Good business or corporate welfare?

| The Daily Gazette

A $46.2 million project would place a new office building on the site of an old Latham concert hall, consolidate 800 highly paid employees now spread across two counties, and boost the town’s tax revenue for the parcel from $30,000 to $1 million a year.

To make it happen, the developer is seeking $5.6 million in local tax incentives and $6.3 million from the town and state to build a road through the old Starlite Music Theater site.

Numbers like these are at the root of the long-running debate about development incentives in New York. (Are subsidies needed because taxes are so high? Or are taxes high because so many subsidies given out? Or both?) In this case, though, the intended beneficiary isn’t some high-tech startup or a local firm with a few dozen employees. The occupant of the new building would be The Ayco Co., a successful financial services firm whose parent, Goldman Sachs, is a Fortune 500 company that turned a 2016 profit of $7.4 billion.

“The economic derivative is much, much higher than the sum being laid out,” said Joe LaCivita, town planning director and executive director of the town Industrial Development Agency, which would approve the incentives.

“There should be a way to make this happen without giving away the store,” said E.J. McMahon, research director of the Empire Center for Public Policy, an Albany think tank that advocates for smart-government and free-market policies.


Ayco and the owner/developer of the site, Rotterdam-based Galesi Group, would not comment for this story.

Local officials were happy to speak about the proposal, though.

Town Supervisor Paula Mahan said it would provide two major benefits for Colonie: Retention of 626 Ayco employees working at two sites in Colonie and construction of the connector road between routes 9 and 9R.

The road has long been on the town’s wish list, due to traffic congestion in the area where routes 7, 9, and 9R intersect with each other and the Northway.

“It’s something that’s very, very expensive and we can’t afford,” she said.

Mahan said the town IDA board has to weigh the benefits of any project seeking assistance against the costs of that assistance. Ayco’s workforce and the new road are both major benefits for the Starlite project, she said, but whether they’re worth $5.6 million in local tax assistance is a question she’ll defer to the IDA board.

LaCivita said the IDA has not made a decision on the incentives, but has expressed its support for the project.

Asked about potential criticism that the assistance amounts to corporate welfare, he said the IDA is doing its job — promoting development in town using the tools it has been given to do so.

“Our IDA is an extremely conservative board,” LaCivita said. The board’s position is that Colonie is a great place to live and work, he said, and therefore companies should not need incentives to locate there. As such, the IDA does not offer many large incentives.

However, LaCivita added, when multiple developers are chasing a big prize — he’s heard there were more than 20 other proposals submitted for the new Ayco headquarters — the IDA does what it must to retain and attract employers, which is its mission.

“That’s the double-edged sword.”

The site has been idle for 19 years: The Starlite shut down in 1998 and was demolished in 2012.


Here are some facts about the Ayco-Starlite project provided by town officials, town tax records, state officials and the requests for financial assistance submitted to the IDA:

  • The total site comprises three contiguous parcels owned by a Galesi Group entity called Starlite Associates LLC; they total about 111 acres, all of it vacant land.
  • The project would occupy 20 acres of a 56-acre site at 629 Columbia St. (Route 9R) where the Starlite once stood.
  • 629 Columbia St. has a full market value of $1.2 million and an assessed value of $800,000.
  • Town, county and school property tax bills for 629 Columbia St. totaled $30,150.58 this year.
  • The Ayco Co. headquarters building would measure 149,005 square feet and cost $25 million to construct. Completion would be in late 2019 or early 2020.
  • Total dollar value of the entire project would be $46.2 million.
  • Estimated assessed value of the finished project is $30.7 million.
  • Without any exemptions, the total property tax bill of the finished project would be $1.07 million a year under current tax rates.
  • Galesi, which would own the site and lease the building to Ayco, is asking to make annually increasing payments in lieu of taxes totaling $6.5 million for the first 10 years of the building’s operation.
  • Galesi calculates this as a $4.15 million next exemption, but such a calculation assumes the full-tax liability would remain $1.07 million for all 10 years, which is unlikely, given the inexorable rise of tax rates.
  • Galesi is seeking a $437,500 exemption in the recording tax on a $35 million mortgage.
  • Galesi is seeking $960,000 in sales and use tax exemptions on the $12 million in project costs.
  • The 0.4-mile connector road is a priority project requested in the competitive state economic development process now underway. The Capital Region Regional Economic Development Council is seeking $5 million from the state and proposes a $1.3 million contribution from the town to build the road.
  • By the end of 2021, Ayco estimates it would have 565 professional/managerial/technical employees on site earning an average $109,000 a year; 218 skilled employees earning an average $50,900; and three unskilled workers earning an average $42,200. Total payroll would be $72.8 million.
  • Ayco would gradually consolidate employees to the new building from its two Colonie offices and its Saratoga Springs headquarters. It would boost employment by at least 80 full- and part-time workers within six months of moving in. It would submit annual employment reports to the town IDA.


The tax numbers seem pretty straightforward with the Ayco project: $30,000 a year versus $650,000 a year.

After 19 years fallow, the Starlite site generates $30,000 a year in tax payments. Galesi proposes to pay an average of $650,000 a year for the first 10 years after construction and more than $1 million a year thereafter. In return, Galesi wants to be exempted from $5.6 million in various taxes, and wants someone else to pay for the $6.3 million road that the project cannot proceed without.

McMahon at the Empire Center said the property tax reduction is not the most objectionable part of the incentive package.

“In the abstract I would say the standard, classic property tax abatement with the sliding scale, you can at least suggest an argument for that. They’re building a nice, valuable structure and thus creating a long-term taxable asset. … It’s a big, empty piece of land that’s paying essentially nothing in taxes now.

“What makes this thing egregious … is building the road,” he said.

The community has gotten by so long without the connector road that it no doubt can continue to do so, McMahon said. The Ayco headquarters, however, cannot be built without it — so the road’s construction should be the responsibility of the developer.

“The first question should be, why are taxpayers being asked to pay for this whole thing?”

He also objects to the sales tax and mortgage tax exemptions.

“That’s the smallest part of the package but it should stick in the craw of people the most,” he said. “They’re a division of one of the largest, most profitable investment banks in the world. They’re essentially nickeling and diming the town of Colonie and the county of Albany. It deserves to get a lot of scrutiny.”

McMahon said it sounds like a good project, with less negative impact and more positive impact than yet another retail plaza.

However, in total, the assistance package is a “pretty extreme case,” he said.

“To give this much in tax breaks begs the question of well, what if someone else comes and wants a break? It creates a really big precedent.”


New York’s IDAs and the rules under which they operate come under periodic criticism, with state watchdogs, good-government groups and small-government advocates all finding fault with the way public funds are spent and tax bills are cut to benefit private industry — often hidden from public scrutiny and sometimes free from accountability.

John Kaehny, executive director of the open-government advocacy organization Reinvent Albany, said he didn’t have enough details on the Ayco proposal to comment on it directly. But he does have an opinion on incentives.

“Generally we are very skeptical of government subsidies that go directly to individual businesses, because the track record is terrible,” he said.

Very often, a better use of taxpayer funds is investment in public infrastructure, Kaehny added.

Too often, he said, the beneficiaries of development incentives are obscured, raising the possibility of conflict of interest or worse.

He noted that The Gazette and other Capital Region media outlets had to formally request financial details of the Ayco proposal from the Colonie IDA through the Freedom of Information Law.

“Why did you have to FOIL this when there are public funds involved here?” Kaehny asked.

He said a lot of information is needed to judge the merits of such a large project.

“If you went to a bank and asked them for $12 million to start up a business, they’d ask for a very detailed business plan,” he said.

“What is the exact return on this $12 million? What does (that return) look like? What are the protections for the public? What happens if the business fails?”

He emphasized that his criticism is of IDAs and their behavior in general, not specifically about Colonie. Some IDAs do a thorough analysis and cover all the bases when considering projects, he said.

Reclaim New York, a fiscally conservative non-profit organization pushing for open government, voiced similar concerns. Spokesman Doug Kellogg also didn’t criticize the Ayco plan or the Colonie IDA, not being familiar with either.

”In general, we’re very concerned about IDAs,” he said. “In general, we think there’s a better solution than turning to IDAs.

“Do we have the transparency to judge their operations? Too often the answer is ‘No’.”

The larger problem, he added, is well-known and longstanding: The state has the worst business climate and the second-worst tax burden in the nation.

Rather than aiding one business at a time, New York needs to improve its business climate, Kellogg said.

“Ultimately, we need that broader relief. Right now we’ve so overburdened the taxpayers and businesses, we’re becoming uncompetitive.”

The incentives the state and its municipalities use to foster economic development comes under periodic official criticism as well, including from the state Comptroller’s Office and state Authorities Budget Office. But the practice continues.

State Sen. Neil Breslin, D-Albany, whose district includes the Starlite site, said large incentives are sometimes needed to keep a company in the state. He’s not involved with the Colonie IDA’s efforts, but said the Ayco proposal sounds like one of those cases where more is needed.

“From afar, it seems eminently reasonable. We protect Ayco staying in the state of New York,” he said.

Breslin said the incentive system becomes a problem when neighboring municipalities use it to poach each other’s businesses.

“What I object to strenuously is when there’s cherry-picking from one community to another. It’s a zero-sum game.”


While Ayco now has its headquarters on Broadway in Saratoga Springs, its first home was in Colonie, in 1971. Eighty percent of Ayco’s 780 Capital Region employees now work at Ayco offices on British American Boulevard and Wall Street in Colonie. (Employees of all three offices gradually would be consolidated into the Starlite site.)

Ayco also has smaller offices in 14 other cities nationwide.

LaCivita and Mahan both said it would be a transformative project for the area, and a major boost for the town: Not only is there the direct impact of so many well-paid employees, but their presence has the potential to attract more business and economic activity to the area. There are wetlands and power lines on the 111-acre site, but at least some of it would be available for further development in the future.

And the connector road, Mahan said, will help Colonie with its perennial traffic congestion.

“Everybody kind of goes through our town to get everywhere,” she said.

Finally, it’s a bridge to the future, Mahan said: With its numerous internships and active hiring, Ayco offers a chance for Colonie’s young adults to build their careers in their hometown, rather than move away to find their first jobs out of college.