By Blaine P. Friedlander Jr.
Local and state government officials are learning that factors such as skilled labor, strong infrastructure and good schools offer more incentive for businesses to start up or relocate to New York than do tax subsidies, according to a Cornell report by graduate researchers.
The report was delivered to state legislators in Albany on May 29.
"Many recognize and accept the evidence that tax abatement subsidies to individual firms do not significantly impact firm decisions to relocate or expand," according to the report. Those jurisdictions "know that tax losses can starve states and communities of the resources needed to provide the services that underpin a strong economy," the report continues.
State Assemblyman Martin A. Luster (D-Ithaca) invited the researchers to present their results to the New York State Assembly and Senate. The report will be published this fall by Cornell's Community and Rural Development Institute (CaRDI).
The Economic Development Alternatives Project is a Cornell graduate level seminar in the City and Regional Planning Department on state economic development policy . The project team, all Cornell graduate students, includes: Martha Armstrong, Antonio Casal, Thomas Clavel, Todd Cornett, David Dornisch, Ann Marie Griffin, Jill Lemke, Valerie Rutstein and Yaver Sayyed. Armstrong, Sayyed and Rutstein presented the report.
Richard Rising, director of planning and
economic development for Geneva, N.Y., joined
Susan Christopherson, Cornell associate professor of city
and regional planning, to present their comments on
the
report to state lawmakers.
Knowing that local and state officials face a serious challenge in promoting economic development, the research team sought out and evaluated local strategies that could be implemented throughout the state.
First, the team suggests a comprehensive evaluation and investment in the state's infrastructure. The report says that such investment not only increases the capital base but stimulates private capital investment, increases direct employment, improves productivity and stabilizes the local economy.
"New York state can no longer afford indiscriminate infrastructure spending. A state level economic development policy can provide a framework for prioritizing investments," according to the report.
Next, the state needs to focus on developing the small and medium-size business sector, the report advises. Smaller firms draw on entrepreneurial talent and technical skills. In fact, clusters of interdependent smaller firms are more likely to circulate money and have a multiplier effect in the local economy and are less likely to leave the area for lower-wage regions, the report points out.
The research team suggests that local economic development agencies can use revolving loan funds, business incubators and technical assistance programs to meet these needs.
Examples include:
·The Erie County Industrial Development Agency. In seven years, Erie County's loan fund has resulted in the creation of 7,000 jobs.
·The Geneva Industrial Incubator, which has provided the crucial start-up infrastructure for smaller businesses.
· The Farming Alternatives Program at Cornell, which supports upstate New York's agricultural industry by providing technical and marketing assistance to regional associations of farmers.
Improving work-force skills is a third alternative development strategy. The report notes that training programs, coupled with economic development, tend to be fragmented. With private and public collaboration in work-force preparation, both employers and workers can benefit, the researchers say.
The report cites the South Bronx Overall Development Corporation (SOBRO) as an example of how building work-force skills can foster economic self-sufficiency. Since 1993, SOBRO has assisted 10 businesses and created more than 102 jobs in one of the state's most economically depressed areas. The financial and technical assistance SOBRO provides to local companies enables them to expand and stabilize.
Researchers emphasize that cooperation to develop efficient economic programs may be a wise political course. They also say that using conventional economic development and government agencies could achieve new ends. The report also suggests that state leadership could streamline the organization and transfer of information. Finally, these strategies could bring broad, improved social and economic diversity to the state, the researchers say.
"The strategies described [here] address different aspects of the economic development problem, but they have some important premises in common -- premises which differentiate them from the competitive, smokestack-chasing strategies which have dominated economic development policy," the report concludes.