Should the boundaries of Poughkeepsie’s Empire Zone expand to include parts of Oakwood Commons, a new Route 9 office complex? Democratic Dutchess County legislators had questions about a proposal to do just that during a meeting of the budget, finance and personnel committee on Nov. 8. A public hearing on the boundary revision has been set for Dec. 6 at 6 p.m. in Legislative chambers.
The New York Empire Zone program confers tax breaks to businesses in order to attract and retain jobs and investment in the state.
“It is integral … to pull in new investment into this county,” said Theresa Kelly, Empire Zone coordinator.
Begun in1986, the Empire Zone program was intended to remedy areas of extreme poverty. Over the years, the state Legislature has relaxed inclusion standards, allowing 10 original zones in 1986 to proliferate to 82 zones across the state in 2007, an annual growth rate of 11 percent. Today there are more than 9,800 certified zone businesses. In return for tax benefits, a business is supposed to demonstrate that it will create new jobs and make investments. But the program’s administrators at the Economic Development Corporation (EDC) came under fire earlier this year for failing to hold companies to promised targets.
Democratic legislators posed questions to Kelly and Peter Winne of the Dutchess County EDC on the program’s merits Nov. 8. Joel Tyner (D-Rhinebeck/Clinton) said that people may now be “wondering about the validity of the entire program.”
Despite some reservations, legislators approved a housekeeping measure designating the county as lead agency for the zone boundary revision by a vote of 22-1 at a session Nov. 13. Tyner opposed, and two legislators were absent.
Democrats focused on the highly visible Oakwood Commons development rapidly undergoing construction on Route 9 in the Town of Poughkeepsie north of the Spackenkill intersection. The first of two five-story office towers, a CVS pharmacy, a Red Robin chain restaurant and a four-level parking deck are included in phase one. The second office tower and a 125-bed Hilton Gardens Inn comprise the second phase. Two major tenants, Key Bank and Compensation Risk Managers (CRM), have already entered into long-term lease agreements. KeyBank is relocating its regional headquarters, currently in Newburgh.
Only part of the project falls within the boundaries of the existing Empire Zone. Under the revision, CVS and Red Robin are out, while the second tower (containing CRM), parking deck and hotel are in. No change in net acreage of the zone results. Retail businesses on Route 9, where strip malls already proliferate, are not eligible for certification – Winne said the corridor “just doesn’t need” more retail. However, an exception was made for the hotel. The developer will get sales tax refunds on building materials for the hotel under the terms of his deal with the county, according to Winne. Hilton Gardens Inn, the company occupying the building, will not be eligible for certification.
While Oakwood Commons is among the most prominent projects affected by boundary changes, it is not the only one. In fact, the zone boundaries are in near-constant flux, with changes made every few years. A laundry list of other changes – parcels in and parcels out – is also proposed for zones in Poughkeepsie, Beacon, East Fishkill and the Town of Pawling. The addition of a parcel in the City of Beacon, it is hoped, will attract a milk distributor.
Legislator Sandra Goldberg (D-Wappingers) likened accommodating the developer’s site plan with the inclusion of the office tower at Oakwood Commons and other structures to “closing the barn door (while) the horse is getting out.”
Goldberg is not alone, as critics in different parts of the state have asserted that shifting zone maps opens the door for politicizing tax benefits.
But Winne said aligning zone boundaries to accommodate developers’ site plans is standard practice around the state. It also helps retain industry in targeted areas, which furthers the purpose of the program.
“I’d say it’s normal,” said Winne.
The EDC has defended itself against criticism that companies might be getting tax breaks by simply promising to create jobs and investments without following through. Actual tax breaks conferred depend on tax returns filed with the state department of taxation and finance, according to EDC officials.
“Nobody is getting any credits that didn’t produce the jobs and the investments,” said Kelly.
Winne likened certification to a library card, conferring no benefits unless utilized. “A company gets no credits or benefits just by being certified. They have to actually create jobs or make investments,” he said.
Developers constructing qualified projects within a zone get a sales tax refund or exemption on building materials, while property owners obtain property tax refunds. Companies (regardless of whether they own property or lease space) that get certified under the program apply for income and wage tax credits, sales tax exemptions and utility rate reductions. In some cases, the relief can entirely eliminate tax liability.