Start-Up ads cost N.Y. taxpayers $53M

ALBANY – The ubiquitous Start-Up NY promotional campaign has cost taxpayers $53 million since the program's inception in late 2013, while it has led to $1.7 million in private investment so far, state records show.

The state spent $47 million on the ads alone since the program started in December 2013, and the total cost included production expenses and other marketing efforts through last month, according to Empire State Development Corp. In July, the agency said $28 million had been spent on the ads.

Gov. Andrew Cuomo and state officials have defended the spending. The program provides tax-free zones for 10 years to companies that locate on or near college campuses, particularly upstate. To promote the program, the state has embarked on a national ad campaign.

A key part of luring new businesses to New York has been to dispel its reputation as a high-tax state, said Howard Zemsky, a Buffalo businessman who heads Empire State Development, the state's economic-development arm, in the program's annual report last week.

"The promotional campaign set into motion in late 2013 did just that. Today, Start-Up NY is a brand known not only throughout the state and across the nation, but around the world," Zemsky wrote.

The ads, however, have been criticized for being a waste of taxpayers' money and labeled as being politically motivated. Although Cuomo doesn't appear in the ads, they ran during his successful re-election bid last year.

"Start-Up NY was never about lifting New York's economy; it was all gimmicky self-promotion for Cuomo," said Assemblyman Kieran Michael Lalor, R-Fishkill, Dutchess County, in a statement. "The ads are a cynical attempt to persuade New Yorkers that the state's business climate isn't among the worst in the nation."

The state has been allocating $50 million a year for the past five years under New York's "Open for Business" marketing campaign, which includes Start-Up NY and the "I Love NY" tourism effort. Comptroller Thomas DiNapoli is auditing the program.

As of July, the state had spent $161 million out of a $237.5 million pot for the overall campaign; about 60 percent went to out-of-state ads.

The money has been approved by the state legislature in each year's budget, and it has come from a $90 million annual transfer from the state Power Authority, which runs 16 power-generating facilities that sell electricity to utility companies.

In this year's state budget, approved April 1, another $50 million was allocated to the "Open for Business" campaign.

Also as part of the $90 million, $35 million will go to an initiative by Cuomo this year called the Global NY Development Program, which includes grants and loans to companies looking to expand internationally. The effort also includes Cuomo-led trade missions to Mexico, Canada, Italy, China, Israel and Cuba.

The Cuba trip is April 20.

Using money from the Power Authority to fund the ad campaign has drawn its own round of jeers.

Westchester County Executive Rob Astorino, a Republican who ran against Cuomo last year, said the transfer is ill-advised because New York has among the highest utility rates in the nation.

"Middle-class taxpayers are stretched to the limit, and they don't want their tax dollars wasted," Astorino said in a statement. "Gimmicks like these are why New Yorkers have lost faith in their government leaders and why so many businesses and families have bailed out on New York."

The Start-Up program, its annual report shows, remains in its infancy.

While 356 tax-free zones at 62 colleges and universities were created, 30 companies began operations last year and created 76 jobs, investing $1.7 million. The 54 companies approved for the program have pledged 2,100 new jobs over five years and to invest $91 million.

The companies received $56,560 in tax credits last year, the report said. They need six months in the program to get the tax breaks.

Another 26 businesses have been approved this year, for a total of 80 since the program started. There were seven companies entered from the Southern Tier, mainly at Binghamton University; four in the Finger Lakes; and two in the Hudson Valley.

Datto Inc., which provides computer data backup and disaster recovery services, was listed as creating 26 jobs after it joined the program last May and moved into the Rochester Institute of Technology's Center for Urban Entrepreneurship building in downtown Rochester. That was the greatest number of jobs of any company listed.

BAK USA, which makes electronic tablets in partnership with the University at Buffalo, listed 16 jobs. Advanced Material Analytics, a research and manufacturing firm at Binghamton University, showed it had created eight new positions.

Zemsky praised the early results.

"There is a buzz in the business community, and the volume of interest has been significant," Zemsky wrote in the report. "The program has built momentum that will drive participation — and the associated benefits to New York state — onward and upward for years to come."

Joseph Spector is the Gannett Albany Bureau chief. Follow him on Twitter @gannettalbany.

At a glance

•The Start-Up NY ad campaign cost $53 million since December 2013, including expenses for production and marketing. The ads' expense was $28 million in July and jumped to $47 million as of last month.

•The program, which started in January 2014, has so far led to $1.7 million in private investment and 76 new jobs, though 2,100 jobs are pledged and $91 million is expected to be invested by 54 companies. Overall, 80 companies have entered the program.

•New York has spent more than $161 million from a $237.5 million pot as of July on its tourism and business ad campaigns. Another $90 million was allocated April 1 for various economic-development programs, including Start-Up NY.