Explaining $500M drop in Empire Zone program

Long Island business people are expected to turn out in droves at the Marriott in Melville Monday to hear the state's economic development chief explain how business and New York are better off now that a program with $550 million in tax benefits has been replaced by one with $50 million.

Dennis Mullen, chairman and chief executive of the Empire State Development Corp., has been traveling the state explaining the Paterson administration's decision to replace the Empire Zone program with the less generous Excelsior Jobs Program. The Empire Zone, which began during the administration of Gov. George Pataki, was terminated June 30.

The Empire program offered about $550 million in tax abatements to companies statewide this year. That number will be about $50 million under Excelsior. Mullen has heard sharp criticism from business people in the state.

"When people say, 'We're dead. The sky is gonna fall,' that isn't accurate," Mullen said Friday. "It is my responsibility to exercise fiscal responsibility and ensure we will have a competitive program."

He laid out his case: About two-thirds of the 8,550 companies in the Empire program are what Mullen calls "anchor" businesses - law firms, taverns and big box retailers - that would have stayed in New York or expanded with or without state tax abatements. The Empire program gave $542 million in abatements to those companies. Mullen said about $352 million of it "was spent on companies that would have done what they did anyway."

Then why did they get the abatements? "They got it legally," Mullen said. "It was an 'as-of-right' program. There was an inherent flaw in the program and that's why the governor advocated for change." No longer will law firms, bars, real estate developers or big-box stores qualify. Instead, Excelsior will focus on manufacturers, distributors, financial firms, and "new economy" industries such as green, bio-tech and technology companies.

Desmond Ryan, executive director for the Association for a Better Long Island, said, "There was a lot of abuse with the Empire" program, but added that the state will provide a $2.1-billion allotment of tax breaks for television and film production companies. He said most of that will go to New York City. Mullen disputed that, saying film production is ongoing these days at former Grumman hangars in Bethpage.

Michael White, executive director of the Long Island Regional Planning Board, which along with the Long Island Association is sponsoring Monday's event, said, "I think there's a lot of open questions and we want to hear directly from Dennis Mullen how it's going to work."