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Who needs Jay or Conan with Sarah? And other observations

Random thoughts on another cold and dreary day in the City of No Illusions:

It's time the Common Council selected a successor to replace Brian Davis. It's going on two months since Davis resigned his Ellicott District seat, the Council has interviewed all the candidates, and Democratic committeemen have finally made their recommendation. Please, put us out of our misery.

I can't help but notice the number of subsidy deals being approved by the Erie County Industrial Development Agency that have little to do with industry or creating a significant number of good-paying jobs.

The deal cut between Erie County Executive Chris Collins and Legislature Chairman Barbara Miller-Williams to provide $300,000 in funding to the Colored Musicians Club, while eliminating funds earmarked for other projects, looks even more dubious with the news that Miller-Williams' husband is vice president of the club's board of directors.

I realize that some of Gov. David Paterson's rhetoric aimed at the State Legislature amounts to self-serving hot air and that some of the more ambitious proposals he has floated may be more for show than anything. But it's still good to hear someone at his level of public office tell it like it is.

With Sarah Palin slated to appear regularly on Fox News, do we really need Jay Leno or Conan O'Brien for televised laughs anymore?

It's been a long time since I saw as contrived a controversy as the one involving comments Sen. Harry Reid made about Barack Obama during the presidential campaign.


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A modest IDA reform

Clawback is a dirty word in much of the economic development community.

It involves retrieving a subsidy granted to a business when it fails to deliver as promised. Typically, clawbacks are used when companies fail to create jobs as promised.

No local economic development agencies use clawbacks, but the Amherst IDA wants its brethren to embrace a limited use. Its board voted unanimously last week to recommend that IDAs throughout Erie County establish a uniform clawback policy when companies use fraud to obtain benefits.

Reported my colleague David Robinson:

The measure, proposed by board member Ayesha F. Nariman, is a scaled-back version of a claw-back proposal that the Amherst IDA rejected in April. That defeated proposal also would have imposed the claw-back on companies that failed to meet their job creation targets.

The Nariman proposal excludes companies that don’t meet their job creation promises due to economic circumstances. The only trigger for the claw-back provision in her proposal is if the tax breaks were sought in “an intent to defraud.”

The county's six IDAs agreed in 2001 to adopt uniform policies, so this proposal would have to gain the approval of the the IDA Leadership Council, which includes the agencies, the county executive and some other economic development types. The council meets again the middle of October.

"Any policy change would be all or none," explains Jim Allen, head of the Amherst IDA. "That way, no one is putting themselves at a competitive advantage or disadvantage.

"My sense it is will be passed. It's something whose time has come. The public is clamoring for a clawback in the event someone isn't playing by the rules."

This seems like an easy lift for the IDAs, as it's limited to fraud. Who can be against punishing a company under those circumstances?

Of course, the provision would have very limited application and would do little to satisfy those pushing for more comprehensive IDA reform.

Local IDAs don't want clawbacks extended to include a company's failure to meet job projections "because the numbers fluctuate," Allen said.

That's true, but the resistance goes beyond that, from what I've seen and heard from a wide range of local economic development officials.

They're concerned clawbacks would make it that much tougher to put deals together. OK, I can appreciate that.

But expanded clawbacks, enacted in numerous states, would also introduce a level of accountability that many economic development types would just as soon not interject into the process. If you had clawbacks, you'd have to go after under-performing companies and that would bring attention to the fact the public wasn't get a full return on its investment.

Darth_vader_2That's not a shot at Alllen, who, despite his Darth Vader reputation among some in the city, strikes me as a progressive guy when it comes to the larger economic development issues confronting this community. He doesn't dispute the notion that the region needs to rethink its approach. In fact, he's put more thought into how to fix things than anyone I've come across. Read this and you'll know what I mean.

Anyways, subsidies are failing to deliver as promised not just here, but around the country. Check out this new new report in Clawback, a blog published by the folks at Good Jobs First.

This story hurts to think about

You've got to read newspaper stories all the way to the end. Witness this ditty, near the bottom of of a story last week on the latest action by the Erie County Industrial Development Agency.

The agency's Regional Development Corp. affiliate approved a $25,000 working capital loan to Art N Body, a Williamsville tattoo and body-piercing parlor at 5407 Sheridan Drive.

Yeah, that's right, a tattoo and piercing parlor.

I guess this is the IDA's idea of economic development.

Think the piercing parlor offers health care coverage and a pension to employees?

Could this be the beginning of a new business cluster?

I don't know, maybe the loan makes sense. I mean, a community can never have too many tattoo artists, to say nothing of piercing practitioners.

IDA shenanigans in Clarence

Dashs_market State law was amended in 1993 to prohibit IDAs from giving benefits to retail operations, everything from dress shops to supermarkets. The six IDAs in Erie County followed up with a memorandum of understanding in 2001 that included the same requirement.

That didn't stop the Clarence IDA from helping to subsidize the new Dash's Market that opened in May at 8845 Main Street.

The site had been home to a couple of supermarkets in the past, a Jubilee and then a Latina's. The store was vacant when Dash's decided to open.

It's an upscale, modern market, complete with a drive through. The exterior is striking and inside includes a Spot Coffee, complete with a fireplace. And, get this, valet parking is available.

The Clarence IDA sanctioned the $5.1 million project, which included about $2.5 million in construction.

Dash's got a 10-year property tax abatement which will save it $110,000, a sales tax exemption on construction materials and non-production equipment worth $180,000, and a waiver on the county mortgage recording that will save it an undetermined amount. If Dash's floated a mortgage for the entire cost of the project, the savings would come to about $51,000.

The Clarence IDA used a "but for" clause in the state law and countywide IDA agreement to benefit the Dash's project. State law makes this exception when:

The predominant purpose of the project would be to make available goods or services which would  not,  but  for the  project,  be  reasonably  accessible to the residents of the city, town, or village within which the  proposed  project  would  be  located  because  of  a  lack  of  reasonably  accessible retail trade facilities offering such goods or services.

In other words, but for the subsidy, residents would be denied access to the retail service.

Buffalo has used incentives to help put a supermarket on Jefferson Avenue on the East Side and replace an aging grocery on Niagara Street on the lower West Side. Fair enough, as those communities might otherwise not have a supermarket.

But Clarence, one of the most affluent suburbs in WNY?

A search on Google Maps shows there are plenty of supermarkets that either border on the Clarence town line along Transit Road or are within a couple-mile drive. They include two Wegmans, two Tops, a Wal-Mart Superstore and, get this, a Dash's.

No access?

Technically speaking, none are in the Town of Clarence, and the IDA used that rationale to qualify the Dash's project.

"They didn't have one (supermarket) in the community," explained Paul Leone, director of business development for the Clarence IDA.

The IDA deal with Dash's new. But it's the one officials chose to crow about in a full-page ad that ran Monday in The News. The agency, in the ad, proclaimed the Dash's project "is a great example of how the IDA works for you."

Indeed, it does.

Missing in action

There's been a lot of talk about business the State Legislature didn't take care of this session: IDA reform, stricter laws for teen drivers, property tax relief.

Let me add this to the list.

A lot of people in the know, including many local economic development officials, have been saying for a couple of years that there's a need to modify the criteria used to determine how the New York Power Authority allocates low-cost electricity to local industry. I did an investigative project 14 months ago that documented how the power is being squandered, and followed up with a piece in September that outlined how it could be put to better use.

The criteria is established by the Legislature, and thus far, no one has submitted a bill, much less gotten it acted on.

Several weeks ago I detailed how the Power Authority is selling low-cost hydropower earmarked for local industry and making a big buck off it. Very little of the money comes back to Western New York. There's hardly a peep out of our local delegation, much less legislative action to change things.

A couple of years back, a commission put together by then Gov. George Pataki and legislative leaders made a series of sweeping recommendations on how to make better use of nine power programs administered by NYPA to promote economic development across the state. The Legislature -- you guessed it -- has done nothing with the report.

Albany's inaction on economic develop reform extends to the state's two other major programs.

IDA reform again stalled this session. Reform of the Empire Zone program hasn't gotten past the talk stage, despite a series of investigations over the past five years by The News and Syracuse Post-Standard.

These subsidy programs involve hundreds of millions of dollars a year in Western New York alone. Alone, they're not going to revive the upstate economy. But used well, they could help.

Which begs the question -- where is our local delegation on all this?

Aside from Sam Hoyt pushing for IDA reform, they have shown no initiative. A year ago, the excuse, for hydro, anyway, was that the Legislature was waiting on Gov. Eliot Spitzer to present a comprehensive bill. Two sessions and another governor later, they're still waiting.

Western New York is in the eye of the subsidy storm. We've got six IDAs in Erie County alone, more than any county in the state. Buffalo, in terms of geography, has more acres of Empire Zones than any city in the state. And the region's share of discounted hydropower may represent the richest subsidy program in the entire state.

Isn't this reason enough for our delegation to show some initiative? In fact, given that these programs are rooted in state law, isn't it their job?



IDA reform dead for now

The IDA reform bill did not pass the State Legislature this session. Whether the issue is dead for good depends on who you talk to.

Much of the recent press coverage focused on provisions of the bill that would have required the payment of prevailing wages on IDA projects. There was a lot more to the bill. The consolidation of the six IDAs in Erie County into one. The imposition of penalties on companies that fail to meet their job-creation commitments. More transparency in the granting of IDA benefits.

HoytAssemblyman Sam Hoyt, prime sponsor of the bill, says there was room for compromise.

"There wasn't a single part of my bill that wasn't open for negotiation," he said Wednesday.

The Assembly passed a reform bill several months ago. A companion bill wasn't introduced in the Senate until a few days ago. Serious talks involving the governor's office and Senate and Assembly leaders didn't ensue, Hoyt said.

"There were discussions. but there were no three-way negotiations," Hoyt said.

Carrie Brunk of Jobs With Justice, an advocate of IDA reform, said there were indications as late as Monday that a deal was in the works. But the surprise announcement by Joe Bruno that he was stepping down as majority leader of the Senate ended that, as the scramble over who would succeed him took precedent.

Hoyt holds out hope that a deal can be reached in the future, but Jim Allen, executive director of the Amherst IDA, doesn't sound interested.

"I can't see any basis of a compromise," he said.

He listed what he considered several deal killers, including prevailing wages on construction and living wages for workers employed by companies based in IDA-financed.

"The stuff the unions want, we can't live with," he said.

The proposed consolidation also raised Allen's ire.

"We don't want to consolidate, and if we do, we'll let you know," he said.

"Let's move on, let's collaborate, let's cooperate," Allen added.

Beats me what happens from here. But for the foreseeable future, the stalemate leaves non-profits unable to use IDA benefits for their projects. Some $2.5 billion of work hangs in the balance.

Brunk, of Jobs With Justice, said reform advocates will stay the course. (This post includes links to newspaper coverage on the issue from around the state.)

"We'll continue the fight and expect a resolution," she said.

Rally For Reform

Ida_protestThis is supposed to be the year to reform the state law governing how industrial development agencies operate. There's just two weeks left in this year's legislative session and about 40 community and labor activists rallied this morning in front of the downtown offices of the Erie County IDA calling on lawmakers to reach a deal.

The Assembly is already on board working off this bill. The Senate and Gov. David Paterson haven't come out with a position.

Something is likely to happen because of the giant game of chicken that's being played. Construction projects, including non-profits, are on hold until a deal is struck because authorization to use IDA benefits has expired. That means the Senate won't be able to simply not act on a reform bill.

Speakers at today's rally touched on a lot of points, but the one that stuck with me is their call to link IDA benefits to the creation of jobs that pay of living wages - something on the order of $9 an hour with benefits or $11 without in Buffalo.

Their argument - public subsidies should not be used to help create jobs that pay poverty wages. That will do nothing to help lift Buffalo out of its current predicament as the nation's second-poorest city, they say.

"Not just any damn job will do," declared Maria Whyte, majority leader of the Erie County Legislature.

"We want good jobs, not just any old job" said Alison Duwe, executive director of the Coalition For Economic Justice, which organized the rally.

IDAs and their critics have each produced studies to support their points of view on the overall effectivness of the program, which involes about $400 million a year in tax breaks statewide. Take your pick of studies.

But, looking at the bigger picture, is there much argument that economic development policy in general is not producing results for upstate, Western New York in particular?  And IDAs, along with Empire Zones and energy subsidy programs run by the New York Power Authority, are the state's major economic development programs.

Why no action on hydropower reform?

Lots has been made of what the state Legislature did not accomplish this recently concluded session. IDA reform. Property tax relief. Tighter restrictions on teen drivers.

Let me add to the list.

There's widespread agreement among local economic development officials that changes ought to be made in the criteria that determines which local industries get low-cost hydropower from the New York Power Authority. I did an investigation a year ago that documented the problem, and followed up with a piece that outlined solutions. Two legislative sessions later, I'm not aware of so much as a bill being introduced by anyone from our local delegation that addresses the substantive issues.

As I reported a couple of weeks ago, low-cost power earmarked for use by local industry that has begging for customers has instead been sold by the Power Authority at a big markup and used for programs that, for the most part, have little to do with Western New York. Again, there's been no legislation introduced to change this. Barely a voice raised in outrage, actually.

There's been talk for years that the state needs to rethink all its power programs geared towards promoting economic development statewide. Gov. George Pataki and the Legislature enpaneled Temporary Commission on the Future of New York State Power Programs For Economic Development to tackle the issue, and the commission issued a series of recommendations in December 2005. The governor and Legislature hasn't done anything with it.

It's not just power programs. The News and Syracuse Post-Standard have done a number of investigations into the Empire Zone program over the past five years. State pols follow by making promises to clean up the program. The talk never translates into legislation, however.

Proponents of IDA reform have gotten further - at least they've introduced legislation and gotten it approved by the Assembly. But nothing has passed the Senate, so reform remains at square one.

Upstate isn't going to dig its way out of its economic malaise through subsidy programs alone. But intelligent use of them can help.

It's a fair question to ask members of our local delegation - starting with George Maziarz, Dale Volker, Sam Hoyt and Robin Schimminger - why they have not taken up these issues. Hoyt gets a pass on IDA reform - he has tried - but on the balance, he and the others have not taken the initiative.

Behind the uproar, a need for reform

There are a number of community and non-profit groups that are understandably upset that their construction projects are being held up by a dispute in Albany over a bill being pushed by Assemblyman Sam Hoyt to reform industrial  development agencies. And critics of the reform package certainly have points worthy of debate, including a provision that would require the payment of prevailing wages on IDA-financed projects, thus increasing costs in some instances.

But let's remember why IDAs are such a bone of contention. Study after study has shown they don't deliver as promised in deals involving private companies, which account for a majority of IDA deals. In a lot of instances, the agencies have failed to clean up their acts. And the tax breaks they give companies deny local government and school boards millions of dollars in revenues that is made up by you-know-who. You.

A study released last year by New York Jobs for Justice found that companies getting IDA subsidies only deliver one-third of the additional jobs they promise in exchange for assistance. A quarter of recipients actually trimmed jobs. And that's only looking at the half that provided data necessary to assess job-creating performance. The other half of recipients simply failed to provide the necessary data. And the IDAs let them get away with it.

OK, so Jobs for Justice has labor ties, and a lot of people don't like unions. So let's look at what the state comptroller has found.

In 2006, a report released by then-Comptroller Alan Hevesi found all sorts of problems. In projects involving the Amherst IDA, for example, companies getting benefits projected 1,205 new jobs, but actually cut their work forces by 324. Hevesi noted that neither the Erie County nor Amherst IDAs use "clawbacks," in which companies that fail to live up to their commitments must return their benefits.

Earlier this year, Comptroller Thomas DiNapoli reported that IDAs typically do not verify the information provided by companies and that many agencies were still failing to collect the information necessary to assess the effectiveness of the subsidies they grant.

A lot of money is involved. Jobs for Justice reports that in 2005, tax breaks, typically property and sales tax abatements, cost local governments and school boards in Erie County $18.5 million. Niagara County was out $8 million.

Yes, an argument can be made that at least some of that revenue would have never materialized without the tax breaks. But over half the companies enjoying tax breaks in Western New York failed to provide data required by the comptroller and two-thirds of them failed to deliver all the jobs they promised. More than a quarter actually shed jobs, according to Jobs with Justice.

Shouldn't taxpayers expect a better return on their investment?