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New York StateWe now know more about how much Start-Up NY will cost taxpayers.

The state estimates the lost revenue will be $323 million through March 2017. The program allows businesses to pay no taxes for 10 years on property, sales or mortgages. Their employees don’t have to pay taxes.

The state’s figures are not the only costs here. Municipalities will lose property tax revenue. Development could be shifted from one town to the town that has the tax-free incentive. For example Rochester may have trouble filling up its vacant buildings because the new businesses are flocking to SUNY Brockport’s campus.

Do you honestly think this will pay for itself? Let’s say the average job pays $50,000. $323 million divided by $50,000 equals 6,460 over the next four years. But those people wouldn’t pay any taxes for 10 years. And their employers wouldn’t pay any taxes for 10 years.

Guess who pays for these new jobs? We do. Someone has to make up that $323 million.

It’s possible these jobs would have been created without the incentive if the state adopted a more even approach to reducing business costs. The state has been throwing money at businesses for a long time – with little success. It just gave a Batavia company $500,000 for an expansion and it’s not clear if the company needed the money.  It just gave Xerox $500,000 for its toner expansion in Webster, after Xerox threatened to build it elsewhere. (Right out of Xerox playbook.)

Astoundingly, Lt. Gov. Bob Duffy suggested Bausch + Lomb might be able to take advantage of Start-Up NY. The company is on the verge of axing hundreds of Rochester workers and we want to reward it?

Meanwhile, New York leads the nation in layoffs this year.

 

Links of the Day:

 

– Buffalo teachers are tired of cleaning up after students who eat school-provided breakfasts in class. They filed a grievance. (I think food belongs in a cafeteria.)

– Is Greek yogurt in schools just an industry subsidy arranged by Sen. Chuck Schumer?

Here’s where drones fly Upstate.

– How cast iron skillets are made at a small Syracuse factory.

Bubba Watson’s bizarre Rochester PGA video.

– Princeton, N.J. is requiring students to wear headgear when player soccer, lacrosse and field hockey, even though experts say it will do o good.

Movie CameraNew York State is giving $4.5 million to an unproven Buffalo start-up that will open a visual effects studio and train workers in the field of post production. The gift – er investment – is supposed to create 150 jobs.

Empire Visual Effects and its workers may not have to pay any taxes if it qualifies for StartUp NY, as it is partnering with Daemen College.

What’s more, movies filmed in New York can shave 45 percent of their costs through the state’s tax credit program.

At the urging of the state, Rochester allowed Amazing Spiderman 2 to shut down Main Street for 10 days. The city didn’t charge one cent beyond its own costs, including police and fire. A friend who works in Hollywood was shocked the city levied no fees and made no profit. Meanwhile, Main Street businesses got stiffed by the production and lost thousands of dollars.

But it’s Hollywood, so I guess it’s okay. Movies are so cool, aren’t they?

Here’s the thing. If (and that’s a big if) the state has to give away money to create jobs, I’d prefer it acts as a venture capitalist in the science and technology fields. Those jobs pay well and could fill up empty factories. It’s been a real struggle in Upstate New York to get discoveries out of the lab and into the marketplace.

Innovation will be the key to our economic growth. Not call centers, casinos and movies.

 

Links of the Day:

 

– Wegmans will allow part-time workers to work more hours to keep health benefits.

– Wegmans could be affected by a Washington D.C. proposal requiring large retailers to pay workers $12.50 an hour. Would the chain abandon plans for the market?

– Jean-Claude Brizard’s Chief of Staff in the Rochester City School District has been forced to resign from the superintendency in North Syracuse. Kim Dyce will get a nice payout. Why is it that superintendents are the only public officials who get golden parachutes?

– The state education commissioner is ordering Buffalo schools to send kids to BOCES because schools are so bad. Why is he only taking this action in Buffalo?

Cuomo - 220X165As Governor Andrew Cuomo tours the state touting his Tax Free NY plan, it’s worth noting nothing is ever free.

His plan would allow private start-up companies that locate at select colleges to pay no income, property or sales tax. Cuomo believes this would spur investment and create jobs.

There are several problems with this approach. First, the rest of us will be paying the taxes these companies are avoiding. Second, the plan hurts municipalities desperate to fill vacant office space and generate property tax revenue. Third, competing businesses get no such benefits, creating an unequal playing field. Fourth, the program could invite abuse. 

A report out this week claims doling out tax incentives in the name of economic development has had dubious benefits in New York State, but has cost taxpayers $7 billion. Critics say trying to lure jobs from other states is nothing but a costly shell game.

Economists across the political spectrum are extremely skeptical of Tax Free NY. The Post-Standard reports it’s unprecedented:

(Tax Foundation’s Scott) Drenkard said such targeted tax breaks make the tax system unfair and ultimately hurts, not helps, businesses.

“Carving out special tax breaks for certain favored businesses is destructive to the economic playing field,” Drenkard said. “A much better option in the long run is to go with broader tax bases and as low a tax rate as you can make while still maintaining necessary government services.”

The right-leaning Empire Center in Albany criticized the program for similar reasons.

(Syracuse University Professor John) Yinger says virtually all the research he has seen, and that he and his students have conducted, on targeted tax breaks shows they simply don’t work — especially those that hope to attract businesses in from other states.

“In New York we have a dizzying array of tax breaks with no evidence they help, and now here’s a new version,” said Yinger, who teaches courses in public budgeting and researches the effect of taxes upon behavior. “I think it would be just be another source of inequity in our tax system and would do nothing to help promote economic development. You’d do much better improving our schools and infrastructure than giving tax breaks to businesses who would be in the state anyway.”

 

Links of the Day:

 

– New York found “shocking” violations at Rochester area daycare centers.

– “In Monroe County, the media coverage of trials is a patchwork, depending to a degree on the whims of a judge.” 

– ABC News profiled a tough school in Philadelphia. This could have been written in many urban schools across the country, including Rochester.

– A teacher was reprimanded for telling students they have a constitutional right not to fill out a school survey on their drug and alcohol use.

– Another sign the U.S. war on drugs is a big failure is the falling price of illegal drugs on the street. 

Immigrants subsidize, rather than drain, Medicare.

– This is surprising. More people are cutting the cord on home Internet than television.

Garden Aerial is for real.

 

Rendering of College Town

Rendering of College Town

 

College Town is taking shape. At a groundbreaking ceremony this week, the list of tenants was named:

  • 150 apartments
  • Barnes & Noble
  • Moe’s Southwest Grill,
  • Corner Bakery and Cafe
  • Flight Wine Bar
  • Benucci’s
  • Saxby’s Coffee & Yogurtland
  • Flower City Provisions
  • Hilton Garden Inn & Conference Center

The $100 million project will also have a 1,560-space parking garage.

The project got a $20 million government loan, to paid back with money that would have gone to the city’s property taxes. It also benefits from $17 million in infrastructure improvements and a $4 million state grant.

The project claims it will generate $49 million in sales and income taxes over the next 10 years. That kind of math assumes we weren’t going to go out and spend our money elsewhere in the community. It assumes the 320 workers wouldn’t have found other low-paying retail jobs. Retail is not good economic development.

The number to look it as how much College Town will be paying in property taxes. Its PILOT calls for $4.8 million over the next 10 years. Not enough for the city to recoup its investment over that time period. (At the end of those 10 years, the roads will probably need repaving, too.) Meantime, the city is crying to Albany that it can’t raise enough revenue in property taxes.

I truly believe this project will be wonderful for the University of Rochester and Mt. Hope neighborhood. But given the fact the retail space is already leased out by tenants catering to a well-to-do crowd, it’s hard to believe this project couldn’t have happened on its own without such heavy taxpayer investment.

Links of the Day:

 

– Many students struggled with the new state tests and couldn’t finish.

A Buffalo suburb gets hip to public transit.

Just call it “The Wire: Albany Edition.”

– In Gloversville, Sno Cone Joe is charged with stalking Mr. Ding-A-Ling.

– I was a guest on The Wease Show and talked about the other side of the Spider-Man shoot. Listen here.

“The Amazing Spider-Man 2” has not been so amazing for everyone.

Main St. between East Ave. and St. Paul was open to pedestrians for a time today. It looked like a ghost town. There wasn’t a single person sitting at the Liberty Pole. Shops in the area were empty.

Main and Clinton was dead on Thursday around 1:30 p.m.

Main and Clinton was dead on Thursday around 1:30 p.m.

The owner of a clothing store at Main and Clinton cursed when I asked him how business has been since filming began. Furious, he said the production offered him $1,000 for the week. He showed me a ledger showing he makes more than double that amount. He makes most of his money the first week of the month, when people get their welfare checks. Many of his customers take the bus, but the buses have been rerouted to Broad St.

“Can you help me?” he asked. “Should I get a lawyer?”

Newal Shoibi owns a minimart next door.

“They treat us like we’re homeless,” Shoibi said, saying the production staff offered him nothing. Shoibi, too, was angry.

A little further down at Metro Market, the owner decked out a back room with a Spider-Man theme. A flat-screen TV played the first Amazing Spider-Man movie. No one was watching. The room was empty. The owner said she’s lost business, but she remains hopeful people will stop in. In the meantime, she hired a man to dress as Spider-Man and hand out ad flyers and pose for pictures for $10 a pop.

Panini's was empty.

Panini’s was empty.

Across the street in the Alliance Building, Panini’s was empty. The owner sat at the register looking defeated. He said business has been terrible. He doesn’t know whom to call for help.

On State Street and in First Federal Plaza, the story is the same.

Charlie Abiad, who runs a hot dog stand outside the County Office Building, set up outside City Hall this week. The film reneged on an offer to rent his cart for $1,000. He said he doesn’t think he’ll lose money at his temporary location, but he’s worried.

Some businesses, including hotels, are getting a bump. But others, particularly ones that serve low-income bus riders,  are getting kicked in the gut. 

Speaking of bus riders, they’re lucky the weather has been nice so far. They have to stand on Broad Street for transfers, where there are no shelters or benches. There’s no safe place to cross the street in the middle of the long block, where the buses are lined up. People, including children, are darting in front of parked buses into traffic to make their connection.

This is all happening because the city granted the film crew unprecedented access to Main St. and surrounding streets for 10 days. The production dictates what roads are closed off and gives less than 24 hours notice. Citizens have never been so restricted from roaming freely in downtown Rochester for such a length of time. People have been told they cannot cross the street or exit buildings. It’s still not clear how much money the city charged to shut down its main thoroughfare.

We have discussed the why the film is not likely to provide any lasting economic benefit to Rochester. We have discussed taxpayer support for this production and others. (We’re all subsidizing the $600,000 in local spending the film crew anticipates.) We haven’t really discussed the wisdom of shutting down Main St. 

By allowing the movie to commandeer Main St., the city picked winners and losers. Sure, it’s cool. But at what cost?

Links of the Day:

– A beautiful and historic Buffalo church needs millions of dollars in repairs. Its fate is uncertain.

Xerox still makes printers in Webster. These are way better jobs than in the company’s call centers.

– Xerox and Harris are on the list of highest CEO to worker pay ratio.

– Cell phone thefts are a huge problem, but the cell phone industry isn’t interested in finding solutions. (They make money when your phone is stolen.)

Movie CameraNew York recently announced ‘Amazing Spiderman 2’ will be filmed entirely within the state. A car chase scene will be shot in Rochester. While it’s cool to envision Spiderman chasing bad guys around the Inner Loop, we might wish this production stayed in Hollywood.

‘Spiderman’ will qualify for state tax credits that can shave 30 percent off production costs. If the tax credits exceed the amount in taxes owed, the movie gets a refund check. New York’s tax credit program will cost $420 million this year. Do you know who pays for these tax credits? We do.

What’s the benefit?

The Tax Foundation says we don’t get much in return. The group found taxpayers get back less than 30 cents for every dollar of spending. The jobs created are mostly temporary and given to nonresidents.

Massachusetts found its film tax credit program cost more money than it brought in and created very few jobs. A Boston Globe columnist writes:

The Massachusetts film tax credit program has been a flop, a taxpayer rip-off that enriches one of the nation’s most profitable industries while choking off funds from more pressing public needs….

Film tax credits are based on a kind of voodoo economics — a faith that the more revenue the state manages to lose to Hollywood, the better off the public will end up. “Lawmakers understand that cutting income tax rates from 6 percent to 5 percent will cost the state revenue,” economics writer Josh Barro observes, yet they imagine “that cutting the tax rate on film productions to negative 25 percent or 40 percent can pay for itself.”

Yet, New York lawmakers are about to pass a budget that ups tax incentives to 40 percent for Upstate productions. It’s long past time the state do a serious, independent cost-benefit analysis of this program. But that’s not likely, since the state won’t even break down where the tax credit money went.

Update: The state has agreed to reveal how tax credits are spent on every movie and to an economic impact study!

Links of the Day:

Costco is looking at sites in Rochester and Albany.

– Batavia firefighters get probation for acting as bookies. The cop investigating them placed bets.

21 graphs that show American health care prices are ludicrous.

A few days after the New York Times published a blockbuster investigation on corporate subsidies and their dubious benefits, Governor Andrew Cuomo announced a $50 million investment in a company, Albany Molecular Research, Inc., bringing 250 jobs to Buffalo.

That’s $200,000 per job. The state will pay for $35 million in new equipment and $15 million in lab space. All of this will benefit a private company.

AMRI has lost money for three straight years. It’s cut jobs and reduced facilities. Aside from the question of whether government should be in the business of providing such large subsidies, this a very clear roll of the dice.

“At first glance, this is not a stock I would recommend to a client,” said Brighton Securities President George Conboy.

Cuomo has promised Buffalo $1 billion in economic development money. We’ll likely see more of these announcements. Meanwhile, other regions and companies of the state have to compete for grants. This is government picking winners and losers.

In Buffalo, the state better hope it picked a winner. There are no guarantees.

Links of the Day:

– Zip lines, horseback riding, rock climbing coming to downtown Niagara Falls?

– Dubbed “Skleinos” by Albany media, new state senate leadership structure is mocked by the New York Post as “banana republic buffoonery.”

“We relentlessly build communities that aren’t safe to walk in.”

– Unionizing workers at the bottom of the pay scale will be difficult. But the alternative to raising wages is building a government safety net to help low wage workers survive.

– Drivers no longer respect funeral processions.

Did you know Wegmans saved $5.41 million on property taxes on its stores in New York state between 2003 and 2009? This is a company that had sales of $6.2 billion in 2011.

The data was contained in a New York Times database. The Times is in the midst of an awesome investigation into local and state subsidies for corporations. Guess what? These incentives, including grants, loans and property tax breaks, often provide dubious benefits.

The Times tallied $80 billion in giveaways every year to companies and believes the true total is far higher:

A portrait arises of mayors and governors who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them. Many of the officials said they feared that companies would move jobs overseas if they did not get subsidies in the United States.

Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors.

While some jobs have certainly migrated overseas, many companies receiving incentives were not considering leaving the country, according to interviews and incentive data.

Despite their scale, state and local incentives have barely been part of the national debate on the economic crisis.

These subsidies are coming as local and state governments cut services and jobs and increase property taxes and fees.

I plugged in “Rochester” into the Times database. A sampling of companies getting breaks:

  • General Motors (Recently pulled out of Honeoye Falls, taking 300 jobs.)
  • PAETEC (Perinton telecom got $7.36 million in corporate income tax credits, rebates or reductions. PAETEC was sold to Windstream for $2.3 billion.)
  • Sibley Building (Rochester taxpayers took a $19 million haircut on that one.)
  • Gannett (The Democrat and Chronicle has repeatedly furloughed and laid off workers.)

We hear threats all the time from businesses wanting tax incentives from government. They threaten to move out of town. They threaten to not spend money on improvements. They threaten to close up shop.

Wilmorite, owner of Greece Ridge Mall, threatened to walk away from a redevelopment project if it didn’t get a PILOT agreement. The $12 million to $14 million project involved tearing down the Bon-Ton and replacing it with nice restaurants. The County of Monroe Industrial Development Agency said Wilmorite needed the PILOT to get bank financing.

Worried the mall would deteriorate, a tentative deal was reached among the town, county and school district.

Was the threat real?

A government official who didn’t want me to use his name said yes. One need only look at Irondequoit Mall, now named Medley Centre. Wilmorite built the mall and when it declined, gave up and sold it. The mall is still awaiting redevelopment. One could say Wilmorite gave up on Sibley, though that’s a bit more complicated.

Judy Seil, head of COMIDA, doesn’t like calling the Greece Ridge incentive plan a “tax break.” She said the mall is reducing its square footage by knocking down the BonTon, so it’s actually not taking advantage of what would likely have been a property tax reduction. I’m skeptical of that explanation, because if this wasn’t a tax break, why would Wilmorite need it in the first place?

Aside from serious questions about whether tax breaks for retail projects are wise, this entire episode begs other questions about malls in general and Greece Ridge in particular. America is discovering it built too many malls. People are shopping more on the Internet. In Rochester, we knocked down Midtown. Medley is almost empty. What’s the long term plan for Greece Ridge? Will restaurants keep it afloat or will it need more taxpayer support in the future?

City of Rochester Communications Burear

The City of Rochester wants to continue giving 10-year tax breaks to rich people who buy condos downtown.

The city first started giving incentives to downtown homeowners in 2007. Anyone who buys a newly-constructed or converted unit in an existing building gets 90 percent off his tax bill the first year, 80 percent off the second year and so on. The goal is to increase home ownership and the availability of affordable housing units downtown.

The program expires in May and the city wants to renew it. According to legislation submitted to City Council, the program hasn’t substantially met its goals. Of 2,914 downtown housing units, only 94 are owner-occupied. Only 20 homes have been built since the program went into effect.

Most downtown housing is high-end and the tax breaks have done nothing to change the dynamic. The average assessment of the 20 new homes built is $230, 323. That’s not exactly affordable housing. People who want to live downtown are choosing a lifestyle and the market indicates price isn’t a concern.

Finally, most downtown developers get tax breaks and other incentives before they sell a single unit. For example, the state awarded $335,000 in Restore NY grants to a developer building only two condos and retail space on East Ave. for $1.2 million. The developer plans to live in one of the units, which he won’t have to pay full taxes on for 10 years.

I understand wanting to get people to own homes downtown.  But the market says only the wealthy can afford it right now – tax breaks or not.