Back in 2008, the industrial development agencies in Erie County handed out $3.7 million in tax breaks to 18 business that promised to bring more than 450 new jobs to the Buffalo Niagara region.
Five years later, those 18 businesses have combined to bring fewer than three dozen new jobs to the region – each one costing taxpayers an average of more than $112,000 in subsidies.
Critics said the meager job creation shows that companies receiving tax breaks through IDAs rarely live up to the promises they make about creating new jobs and highlights the need for clawback provisions to recover incentives granted to businesses that fail to create the jobs they promised.
“Taxpayers should not be footing the bill for bad tax break deals,” said Assemblyman Sean Ryan, D-Buffalo. “The ripple effect is that it pushes the tax burden onto homeowners.”
But IDA officials counter that the snapshot, included in a recently released report from the New York State Authorities Budget Office, covers an extremely trying period for all businesses, beginning just as the nation was falling into its deepest recession in more than 70 years and continuing through a comparatively tepid economic recovery.
“You were going through the second worst recession that the country has ever seen,” said David Mingoia, the Amherst Industrial Development Agency’s deputy director, who said it was “disingenuous and misleading” for the report to base its comparison on the 2008-12 time period.
The Great Recession was especially hard on the Buffalo Niagara region’s manufacturers, which eliminated almost 11 percent of the factory jobs in Erie and Niagara counties during the period covered by the report.
“Certainly, for the manufacturers at least, most of them fell out of bed in 2008, and they have not come all the way back yet,” said Al Culliton, the Erie County IDA’s chief operating officer.
Ryan, however, said previous reports from the state have shown that IDAs over the past 20 years have consistently failed to live up to their job creation targets, regardless of the state of the economy at the time.
“Whether we’ve had a stable economy, a growing economy or a declining economy, the IDAs haven’t been living up to their job creation promises,” he said. “As a whole, the IDAs in Erie County have failed. But that’s not surprising because the IDAs in New York have failed.”
In all, the state report found that the Erie County IDA, along with five of the six suburban IDAs that operate in the county, granted tax breaks to a total of 18 projects during 2008, with the ECIDA accounting for two-thirds of the activity.
At the time, those projects were expected to create 464 new jobs in Erie County, with an average taxpayer subsidy of just under $8,000 per job.
But by the end of 2012, those promises turned out to be extremely hard to keep. Just 33 new jobs had been created by those 18 companies – 7 percent of the total number of new positions that had been promised when the tax breaks were granted.
And because the companies fell so far short of meeting their job promises, the cost to taxpayers for each of the positions that were created has ballooned to more than $112,000 apiece, roughly 14 times the cost that was initially projected.
“This highlights the need for stricter standards on what we’re providing incentives for,” said Jennifer Diagostino, the executive director for the Coalition for Economic Justice in Buffalo. “If we’re going to be investing public money into private companies, we should be seeing some public good out of it.”
As part of the state budget passed this spring, new restrictions were placed on IDAs that made it more difficult for them to grant incentives to retail projects, such as stores, medical offices and restaurants.
Statewide, the report found that IDAs across New York granted tax breaks worth nearly $183 million to 280 projects during 2008. Those projects were expected to create 9,128 new jobs but by last year had added 7,487 new positions – a shortfall of 1,641 jobs compared with the initial projection.
As part of the report, the Authorities Budget Office recommended that all IDAs across the state be required to use a standard application and develop specific criteria for evaluating projects, including setting priorities for the types of projects that would qualify for tax breaks and those that would not.
The report also said IDAs should consider the type and number of jobs that a project would create and consider the impact the development would have on existing businesses and the school districts and municipalities that would lose tax revenues because of the incentives.
The report also recommended that IDA boards consider how viable the project might be even without taxpayer subsidies – a guideline that Erie County Executive Mark Poloncarz last month proposed establishing for the Erie County IDA.
“We need to look at the broader system and ask why we are funneling money into programs that aren’t creating the jobs they’re promising,” Diagostino said.
Amherst IDA officials, who reviewed their project log from 2008 on Monday, said the agency gave tax breaks to three projects during 2008 that are still classified as active. Those projects, by the Amherst IDA’s calculations, received $174,477 in tax breaks and have created a total of 48 net new jobs, Mingoia said.
One project, an office at 45 Bryant Woods that is headquarters for the accounting firm Chiampou Travis Besaw & Kershner, had 17 more employees last year than initially forecast, Mingoia said. Another project involved an addition to the Dent Tower, which has 190 more employees than originally estimated. The third is an Iskalo Development project at 2410 North Forest Road that has not been completed. That project, which is still under partial assessment, was expected to create 295 jobs but only had 136 positions as of last year.
In Niagara County, the 14 projects that received $13.3 million in tax breaks through the Niagara County IDA created a total of 274 net new jobs – four more than promised. The two projects backed by the Lockport IDA received $53,226 in tax breaks but created 14 new jobs – six fewer jobs than promised.
How 2008 IDA projects fared
Companies created only 7 percent of jobs they promised
Amherst IDA: 2 projects; $698,544 in tax breaks; job creation goal of 155; change in jobs from 2008-’12: 17
Clarence IDA: 1 project; $7,459 tax breaks; job creation goal of 6; change in jobs 2008-’12: 6
Concord IDA: 1 project; $11,670 in tax breaks; job creation goal of 15; change in jobs 2008-’12: -1
Erie County IDA: 12 projects; $2,959,172 in tax breaks; job creation coal of 262; change in jobs 2008-’12: -14
Hamburg IDA: 1 project; $8,616 in tax breaks; job creation goal of 24; change in jobs 2008-’12: 12
Lancaster IDA: 1 project; $15,634 in tax breaks; job creation goal of 2; change in jobs 2008-’12: 13
Note: Springville IDA was not included in report.
Source: New York State Authorities Budget Office