Upstate jobs crisis

It was the task of former Schenectady mayor, Brian U. Stratton, now director of the state’s canal corporation, to explain governor Andrew Cuomo’s new Tax-Free NY proposal to a Stone Ridge audience of about 40 persons, about half connected to Ulster County Community College, on this past rainy Monday morning. His assignment, Stratton said, was to explain how the state could use “the inherent strengths of its higher-education institutions to further economic development.”

Using a slide show that had been provided to him in Albany, he started with four propositions: A new economy is growing because of higher education. The state has a tremendous asset in SUNY. There is positive synergy between academia and entrepreneurial activity. And businesses are attracted to lower-tax communities.

From these premises Stratton came up with a conclusion: The state should pass legislation so that New York’s higher-education campuses could provide tax-free environments for appropriate technology-based businesses moving into the state or for businesses formed in the state creating new jobs. The plan proposes that each SUNY school north of Westchester County would be able to provide up to 200,000 square feet of space for economic development on campus or in a square mile around it. Private colleges and 20 state-owned sites would also participate.

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The proposal just happens to be the policy initiative announced by Cuomo on May 22. The governor, Stratton said, was currently involved in a process with the state legislature to get it passed.

Following the successful but very costly example of the new nanotechnology college in the Albany area, New York State has been trying to harness the technological strengths of the other state colleges and universities. Cuomo, Stratton explained, was now ready “to put all the pieces together.”

The initiative is complex. In his brief but effulgent introduction, UCCC President Don Katt said that Cuomo had presented “a bold, big idea.” Said Katt, “It transcends visionary.”

Stratton fielded a number of questions on Tax-Free NY. Some people were supportive. Others were cautious. Still other contributed to a rumble of discontent: “Why support a separate type of people?” asked one woman. And a TechCity manager felt that the state’s efforts would undercut his organization’s efforts.

“The Upstate Jobs Crisis” was the title of E.J. McMahon’s talk Wednesday morning, June 5, in Albany. New York’s recent employment figures showed a tale of two large regions, McMahon explained, downstate and upstate. Their economies differed dramatically.

“During a generally sluggish economic recovery, New York City, Long Island and the lower Hudson Valley have matched or exceeded the national pace of job creation,” McMahon, who heads an Albany anti-tax think tank, said. “But in the 50 counties of upstate New York, once a breeding ground of industrial innovations that changed the world, employment growth has continued to trail far behind both downstate and national trends.”

The divergence between downstate and upstate has been increasing for more than two decades. Bemoaning its existence is not the domain of any single political party. George Pataki identified and complained about the situation when he was first elected governor in 1994. In her 2000 senatorial campaign, Hilary Clinton promised to create 200,000 more upstate jobs. In January 2007 newly elected governor Eliot Spitzer, fulfilling a campaign promise, appointed a new team to lead the effort to turn around the struggling upstate economy. Just last week, Gov. Cuomo was touting how creating tax-free zones on the state’s upstate public university campuses would attract businesses.

“With most State University of New York real estate located north of New York City,” reported the Long Island daily Newsday, “some say the governor is trying to switch the focus of the final weeks of the legislative session to upstate economic development.”

“It’s pretty obvious, what’s going on,” said McMahon. “He wants to change the subject.”

In his analysis, McMahon defined downstate as the 12 New York counties where higher sales taxes subsidize the Metropolitan Commuter Transportation District. Downstate included the five counties of New York City, Nassau and Suffolk counties on Long Island, and five north-of-the-Big-Apple counties: Westchester, Rockland, Putnam, Orange and Dutchess. McMahon relegated Ulster and Sullivan counties, which are within the boundaries of the same economic development regions, to the upstate category.

Ulster and Sullivan constitute the wild upstate frontier. Though their categorization doesn’t make much difference to the state’s job numbers, whether they’re one or other is of no small import to their residents. Let’s face it. These days North Apple is a more attractive address than Northeast Appalachia.

From 2000 through April 2013, New York State gained 320,000 of the nation’s 2.8 million additional jobs. New York’s private job-growth rate during that 13-year period, 4.5 percent, was higher than the nation’s, which was only 2.5 per cent during the same period. While private job growth in the 12 downstate counties a robust 7.6 per cent, according to McMahon, the 50 upstate counties lost 2 percent of their private jobs — an abysmal contrast.

There has been little recent improvement. In the three years of gradual recovery from April 2010 to April 2013, McMahon said, downstate had added 352,000 private-sector jobs while upstate had added only 45,000.

“Where is the economy of New York State going and where do we want it to go?”

The Andrew Cuomo administration asked this question in a recently issued statewide capital plan. In Cuomo’s vision the root of state policy is based — at least in formal terms — on regional building blocks. “Though they are interconnected, each of the state’s ten regions has a distinct economy, with different strengths, weaknesses, and needs,” the plan explained.

Cuomo sees his ten-region apparatus as evolving. The development of regional economic strategies, which the state sees as an important determinant of regional infrastructure investment planning, are the responsibility of the ten Regional Economic Development Councils (REDC). Three — Long Island, New York City and the Hudson Valley — are downstate, the other seven upstate. For Empire State Development unlike for McMahon, the Hudson Valley region includes Ulster and Sullivan counties.

The unfolding strategy of the Cuomo administration began with the formation of the regional economic development councils, whose memberships have largely consisted of the same appointees who have been unsuccessful at previous attempts to coordinate economic development efforts. The big money at stake seems to have invigorated the REDC participants this time around and encouraged greater participation on the part of local governments, non-profit organizations of all sizes and stripes, and private businesses. According to Stratton, REDC projects wholly within Ulster County received $4.1 in state support of 11 proposals in 2011 and $6.9 million for 17 projects in 2012.

In its second round of funding last year, the REDC process was expanded to include a wider array of projects that went beyond housing support and infrastructure to include more educational, environmental and cultural projects. Some grants and loans were for small amounts and others for larger. They were distributed among consortia of smaller non-profit organizations, governments and individual businesses as well as awarded to more established applicants.

This year the REDC structure will seek regional participation in state decisions involving up to $760 million in grants, loans and tax credits, including substantial bonus money for regions judged to have performed well. This year 29 programs in 13 state agencies are involved.

The consolidated funding application (CFA) process is now entering its third year. This year the CFA applications will be open to applicants from Monday morning, June 17, until 4 p.m. on Aug. 12.

A recent McMahon blog posting conceded that the governor’s recent Tax-Free NY plan offering broad tax exemptions might be “a broader and potentially more attractive incentive than the array of targeted tax credits the state offered in the past, while avoiding some of the more egregious abuses of the now-defunct Empire Zones program.” But McMahon felt that the Tax-Free NY plan was unlikely “to give upstate the jolt it needs.”

And he had a more fundamental point. If taxes are such a hindrance to growth, he said, why not reduce them for everyone?

Expressing his skeptical libertarian tendencies, McMahon advocated the “more daring approach” of phasing out the state corporate franchise tax entirely for all businesses operating in the 50-county upstate region. “Sure, the ‘tax-free’ promise should be enough to entice some firms into partnerships with some colleges and universities,” he argued. “But given the reams of red tape that will necessarily apply to projects in one of these relatively small zones, including the requirement that each project be tied to the mission of the college or university involved, the initiative is highly unlikely to generate growth on a game-changing scale.”

In his response to a question at UCCC, Stratton said that eliminating the business tax entirely would cost the state billions of dollars it could ill afford to lose.

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