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Managing Economic Development Programs in New York City: Lessons for the Next Mayor from the Past Decade 1 The Most Important Economic and Fiscal Decisions.

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Presentation on theme: "Managing Economic Development Programs in New York City: Lessons for the Next Mayor from the Past Decade 1 The Most Important Economic and Fiscal Decisions."— Presentation transcript:

1 Managing Economic Development Programs in New York City: Lessons for the Next Mayor from the Past Decade 1 The Most Important Economic and Fiscal Decisions Facing the Next Mayor A Citizens Budget Commission Conference December 6, 2013

2 “But-for” Challenges in Evaluating Economic Development Problem: How do we know the policy or program is making a difference? Would activities otherwise not have occurred in NYC? Are programs creating new activity or simply moving it around the city? Can we separate the impact of contextual factors from program results? Is the benefit from new economic activity worth the cost? 2

3 General Guidelines for Effective Economic Development Programs Use jobs as the prime criterion for assessment Clearly identify all costs and benefits Be transparent: publicly report costs and benefits Regularly monitor and evaluate criteria and results 3

4 Four Objectives Promote growth in the number of jobs and scale of economic activity, and by extension, the tax base Enhance residents’ access to “quality” jobs providing adequate wages and benefits Diversify local economic activity across industries and boroughs Maintain the city’s central position within the region’s economy 4

5 Job and Aggregate Wage Growth Have Outpaced the Nation Index of Average Annual Private Employment, NYC and US, Index of Aggregate Private Sector Wages, NYC and US,

6 Mixed Performance: Quality, Diversity and City Share of Jobs 6 “Quality” jobs “Quality” jobs: 68% of new jobs since 2000 in three sectors– health, leisure, retail trade– with average wages lower than national average Economic diversification Economic diversification: Employment shares increased in Brooklyn and the Bronx; education and health services and leisure and hospitality jobs now 34% of local economy, up from 26% Regional core Regional core: City share of regional jobs and personal income now higher than in 2000

7 Contextual Factors have Bolstered Performance Since 2002 Positive trends – Crime has trended downward, resulting in the “safest big city” title – Public school graduation rates and testing results shows positive trend – International in-migration continues while domestic out-migration has ebbed Negative trend – High tax burden increased 7

8 Five Economic Development Tools TOOLS TAX EXPENDITURES As-of-Right (property/other) Discretionary CAPITAL SPENDING CONDUIT FINANCING OPERATING PROGRAMS ZONING 8

9 NYC Economic Development Spending Now Surpasses $2.7B Annually; Doubled Since 2002 Annual Spending, 2002 and 2012 Conduit Debt Outstanding 9

10 “As-of-Right” Property Tax Expenditures 2007 City study found 77% of projects did not pass the “but-for” test Study led to partial reforms Reforms failed to address fully: – Benefits tied to property appreciation rather than initial investment – Unnecessarily long benefits (up to 25 years) – Benefits to retail projects – Benefits for projects in Manhattan CBD that did not require inducement 10

11 Other As-of-Right Tax Benefits Largely For Two Older Programs Program Insurance Company Non-Taxation$187M$365M Fuel Sold to Airlines$38$117 Commercial Revitalization Program$25$37 Energy Cost Savings$19$32 Commercial Rent Tax Abatement$6$5 Film Production Tax Credit$0$33 Energy Cost Savings Program$38$29 Relocation & Employment Assistance$7$23 Total$295M$604M 11

12 Discretionary Tax Benefits: Insufficient Information to Know if They are Working 12 Cost of benefits directly administered by EDC: $273 million in 2012 Total project subsidies per job vary widely within industries, as well as across industries Annual EDC reports do not includes all project subsidies, making evaluation difficult

13 Capital Spending 13 Since FY2002, $6.4 billion in New York City capital for economic development Many projects not accompanied by economic analysis demonstrating measurable benefits – Whitney Museum vs. Hunts Point EDC also serves as capital project manager for city projects with limited job creation goals

14 Conduit Financing Provides access to low-cost financing Net cost to City is relatively small More cost-effective than capital grant support Used by growing industries: health and social services, education, arts and recreation 14

15 Zoning Zoning should support the evolution of the City’s economy Over 36 percent of land has been rezoned since 2002 Creation of more mixed-use special districts has enhanced flexibility of land use 15

16 Seven Lessons for the Next Mayor 1)As-of-right property tax expenditures: 1)As-of-right property tax expenditures: Additional reform to make them more cost- effective 2)Other as-of-right tax expenditures: 2)Other as-of-right tax expenditures: Evaluate longstanding programs for insurance and airlines 3)Discretionary tax expenditures: 3)Discretionary tax expenditures: Establish clear standards for size of subsidies 16

17 Lessons for the Next Mayor (continued) Capital 4) Capital: Invest in neighborhoods, not firms; develop local infrastructure with long-term development potential Conduit financing 5) Conduit financing: Look to conduit financing, rather than capital grants, for individual firms Zoning 6) Zoning: Expand special mixed-use districts to facilitate diversified job growth All tools 7) All tools: EDC should focus on job creation and enhancing transparency 17

18 Managing Economic Development Programs in New York City: Lessons for the Next Mayor from the Past Decade 18 The Most Important Economic and Fiscal Decisions Facing the Next Mayor A Citizens Budget Commission Conference December 6, 2013


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