Bang For The Buck: Are the state’s Regional Economic Development Councils having an impact?

By Adam Janos

In late December New York Medical College announced that it was starting the construction of iBio-NYSM, a biotechnology incubator on the college’s campus in Valhalla, N.Y. When it is completed, the incubator is expected to add 140 full-time jobs and 75 part-time jobs to the emerging biotech sector of the mid-Hudson Valley.

“This new biotechnology center is an ideal repurposing of a solid facility with a stellar history,” Dr. Alan Kadish, the president of New York Medical College, said in a statement. “We are thankful to Gov. Cuomo, the Mid-Hudson Regional Economic Development Council and all of our partners for their support.”

The Mid-Hudson Regional Economic Development Council is one of 10 such councils covering the state. Each council—run by 22 to 25 prominent community members from business, local government, higher education, state agencies and labor—weighs in and recommends projects for state funding based on regional economic development goals in which they want to strategically invest. Cuomo announced the start of the competition’s
third year of funding in May. Awards will be granted in December.

Lt. Gov. Robert Duffy, who chairs the Regional Economic Development Councils, sees the approach as a fundamental improvement to economic development in the state.

“I’ve been in public life for 36 years, and I’ve never seen anything with as
much potential to generate success thus far,” Duffy said. “I go to almost every one of these meetings: Around the state, each council, you have people around the table who have never worked together. It transcends political boundaries and creates synergies that before did not exist.”

Business advocates and good-government groups offer more mixed views, from skepticism to cautious optimism.

E.J. McMahon, a senior fellow at the Manhattan Institute, a conservative think tank, derided the REDCs as little more than political posturing. He noted that the council members’ vote for government spending only carries 20 percent weight in the ultimate decision of how capital funds and development money will be spent by the state agencies that the REDCs advise.

“It’s hard to escape the feeling that this process is mostly intended to give the governor something to point to as another smashing transformation of something that was previously broken,” McMahon said. “It’s a fairly elaborate rearranging of the deck chairs.”

Tammy Gamerman, a senior research associate at the Citizen’s Budget Commission, said that the councils were a positive development, but that more could be done.

“The regional councils have set up a great platform for ensuring that economic development in the state is done in a more effective manner,” she said. “But they still only control relatively small fractions of all the economic development activity that we have in the state, and it’ll take a few years to know if their investments have been successful.”

According to a recent report by the Alliance for a Greater New York, a coalition of organized labor and community groups, economic development in New York State is riddled with wasteful spending and a lack of oversight. But of the $6.9 billion in total grants and tax breaks the state gave out in 2012, executive director Matt Ryan said that the $409 million distributed through the REDC process represents “a step in the right direction.”

“I think one thing that’s very positive are the councils’ criteria for what they’d like to support,” he said. “It creates a system that’s more forward-looking and intentional for how we use public dollars. [However,] you need transparency and money-back guarantees to tip things back in a more equitable direction, if there are problems.”

With state economic development incentives, money-back guarantees come in the form of “claw-back options,” where groups that receive money or credits for economic development lose what they were given if they can’t meet job creation and performance benchmarks. Of the $409 million distributed by the REDCs last year, $248 million ($178 million from Empire State Development, $70 million in Excelsior Jobs Program tax credits) came with claw-backs.

Better coordination between the staterun councils and local Industrial Development Agencies would help improve the efficiency of economic development, Gamerman said. Unlike the REDCs, the local IDAs help provide tax exemptions for businesses operating on a smaller scale than projects like the $14 million Valhalla biotech incubator. The 2013–14 executive budget included a new claw-back clause for IDAs, increasing the regulation of the smaller agencies.

“We’re trying to figure out: Is this a rational approach to economic development?” said David Kidera, the director of the New York State Authorities Budget Office. “I think, conceptually, the goal is to focus the state economic development dollars in a way that maximizes jobs and maximizes spin-off economic development.”

Heather Briccetti, the president and CEO of the Business Council of New York State, thinks just getting the state agencies in the same room is already a big step forward.

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