EMPIRE ZONES FOR SALE; COMMUNITIES CASHED IN BY USING A LOOPHOLE TO HAND OUT TAX BREAKS
Beware of the consequences of good intentions. That could be the watchword for New York's Empire Zone program, which staff writers Mike McAndrew and Michelle Breidenbach have been examining for five months.
Empire Zones were created a half-dozen years ago to bring jobs and economic development to hard-pressed areas. Things haven't always worked out that way. Alert lawyers and accountants found and exploited loopholes. Some companies discovered they could simply change their names and qualify for tax breaks. Others failed to keep their job-creation promises.
One particularly haphazard way Empire Zone acreage spread was detailed by McAndrew and Breidenbach in their latest report. It seems generous Empire Zone allotments allowed local officials to "sell" leftover acreage - with state approval - to businesses outside their zones.
That's what happened in the city of Geneva, which granted Empire Zone status to the Eastview Mall, 31 miles away in Victor. In exchange for a $1.5 million payment, mall owner Wilmorite won tax breaks worth some $14 million. Not bad - especially with Victor's minuscule 2 percent poverty rate.
Similar deals went through in Columbia County, Lewis County and the city and town of Potsdam - which earned as much as $12.5 million by expanding its Empire Zone to include 21 power plants stretching into neighboring St. Lawrence County. The Texas-based owners won tax breaks that could end up being worth more than $72 million.
By the way, this information was not easy to find. The reporters had to dig - and get lucky. The lack of transparency in Empire Zone transactions is a scandal in itself.
Last year, Wilmorite sold Eastview Mall and 12 other shopping centers to a California investment trust. The same year, the state Legislature and Gov. George Pataki tightened Empire Zone rules. But the mall's tax breaks continue to flow out of state. The total estimated value of all Empire Zone tax breaks this year is $546 million. That's money state taxpayers have to make up.
You can hardly blame local officials. They saw tangible benefits in up-front payments from companies, and the state covered the tax breaks awarded.
The approach of the Empire State Development Corp., which oversees Empire Zones, is more debatable. How did this program get so far out of hand? What criteria did ESDC use? Why, for example, did it approve Potsdam's and Geneva's acreage sales while turning down a bid from Schuyler County?
Gov.-elect Eliot Spitzer says he's long been skeptical of Empire Zones but wants to hear more. Spitzer doubts much can be done about past deals, since the rules didn't include money-back guarantees.
The Post-Standard's ongoing investigation should help bring the incoming governor up to speed on Empire Zones as he charts his course.