Department of Economic Development

Administration of Empire Zones Program (Follow-Up Report)

In the Empire Zones Program, which is funded primarily by the State and administered by local governments, businesses located in certain economically distressed areas of the State (empire zones) may receive tax benefits and other incentives that are intended to encourage economic development, business investment and job creation. A total of 72 areas in 51 counties have been designated as empire zones. In audit report 2003-S-41, we examined the statewide oversight of the program by the Department of Economic Development and found that a number of improvements were needed. In particular, the Department did not perform cost/benefit analyses to determine whether individual zones, or the program as a whole, were creating new jobs and other economic benefits that were commensurate with the tax credits and utility discounts provided by the program.

We also found that the Department did not receive the information it needed to perform reliable analyses of program effectiveness, as participating businesses were not required to report certain critical information and the information that was reported was not independently verified. We further noted that the Departmentís approval of areas for zone designation was not always adequately documented, and businesses were not required to create a certain number of jobs or make a certain level of business investment to be certified for participation. We recommended that a number of actions be taken by the Department, and when we followed up on our recommendations, we found that some progress had been made in addressing the problems identified by our audit.

For a complete copy of Report 2005-F-32 click here.
For a copy of the 90-day response click here.