EDITORIALS
Hurray, Yahoo!
Hope for boost to ‘new economy’ helps justify costly incentives
Direct your browser to www.yahoo.com and type in the phrase “New York business climate.” We did the other day, and the first three non-sponsored hits were variations on the theme, “NY business climate rated 2nd worst.”
Yahoo! is coming here anyway. If that means not just landing an iconic new-economy company but opening a portal to other such firms and a vibrant new local economic sector, that’s a major victory for the region.
The many millions of dollars in public subsidies for Yahoo! are necessary to overcome the enormous disincentives to new or expanded business operations in the state. High taxes in particular have made this state’s business climate so gloomy that significant incentives are needed to restore the bit of sunshine that might encourage growth. Add in exorbitant electric costs despite Niagara Falls on our doorstep, snow and perceived difficulties with labor unions, and you can see why business doesn’t like New York.
There’s not much the governor and lawmakers can do about the snow, but they’re the only ones who can fix the policy problems. We have high taxes because the state, held hostage by public unions, keeps spending money it doesn’t have and then requiring citizens to pay more to cover the gaps, leaving us with one of the highest combined tax burdens in the nation.
That’s why the state has to extend itself, and overcome the hurdles it has erected, just to be competitive in attracting new businesses and jobs. The incentives are expensive in this agreement, but the potential for Yahoo! to be not just a business but a magnet is what makes this deal worth it. Luring the new $150 million data center planned by such a global high-tech player to the Town of Lockport Industrial Park not only will add construction and 125 high-paying permanent jobs in a zero-pollution industry, it also will put the region on the map for the many other high-tech players who will note what the world’s second-biggest Internet search company is up to.
It was also a great example of how local, state and even federalofficials— U. S. Sen. Charles E. Schumer and Rep. Chris Lee were part of the press gang—can succeed when they work together, not stand by and allow rival local industrial development agencies to annihilate each other.
But the hazards those recruiters had to avoid are largely a creation of our own elected officials, mostly in Albany.
Because of actions and inactions by the Legislature over many years, upstate New York in particular has earned a reputation as an unaffordable place to do business. Taxes are too high. Construction costs are too high. The number of local governments that has to be fed is too great.
As a partial antidote to all that, the New York Power Authority— pushed by Gov. David A. Paterson—is helping by selling Yahoo! discounted hydropower that, depending on the market price of juice over the next 15 years, could amount to a savings for the company of up to $101.2 million.
That’s not cash, but it works out to a power subsidy of $33,000 to $54,000 per job, per year, for jobs that pay $65,000 to $75,000 plus benefits. That’s more than four times the average annual per-job power discount of the 61 authority deals worked out since 2006, which figures to $12,446.
The Lockport Industrial Development Agency, meanwhile, has arranged for significant property tax breaks, the value of which depends on local tax rates and the final valuation of the Yahoo! property, as well as some $12 million in sales tax savings on construction materials and equipment. GEICO, by comparison, received $100 million in IDA tax breaks over 15 years for a promise of 500 jobs (and uncommitted hopes, now half-realized, of an eventual 2,500 jobs).
All those tax breaks and all that cheap power offered to Yahoo! inevitably shift the costs of government and of electricity onto others—households, businesses and governments— making it necessary to offer the next big business prospect still more incentives. Etc., etc., etc.
How much better it would be for the New York Legislature to help everyone, not just the big companies, by lowering taxes and costs enough that our region could attract and grow businesses without such expensive give-aways.
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