Accountable USA - New York

New York is the tale of two economies, upstate and New York City, but both are characterized by a subsidy system run by the state's dysfunctional network of Industrial Development Agencies (IDAs), with their powers to bundle large state and local tax breaks, and a centralized quasi-public agency, the Empire State Development Corporation, which awards lavish subsidies with little accountability. The Fiscal Policy Institute estimates that combined state and local business tax expenditures in New York total about $8 billion annually.   A 2013 report prepared for Governor Cuomo’s Tax Reform and Fairness Commission recommended a complete overhaul of the state’s subsidy programs given the lack of real impact on struggling economies: "There is, however, no conclusive evidence from research studies conducted since the mid-1950s to show that business tax incentives have an impact on net economic gains to the states above and beyond the level that would have been attained absent incentives.”

Upstate, which has long struggled to achieve adequate levels of economic growth, has given massive subsidy deals to build a semiconductor cluster in the Hudson Valley and around Albany. These include the state's 2006 $1.2 billion package to Advanced Micro Devices, which later transferred the project to Abu Dhabi-controlled GlobalFoundries (see below).  Another major beneficiary has been IBM, which received a pair of deals in 2000 and 2008 worth about $800 million (see below). In November 2010 Verizon got a subsidy deal for a data center near Buffalo that the Buffalo News estimated was worth $614 million, but the company decided to abandon the project.

More recently the Cuomo Administration has launched two major economic development programs aimed at spurring upstate economic growth: the so-called Buffalo Billion and StartUP-NY. The Buffalo Billion plan, first announced 2012, allocates $1 billion for companies involved in clean energy, manufacturing and biomedical research to expand or relocate in Buffalo. The capstone project of the plan includes a $750 million subsidy – among the largest in the state’s history – to SolarCity, a solar panel manufacturing firm chaired by billionaire Elon Musk. Other recipients of the Buffalo Billion include AMRI (Albany Molecular Research, Inc.) which is targeted to receive $50 million and IBM to receive $55 million.

StartUP-NY is a controversial new program that seeks to entice businesses to certain geographic areas deemed to be fully tax free. Companies that establish a business within these zones, created through a partnership with state and private colleges and other institutions, are exempt from all taxes – property, business, sales and income. With 345 tax free zones throughout the state and 55 companies enrolled one year after the program was announced, many expect the estimated cost of the program to exceed $100 million.Then there is the story of New York City, which for decades had been repeatedly hit up for eight- and nine-figure “retention” deals by major financial, media and other high-profile companies engaging in “job blackmail” by threatening to move their headquarters to nearby New Jersey or Connecticut. The practice, closely monitored by our affiliate Good Jobs New York, has been in decline during the administrations of former Mayor Michael Bloomberg and current Mayor Bill de Blasio, but some companies have continued to play the game. For example, in 2005 Goldman Sachs got $1.7 billion in Liberty Bond financing (one fifth of all those special, triple tax-exempt post-9/11 bonds) and other subsidies for a new headquarters building near Ground Zero (see below). In 2013 the online grocery retailer Fresh Direct was approved to receive a subsidy worth nearly $130 million in state and local subsidies after it threatened to move its operations to New Jersey. Some believe that the de Blasio administration will significantly alter the subsidy landscape in New York City by shifting focus away from large subsidies to wealthy corporations that threaten to relocate. In fact, it was reported that JPMorgan Chase withdrew a request for a subsidy worth $1 billion to build its corporate headquarters at the heavily subsidized Hudson Yards after officials in the de Blasio administration refused to negotiate such an astronomical sum.

The city has succumbed to another form of blackmail: the demands of major professional sports teams for large amounts of public financing for new stadiums. In recent years, the New York Yankees and the Mets have together received about $1.7 billion in such subsidies for new ballparks in the Bronx and Queens (see below). The controversial Brooklyn Atlantic Yards proposal, announced in 2003, could use nearly $5 billion in various subsidies.

Aside from these individual deals, New York State has faced considerable controversy in connection with its major subsidy programs, especially Empire Zones. Due to excessive costs and lack of transparency, in 2010, the state legislature closed the Empire Zone program to new entrants (though existing recipients are allowed to continue receiving contracted benefits) and replaced it with the Excelsior Jobs Program, which has stricter eligibility requirements, cost ceilings (capped at $250 million annually) and good transparency requirements.

The state legislature has for several years gridlocked on reforming the other most problematic program, the highly decentralized IDA system, under which local boards can hand out discretionary property tax abatements and sales tax exemptions.  The New York State Comptroller’s office and groups such as ALIGN (formerly New York Jobs with Justice and Urban Agenda) and Metro Justice in Rochester have published scathing critiques of IDAs, focusing on their cost (estimated at $554 million net tax exemptions in 2012), their poor record in job creation and their limited reporting. Despite the introduction of Regional Councils, which seek to reward IDAs that have the most innovating or targeted approach to economic development, many find the process lacking public participation and transparency.

Another increasingly expensive state subsidy is the Brownfield Cleanup Program, which uses tax credits to encourage private remediation and redevelopment of old industrial sites. Its cost rose to more than $600 million a year but subsequently declined to $350 million. The state’s rapidly growing film production credit now costs more than $270 million a year.

Apart from the reporting on Excelsior Jobs recipients (which had not yet begun when we did our latest transparency report), only two of the state’s five major subsidy programs we examined have online recipient disclosure: the Brownfield Cleanup Program and the IDAs. The information in that spreadsheet was available thanks to the Public Authorities Reform Act passed by the legislature in 2009. In New York City, after years of agitation by Good Jobs New York, the NYC IDA disclosed extensive data to the City Council and to the public.

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Brownfield Cleanup Program

corporate tax credit program created to encourage remediation and development of old industrial sites; its cost ballooned

$503 million (2013)
23/100
10/100
30/100

Empire State Film Production Credit

fully refundable corporate tax credits for film production costs; also provides sales tax exemptions

$374 million (2013)
0/100
10/100
38/100

Excelsior Jobs Program

created in 2010 as a less expensive and more accountable replacement for the Empire Zone Program; provides corporate tax credits linked to job creation, investment and R&D expenses.

$150 million (2013)
41/100
25/100
35/100

Industrial Development Agencies

controversial system of decentralized agencies that provide lavish state sales tax exemptions and local property tax abatements

$560 million (2011)
66/100
25/100
35/100

Start-UP NY

a large‐scale tax exempion program created in 2013 that will establish tax‐free “zones” on or near college campuses around the state. The program also provides exemptions of personal income taxes for employees of participating businesses for the first five years and up to ten years.

$100 million (estimate)
60/100
n.a.
n.a.

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

AMD/GlobalFoundries (2006)

 Only a few weeks after it was revealed in 2006 that Advanced Micro Devices (AMD) was considering sites in upstate New York for a $3.5 billion semiconductor fabrication plant that would employ 1,200 people, the state legislature approved a $1.2 billion subsidy package negotiated by the administration of Gov. George Pataki. The package, worth about $1 million for each of the projected jobs, included a capital grant of $500 million, Empire Zone benefits of $250 million, research subsidies worth $150 million and $300 million in infrastructure assistance at the site in Malta, north of Albany.

During 2007 and early 2008, the state grew anxious as AMD put off groundbreaking and there were reports that the company was experiencing financial difficulties and might be taken over. In October 2008 AMD announced plans to sell its existing chip plants to a new Abu Dhabi entity called Advanced Technology Investment Co., which would also be the majority owner of another new entity, The Foundry Company, that would build the new facility in New York. AMD, part owner of Foundry Company, got the state to transfer the subsidy package – whose cost rose to $1.3 billion as the cost of the plant climbed to $4.2 billion – to the new entity. The company, which in March 2009 was renamed GlobalFoundries, initially would not commit to using union construction labor, but it gave in to pressure from the administration of Gov. David Paterson, which had been lobbied hard by the building trades.

It later came out that the state added $15 million to the subsidy package for GlobalFoundries, apparently as an inducement for a project labor agreement. In June 2009 – three years after the deal was first announced – bulldozers finally began clearing land for the plant. In 2010 GlobalFoundries asked the state for an additional $300 million in subsidies and sought to reduce its property tax bill by challenging the assessed value local authorities planned to assign to the plant. In 2011 the company said it was considering a second chip fab at the site and raised the possibility of another subsidy package, which was rejected by Gov. Andrew Cuomo. In October 2011 the Albany Times-Union published the results of an investigation showing that GlobalFoundries had been reimbursed by the state for more than $500 million in expenses, including many not directly related to chip production. (Key sources)

IBM (2000 and 2008)

 In 2000 the administration of Gov. George Pataki showed it was willing to spend heavily in an effort to create a high-tech center in the Empire State. It arranged for IBM to get a subsidy package worth $660 million (a state record at the time) for a new $2.5 billion computer chip fabrication plant to be built in the Dutchess County town of East Fishkill. The state kicked in $475 million in Empire Zone tax breaks and a $22 million grant, with the rest of the deal coming mainly from local tax breaks. When the company later sought to expand the plant, it came back to the state for more assistance.

In 2008 it got a new subsidy deal worth $140 million (in the form of grants) for a $1.5 billion project, which was expected to add about 325 jobs to the chip plant’s workforce of about 1,400. Enthusiasm about the plan was dampened a month later when IBM announced a 10 percent pay reduction for production workers in East Fishkill in order to be “competitive.” According to an August 2008 report in Site Selection Online Insider, IBM failed to obtain the $475 million in state tax breaks promised in 2000, because while it created 1,400 jobs in Fishkill its overall employment in the state declined. (Key sources)

Goldman Sachs (2005)

 After the attacks on the World Trade Center in September 2001, Goldman Sachs began moving jobs out of lower Manhattan, mainly to a tower across the Hudson River in Jersey City for which it got a $164 million subsidy. Yet by late 2003 things in the financial district had stabilized to the point that Goldman decided to build a new $2 billion headquarters across the street from Ground Zero. The firm told New York officials that it expected substantial subsidies, expressing particular interest in the triple-tax-exempt Liberty Bond program that Congress had created to help reinvigorate the city’s economy.

The original plan was for the company to make use of $1 billion in such bonds, but after Goldman suggested that it might cancel the project because of its unhappiness with a proposed traffic tunnel by the site, the deal was sweetened. Now Goldman would get $1.65 billion in Liberty Bonds (more than a fifth of the $8 billion in total bonds Congress authorized) plus a $25 million Community Development Block Grant and up to $150 million in new city and state tax credits. Goldman’s new headquarters opened in 2009 without a ribbon cutting or its name on the building. (Key sources)

New York Yankees and New York Mets (2006, 2007 and 2009)

 In three rounds of subsidies in 2006, 2007 and 2009 New York City officials authorized about $1.8 billion in subsidies for new ballparks for the Yankees and the Mets, each located adjacent to the team’s existing stadium. Mets fans saw the 1960s-era Shea Stadium replaced with Citi Field (naming rights were sold to Citigroup), with a cost to city, state and federal taxpayers of about $600 million. Citi Field was built atop the parking lot of the old stadium, so it did not create a great deal of disruption for its neighbors in Queens. The new $1.2 billion Yankee Stadium, however, had a more serious impact on the Bronx.

The Yankees persuaded city and state officials to covertly seize, for free and with no public hearing, more than 24 acres of public parkland across the street from the old stadium to serve as the site for the new ballpark. In addition to free land and no rent payments, the Yankees received nearly $1 billion in tax-exempt financing and $500 million in city and state tax breaks. City taxpayers also bore the cost of demolishing the original stadium, replacing the lost parkland and other necessary infrastructure. The total public cost is estimated at $1.2 billion.

There is also controversy regarding the replacement parklands: many will have artificial-turf playgrounds and some are located atop stadium parking garages. South Bronx residents formed “Save Our Parks” and took the city and the Yankees to court to stop the plan, but lost. The new Yankee Stadium and Citi Field both opened in 2009. In the fall of 2010, the developers of the parking garages for Yankee Stadium notified holders of $237 million in civic-facility bonds that, due to fewer than expected customers (thanks to cheaper parking at a nearby mall, fewer seats at the new stadium and the opening of suburban-line train stop near the stadium), the bonds were in danger of default. (Key sources)

Fresh Direct (2013)

After threatening to relocate its online grocery delivery business to New Jersey, FreshDirect sought and was approved to receive over $81 million in city subsidies from the New York City Industrial Development Agency to expand its facility in the South Bronx. In February 2012 City, State and Bronx officials announced the deal as complete days before the initial public hearing, prompting a groundswell of opposition from local residents. The opposition resulted in a law suit against the city for neglecting to complete a new environmental assessment despite the company’s intention to bring thousands of daily diesel truck trips through the neighborhood, which is already overly burdened by heavy air pollution and with asthma rates among the highest in the nation. After significant delays due to the law suit, the project was authorized in July 2013, FreshDirect entered a lease agreement with New York City in December 2013 and broke ground the site in the South Bronx in December 2014. In February 2015, the Empire State Development board of directors voted in favor of a $9 million grant and $1 million loan for the project. The firm is also eligible to receive over $18 million in Excelsior tax credits through New York State, in addition to financing through the Bronx Borough President, the Bronx Overall Economic Development Corporation and other public agencies. For more background on the chronology of the subsidy, see commentary and analysis by Good Jobs New York.

Walmart in New York

Wal-Mart in New York

  • At least 5 Wal-Mart locations have received subsidies worth about $52 million in New York.
  • At least 8 Wal-Mart locations in New York have challenged their property tax assessment, recouping about $766,000.
  • Many Wal-Mart workers are ineligible for health coverage from their employer or choose not to purchase what is available, because it is too expensive or too limited in scope. These workers often turn to taxpayer-funded health programs such as Medicaid. New York is among those states that have not disclosed data on the employers with the most workers or their dependents enrolled in such programs.

 For more information, see the New York page of Wal-Mart Subsidy Watch.