Spitzer urged to shut down Empire Zone program

A veteran state lawmaker is calling on the Spitzer administration to shut down the state's Empire Zone economic development program, which has been criticized as providing an increasing number of tax breaks for companies that either create no jobs or were planning to increase their employment even without the government incentives.

"The program is in shambles," Assemblyman Richard Brodsky, a Westchester County Democrat told the state's two economic development czars during a hearing he called Tuesday to monitor the new administration's efforts to retool the state's economic development programs.

Brodsky said the Empire Zone program, which is scattered around 82 sites statewide, should be closed down while officials seek ways to improve it to ensure state funds - $1.9 billion over the past five years - are going to true job creation and retention efforts. He called the program "catastrophically corrupt and inefficient."

The two Spitzer officials, Patrick Foye and Daniel Gundersen, the downstate and upstate chairmen of the state's Empire State Development Corp., respectively, acknowledged a host of problems with the program, but said it should be kept in operation as changes are considered.

"Clearly, there are significant problems with Empire Zones," Foye said. "We believe, however, that it is important that the state remain open for business and that economic development activities upstate and downstate continue."

"Let's keep some of the good things, but let's be more strategic about where we're employing our resources," added Gundersen, who is based in Buffalo.

Administration officials released numbers that raised as many questions as answers about the program. Despite the problems, Gundersen said, the state has approved incentives for 200 companies so far since Gov. Eliot L. Spitzer took office in January.

Brodsky, however, said that number did not provide him "comfort" because the state did not apply any higher standards to the applications than were being used by the Pataki administration.

Originally designed to spur growth in blighted urban and rural areas, the program expanded over the years and became a tool by many healthy companies to lower their tax bills.

The Spitzer administration officials said 230,000 jobs have been retained and 109,000 jobs created in 9,800 companies doing business in Empire Zones over the past five years. But they cautioned those numbers can be misleading. For starters, the numbers are reported by the companies themselves.

Additionally, officials said about 27,000 of those jobs created were the result of companies changing their names, with the employment count of the previous company being listed as jobs "created" under the new name.

Foye also said a "significant portion" of the Empire Zone incentives provided to energy, real estate, retail and legal companies were considered "not at risk" jobs, meaning they were positions that were already on track to be created or retained with or without the tax breaks. Brodsky said such positions accounted for 30,000 of the Empire Zone jobs. Nearly 10 percent of the $1.9 billion in tax breaks and other incentives went to retailers, and 21 percent went to the real estate industry.

The Empire Zone program in 2006 cost the state $550 million, said Foye, who projected that the program's costs will grow by 20 percent this year alone.

tprecious@buffnews.com