Big stakes and big help Empire Zone proves a tool of big business By LYNN WOODS

Big stakes and big help
Empire Zone proves a tool of big business
By LYNN WOODS

When the Empire Zone was established in Poughkeepsie in 1994, downtown was on the skids. IBM, the economic mainstay of the mid-Hudson Valley, was downsizing its facility in the city and there were fears it would pull up stakes completely, as it was doing in Kingston.

Anne Conroy, president and CEO of the Dutchess County Economic Development Corp., based in Poughkeepsie, said that Empire Zone (EZ) tax credits were key to the reinvestment efforts of the corporate behemoth in the area, culminating in the construction of a $2.5 billion chip fabrication plant, which she said was the most advanced in the world, in East Fishkill. The plant opened in 2005. IBM’s total investment for the facility was $4 billion, according to Conroy. “The Empire Zone was a way for the state to deliver assistance to IBM in a way that would work,” she said.

Although the number of jobs at both the East Fishkill plant and IBM’s existing facility in Poughkeepsie fluctuates from year to year, the collective increase is several thousand since the new plant opened, with a total of 11,865 employees in 2006. (That’s still significantly less than the 21,000 employees IBM had in the Hudson Valley 20 years ago, Conroy said.)

In return for investing in the area, IBM received $17,050,000 in EZ tax credits in 2003 and 2004, most of it in the form of the Empire Incentive Tax Credit. In 2005, it received no benefits; instead, IBM spokesperson Jeff Couture said the corporation got a $130 million grant from Empire State Development, separate from the EZ program.

The biggest beneficiary of EZ credits in the Poughkeepsie zone in 2003 to 2005, according to state data, was Phillips Semiconductor, which received $22,249,465, most of it in investment tax credits, along with $l.4 million in wage tax credits. Phillips got the credits in return for taking over a semiconductor manufacturing facility previously owned by Micrus, according to Conroy. The facility has since been purchased by a private investor group, NXP, based in California, and it currently employs about 1,000. (Details on the additional investment and job creation weren’t available by press time.)

The third-biggest beneficiary was the Gap, which received $4,183,537, most in real property tax credits. The money was for the new Gap distribution center, which when it was built in 1999 was the largest single-owned distribution facility in the world, said Conroy. The 2.4-million-square-foot facility has employed as many as 1,300 workers and now employs about 800, she said. “Gap anticipated 1,000 jobs. They met and exceeded that number.” She noted that the incentives that are awarded to EZ companies vary from year to year, depending on performance.

In all, the Poughkeepsie zone awarded $53,370,164 in tax credits from 2003 through 2005, according to state data. Since the zone was established in 1994, it has spurred $5.07 billion in total investment, according to information provided by Theresa Kelly, the zone coordinator. In 2005, $502.8 million was invested by large businesses and $45 million by small businesses; small businesses accounted for $235.8 million in investment since 1994. In 2005 small businesses created a net of 276 new jobs, a 9.2 percent increase in employment compared with 2004. The large businesses, however, had a net loss of 416 jobs in 2005, a 3.2 percent decrease from 2004, which raises questions about the millions of dollars in tax credits they received.

Just over a third of the 328 certified companies in the Poughkeepsie zone 114 firms appeared on a list released by the Empire State Development Corp. a month ago as failing to meet 60 percent of their projected employment and investment goals, based on a review of the companies’ 2005 business annual reports. The large corporations weren’t on the list. Kelly said her office reviews the annual reports to monitor performance, but “at times information is sometimes left out. A lot of the companies are bogged down by paperwork. We question when we see a discrepancy in the annual reports and do our best to collect the information and have it be as exact as possible. There’s always room for improvement.”

Mark Pastreich, managing agent of Eagle River View and owner of Acadia Hudson L.L.C., a real estate holding company, said the EZ credits were definitely an incentive for him to buy and renovate an abandoned building in downtown Poughkeepsie. Acadia Hudson got $802,608 in tax credits, mostly in real property tax credits between 2003 and 2005, and according to the state data created five jobs. However, he said by restoring the building he’s brought in 20 firms and “literally has created tons of jobs.” The businesses include a barber shop, a Korean sneaker retailer, the Hudson Valley Credit Union, and HV Help Wanted, as well as a court room for the state’s workers comp program and offices occupied by nonprofit environmental group Scenic Hudson.

Conroy said a criticism she had of the EZ program was that it was “too complicated. It should be streamlined to be more business friendly and more supported.” On the plus side, she said she liked the way the program was structured to allow input from the local coordinators. “It lets each community determine what’s important” and tailor incentives, such as encouraging retailers to locate downtown but not elsewhere in the zone. (Besides sections of the city and town of Poughkeepsie, the zone includes Beacon and the towns of Amenia, Dover, East Fishkill, Wappinger and Pawling.) In addition, “it has a lot of local buy-in. And it’s a performed based program. That’s its premise.”

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