StartUp NY: Nearsighted

New York lawmakers complain about the short-term results of a long-term development program with 10-year incentives.


https://businessfacilities.com/2016/08/startup-ny-nearsighted/
New York lawmakers complain about the short-term results of a long-term development program with 10-year incentives.
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Nearsighted

New York lawmakers complain about the short-term results of a long-term development program with 10-year incentives.

StartUp NY: Nearsighted

During the year, we try to have as many face-to-face encounters as we can with our friends at economic development agencies. Sometimes, during these chats, we’ll get a surprise: they’ll inform us about an innovative new program that’s been working successfully for several months, something we hadn’t heard about (or seen a press release about) before. In that subtle way of ours, we’ll ask them “why are you keeping this a secret?”

StartUp NYThis week comes proof that making too much noise about an innovative new program also can be a problem.

In 2013, New York launched StartUp NY, an initiative to transform SUNY campuses and other university communities across the state into tax-free communities for innovative new businesses (the name of the program itself is an acronym for SUNY Tax-Free Areas to Revitalize and Transform Upstate NY). Businesses locating within StartUp NY zones operate 100 percent tax-free for 10 years (no income, business, sales or property taxes and no franchise fees).

StartUp NY is geared to give businesses access to resources of world-class higher education institutions, including industry experts and advanced research labs. In turn, universities and colleges become tax-free communities that provide their students and teachers access to real-world, cutting-edge
 business experience. Eligible businesses must create net new jobs in order to participate by being a new start-up company; being a company from out-of-state that is relocating to New York State; or by expanding as an existing New York State company (for example, a company creating a new line of business or opening a new advanced manufacturing facility) and not simply moving existing jobs from one location to another location in the state. In New York City, Long Island and Westchester County, businesses must be start-ups or high-tech companies.

New York’s bold initiative to attract tech startups with generous incentives and access to leading universities impressed us: In 2014, we gave StartUp NY one of BF‘s Economic Development Awards for Achievement in Targeted Incentives.

Then came the TV commercials, lots of them, all created with Oscar-worthy production values. We’ve seen these Hollywood-style pitches for StartUp NY hundreds of times, but they’re so slick we never get tired of watching them. The commercials are economic development eye candy; they seem to air every night of the week (but maybe that’s because we watch a lot of baseball featuring NY’s two struggling MLB franchises).

With digital equipment, the cost of producing a glitzy TV promo may not be as expensive as it used to be, but we have no doubt that the cost of purchasing air time in the nation’s most-expensive media market is astronomical. Here’s the bottom line: NY has spent nearly $50 million promoting its economic development programs on television, with the lion’s share going to StartUp NY.

With the silly season of electoral politics upon us, the New York State Legislature put aside its substantive and long-overdue priorities (like passing some new ethical boundaries for legislators) and ordered the state’s economic development director to Albany to explain the disparity between the amount of moolah being spent to promote StartUp NY and the return on this investment in terms of jobs created.

Empire State Development CEO Howard Zemsky patiently sat in the hot seat as the members of the NY Assembly’s Committee on Economic Development, Job Creation, Commerce and Industry hammered him over the head with the fact that, according to ESD’s most-recent report to the committee, StartUp NY has only created 408 new jobs since its inception in 2013.

Zemsky gave the esteemed legislators a tutorial in how business startups work in the real world. The process of commercializing innovations and transferring them from the labs to the marketplace always starts small. Most business startups are staffed by 25 or less employees. It can take several years for an innovation to blossom into a major growth sector.

The true measure of a program’s success, Zemsky noted, are the long-term investments that have been committed to the startups. Measured against this benchmark, StartUp NY is an unqualified success: companies that have signed up for the program—there are more than 100 of them—are investing $230 million in projects that are expected to create at least 4,000 new jobs within the next four years, jobs in advanced manufacturing initiatives that offer the potential for rapid growth.

Zemsky’s overview reduced one legislator to gripe that the jobs statistic had been buried in a footnote of ESD’s report. “I will assure you that we will make all the print the same size next time,” the ESD CEO responded.

Zemsky also went on offense to fend off criticism of the lavish promotional campaign for NY’s economic development programs, arguing that it is producing the “intangible” but valuable benefit of reversing the state’s decades-old reputation as a place with one of the worst business climates in the nation. “We dramatically changed the perception of New York State,” he said. “The world thought New York State was not open for business. Now, the world thinks New York State is open for business.”

As the grilling of the ESD chief wound down in Albany, Zemsky challenged the legislators to keep putting his feet to the fire.

“If it would help to exorcise all of the emotion around the StartUp New York program, I would be willing to subject myself to any types of medieval torture, any other things that could make all the anger go away,” he said.

We don’t think an exorcism will be necessary and we’re not rescinding our award for StartUp NY, which remains the right program at the right time for New York.

But enough with the TV commercials, Howard. We get the message.

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