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Debate surrounds bill to tighten job promises

When the city of Rochester lured Monro Muffler Brake Inc. to Holleder Industrial Park last year, it gave the company generous tax breaks tied to specific job-creation promises.
If the jobs do not materialize, Monro Muffler’s tax breaks will evaporate.
Now, a measure before the state Legislature would hold all firms receiving economic development benefits from the state to a similar guarantee.
The proposal follows a similar bill the Legislature passed but Gov. Mario Cuomo vetoed last year.
In theory, the state already extracts such guarantees, but it is not clear how well they are monitored or enforced.
The bill–co-sponsored in the Assembly by Majority Leader Michael Bragman and Assemblywoman Eileen Dugan, D-Brooklyn, and in the Senate by Sen. William Stachowski, D-Buffalo–seeks to create uniform monitoring and enforcement policies for state agencies distributing economic development boons.
New York’s increasingly limited resources demand higher accountability, the bill’s sponsors say.
Indeed, Bragman’s concern over the issue was sparked by several Syracuse-area firms that not only failed to create jobs after getting economic development deals, but actually cut staff, Bragman aide Darren Dopp said.
The bill’s critics counter that the measure is not needed and could discourage businesses from locating or expanding in New York.
Each year the state dispenses millions of dollars in loans, grants, loan guarantees and tax concessions to private businesses on the theory that such aid will pay off in jobs for state residents.
In some cases, incentives are dangled like carrots to attract firms to move from other states or to locate new facilities here. But in other cases, they serve merely to keep companies already here from leaving.
The state Department of Economic Development keeps no records on compliance and does no enforcement, leaving these matters to individual agencies such as the Urban Development Corp., said Eric Scheffel, Economic Development Department spokesman.
The UDC routinely monitors deals for job-creation compliance and extracts penalties from firms that do not meet obligations, spokeswoman Lorraine Kreahling said.
If a company promises to create 12 jobs in exchange for a low-interest loan, for example, interest rises to the market rate if the jobs are not created within three years, she said.
However, monitoring and enforcement are done only on a case-by-case basis with no records kept to show how jobs promised compare to jobs created. The state cannot tally how many firms have failed to meet obligations or whether any have repaid incentives after failing to comply with job-creation promises, Kreahling said.
“We ought to have a much better way of assessing how those dollars are being used,” said Assemblyman Joseph Morelle, D-Irondequoit.
Local economic development officials said the Bragman-Dugan bill could do more harm than good, however.
To businesses that already see New York as overregulated, such provisions would be just one more reason not to locate here, said Patrick Rountree, director of the Livingston County Industrial Development Agency.
Employers fulfill the vast majority of job-creation promises they make, he believes. In Livingston County, only one firm out of 50 that received tax breaks over the last eight years failed to create jobs promised in return, he said.
Jeffrey Carlson, Rochester City Hall chief of staff, echoed Morelle, saying taxpayers have a right to know that economic development money is being well-spent. But, like Rountree, he saw potential problems with the Bragman-Dugan bill.
If market conditions unexpectedly go against a company, for example, it should not be held responsible for a promise made in good faith, he said.
“The key to anything like this working is flexibility,” he said. “If the law is a straitjacket, it won’t work.”
A current draft of the bill states agencies can excuse firms from penalties if promises are not met due to circumstances beyond a company’s control.
Dopp said the measure looks likely to pass again in the Senate and Assembly, but Gov. George Pataki has yet to indicate whether he will support it or not.
Pataki voted for the measure in the Senate last year.
A March 7 public hearing on the bill is scheduled before the Assembly’s Standing Committee on Economic Development in Albany.

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