Governor Andrew Cuomo’s executive budget proposal pulls the plug on the state’s disappointing START-UP NY program.
Under Public Protection and General Government legislation submitted as part of the budget process, Cuomo proposes rebranding START-UP as the “Excelsior Business Program” (not to be confused with the “Excelsior Jobs Program”). Excelsior would give out similar tax-free benefits but operate under substantially different rules.
Companies that are fewer than five years old would be eligible for the modified program, which allows businesses to operate for at least five years without paying income, sales or property tax. The law now requires that businesses “must not be operating or located within the state” at the time they apply to START-UP.
Cuomo’s proposal swaps out the prohibition on moving jobs from one part of the state to another for a requirement that the company must not have “generated net income,” and also adds a 25-employee limit on companies that apply. Many of the businesses currently admitted to START-UP exceed this limit, but would appear to be grandfathered in.
Instead of having to create jobs within their first year, Excelsior would require businesses to create “at least one net new job” during their first five years of operations (page 161).
The legislation also rolls back the state’s overall reporting requirements for its job creation programs: instead of updating the public on a quarterly basis, Empire State Development, which oversees the programs, will now only have to produce annual reports (page 178).
The Empire Center first revealed in July 2016 that START-UP NY had appeared to peak during 2015, securing roughly the same number of job pledges—about 2,100—as it had the year before. In November, a separate Empire Center analysis determined that 2016 would likely be START-UP’s worst year yet.
This isn’t the first time the Cuomo administration has rebranded a failed economic development program: in 2014, its Innovate NY venture capital program became the target of a federal probe, after one of the participants appeared to steer more than $1 million in public funds meant for start-ups into companies it already owned. The program was soon replaced by an even larger VC program called the New York State Innovation Venture Capital Fund program.
START-UP NY lacked the fundamental elements necessary to spark the upstate revitalization its proponents hoped for when it was created in 2013. But if nothing else, it’s served as a controlled experiment, showing that New York’s hostile business climate extends beyond its tax code, and shows that other measures are necessary to make the state more amenable to private-sector growth.