Add Art 14 §§1401 - 1405, BC L; add Art 10-E §§3980 - 3984, Pub Auth L
Enacts the corporate accountability for tax expenditures act; standardizes applications for state development assistance for empire zone assistance and industrial development agency assistance; requires submission of certain development assistance agreements to the department of taxation and finance; requires recipients of certain development assistance to submit progress reports which include certain information and disclosures; makes certain recapture provisions; defines relevant terms.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2612
SPONSOR: Kim TITLE OF BILL:
An act to amend the business corporation law and the public authorities
law, in relation to enacting the "corporate accountability for tax
expenditures act"
PURPOSE OR GENERAL IDEA OF BILL:
To provide a comprehensive record of all economic development incentives
that are entered into between state entities and businesses in order for
the Legislature and the Governor to make well informed decisions about
tax expenditures.
SUMMARY OF PROVISIONS:
Creates the State Corporate Accountability for Tax Expenditures Act.
Provides that State economic assistance provided by any state agency,
public authority and/or public benefit corporation, as an incentive to a
business organization must be based on the terms of a written incentive
agreement between the department and the business organization. Every
agreement must identify the specific State economic assistance to be
provided to the business organization during the term of the agreement
and lists terms the agreement must contain. Provides that State economic
assistance incentive agreements must provide that if a business organ-
ization either fails to make the requisite level of capital investment
in the project or fails to create or retain the specified number of jobs
within the specified time frame, as provided under the Act authorizing
the State economic assistance, the business organization shall be deemed
to no longer qualify for the State economic assistance. Provides that
the full content of all written incentive agreements are to be
published.
DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE):
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JUSTIFICATION:
Every year, New York State spends billions of dollars on economic devel-
opment incentives and subsidies, mostly for large businesses. These
subsidies take many forms: corporate income tax credits, property tax
abatements, low-interest loans, empire zone credits, rebates, utility
rate reductions, deferrals on taxes that would otherwise be paid, incen-
tives to invest in research and development, training grants, land site
preparation and infrastructure financing. In return, companies promise
economic development, especially the creation of new jobs and/or promise
assistance to lower income and/or elderly New Yorkers.
There is currently no comprehensive system of standards or oversight for
the distribution of economic development subsidies and incentives. These
subsidies are usually offered through off-budget public authorities (of
which there are more than 600 in New York State) or as tax expenditures
built in the State budget, but rarely approved as free- standing legis-
lation. Decisions about the allocation of economic incentives and eval-
uation of the economic benefits to residents of New York State provided
by those incentives are not subject to significant public or legislative
scrutiny or review. In fact, it is currently not possible for New York
State to accurately calculate the cost effectiveness of these incen-
tives. Once granted, measures initiated in the name of economic develop-
ment are seldom audited nor do they sunset, especially those that relate
to tax breaks.
The state's structural budget problems mean that we must ensure public
transparency and ongoing review of expended dollars and lost state
revenues. We need to evaluate whether these models are working. A
comprehensive cost/benefit analysis would detail the benefits that are
provided in comparison to the other proposed uses of state funds. The
impact of inequities in our tax policies due to the use of industry
specific tax expenditures should also be addressed. We need to exercise
due diligence through legislative and public oversight to make sure that
programs are run efficiently and that the state gets the best return for
the public for each state dollar that is spent. Dollars spent on
economic development incentives and tax breaks should be reviewed with
the same degree of scrutiny as dollars spent on all other government
programs.
Many of the corporate tax expenditures were enacted for the purpose of
encouraging investment and job creation in New York. However, the effi-
cacy of the expenditures have yet to be analyzed and measured. By having
the Tax Department submit a report on all of the State's tax expendi-
tures, credits, deductions, exclusions, exemptions or any other tax
benefits to the Senate, Assembly and the Governor, informed decisions
can be made based on the efficacy of the existing programs. All too
frequently, the state has provided subsidies, loans and tax breaks to
companies that then failed to create jobs as promised. The accountabil-
ity procedures for keeping track of the subsidy process are weak. Gener-
al outcome reports, which are meant to provide details of the state's
job-creation and tax-credit programs, are not reported, are incomplete,
not filed annually, or ignore the details of the reporting requirements.
Comprehensive audits, prepared by the comptroller's office, found that
93 of 152 program-specific reports were never completed and only 15 of
173 subsidiaries connected to Empire State Development (ESD) filed an
annual report at all.
Critics claim that corporations would relocate to New York without large
tax breaks and that targeted economic development incentives fail to
produce economic growth. Economic Development Councils (EDC) have
pledged more than $4.4 billion to 5,300 projects since 2011, but site
little to no job creation goals. Local Development Corporations (LDC)
offered a total of $1.3 billion in tax breaks to 1,660 projects between
2010 and 2015, producing only 1,686 jobs, considerably lower than the
9,136 promised. Industrial Development Agencies (IDA) also fell short on
their stated goals. Between 2010 and 2015, costs of IDA's rose 22
percent while the tax exemptions for the projects grew by 44 percent.
The most notable tax subsidy is with Tesla's Solar City. In 2012, Gover-
nor Andrew Cuomo announced the Buffalo Billion program. Solar City would
receive $750 million in cash and tax incentives in exchange for building
a solar panel manufacturing factory. The original agreement would have
created 1460 new jobs within two years, another 1440 new jobs with
suppliers and service providers, and 5000 new jobs within ten years to
help to reverse Buffalo's 40 year economic decline. However, the agree-
ment has been revised 10 times over the last four years. The requirement
to bring in 1440 suppliers was ultimately waived. In 2016, Solar City
was in dire financial shape. It was sold to Panasonic, Tesla's battery
partner, who would then manufacture solar panels as a subtenant under
Tesla. This newer Tesla team has surpassed its first employment target
which is to create 500 jobs by April of 2019. However, the manufacturer
still needs to more than double the current workforce of 600-700 to meet
the second target by 2020. Tesla's solar energy deployments are down by
50%. Tesla is also no longer the nation's biggest rooftop installer and
will only provide half the stated capacity of the Buffalo factory by
2018 year end. Newly added tariffs on imported solar panels have altered
the cost-benefit equation of the contract. Amazon's November 2018
announcement to build two new state of the art e-commerce headquarters
one in Crystal City, VA and the other in Long Island City (LIC), NY
again raised concerns over proposed tax incentives.
Amazon will invest $3.68 billion over 15 years. Other highlights of the
agreement include Amazon's commitment to build a state of the art tech
center, offer workforce development and job training as well as much
needed infrastructure development. In exchange, New York will offer
Amazon up to $1.7 billion in incentives on a post-performance basis if
the company creates as many as 40,000 jobs. The State commitment
includes $505 million in capital grants and $1.2 billion in Excelsior
Jobs tax credits.
Amazon will also receive $897 million in Relocation and Employment
Assistance Program (REAP) and $386 million from the Industrial & Commer-
cial Abatement Program (ICAP). This brings the total amount of public
funds granted to $2.988 billion.
LIC community members are concerned about the impact of Amazon's deal.
Residents worry about losing their small businesses, their homes or
being driven out by increased property taxes. Whatever the outcome of
these recent deals, pressure continues to create oversight and account-
ability as a means to halt completely unnecessary giveaways to some of
the world's richest companies. As New York continues to encourage
economic development opportunities, these types of fiscally unsound
incentive programs must be monitored.
In addition to real job creation, companies should be expected to have a
record of good corporate citizenship if they are going to receive public
support. Currently there are no such standards. If subsidies are really
going to benefit the people of New York, the businesses that receive
them should be required to pay living waves, avoid criminal activity,
and work with the communities in which they are located.
PRIOR LEGISLATIVE HISTORY:
2017-18 53364-A/No Same as - died in committee
2015-16 S3109/A6180-A Kavanagh - died in committee
2013-14 S3449/A2062-A Kavanagh - died in committee
2011-12 S446-A/A5920-A Kavanah - died in committee
2009-10 S750/A557 Kavanagh - died in committee
2007-08 S3337/A8227 Kavanagh - died in committee
2005-06 S2414/A2026 Brodsky.- died in committee
2004 S5921/A10231 Brodsky - died in committee
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
Increaseincostforadditional audit equipment.
EFFECTIVE DATE:
This act shall take effect on the one hundred twentieth day after it
shall have become a law.
