Albany

Tax breaks do not necessarily create jobs.

That's the finding of a new report from the state Authorities Budget Office, which measured regional private sector employment changes against the tens of millions of dollars in tax breaks granted by New York's 109 industrial development agencies each year.

The report, released last week, confirms earlier agency findings, and echoes conclusions from a growing number of other watchdog groups that question the state's most incentive-heavy approaches to local economic development.

Between 2012 and 2016, ABO reported, counties saw private-sector jobs created at a rate higher than the statewide, 8.1 percent rate. But few of those counties had high numbers of IDA-approved projects. Columbia, Putnam and Ulster counties, for example, had the fifth through seventh highest private sector job growth over the period. But the IDAs from those counties approved just eight projects in total.

Conversely, the three counties with the most projects approved during that period — Monroe, Nassau and Suffolk — had a combined 5.6 percent growth rate.

Saratoga County had the state's second highest rate of private sector employment growth, and had 20 IDA projects approved over the analyzed four-year period.

All told, the four-county Capital Region had a combined 112 projects approved. Albany County, with 42 projects, saw a 7.4 percent growth in private sector jobs. Schenectady added only 0.02 percent in growth, but approved 13 projects.

Statewide, IDAs reported 292 projects worth $53.3 million in 2016, with about 18,000 jobs expected to be created as a result — or 62 jobs per project. But, as the report notes, nearly 70 percent of those jobs would come from projects overseen by the New York City IDA. The average tax break per job increased by $927 since 2015, to $2,960.

Despite the year-over-year uptick, IDAs generally are spending less — a trend the ABO's director credited to increased oversight and rule changes.

"Since the ABO has been watching," said Jeffrey Pearlman, the director, "the amount of tax levy exemptions has shrunk, which means, in our estimation, that our watching has given the (IDAs) pause in authorizing these tax breaks, and made them probably sharpen their pencils and make a determination that maybe they don't need to give as big a grant."

Changes have been applauded by some watchdog groups, as well as in Pew Charitable Trusts' recent study of how states evaluate economic development programs. (Overall, Pew found, New York has failed to monitor the efficacy of many of its programs, though the group did praise changes to IDA analyses).

And, as Brian McMahon, executive director of the state Economic Development Council, which represents the state's IDAs, noted, "While job creation is often the reason an IDA will assist a project, there often are other reasons.

"For example," he told the Rochester Democrat and Chronicle, "an IDA may assist a manufacturer to help it finance productivity-enhancing equipment, which will make the business more competitive, but may actually result in fewer employees."

"If companies invest to become more productive and more competitive, they will stay in our communities longer," he said.

Of course, it would be misleading to treat all 109 of New York's IDAs as one homogenous entity. Guilderland's IDA, for example, has historically avoided the large and long-term tax exemptions that can affect town and county budgets for decades. And the Cohoes IDA has used incentives to lure developers of large-scale, expensive housing complexes to build there.

But the ABO's report is not the first to call into question the efficacy of the overall system.

In his doctoral thesis last year, Stanford University economist Evan Mast found a direct correlation between the number of IDAs within a certain distance of one another, and the average amount of tax breaks given to one another. In 2013 alone, there were 4,709 IDA-supported projects in the state, worth $77 billion in property value, and receiving $660 million in tax exemptions — or $34 per New Yorker.

So what's driving large tax exemptions? "IDAs seem to compete with each other," he said in April. "It's a pretty simple interpretation."

"It's not that businesses don't care about taxes," he said. But smaller "businesses wouldn't, in principle, change their location because of taxes."

Take, for example, two IDAs operating close to a major city. If neither is able to give tax breaks, Mast said, it seems unlikely that the company would choose to move hundreds of miles away.

For the most part, he found, it seems unlikely that IDA deals have a serious effect on where firms choose to operate.

"The number of IDAs nearby has a larger effect on local property tax exemptions than on state sales tax exemptions or exemptions on other non-local taxes, suggesting that IDAs mainly compete on local taxes," he wrote. "(If) tax exemptions were so important, IDAs from further away would be able to exert competitive pressure."

By altogether eliminating the state's 50-plus town IDAs, he found, the average exemption rate would decrease by roughly 30 percent.