Streams

Do industrial development agencies really create jobs?

Friday, February 10, 2012 - 03:46 PM

By Innovation Trail's Marie Cusick

Ask just about any politician these days, and he'll likely tell you that a big part of his job is to create jobs.

So how does the government attempt to do that?

Here in New York, industrial development agencies (IDAs) are one of main job creation mechanisms for local communities.

In 2009, IDAs gave away close to half a billion dollars in tax breaks to companies in the name of economic development.

IDAs are known as "public benefit corporations" - they're supposed to help their local communities, and create jobs.

But in their four decades of existence, they've been accused of everything from failing to comply with state laws, to simply being inefficient.

Money we're not collecting

Allison Duwe heads the labor-backed, Coalition for Economic Justice, and is an advocate for reforming IDAs.

"Everyone right now is saying that we're broke and that we need to all tighten our belts, and we need to think about cutting spending," she says. "But the reality is we're not broke. There's money that we're not collecting from corporations, from businesses, that are receiving significant tax breaks."

Duwe's referring to the nearly $500 million in tax exemptions IDAs granted in 2009 - mainly through property and sales tax breaks.

The role of IDAs in economic growth and creating jobs is also often overstated, according to Bob Ward.  He's the deputy director of SUNY’s Rockefeller Institute of Government in Albany, and also served on the board of directors for the town of Bethlehem IDA for five years.

"IDAs are involved in maybe a few tens of thousands of jobs created each year," Ward says. "Many of those jobs would have been created - whether the government, or a quasi-governmental agency, were involved anyway."

You could think of IDAs as local "job creation" machines. But despite some reform efforts over the years, IDAs don't always work.

According to 2008 data from the State Comptroller's Office, over half of all the IDA projects in New York State were expected to create fewer than 10 jobs.

But Richard D'Attilio, the executive director of the Broome County IDA, says he looks beyond those job numbers, toward the long-term benefits for the community.

"A lot of elected officials really need to talk about jobs," he says. "From my perspective, I talk about the whole package, and I believe investment is as important in the community as the job creation."

Jobs may be scarce, but IDAs are not

In recent years, many New Yorkers have found it tough to find a job, but it's certainly not too tough to find an IDA.

There are currently 115 of them around the state - sometimes more than half a dozen in the same county. In some cases, IDAs have been accused of working against each other when courting companies, as State Comptroller Tom DiNapoli points out.

"There can be some overlapping jurisdictions," says DiNapoli.  "They're certainly not meant to raid each other, but sometimes those issues have come up."

Reform advocates say all of these issues mean it's time to take another look at IDAs.

Kristi Barnes is with the Alliance for a Greater New York - an advocacy group based in New York City.

"Where people see [IDAs] hitting home is really in their property tax levies, in their school taxes ... who's actually paying the tax burden? ... It's being shifted from big companies onto everyday working families," she argues.

Comptroller DiNapoli agrees that New York needs to re-think its IDAs.

"I do think there needs to be a more clear state strategy on how what they're doing is integrated into a broader approach to economic development in our state."

But complicating the adoption of a revised approach is the state's economy - DiNapoli recently issued a report that found that New York is recovering more slowly than expected.

Meaning: It can be tough to argue against anything that could create a job - even if it doesn't always work.

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Comments [1]

Larry Littlefield

Short answer: no.

The NYC tax burden is the just about the highest in the country, and other parts of the state are far above average as well.  So clearly if the beneficiaries of the tax breaks are paying less, others are paying more.

We don't really know how many tax break beneficiaries would not have been there, or have been as large, without the breaks.  But we also don't know how many jobs were lost in firms that didn't open, move here or expand here because of the tax burden on firms that didn't get the breaks.

Economic development agencies count jobs created and retained by subsidies, but not jobs destroyed or not created in those who pay for subsidies for others.

Feb. 10 2012 09:12 PM

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