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Post-Standard Database Sheds Light on Empire Zone “Winners”

April 7, 2009

The Syracuse Post-Standard recently published an updated, on-line database titled “Empire Zone Winners,” which exposes taxpayer losses from this broken subsidy program. For years, advocacy groups and elected officials have called for the program’s end, or at least major reforms.

The Post-Standard’s database lists Empire Zone tax breaks that 4,990 businesses expected to claim on their 2007 taxes. The database is searchable by geographic area (broken into Empire Zones) and for each company includes: its rank in NY (in terms of the amount of credit given), the amount of tax credits for 2007, the number of full time jobs at the company, the number of new jobs created in 2007, average wage, total payroll, and total investment.

In New York City, a number of projects demonstrate the program’s dysfunction in providing tax dollars for few or no jobs and little or no investment, for low-paying jobs, and, sometimes, to bad employers. Among the many:

Blauners, LLC, a real-estate investment company, in Hunts Point, Bronx, expected to claim $1.26 million for only three jobs with an average wage of $8/hour. That’s about $420,000 per job. To add insult to injury, the company only invested $231,819 at the site.

B & H Foto in North Brooklyn expected to claim a large credit of $2.6 million for 190 jobs with an average wage of $9/hour, with an investment of only $913,640. Last week, the company settled an EEOC lawsuit by agreeing to provide $4.3 million to Hispanic workers who were denied promotions and paid less than their non-Hispanic counterparts.

FC Gowanus Associates, which shares the same parent company as the developer of Brooklyn’s controversial Atlantic Yards project, expected a smaller tax credit of about $174,000, but like a number of other companies, it had zero jobs, and zero investment when claiming the credit.

Last week, state legislators agreed to some basic reforms, including disallowing incentives for some companies that did not invest at least as much as they received in tax breaks, and ending the program one year ahead of schedule, on June 30, 2010. Yet, despite action to scale back the program, New York City has taken efforts to expand it by allowing certain projects outside of Empire Zones to nevertheless secure Empire Zone benefits. Given the nature of some of the projects in the Post-Standard’s database, this doesn’t seem like the wisest use of taxpayer funds.

Questionable Projects Promoted for Stimulus Funding in New York

April 2, 2009

Atlantic Yards

Atlantic Yards

The New York State Economic Recovery and Reinvestment Cabinet has compiled a list of projects submitted by municipalities, organizations and individuals for possible funding under the American Recovery and Reinvestment Act (ARRA). While a project’s inclusion on the list does not, according to the cabinet, imply “acceptance, validation or certification of any project,” it does mean the projects may be up for consideration.

At least two of the New York City projects that appear on the list are eyebrow raising, and they demonstrate the importance of keeping millions of eyeballs on the Recovery Act: Atlantic Yards in Brooklyn, and a “South Bronx Development Initiative.”

The controversial Atlantic Yards project has already received hundreds of millions in taxpayer subsidies, and its developer, Forest City Ratner, claimed last year that the project needs more. The news that Forest City Ratner would likely seek ARRA funds broke in February, and prompted an on-line petition with almost 3,000 signatories who feel that “Any allocation of stimulus to Atlantic Yards at this point would not only further reduce the project’s already unacceptable standard of accountability, it would deprive the people of New York City investment in urgently needed public works.”

The “South Bronx Development Initiative” is a new proposal, but its priority is clearly not to serve existing local residents, considering that its major features include film studios, 4-star hotels, and luxury condos. The project also includes a shuttle to the train station near the controversial new Yankee Stadium.

While most of the projects have a requested dollar amount associated with them, these two are among the few where the listed amount is zero. It is unclear whether this means those who submitted the projects have not yet finalized an amount they want to request, that they simply are not disclosing any amount at the present time, or something else. Further complicating matters is that it is unknown who submitted these projects to the state. On his Atlantic Yards Report, Norman Oder reports he was told that a “citizen” submitted the Atlantic Yards project and that it was not an official request.

Despite this uncertainty, one thing is for sure. States are starting to compile lists and it’s up to all concerned residents and taxpayers to check them twice.

Public Money for Banks is Déjà Vu in NYC

February 17, 2009

bailoutcover1At a time when the federal government is promising to make its bank bailout more transparent by requiring financial institutions receiving funds from the Troubled Asset Relief Program (TARP) to report what they are doing with the money, New York City should shed more light on the subsidies it has provided to many of these same firms over the past two decades. Before the Bailout of 2008: New York City’s Experience with Tax Giveaways to Financial Giants, a new report by Good Jobs New York, documents the lack of transparency and accountability in New York City’s corporate subsidy deals.

Before the Bailout focuses on six financial firms that have received some of the largest federal payouts under TARP and earlier received subsidy deals worth hundreds of millions of dollars from New York City: American International Group (AIG), Bank of America, Bear Stearns, Citigroup, JPMorgan Chase, and Merrill Lynch.

Good Jobs New York released the report last week at a press conference with New York City Council Members Eric Gioia, David Yassky and Letitia James, and advocacy groups Common Cause/New York and New York Jobs with Justice.

The report documents problems with New York City’s reporting system that make it difficult to discern whether these companies have lived up to the job promises they made in exchange for tax breaks. One of the biggest roadblocks is that the New York City Industrial Development Agency’s Annual Projects Report excludes companies that were initially granted subsidies eight or more years prior, even though many of the companies are still receiving city subsidies. While reporting requirements expire after seven years, most deals last more than twice as long – Bear Stearns’ deal is for fifty years.

From the documentation we have been able to obtain we found that the city’s return on these deals is disappointing: some firms failed to live up to their job-creation promises, others laid people off despite supposedly agreeing to retain or create jobs, and others only reached promised job levels thanks to mergers.

The report details a number of recommendations for making the city’s subsidy deals more transparent and accountable to taxpayers. Among them:

Improve web-based transparency – The current reporting system provides information only for the first eight years of a deal, leaving the public in the dark for the remaining duration of the projects.

Provide full advance disclosure of proposed subsidy contracts – The IDA should post the full text of proposed subsidy contracts online 30 days in advance of the public hearing. Details should include job creation and retention requirements and clawback (money back guarantee) provisions.

Implement job quality standards – Subsidized firms should guarantee all employees earn a living wage and have health benefits. This requirement – that companies receiving subsidies adhere to job quality standards – already exists in numerous states and municipalities across the country.

Strictly enforce job-creation requirements Any new subsidy contracts must eliminate the possibility of a firm laying off workers while still claiming tax breaks.

Whether federal or local funds are involved, the public deserves to know how banks are using taxpayer dollars.

New York Baseball Teams’ Win Is Taxpayers’ Loss

January 23, 2009

Last Friday, just one day after a heavily attended public hearing, the New York City Industrial Development Agency (IDA) approved hundreds of millions of dollars in additional tax-free bonds for new stadiums for the New York Yankees and New York Mets. Adding in the subsidies approved in 2005, this brings the total public cost of the new Yankee Stadium well above $1 billion and the Mets’ new Citifield Stadium to over $600 million.

The IDA’s approval came despite increased media attention and new opposition to the city’s deal with the Yankees. Over the past several months, the Yankees’ plea for more public assistance has been met with increasing opposition, extending well beyond those of us who have long been demanding more transparency to the public giveaways for the new Yankee Stadium project.

After receiving wide support from New York City’s daily newspapers in 2005, criticism of the project has grown among major media sources. While The New York Times had been mostly silent on the public finances of the stadium subsidies, last week its editorial board called on the city to renegotiate the Yankees deal before providing the team with more financing. And reporters who have long been critical of the project, like Juan Gonzalez of the Daily News, joined Neil deMause and Patrick Arden to continue to question the additional subsidies. Gonzalez even had extra fodder when project documents revealed that the Yankees wanted more money for improved video boards, suite upgrades and “fancy johns.”

Two New York politicians who initially voted in favor of the Yankees project also stand out: State Assembly Member Richard Brodsky, whose recent sparrings with city officials and the Yankees’ Randy Levine has garnered wide attention, and New York City Comptroller William C. Thompson, Jr. Last year, Assembly Member Brodsky joined U.S. Representative Dennis Kucinich, chair of the Domestic policy Subcommittee, in investigating the financing scheme that allowed the city to provide the Yankees with $942 million in tax-free bonds in 2006. And more recently, Comptroller Thompson, a member of the IDA’s Board of Directors, spoke out against additional subsidies for the Yankees. In deviating from standard IDA practice, where the Board unanimously approves most proposals before it, Comptroller Thompson voted against additional financing for the Yankees.

While it was refreshing to see IDA board members debate at last Friday’s meeting, it’s disconcerting to those of us concerned with transparency and accountability that the projects moved forward. One of the many reasons is that Representatives for the Yankees and Mets each made presentations during the hearing, though by the IDA’s own rules comments in favor or opposition to projects are limited to public hearings.

Despite increasing opposition to public financing for the new Yankee Stadium, the city has continued to let the Yankees play by their own rules.

Opposition Grows on Proposal to Cut Bond Transparency

December 9, 2008

In November we blogged about an IRS proposal that would lessen the public approval and transparency requirements states and localities must follow when they issue tax-exempt bonds for private economic development and housing projects. These bonds have been used for a variety of purposes involving affordable housing, nonprofit organizations (including hospitals),  and (in some cases) commercial firms, Wal-Mart warehouses, and private prisons. [This paragraph was updated on 1/23/09].

The following local and national groups joined Good Jobs First and Good Jobs New York in submitting comments against the proposal, either individually or jointly:

Center for Tax and Budget Accountability (Chicago, IL)

Citizens for Tax Justice (Washington, DC)

Coalition for the Homeless (New York, NY)

Community Service Society (New York, NY)

Develop Don’t Destroy Brooklyn (Brooklyn, NY)

Families United for Racial and Economic Equality (Brooklyn, NY)

The Fiscal Policy Institute (Albany, NY and New York, NY)

International Brotherhood of Teamsters (Washington, DC)

Law Office of Weinberg, Roger & Rosenfeld, on behalf of its Building and Construction Trades Clients (Alameda, CA)

Living Wage Coalition of Sonoma County (Santa Rosa, CA)

Metro Justice (Rochester, NY)

New Jersey Policy Perspective (Trenton, NJ)

New York Industrial Retention Network (New York, NY)

New York Jobs with Justice (New York, NY)

New Yorkers for Parks (New York, NY)

NYC Park Advocates (New York, NY)

Pratt Center for Community Development (Brooklyn, NY)

Service Employees International Union (Washington, DC)

Service Employees International Union, Local 32 BJ (New York, New York)

UNITE HERE (San Francisco, CA)

United Food and Commercial Workers Union, Local 1500 (New York, New York)

U.S. Public Interest Research Group (Boston, MA)

Willet, Daniel (Silver Spring, MD)

Working Families Party (NY)

Those listed above specifically challenged the following aspects of the IRS proposal, in addition to others:

1) Decreasing from two weeks to one the amount of time the public has to research an announced project and prepare testimony in support or opposition.

2) Allowing localities to proceed with no hearing at all if there are no “timely requests” to participate.

3) Limiting the information now made publicly available prior to a hearing by allowing for more general project descriptions.

[Updated on 1/21/09] A public hearing is scheduled for January 26 at 10 AM at the IRS. Anyone wishing to testify must submit an outline of topics to be discussed by December 29, 2008. Please contact us for more information.

The Citi that Never Sleeps but Still Dreams of Taxpayer Money

November 26, 2008

metscomic3This week news broke that Citigroup will be the latest entry in the growing list of financial companies to receive huge infusions of federal tax dollars. But the bank is used to having money of others to keep it warm at night. As colleague Phil Mattera notes in Dirt Diggers Digest, the Fed’s guarantee of over $300 billion in Citigroup assets, along with a $20 billion direct cash infusion, demonstrates only the most recent example of the company’s tendency to get into trouble that requires a bailout. Add Uncle Sam to the list of 19th century tycoon John Jacob Astor, a modern Saudi Prince, and the government of Abu Dhabi, who have all previously provided financial aid.

But Citigroup’s search for outside assistance has happened in good times as well as bad. Even when the company was raking in billions in profits, it relentlessly sought, and often received, state and local tax breaks without providing any benefits in return.

Last year, Good Jobs New York and New Jersey Policy Perspective released a report examining Citigroup’s systematic use of relocation threats to play localities against one another so the bank could extract hundreds of millions in state and local subsidies. In Pay or We (Might) Go: How Citigroup Games the States and Cities, we examined Citigroup subsidies in New York and New Jersey, Kentucky and Texas between 1989 and 2007, and discovered the company benefited from almost $300 million in public funds in those four states alone. In virtually every move Citigroup made, it sought taxpayer help in footing its bill, often by threatening to move jobs elsewhere.

So what then did these localities get in return for its investment in Citigroup? Here’s a telling example: Two years after the company (then Citicorp) received $90 million in New York City subsidies for its tower in Queens, it eliminated 500 jobs. And a few years after that, it decided to move hundreds of its New York City employees to Hillsborough County in Florida. New York will be hit (hard) again when the company lays off 52,000 jobs globally. Yet Citi is still trying to bolster its image by maintaining its $400 million plan to purchase naming rights for the new Mets “Citi Field” stadium.

Considering Citigroup’s demand for public money without providing benefits, there may be extra reason to worry about the returns federal taxpayers will see from their unprecedented investment.

Feds’ Proposal Would Cut Transparency on Tax-Exempt Bonds

November 12, 2008


The Bush Administration is coming to a close, but it’s not asleep. With eyebrow-raising timing, the Internal Revenue Service (IRS) recently proposed changes, that would lessen the public approval and transparency requirements states and localities have to follow when they issue tax-exempt bonds for economic development projects.

Under the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, and subsequently the Tax Reform Act of 1986, all localities must hold a public hearing before issuing triple (local, state and federal) tax-free bonds for private-sector projects. Those eligible for these bonds, which carry below-market interest rates, include some manufacturers (through Industrial Revenue Bonds), housing developers, nonprofit organizations (including hospitals), among others. We’ve even seen a few financial firms benefit in New York City, mostly under the post-9/11 Liberty Bond Program, and we’ve seen Wal-Marts across the country receive tax-free bonds. [This paragraph was updated on 1/23/09]

Cutting back these so-called “TEFRA requirements” would diminish the ability of community groups, labor unions, tax & budget advocates and individual taxpayers to question the use of tax-exempt bonds. Good Jobs New York has successfully used the TEFRA process to expose the questionable labor practices of some proposed bond recipients and to highlight inequitable and irresponsible proposals – like using post-9/11 Liberty Bonds for luxury housing, and issuing tax-free bonds to build the new Yankee and Mets Stadiums.

The IRS’ proposed changes would:

1) Decrease from two weeks to one the amount of time the public has to research a project and prepare testimony in support or opposition.

2) Allow localities to proceed with no hearing at all if there are no “timely requests” to participate.

3) Limit the information now made publicly available prior to a hearing by allowing for more general project descriptions.

Before the IRS can change the TEFRA public approval process, it is itself subject to a public approval process. You can tell the IRS not to diminish your community’s voice by submitting testimony before December 8, 2008. There will be a hearing at the IRS on January 26, 2009, but you’ve got to submit written comments first.

More information about the proposed changes and how to comment are HERE.

Good Jobs New York encourages you to contact us with any questions or to let us know if you are interested in submitting comments.

An EZ Pass to EZ Reform?

September 24, 2008
NYS Senator Skelos

NYS Senate Majority Leader Skelos

After years of criticism from New York State watchdog groups like the Fiscal Policy Institute and certain elected officials, a high-ranking state legislator is chiming in on demands that the wasteful Empire Zone (EZ) program be drastically reformed. Last week, State Senate Majority Leader Dean Skelos issued a press release detailing the Senate’s new “Job Creation Plan,” which calls for reforms to increase accountability in the Empire Zone program and an elimination of it upon its 2011 expiration.

The president of the powerful Partnership for New York City – a business lobby group – issued a brief statement saying it supports Skelos’ call for an end to “a program that has spiraled out of control and provides almost $500 million a year in indiscriminate tax breaks to businesses without consideration of their contribution to the state’s economic growth.”

As we’ve blogged previously, too many businesses receive Empire Zone benefits without creating new, good jobs, or sometimes any jobs at all. Additionally, the program has strayed far from its original intent of targeting private investment and job growth to the state’s most economically depressed neighborhoods. With new Empire Zones designated frequently, there is now at least one in every county. Making matters worse, some business can receive benefits even if they fall outside of a zone.

Senator Skelos and the Senate majority have not discussed better targeting of tax breaks to truly needy areas, and they have not detailed how they will ensure greater accountability (for however long the program exists) so that only businesses that create high-quality jobs receive breaks. Rather, they focus on a plan for how the state could use the money saved from reform and program elimination, supposedly to lessen the tax burden across the board, especially for manufacturers, small businesses and high tech companies.

The details of the Senate’s plan will surely come under debate, but its focus on reining in Empire Zone benefits and letting the program expire is sound. It seems that officials across the political spectrum and advocates with very different agendas finally may be reaching some consensus that the Empire Zone program needs drastic changes, or it needs to be eliminated. Reaching an agreement out how to apply the savings will be a different story.

Maybe some subsidies for MLB are not meant to be

August 26, 2008

With all the public funding New York City has lavished on the Yankees and Mets for their new stadiums (with amazingly high ticket prices), Major League Baseball is having a field day in the big apple. MLB has also been promised $5 million more in tax breaks to locate its start up cable network – the MLB Network LLC – in East Harlem.

The MLB Network is supposed to serve as the anchor tenant in the “Harlem Park” office tower that Vornado Realty Trust wants to build on 125th St. and Park Ave. In March the city approved over $16 million in subsidies for Vornado’s tower in conjunction with its approval of MLB Network’s tax breaks, since Vornado claimed in its subsidy application that without the assistance it would build a retail and residential complex rather than an office tower.

Despite the subsidies, it seems now that the office tower plan may not come to fruition, at least not as originally envisioned. Last month the New York Times reported that Vornado was scaling back the size of its proposed tower and seeking to renegotiate its lease with Major League Baseball due to financing problems, including difficulty attracting other office tenants.

And according to a Times story this past weekend, the MLB Network is now (unofficially) rejecting the new lease terms proposed by Vornado, which would require them to rent additional space in the building and pay an extra $2 million a year. Real estate executives say the network is instead considering staying in its temporary offices in Secaucus, New Jersey, at least for another few years.

All this goes to show that subsidies are usually not the key factor in determining how development deals pan out.

Big Breaks for the Big Boys

August 6, 2008

New York City has traditionally been a haven for small and independent businesses, but that seems to be changing. A new survey by the Center for an Urban Future titled “Attack of the Chains?” found over 5,700 chain stores in New York City’s five boroughs. As the Center’s Director told the Daily News, “There’s no question that some neighborhoods and maybe most of Manhattan is really oversaturated when it comes to chain stores…Clearly this does present a lot of problems for the mom-and-pop businesses out there.”

Not only are chain stores proliferating in NYC, but their bottom lines have been lifted by public money. Many of these chains have benefited from property tax breaks in New York’s recently reformed – but still problematic – Industrial and Commercial Incentive Program (ICIP), now the Industrial and Commercial Abatement Program (ICAP). Some of New York’s chains receiving subsidies: Dunkin’ Donuts, McDonald’s, White Castle and Rite Aid. And as big box stores have begun to creep into the city, they too have been subsidized. Most of the city’s seven Target and seven Kmart stores have received ICIP tax breaks.

At a cost of over $409 million to the city in 2007, ICIP, which provides as-of-right property tax breaks for construction or renovation projects, has been New York’s most expensive economic development program. Good Jobs New York has been a longtime critic of it, and even the city’s Economic Development Corporation has recommended reforms. In May, the Manhattan Borough President issued a report criticizing the millions in ICIP tax breaks that have gone to fast food restaurants, gas stations, and chain retail stores (we’ve also objected to the millions in ICIP subsidies for Midtown Manhattan commercial projects). The Borough President’s report noted that only about 12% of ICIP benefits for Manhattan retail went to independently owned businesses in 2008, with the remainder going to chain stores.

The state legislature passed program reforms this June (S6366 and S8705), converting ICIP into ICAP. Among the reforms, most retail space in Midtown Manhattan will be ineligible for benefits for any new renovations (though those already receiving ICIP will continue to). While this will affect both chains and independent stores, it has largely been the chains that have benefited. Still, the new legislation will not bar chain stores in Upper Manhattan and the outer boroughs from receiving the subsidies.

Of course, providing tax breaks to chain stores isn’t something limited to New York. Cities and states across the country give millions in subsidies to chains, including big box stores such as Wal-Mart and Cabela’s.