance. The Excelsior Jobs Program is clearly a step in the right direction. We would suggest that ESD measure impact frequently and be prepared to move quickly to react to changing economies and markets. We must craft and shape our economic development incentive programs to keep pace with the speed that business moves in the digital age.
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Michael Conway directs the Adirondack Economic Development Corporation, based in Saranac Lake.