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Buffalo Niagara Partnership Testimony Before the NYS Assembly Standing Committee on Economic Development, Job Creation, Commerce and Industry
October 21, 2009

Chairman Schimminger, members of the Committee, thank you for this opportunity to speak before you today. The future of economic development in New York State is an extremely important discussion, and long overdue.

New York State is not a friendly place to do business. Whether it’s the 2nd highest taxes in the nation, expensive and unpredictable energy costs or a burdensome regulatory environment, there are a host of challenges that leave New York at a definitive disadvantage when it comes to attracting and retaining private sector investment.

The sting of Albany’s mismanagement is felt particularly by Upstate. That’s why the Buffalo Niagara Partnership and 70 other employer organizations throughout Upstate started the Unshackle Upstate coalition – to highlight the lack of economic development focus on Upstate, and engage the community in a discussion on how Albany’s actions make it harder and harder for our private sector to grow.

We are not ignorant to how Albany works. We understand that every proposed piece of legislation, new regulation and increased tax has some special interest pushing it. And to give credit where credit is due – the Upstate business community has received some love from Albany. Last year’s passage of brownfields reform and this year’s passage of the Historic Rehabilitation Tax Credit are beneficial economic development programs, and we appreciate the hard work that’s been put into achieving those.

However, it’s safe to say that for the most part, it’s the Upstate employer community that generally ends up holding the short end of the Albany straw. A good portion of the budget gap fillers in this year’s Deficit Reduction Package and then the enacted 09/10 state budget were direct assaults on employers – the increase in personal income tax that affected thousands of small businesses statewide, the 18A assessments on energy costs and over $700 million in taxes on health insurance. All of this to support a state budget that somehow during a recession grew by over $10 billion.

The bottom line is that Albany needs a new attitude when it comes to economic development, and through that a thoughtful, comprehensive, 21st century economic development program. The special interests have had their way, and the result is a budget deficit that last week State Comptroller Tom DiNapoli estimated to be over $4 billion. Like employers or not, they pay taxes in New York State. And they create jobs – and the people they employ pay taxes in New York State. It’s certainly easy to demonize the business community, particularly in light of what’s happened on Wall Street in the past twelve months – with bank bail-outs and multi-million dollar bonuses sprawled across the worldwide media. But those stories are far from the reality of what Upstate employers deal with on a daily basis.

Yet, to answer special interests’ demands, Albany seems intent upon ensuring that the grass is greener on the other side of the state line. The state legislature refuses to acknowledge the importance of the fact that employers that leave and workers that lose their jobs come off of the tax rolls. We long in our fantasies for the day when entities that pay taxes are more valuable constituents to Albany than those who support campaigns.

Take these examples into consideration:

• In order to avoid cost-saving reforms in state government to protect public employee unions, Albany slapped new taxes on energy usage that are now costing manufacturers in Buffalo Niagara hundreds of thousands of dollars annually.
• In lieu of budget cuts to fill the state’s deficit, Albany issued statements to hundreds of companies statewide telling them they were no longer eligible for the Empire Zone program based on parameters that were not in existence at the time their contracts were signed.
• Earlier this year, Upstate legislators supported an MTA bailout of over $2 billion based upon a promise that Upstate’s infrastructure needs would be addressed later in 2009. Last week, the Governor announced he would not be funding the infrastructure package that Upstate developers and our workforce have anxiously been awaiting.

As the Partnership’s policy director, I have the opportunity to see all proposed legislation in New York State that would affect the business community – and I have to tell you, it’s ugly. Proposal after proposal seeks to inflict a more regulatory environment that far exceeds other states. In the economic development world – we see other states as competition for tax-paying private sector investment. We can’t comprehend how Albany doesn’t view them the same way.

An example: Across town right now, a public hearing is being held on proposed legislation that would subject any parcel over one acre to wetlands review before it can be developed (the standard is currently 12.5 acres).  Unfortunately, since wetlands review is more subjective and less transparent than it should be, forcing more projects through this lengthy and costly review process would be yet another deterrent to investing in New York.

This is an example of why we’ve been forced to establish a system of incentive programs to supersede the burden of doing business in New York. Yet even those programs aren’t safe from special interest demands, as the two-year running battle with organized labor attempting to annihilate the IDAs’ efforts throughout the state with costly wage mandates as told us.

Obviously, with a $4 billion gap in the budget, the state’s employers understand that New York is not going to be pumping cash into economic development right now. However, a number of economic development proposals that require absolutely no investment from taxpayers have been forwarded, and continue to be stifled by special interests.

Those proposals include:

Tax increment financing – Tax increment financing, or TIF, is an economic development tool used very successfully in other states. It uses future gains in taxes to finance current improvements (which theoretically will create the conditions for those future gains). New York’s law has a serious defect – which has ensured that TIF has been seldom used across the state – it does not include school districts, which are, of course, the largest share of property taxes. Thanks to Assemblyman Schimminger and Senator Stachowski for sponsoring legislation to make TIF more usable, but Albany politics has so far shut down this very useful economic development tool that has no cost to taxpayers.

Second, is renewing the “civic facilities” component of IDA legislation. Almost two years ago, the ability for IDAs across the state to provide financing for not-for-profit expansion projects expired. Since then, the restoration of civic facilities to the IDAs has been mired in a political battle over organized labor’s insistence that IDA legislation include wage requirements that we know would diminish – if not eliminate – the benefits of the incentives received. Not-for-profits have been held hostage in the debate, and as a result, work on over $2.4 billion in not-for-profit projects remains at a standstill. The incentives are not public money – they simply allow not-for-profits to utilize the IDA’s borrowing power. Yet, another initiative that is no cost to taxpayers remains dormant while the state’s economy screams for stimulus and job creation.

We see no reason beyond special interest lobbying why no-cost, job-creating initiatives such as these haven’t been moved forward.

Which again speaks to Albany’s attitude when it comes to economic development. We must invite the employers’ perspective into the conversation and be willing to work out solutions. In a recent Unshackle Upstate meeting with DEC Commissioner Peter Grannis, he said that he didn’t look at the state’s actions from an economic development perspective because that’s not his job. We would disagree. We would suggest that ensuring New York State is fiscally viable is the job of every department of state government. When things are done in a vacuum, we end up with legislation like the wetlands piece they’re discussing over at the Science Museum – initiatives that benefit one special interest at the expense of jobs in New York State. Does that make any sense at all?

Given that inclusion in the conversation, employers will tell you that New York’s economic development programs – in whatever form they come – must be clear, transparent and reliable. They should focus certainly on job creation, but with an understanding that investment itself is often the key to retaining already existing jobs. Employers are seeking consistency and dependability, and offering that in itself would be a benefit to business attraction and retention.

We have such great opportunity here in Upstate. Here in Buffalo Niagara, you need not go further than UB and the Buffalo Niagara Medical Campus, or watch trucks pour over the Peace Bridge, or drive through clusters of advanced manufacturers in office parks in Amherst or Orchard Park to see that there is a foundation to build upon and room for growth. But we need Albany to stop inflicting pain. Special interest-guided government has failed. We have a $4 billion budget deficit and the size and cost of state government is unsustainable. It’s time to refocus efforts onto the economic vitality of our state.

One interesting conversation piece that came out of our Unshackle Upstate meeting with Commissioner Grannis is this: It is rare that at the bottom of a piece of proposed legislation in Albany the “Fiscal impact” notation is marked with anything negative. There’s a good reason for this – because on the surface the legislation is no skin off of Albany’s back. Unfortunately, that lack of analysis is shortsighted and detrimental. I would maintain that the day we replace “fiscal impact” on proposed legislation with “economic impact” will be an important day in New York State.

Thank you.