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DiNapoli: Poor oversight in Cuomo’s jobs, tax break program

New York State Comptroller Thomas DiNapoli on Sept.

New York State Comptroller Thomas DiNapoli on Sept. 19, 2014. Credit: AP / Mike Groll

ALBANY - State Comptroller Thomas DiNapoli said Thursday that his review of one of Gov. Andrew M. Cuomo’s signature economic development programs couldn’t verify that many companies which received tax breaks met their obligation to create jobs or even justified the need for the taxpayers’ subsidy.

The Cuomo administration said the report, released days after its own report found few jobs were created so far in another economic development program, was inaccurate and ignored facts.

Thursday’ audit was the third report in a year that questioned the value of millions of dollars in tax breaks provided to companies that promise to create or retain jobs.

DiNapoli’s report released Thursday found Cuomo’s Empire State Development Corp. which runs the Excelsior Jobs Program lowered job creation goals after companies didn’t meet expectations and sometimes didn’t verify if jobs were full-time or part-time. The report also found Empire State Development couldn’t produce evidence that several companies created jobs, rather than simply shifting jobs from elsewhere in the company.

“New York state gives away millions of dollars each year in tax breaks for companies that are supposed to create jobs and expand under the Excelsior program, but ESD’s oversight leaves a lot to be desired,” DiNapoli said in a statement. “ESD needs to stop lowering the bar and giving companies a pass when they fall short of promises. ESD needs to ensure these businesses are not taking advantage of state taxpayers.”

The audit sampled 25 companies in the program that includes 328 companies receiving more than $548 million in tax credits in exchange for promises to invest $5.8 billion and create 34,472 jobs.

But auditors reported that the ESD used a higher wage amount in calculations than was paid, resulting in bloated tax credits; changed job commitments to lower figures when goals weren’t met; and that some new hires didn’t meet the standard of working at least 35 hours a week. Auditors said more than $4.4 million in tax credits werent’ supported by ESD records.

The companies reviewed included three on Long Island: Precipart Group in Farmingdale, which created a net of 20 new jobs for a $700,000 maximum tax credit, but ESD records didn’t justify $111,995 of it. A company spokesman didn’t immediately respond to a request for comment.

Auditors said the ESD had adequate records for the 15 net jobs Thuro Metal Products of Brentwood has promised to created for a maximum tax credit of $200,000. The audit found there was also proper accounting for the 90 jobs U.S. Nonwovens Corp. of Brentwood promised to create for a $750,000 tax credit.

Cuomo’s Economic Development Corp. blasted back at what it called an inaccurate assessment.

“Auditors willfully chose to ignore key facts‎, resulting in a flawed and inaccurate report,” said ESD spokesman Jason Conwall. “Any truly objective review would show this program is cost-effective, performance-based, and incentivizes business growth by only providing tax credits to those that have achieved their job commitments and investments.”

Conwall said the ESD and the state Labor Department perform rigorous and effective oversight.

“Auditors did not find a single instance where incentives were improperly provided,” Conwall said. “They also apparently ignored the success of this program, which, to date has admitted 434 businesses that have committed to create more than 44,445 new jobs, retain nearly 158,000 existing jobs and invest $4.2 billion.”

“I think we found significant lapses,” DiNapoli said in an interview of the audit released Thursday. He dismissed the ESD’s reaction as “more heat than substance.”

DiNapoli’s report comes after Cuomo released a report late on the Friday before the July 4 holiday that also showed his other major economic development program, Start-Up NY, spent more than $53 million to create just 332 jobs statewide last year, including 34 on Long Island. The program provides a company a full exemption from state and local taxes and exempts employees from state income taxes for 10 years.

Last year, DiNapoli’s audit of the Empire State Development Corp’s $211 campaign to promote economic development and tourism and found it delivered no tangible benefit.

On Tuesday at a media event, Cuomo said there is a lag time for companies that receive state tax breaks and subsidies to produce jobs and the state has to continue to offer inducements to lure and keep employers.

He said his Start-UP NY program costs New Yorkers nothing, but the TV and other ads promoting the program have cost over $53 million. In additon, other residential and business taxpayers must help cover the costs of any added public services not paid by companies.

“It’s almost a bidding war and companies nowadays will shop from state to state,” Cuomo said.


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