Department of Economic Development

Administration of Empire Zones Program

The New York State Empire Zones Program (Program) assists economically-distressed parts of the State by giving tax and other incentives to businesses to stimulate private investment and create new jobs in designated Empire Zones (zones). There are currently 72 zones located in 51 of the 62 counties across New York State with a total of about 8,600 businesses. The Program is administered at the State level by the Department of Economic Development (DED). We found that DEDís administration of the Program needs improvement to ensure that taxpayer moneys devoted to the Program produce the results intended by the Legislature. For example, DED does not perform cost/benefit analyses of the Program, the individual zones, or the zone businesses to determine if their achievements in creating new jobs and making investments are commensurate with the State and local tax credits and utility discounts provided by the Program. It is estimated that State tax credits alone to zone businesses will total about $291 million in 2004. It is therefore imperative that DED establish a system to continually evaluate the effectiveness of the Program. In this regard, we identified weaknesses in the various Program reporting systems that prevent them from being useful tools for DED to oversee and monitor the performance of zone businesses and the individual zones and for assessing overall Program results.

In addition, we determined that DED needs to improve its zone application review process. We found that DED officials are not required to document their decisions regarding which applications to recommend for zone designation. We noted instances where senior DED officials recommended applicants for zone designation contrary to what would have been expected based on the written summaries of their applications prepared by DED staff. Regarding DEDís review of applications submitted by businesses to become zone certified, we found that DED has not developed or promulgated specific job creation and investment criteria. As a result, businesses that plan to create few to no jobs and make little or no investment are approved.

For a complete copy of Report 2003-S-41 click here.
For a copy of the associated follow-up report click here.
For a copy of the 90-day response click here.