Report: ESD fails to fully evaluate most of its economic development programs

Empire State Development spends nearly $2 billion annually in taxpayer money for loans, grants, tax credits and other incentives to companies and projects, but fails to properly evaluate most of its programs to determine if they actually are boosting the state’s economy, a new audit from the state’s comptroller found.

In a report released Monday, New York state Comptroller Thomas DiNapoli noted that ESD administers some 57 programs with more than 5,000 associated projects that state laws and regulations require the public authority to evaluate every two to four years. Almost without exception, the audit found that ESD does not monitor or evaluate its economic assistance programs to determine whether goals are met, identify program successes and failures or apply successful strategies to other programs.

That creates uncertainty about program effectiveness, according to the audit.

“Empire State Development has an important role in helping New York’s economy grow and create jobs, especially now as we work to recover from the COVID-19 pandemic. However, the authority has not fully evaluated which programs work and which don’t,” DiNapoli said in a statement. “ESD does not use the data it collects to assess the effectiveness of its programs and see if the billions of dollars spent are creating opportunities across the state. The agency must do a better job of analyzing whether these programs are achieving their goals and share this information with the public.”

ESD officials said they have reviewed data for their Excelsior Jobs Program and START-UP NY Program that showed positive results and led to some changes in those programs. However, when auditors asked for supporting documentation showing how data was analyzed, ESD was unable to provide it.

Auditors also found that while ESD has migrated, or plans to migrate, many of its programs to a central database (Dynamics), others remain tracked elsewhere, and only 37 of its 57 programs were fully tracked in the Dynamics system. Having its programs and all associated projects in a centralized project tracking system would allow for greater efficiencies in compiling and reporting on relevant data, auditors said.

The audit did find that ESD does evaluate the economic impact of the film industry and that its evaluation found that the industry spends significant dollars throughout the state that generated nearly $1 billion in tax collections. As a result, ESD recommended that the state Legislature reduce the film tax credit from 30 percent to 25 percent of eligible expenses to ensure the long-term viability of the program.

ESD also evaluates its business and tourism marketing efforts to measure the effectiveness of its marketing programs, the audit found. ESD used the results to optimize marketing plans on an ongoing basis.

But the audit, which covered the period from Jan. 1, 2016, through April 16, 2021, also found that “despite the fact that ESD collects relevant data, beyond these specific program evaluations, ESD management does not see the value of conducting similar types of analyses or evaluations of any other of its economic assistance programs.”

ESD officials said analyses and evaluations were performed but were unable to provide documentation of such evaluations, according to the audit. ESD officials said they use a multi-level process to evaluate programs and individual projects are evaluated and audited to determine if the project’s goals are met, including employment and private investment goals. Officials said ESD issues more than 50 quarterly and annual reports each year, which are posted on the organization’s website.

“However, while providing valuable program information, most of these reports do not clearly evaluate program effectiveness,” according to the audit.

In ESD’s response to the audit, the agency noted that it has since launched a Database of Economic Incentives, which provides three years’ worth of active projects that will continue to be added to and updated quarterly. The database tracks project status, compliance status, job creation commitments and actual jobs created, among other things.

ESD officials also responded to the audit’s assertion that the agency does not conduct enough evaluations of its economic assistance programs by stating that the assertion is incorrect.

“ESD regularly engages in both project-level and program performance evaluations and routinely reports the results to the public,” ESD officials responded, to which DiNapoli reiterated that ESD was unable to provide evidence of any other evaluations or assessments beyond those referenced in the audit.

DiNapoli went on to say that ESD’s contention that it conducts and documents program assessments does not align with comments from legislators during annual budget hearings.

“Specifically, during the 2021 Executive Budget joint legislative hearing on economic development, the Senate Finance Committee questioned ESD on whether or not it evaluates the use of taxpayer dollars that go into programs and the new economic activity and new job opportunities created for the state,” DiNapoli wrote in his response. “Furthermore, the Senate Finance Committee states, ‘I’m just not sure that if we take a hard look, we’re going to be so happy with the results. But the fact is if we don’t take a hard look, we’re not going to learn from the mistakes we’ve made either.’”

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