CANON USA’s $35M HANDOUT !
CANON USA’s $35M HANDOUT !
2007-02-02 at 11:38:00 am #17701
Suffolk sets new standard in Canon deal
When it comes to the largest economic package in its three-decade history, Suffolk County’s Industrial Development Agency wants one thing clear: It isn’t offering Canon USA a $35 million handout.The IDA will for the first time link property tax breaks to the precise number of jobs Canon creates for Long Island in the next decade, something local officials are considering for other proposals.“If we’re going to be providing these tax incentives, we want to make sure that we receive our dividends in the form of jobs,” said Suffolk Executive Steve Levy. “And that they actually pan out.”New York economic development agencies, including the state’s own Empire State Development Corp., have come under increasing fire for handing out generous incentives but never following up on promised job gains.Last week, the Suffolk IDA board unanimously voted to offer Canon up to $35 million to build a $459 million, 864,000-square-foot headquarters just off the Long Island Expressway in Melville. The deal, which should be finalized in a week or two, includes up to $16 million in local and state sales tax exemptions and $19 million in property tax breaks for a decade after the headquarters opens.The IDA’s board considers this an investment in the region. In addition to keeping 1,260 jobs – that pay an average of $75,000 – on Long Island, the imaging giant owned by Japan-based Canon aims to increase its workforce by 40 percent, to 2,110, by 2020.Canon has outgrown its current Lake Success home and is threatening to take its economy-boosting payroll to a Canon-owned site in Jamesburg, N.J.Such a threat is hardly unique. Companies frequently talk about relocating to scare local officials into coughing up cash to keep them.“The criticism of the IDA in the past is that there would be all this money thrown around and there were questions as to whether there was aggressive follow-up to determine if the promises were fulfilled,” Levy said. “If not, what were the consequences?”Few, and that has generated ire. An audit by former state Comptroller Alan Hevesi found that the bulk of businesses awarded IDA tax breaks didn’t generate the jobs promised. In that audit, Suffolk County was the only one of six counties to exceed job projections, according to Jim Morgo, IDA board chairman and the county’s commissioner of economic development and workforce housing.The IDAs aren’t the only troubled development group. Hevesi also questioned the Empire State Development Corp.’s oversight of companies getting tax breaks in the state’s more than 80 Empire Zones, created to stimulate economic growth. A 2004 audit of eight Empire Zones found 47 percent of participating businesses didn’t deliver the promised positions.Suffolk wants to avoid such embarrassment with Canon, a high-profile deal that required months of quiet meetings and negotiations between two powerful developers who each wanted to sell Canon the $102 million parcel.“It’s not done because we think Canon is going to cheat or Canon’s not going to do what they say they’re going to do,” said Bruce E. Ferguson, the IDA’s executivedirector. “There’s not any deception here. It provides a greater comfort level for the public that, in fact, there will be a significant return in regards to this significant assistance being provided.”Under this deal, Canon’s property taxes will be phased in over 10 years, Levy said. In the first year, it will pay one-tenth of the improved property’s taxes; the value will escalate annually for a decade.When it applied for economic assistance, Canon said it should have 1,310 employees – with jobs including printer sales, human resources, sales training and legal administration – when the new headquarters is finished in late 2009. Five years later, in 2014, there should be 1,810. And, in 2019, Canon expects to have more than 2,000 employees.Canon will periodically report how many jobs it has created and the county will check the numbers, Ferguson said. The two sides are still deciding how to define a full-time employee and how to verify the workforce count.“We always check that they’ve created jobs,” Morgo said. “But we’ve never done it in such a precise benchmarking fashion over 10 years, that we have job benchmarks directly tied to the property tax abatement.”If the number falls below the projected count, the board will want an explanation of what happened and property taxes could be increased. If the number of projected jobs falls by 10 percent, for example, the tax could be boosted by that much, Morgo said. At the end of the 10 years, Canon will have a tax bill estimated at more than $4 million each year.
Ferguson doesn’t expect Canon to have problems.
“They’ve made long-term plans, long-term strategic analysis of their position,” he said. “There are definite [counts] of what they feel they can reach and what they want to reach.”Frank Mauro, director of the Fiscal Policy Institute, a think-tank based near Albany, has pushed for accountability in government subsidies. Suffolk’s move, he said, is a good thing because “it creates accountability to the public, to the taxpayers, and it’s a way of designing a yardstick for measuring the effectiveness of the breaks.”Suffolk Legis. Wayne R. Horsley, who chairs the Legislature’s economic development committee, labeled the IDA’s plan “innovative.”“It’s a very positive thing,” he said.That’s why Levy predicts Canon will be the first of other deals tied to keeping promises.“This is something we hope to set as a precedent for future incentives given through the IDA,” he said. “Taxpayers are willing to make the investment to brink in these high-paying jobs because there’s a long-term benefit, but they don’t want it to be a giveaway and see no bang for the buck.”