*NEWS*CANON USA’s $35M HANDOUT !

[Anonymous]

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.”

[Author]

February 2, 2007 at 11:38 AM