Economic development money should go to small, start-up business
I have been complaining a lot about the leadership in many areas: in state politics, in media and in the schools. The economic development gurus in New York state also seem to be way off-base in their priorities.
The state comptroller, Thomas DiNapoli, recently announced that New York state granted $1.5 billion in tax breaks to business and corporate interests in 2011. These tax breaks were given out at a time when local governments and school districts are facing serious funding shortfalls. In a 2012 report, DiNapoli’s office noted a very limited correlation in New York between higher tax exemptions and actual job growth.
The comptroller also has recently expressed concern that the 113 New York state economic development organizations were far from transparent in their operations.
Since a major issue in state government at the present time is corruption, let me point out that the Attorney General’s Office under Eric Schneiderman can’t simultaneously police rampant Wall Street corruption, corruption in the New York state legislature and as well as corruption within 113 state economic development entities. The staff in that office can’t work wonders — especially on its insufficient budget.
We can suspect, though, that any thorough analysis of the economic development agencies would reveal startling levels of corrupt internal practices: padded bonuses for the executives, excessive pensions and severance arrangements as well as the rewarding of many grants to cronies in indirect quid pro quo arrangements.
It is too early to gauge how many real permanent jobs, good jobs providing health insurance and an adequate pension option, have really been created in the great tax incentive giveaway of the past decade. Meanwhile local cities continue to languish. Not enough economic development money is being directed to small business entrepreneurship inside cities like Gloversville and Amsterdam and Johnstown and Schenectady.
A large chunk of that $62.7 million in the 2011 New York state Economic Development competition money for our area should have gone to small-scale start-up projects in our stressed regional cities. At least 15 percent of it should have been designated for start-up help for young entrepreneurs ready to commit themselves to a long-term presence in actual communities in the Mohawk Valley. According to my calculation, though, less than 0.5 percent of the 2011 award money was dedicated to micro-enterprise development. That is a pittance.
My two favorite “I can’t believe it” public taxpayer grants to private companies were the $903,021 thrown to Quandt’s Foodservice Distributors in Amsterdam for a warehouse, allegedly to keep the company from leaving Amsterdam, and the $5 million awarded to M.H. Stallman to move into the town of Johnstown. Five million? That one grant alone could have been divided into one hundred grants of $50,000 for small business start-up ideas in Gloversville, Johnstown, Amsterdam and Schenectady.
How many real permanent-quality jobs were created with that combined $5.9 million? Or are such projects creating low-wage jobs without medical insurance and pension plans?
The point is that intelligent development entails far more than throwing public money to big companies and large corporations, especially ones whose past actions indicate that they are not fully committed to our regional communities.
Certainly a massively expanded program of small grants for Main Street start-ups should be part of any intelligent economic development program. We have assumed for too long that nothing much can be accomplished in our communities without public offerings of tax breaks and incentives to big private companies. We are overlooking the role of small-scale business in the local economy.
Some of the best ideas about an alternate way come from Vincent DiSantis, a longtime resident of Gloversville. Here is someone with a clear vision of what enlightened economic development can be. His book “Toward Civic Integrity: Re-establishing the Micropolis” contains a vision of community-based development at least two decades ahead of the Neanderthal attitude that tax incentives granted to large corporations must be the essential cornerstone of regional development.
DiSantis writes about the challenges of community economic development from the enlightened perspective of a Gloversvillian who has lived through two generations of economic neglect that left his native city a decaying shell of what it once was.
Among the many excellent ideas in his book, DiSantis believes that small, locally owned businesses can profit from the creation of non-profit loan pools focused on providing micro loans to start-up entrepreneurs with good ideas. Such economic activity is what public money should be funding far more aggressively. In the long run, these small scale start-ups are the catalysts for long term economic revitalization.
What about a reallocation of development money toward business ideas sponsored by female entrepreneurs? Female entrepreneurship is a big growth area. And what about a targeted program for the development of minority-owned businesses within the very city communities that need economic development?
And why not grant large awards of development money to finance natural energy production projects of the kind Karen Cookson sensibly advocated in last Sunday’s lead opinion essay? Far too little money was given to such programs in the big New York state economic development grant giveaway of 2011.
The current economic development leaders need to get in the real ballgame, a serious, real existential competition that is not about feeding big companies so much public tax money while neglecting the real needs of regional economic development. A balance is needed. Smart growth starts small.
While we wait for more sensible leadership to surface, I’ll bet anyone a whole nickel that in 25 years Global Foundries will have vacated Malta, leaving in its wake a sprawling developmental wasteland with sinking property values. Anyone give me 2-to-1 odds? I’ll take them. I hope I am wrong.
L.D. Davidson lives in Amsterdam and is a regular contributor to the Sunday Opinion section.