New York

Tax Incentive Evaluation Ratings

Tax Incentive Evaluation Ratings: New York

Rating: Trailing

Key points:

  • New York is trailing other states because it has not adopted a plan for regular evaluation of tax incentives.
  • The state has produced several evaluations in recent years that have helped improve incentives, but other programs are not subject to the same scrutiny.
  • High-quality evaluations could help inform ongoing debates over the merits of Start-Up NY and other incentive programs.

For more information on state ratings, please visit our interactive map.  

New York has produced several evaluations in recent years that have helped improve tax incentives. Without a consistent approach, however, lawmakers have struggled at times to determine which incentives are cost-effective.

The office of the New York comptroller, an elected official who serves as the state’s chief fiscal officer, has published many of the evaluations. For example, the office regularly analyzes the state’s industrial development agencies (IDAs)—local entities that provide hundreds of millions of dollars in tax exemptions to businesses each year. The office conducts an annual study of the IDA program as a whole and also frequently audits specific IDAs.a Based on this analysis, the comptroller supported legislation that lawmakers adopted in 2015 to reform the IDA program.b The legislation requires IDAs to use standardized criteria for selecting which businesses receive incentives as well as standardized agreements that document the terms of the deals.c Those changes are designed to ensure that only deserving businesses that fulfill their performance obligations receive incentives.d

Similarly, a 2013 evaluation that was conducted for a state commission noted weaknesses in New York’s Brownfields Cleanup Program, one of the state’s largest tax incentives. The program was created to encourage cleanup and development of environmentally contaminated sites, but the evaluation showed that the state had awarded credits to projects that had little to do with its environmental goals.e New York lawmakers revised the program in 2015 to more closely link the size of the awards to the amount of environmental remediation.f

In other instances, however, lawmakers have lacked this type of information. A case in point is the debate over a program called Start-Up NY. In 2013, Governor Andrew Cuomo (D) and New York lawmakers created this initiative with a bold promise: Businesses could operate tax-free for up to 10 years if they created jobs in designated zones on or near university campuses.g The concept of the program is for high-tech businesses to partner with universities—taking advantage of their research laboratories, for example—to help the companies grow.h By summer 2016, though, Start-Up NY was the subject of widespread criticism after the state reported that the program had created only a few hundred jobs.i In January 2017, Gov. Cuomo proposed a significant redesign of the program.j

A high-quality evaluation would identify metrics for measuring the program’s performance, determine a reasonable time frame for assessing the results, and compare the incentive to policy alternatives.

The state’s lead economic development agency, Empire State Development, is statutorily required to produce a one-time evaluation of Start-Up NY, but that report is not due until Dec. 31, 2020.k With a regular evaluation process, New York lawmakers would have timely, consistent information to assess the performance of all its tax incentives.

Endnotes

  1. New York Office of the State Comptroller, “Annual Performance Report on New York State’s Industrial Development Agencies” (June 2016), http://www.osc.state.ny.us/localgov/pubs/research/ida_reports/2016/ idaperformance.pdf; New York Office of the State Comptroller, “Audits: Industrial Development Agencies,” accessed Feb. 1, 2017, http://osc.state.ny.us/localgov/audits/ida/index.htm.
  2. New York Office of the State Comptroller, “Annual Performance Report,” 1–4.
  3. New York A.B. 7915 (2015), http://assembly.state.ny.us/leg/?default_fld=&leg_video=&bn=A07915&term=2015&Summary=Y.
  4. New York Office of the State Comptroller, “Annual Performance Report,” 1–4.
  5. Marilyn M. Rubin and Donald J. Boyd, “New York State Business Tax Credits: Analysis and Evaluation,” prepared for the New York State Tax Reform and Fairness Commission (November 2013), 70–71, http://origin-states.politico.com.s3-website-us-east-1.amazonaws.com/files/131115__Incentive_Study_Final_0.pdf.
  6. New York State Department of Environmental Conservation, “2015 Enacted Budget Brownfield Cleanup Program Reforms,” accessed Feb. 1, 2017, http://www.dec.ny.gov/chemical/101350.html.
  7. “Tax-Free Plan a Promising Start,” The Journal News, June 28, 2013.
  8. Start-Up NY, “What Is Start-Up NY?” accessed Feb. 1, 2017, https://startup.ny.gov/business-growth.
  9. Jimmy Vielkind, “Cuomo Economic Development Chief Responds Defiantly to Start-Up NY Questions,” Politico, Aug. 3, 2016, http://www.politico.com/states/new-york/albany/story/2016/08/cuomos-economic-development-chief-defiantly-faces-down-start-up-ny-questions-104467.
  10. David Robinson, “StartUp NY Gets a Makeover in Cuomo’s Budget Plan,” The Buffalo News, Jan. 19, 2017, https://buffalonews.com/2017/01/19/cuomo-budget-gives-start-ny-makeover.
  11. New York Econ. Dev. Law § 436, https://www.nysenate.gov/legislation/laws/COM/436.
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Tax incentives—including credits, exemptions, and deductions—are one of the primary tools that states use to try to create jobs, attract new businesses, and strengthen their economies. Incentives are also major budget commitments, collectively costing states billions of dollars a year. Given this importance, policymakers across the country increasingly are demanding high-quality information on the results of tax incentives.