At SUNY Fredonia, tax-free zones created under the state’s new Start-Up NY incentive program could attract agribusiness companies that supply the region’s food processors or digital arts companies to the school’s technology incubator in Dunkirk.
At SUNY Buffalo State, school officials envision the workers and managers from their Start-Up companies hiring their students as interns, attending lectures and eating in the campus dining hall.
And at the University at Buffalo, a recent lecture explaining Start-Up NY drew a packed room of business owners who were curious about what the initiative could offer their companies.
“Every business should be thinking about this program,” Marnie LaVigne, UB’s associate vice president of economic development, told the crowd on the Buffalo Niagara Medical Campus.
Ten months after Gov. Andrew M. Cuomo announced Start-Up NY, which offers 10 years of broad-based tax savings for companies that locate on or near college campuses, school and state officials say the program is generating considerable interest from the business community.
The governor touts Start-Up NY as an economic-development stimulus program that puts New York – upstate in particular – on an even footing with other states that have more business-friendly reputations.
Colleges here and across the state are awaiting formal approval of their tax-free zone boundaries, with an announcement from the state expected soon. But they’re already marketing Start-Up NY to potential partners.
“I believe this is probably the best opportunity in my lifetime to transform the economy of Western New York,” said Kevin P. Kearns, Fredonia’s vice president for engagement and economic development.
Start-Up NY is meant to encourage start-up companies – or new divisions spun off from existing companies – to hire new employees and set up shop in a zone connected to a college.
The program’s rules ensure the jobs aren’t shifted from somewhere else, the benefits go to new hires and the companies receiving the tax breaks have a connection to the schools.
But economic-development experts say it’s hard to say whether any of the tax-incentive programs introduced by the state have had a significant economic impact in New York, while critics say the program rewards new companies at the expense of existing companies.
And several companies interested in the Start-Up NY program aren’t ready to commit yet because they have unanswered questions about how the initiative will function and how to fairly balance the interests of new workers eligible for the tax incentives and current employees who aren’t.
“The ultimate goal is growth, and I have to do that in a way that is fair to all employees,” said Paul E. Buckley, president of Applied Sciences Group, the software developer in Cheektowaga.
Interest is high
Last May, Cuomo unveiled “Tax-Free NY,” later renamed “Start-Up NY,” a package of incentives that would eliminate for a decade sales taxes and property, business and corporate taxes for companies that open up or near State University of New York campuses.
Further, newly hired employees at those businesses wouldn’t pay income taxes for as much as 10 years.
Empire State Development has not released projections on the number of companies they expect to participate, or the number of jobs expected to be created, through Start-Up NY in 2014, but officials say interest in the program is high, especially in Western New York.
“Obviously tax-free is a very appealing thing, right? But what has also been very interesting is that people get the power of the connection between business and academia,” said Leslie F. Whatley, executive vice president for Start-Up NY.
The program initially was focused on SUNY campuses but was expanded to include more New York City-area schools. Private colleges and universities also may participate.
The colleges serve as the point of contact for companies interested in joining Start-Up NY. Since the original announcement, SUNY campuses in Western New York have drafted preferred boundaries for their zones and identified industry sectors that make the most sense to target.
“When we sit down with a company we want to learn what is it you need to help you grow?” UB’s LaVigne told the business executives.
UB makes a big push
UB has submitted to the state a proposed list of 13 on-campus, tax-free zones and has made a major push to recruit companies for Start-Up NY.
Following an inventory, UB employees identified property on and near its North Campus in Amherst, its South Campus in the University Heights and the medical campus downtown.
LaVigne said the university already was in serious discussions with about three dozen companies, most of them existing advanced manufacturing companies interested in expanding into the zones.
She encouraged executives to talk to other SUNY campuses about “Start-Up NY,” emphasizing that it’s not a competition among schools, and she said the companies’ program applications should be “only limited by your imagination.”
SUNY Buffalo State’s Susan A. McCartney, special adviser to the provost for economic development, said the campus has fully bought into the program, which could be attractive to food tech companies, fashion technology companies and firms that work in applied mathematics, among others.
The school officially only lists a portion of Buckham Hall as a prospective Start-Up NY zone, but she said the school also may host companies in leased space in the nearby Pierce-Arrow Building and is considering space in the Richardson Complex.
Buffalo State wants company employees to feel a strong connection to the school.
“We feel the best way to do that is to have the business as close to us as possible,” McCartney said, adding, “We’re not going to let them be there and just take up space.”
SUNY Fredonia is eyeing space on and near its campus, inside its technology incubator and along the Dunkirk waterfront, for clusters of businesses drawn by the Start-Up NY incentives, Kearns said.
Companies providing everything from packaging materials to high-grade food additives would supply the area’s food processors. Digital entertainment companies would move into the tech incubator and align with the school’s music and performing-arts programs.
And other companies would locate on the Dunkirk waterfront, perhaps near a new science and education center on Lake Erie.
“Our location is underappreciated,” Kearns said.
Erie Community College administrators have met with county officials to draw up a Start-Up NY game plan for ECC. The school would look to work primarily with advanced manufacturing companies or medical firms to tie into the school’s degree programs in those fields, said William D. Reuter, ECC’s chief administrative and financial officer.
Private colleges can take part, but there are different limitations on their involvement.
Canisius College is exploring its options with Start-Up NY, spokeswoman Eileen C. Herbert said. Niagara University plans to take part and would set up tax-free zones on vacant land on its Lewiston campus and at a downtown Niagara Falls tourism institute under development, said Thomas J. Burns, a university spokesman.
Who would qualify?
Companies interested in Start-Up NY are, for the most part, still exploring whether they qualify for the program and whether it makes sense for them to open a new facility in a campus tax-free zone.
Applied Sciences Group performs some research and development that could be spun off into a separate company, or department, with a handful of new workers to start, said Buckley, the company president.
For an existing company, a sticky problem is how to balance the salaries of existing employees, who would still have to pay state income tax, and new employees in the tax-free zone, who would not, Buckley said.
He could pay new employees a lower salary but he doesn’t believe that’s what the state intended.
“So that’s my dilemma. I’ve had this since Day One,” he said. “The response I get is, ‘That’s a good question.’ ”
Tapecon, is a 95-year-old printing company that has reinvented itself for the 21st century, manufacturing single-use, diagnostic indicators for medical customers or printing electronic membrane switches, like the keypad on a microwave, from a commercial building in the Larkin district.
The Buffalo company is considering expanding its commercialization services and making it a separate business line, perhaps setting it up on the medical campus in a Start-Up NY zone, said Jay Ziegler, Tapecon’s director of sales and marketing.
There are benefits to taking part in the program, Ziegler said, “At the same time, there’s a lot of paperwork and a lot of oversight that goes with it.”
And Algonquin Studios, an Internet and software solutions company, also is looking at space in a Start-Up NY zone for SWRemote, which provides mobile field service and inventory software and has overlapping ties with Algonquin.
“There is an organization that could benefit from aligning with colleges and universities,” said Algonquin President Stephen M. Kiernan II, citing the ability to directly recruit on campus and keep those college graduates in Buffalo.
Do incentives work?
New York has a litany of economic-development programs, with state and local governments investing more than $6.6 billion annually in tax credits and direct spending, to uncertain effect, according to a 2011 report from the nonpartisan Citizens Budget Commission.
“Start-Up adds to that lengthy list. And there isn’t a lot of empirical evidence that shows they work, that they actually induce economic growth,” said Elizabeth Lynam, the commission’s vice president and director of state studies.
Programs like this one can create “an unlevel playing field” among companies, Lynam added, and when some taxpayers are handed tax breaks the cost of providing those incentives is pushed onto everyone else in the state.
The governor’s office soon will announce the schools and the zone boundaries approved in the first “class” of Start-Up NY, said Whatley, the executive vice president, with more announcements to come in later weeks and months.
She declined to say how many institutions will be included in the first wave.
Once schools receive word of their formal approval, they can begin taking applications from interested companies. Colleges then submit the company applications to Empire State Development for final approval.
The program sets a statewide cap of 10,000 employees who can receive the income-tax break each year. Whatley said that’s the job-creation goal for the program, though it will be harder to reach that level in 2014.
“It’s the first year of the program. It’s obviously challenging to come up with a number,” Whatley said.