More than 3,000 businesses in New York State, including nearly 500 in Western New York, fell far short of the job-creation promises that they made when they received lucrative government benefits under the state's much-criticized Empire Zones program.
The companies had reached only 60 percent or less of their job-creation promises in 2005 yet still received tax breaks and other incentives for being located in Empire Zones, a program that costs state taxpayers $500 million annually. The list of companies, sent in an internal e-mail from the state's economic-development agency, was obtained by The Buffalo News.
The letter surfaced several hours after one of the Spitzer administration's top economic-development officials said that hundreds of businesses across New York could be told to reimburse the state money for failing to keep job-creation promises.
The state, according to Patrick J. Foye, the co-chairman of Empire State Development Corp., will be sending letters out to businesses later this summer notifying them of the problem, setting up a nasty confrontation between the Spitzer administration and companies awarded financial incentives by the administration of the preceding governor, George E. Pataki.
"We're going to be aggressively asserting our rights under the Empire Zone program and other programs that we administer. We think it's the responsible thing to do in terms of our accountability to the governor and the Legislature and the taxpayer," said Foye, the state's top downstate economic-development official.
Foye last spring told lawmakers that upwards of 30 percent of companies getting Empire Zone incentives failed to meet job-creation targets. He declined Tuesday to provide any further information about the letters that will be going out to companies.
How many firms might be targeted? "I said higher than hundreds," Foye said.
But the July 13 e-mail obtained by The News from Randal D. Coburn, the head of the state's Empire Zone program, said the state recently completed an audit of companies participating in the program, which gives a range of tax breaks and other incentives to companies that the state finances. The e-mail said the records of more than 6,500 businesses that were certified prior to 2004 were audited and that 3,000 of them were "substantially short" in fulfilling job-creation goals for 2005.
Businesses on the list next week will receive letters from the state informing them of the problem and asking to see if "any further progress" was made in 2006 to meet the job goals. It said companies that continue to fail to meet the 60 percent job-creation test could be "decertified" from the program, meaning that they would be booted from the Empire Zone program and that state-funded benefits would cease. It said a decision on that would not come until November.
In Western New York, 288 of the nearly 500 companies on the list are located in Buffalo. They included auto sales companies, restaurants, manufacturers, real estate developers, marketing companies, warehouses, trucking companies, law firms and a physical therapist. The list ranged from big companies such as Tops Market and NRG Energy to smaller ones such as Watson Candies in the Town of Tonawanda.
A government source Tuesday evening cautioned that the list of companies was still be checked by local Empire Zone offices and that some firms making the problem list did meet the job-creation goals.
As early as the spring, state officials began floating the idea of trying to get back money from companies that got Empire Zone benefits but failed to produce enough jobs. Assemblyman Richard L. Brodsky, D-Westchester, said earlier this year that the program was so filled with problems that Gov. Eliot L. Spitzer should temporarily freeze it.
"This action represents the first time in the history of the program that Empire Zone-certified companies will be notified of the state's expectations that companies make meaningful progress towards their goals in order to continue enjoying the benefits of the program," the July 13 e-mail said. The letter was silent on any effort to collect reimbursements from firms failing to meet job goals.
Meanwhile, the state released a report Tuesday urging the government to focus its job-creation efforts on industries involved in one way or another in high-technology fields.
The report by A.T. Kearney was also highly critical of the Empire Zone program, which a Buffalo News series in 2003 found was beset by widespread problems, including overstated job claims, lower wages for workers in zones, and benefits going to politically connected companies.
Enacted in 1986 to help 10 economically struggling areas of the state, the program has expanded to 82 zones -- including some communities few would consider distressed -- with benefits for more than 9,500 companies, the report said.
The report said the program was the best example of "good economic development intentions gone wrong."