Education component makes a difference for Start-Up NY

July 10, 2014 Updated Jul 10, 2014 at 9:36 AM EDT

By Dan Miner, Reporter- Business First

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Education component makes a difference for Start-Up NY

July 10, 2014 Updated Jul 10, 2014 at 9:36 AM EDT


Start-Up NY is nearly eight months old and it's clear the tax breaks program has tremendous implications for Buffalo.

The program will likely provide a tax-free environment for at least dozens - and possibly many more - companies operating in Western New York. It is also a major component of the state's broader strategy of making targeted investments in publicly owned facilities.

Business First's cover story on Friday, July 11 will explore the early returns on the fledgling program, including how it has helped recruit companies to Buffalo and helped companies recruit talent, but also about lingering concerns from critics who say it replicates controversial state tax incentive programs from the past, such as Empire Zones.

Thus far, state officials charged with implementing and overseeing Start-Up NY say they're pleased with the complex law's real-world application.

"I'm hoping everybody will agree that it has been and will be an outstanding success," said Leslie Whatley, executive vice president for Start-Up NY, who was recruited to state employ from her prominent private-sector job as global head of corporate real estate for Morgan Stanley.

Whatley oversees a team that includes Adam Spence, who resigned from his job as managing director in the Sponsor Finance Group of American Capital to become senior vice president of Start-Up NY. The program includes officers from Empire State Development Corp., who handle application reviews and project oversight, among other matters, but also brings in the Department of Labor and the State University of New York.

Start-Up NY's most novel element is the inclusion of colleges and universities across the state, who are being twined to economic development in an unprecedented way. Those institutions - whose "campus plans" must be approved before they can actively participate in Start-Up NY - essentially work with local economic development officials to form the program's local infrastructure. It is the colleges who decide what kind of companies they'll accept, and where they'll go. It's the colleges who set up the mechanism for accepting applications, and then for vetting the potential companies before sending them to ESD for final approval.

Every state has incentive programs to attract business, and many of them aren't shy about huge subsidy packages to go along with existing low-cost environments (New York state, by contrast, has the worst tax climate of all the U.S. states, according to the nonprofit Tax Foundation).

So the inclusion of higher education, along with the extreme tax breaks, is being billed as a way that sets Start-Up NY apart.

"It absolutely is a pioneer," Whatley said.

Start-Up NY has a broader context, and ESD officials who work with it are also responsible for other incentive programs, such as the Excelsior Tax Credit program. It is seen as a natural fit for ESD's rollout of state-certified incubators and Innovation Hot Spots, which aim to bring resources to entrepreneurs and improve the trajectory of early-stage companies in New York.

In Buffalo, Start-Up NY is considered an element of the Buffalo Billion plan, which includes a variety of high-profile projects with university partners. Campus plans have been approved for the University at Buffalo, SUNY Buffalo State and Jamestown Community College, while the State University of New York continues to develop its plan.

UB, in particular, has been aggressive in embracing the program and pushing applications through the process. Of the first 12 companies accepted into Start-Up NY across the state, eight of them were sponsored by UB, representing a pledge of more than 200 new jobs. That's just the first wave: UB has already prepared about 15 additional applications, the fate of which should be learned in the coming months.

The companies in Start-Up NY will be beholden to their initial projections, and could be dropped from the program if they don't meet their stated job creation schedule, ESD officials said. The companies will submit an annual report of their progress to ESD. If they meet less than 100 percent but more than 75 percent of their commitments, they'll be subject to a pro rata reduction in benefits. If they go below that 75 percent threshold, there is still a proportional reduction for a year, but if that continues for a second year, the benefits are suspended. If they fall below the 75 percent threshold in their third year, ESD reserves the right to kick a company out of the program.

In the long haul, Whatley said the program's effectiveness will be measured in simple terms.

"We need to produce jobs and we need to continue to find high-quality companies that have solid links to the universities," Whatley said. "I think we're going to see over time that the benefit we produced will continue to flow both ways."

Whatley said she fully believes that will happen.

"The governor's program is brilliant," she said. "I came from business to run it because I believe in it."

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