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February 11, 2008

 

DiNapoli: New York’s Empire Zones Continue to Fall Short

Local Zones Made Limited Progress Correcting Problems Identified in 2004 Report

Local Empire Zones generally do not measure the success of their programs, and even those that do attempt to measure success don’t know if job creation data used is accurate. As a result, there’s no way to determine the effectiveness of Empire Zone tax breaks, according to a report released by state Comptroller Thomas P. DiNapoli.

The report follows up on a 2004 Comptroller’s office report which found Empire Zones were poorly administered, kept inadequate records, and did not hold firms accountable for actually producing jobs. That report also found that local zones failed to determine whether the tax breaks given to businesses were cost-effective or if businesses were reporting accurately about the number of jobs created.

"New York should take another look at the Empire Zone program," DiNapoli said. "We need to know if we're getting a bang for the taxpayers' buck. If officials representing local zones can't demonstrate that the program is working, and if local governments and taxpayers are not benefiting from a program that's supposed to generate economic development and create jobs, it calls into question the value of the program."

Auditors revisited eight zones cited in the 2004 report to determine if they complied with Comptroller’s office corrective action recommendations. The zones were located in the cities of Buffalo, Syracuse, Rochester and Yonkers; Broome County; and the towns of Tonawanda, Friendship and Islip.

Auditors found that zone officials made only limited progress in correcting the problems identified in 2004. Specifically:

  • Each zone collected data needed to determine their program’s costs and benefits but they did not verify the accuracy of the data;
  • None of the zones moved to initiate decertifications of businesses that had performance shortfalls;
    None of the zones completed annual reports that included outcome measures and comparisons to goals;
  • Only Yonkers and Friendship developed a complete and comprehensive written evaluation plan that established clear and measurable goals, and then compared actual outcomes to those goals;
    Only Friendship established a performance measurement system;
  • Only Tonawanda conducted a zone-wide cost benefit analysis to determine the effectiveness of the program – however they were unable to verify the accuracy of data they received from zone businesses. Syracuse and Yonkers partially achieved this goal, but the remaining municipalities did not;
  • Most improvements implemented by the zones came about in response to 2005 state Legislative changes. These include:
    • All eight zones conducted cost benefit analyses to help ensure that individual businesses wouldn’t be certified if the value of their tax break exceeded the value of the benefit the businesses provided to the community;
    • Each zone improved monitoring and evaluation systems to address control deficiencies; and
    • Each zone worked with the state Department of Economic Development (DED) and the Empire State Development Corporation (ESDC) to review applications to determine whether business’s projections are reasonable.

There are 82 Empire Zones in New York State. The DED works in conjunction with the ESDC to administer the program at the state level. Zone boards are responsible for administering the program at the local level. Generally, a zone coordinator administers the program on a day-to-day basis.

Click here for a copy of the audit.

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