Press Release: Companies Certified Prior to the June 2004 Sunset of a Little Known and Badly Misused Tax Break Are Back in the Money
Companies Certified Prior to the June 2004 Sunset of a Little Known and Badly Misused Tax Break Are Back in the Money
Good Jobs New York Releases List of Recipients That Include Giuliani Partners, Ernst & Young, Fox News and News America
Unpublicized Rider to Empire Zones “Reform” Legislation Allows Firms Certified for Zone Equivalent Area or ZEA Wage Tax Credits Prior to June 2004 to Receive Up to Five (5) Years of Benefits Despite Program’s Expiration
April 1, 2005 – New York, NY – A little-known state subsidy program called the Zone Equivalent Area (ZEA) program has been providing tax breaks to large finance, law, and media firms in Times Square for hiring stock brokers, lawyers, and other high-income employees. The ZEA program sunset in June 2004 but a budget bill was passed yesterday by the State Legislature would allow firms certified prior to June 2004 to receive up to five years of benefits. This is despite the fact the ZEA provision was never mentioned in the Economic Development budget conference subcommittee’s meetings or in its report to the General Budget Conference Committee.
A list of recipients as well as a description of the ZEA program is available at www.goodjobsny.org.
Although “Zone Equivalent Area” or ZEA credits were originally meant to help alleviate poverty and unemployment among New York State residents, in practice they often went to finance, law, and media firms for hiring stock brokers, lawyers, and other high-income employees. ZEA benefits have also gone to food and retail employers that offer workers poverty-level wages and few or no benefits. The program did not require companies to hire locally or to provide living wages or health insurance.
“The ZEA program was created to help relieve poverty, but instead it became a poster child for how good economic development intentions can go sour,” said Stephanie Greenwood, Research Analyst for Good Jobs New York. “It’s a disgrace that leaders in Albany would continue to hand out millions in tax-payer dollars to some of the most profitable companies in the in heart of Manhattan with no benefits guaranteed to New Yorkers and no transparency.”
Like many economic development programs, the ZEA program, which began in 1994, started out as an attempt to reduce poverty and unemployment in areas of New York considered blighted by the 1990 census. But the program hasn’t reflected the movement of wealthy firms into the Times Square area or included a requirement that local low-income residents be hired in order to receive benefits. Applications for benefits were accepted until June 13, 2004.
Benefits for firms vary from tax credits worth $1,500 to $3,000 per employee with low-income and hard to employ workers providing the most benefit. Employees such as accountants and lawyers, or “non-targeted” employees can still provide a $1,500 credit to their employer every year for five years. Virtually all of Times Square’s ZEA recipients registered to begin receiving benefits after 2001, when the area’s transition to a major business and tourism center was largely complete.
Recipients in Times Square include Ernst & Young, Morgan Stanley, Lehman Brothers, White & Case, Giuliani Partners, Giuliani Group, Giuliani-Kerik (which was re-named Giuliani Security and Safety, following the recent departure of former Police Commissioner Bernard Kerik from the firm), and Giuliani-Van Essen. The Giuliani firms are registered to receive benefits at 5 Times Square, a building, which pays no property tax as part of the 42nd Street Redevelopment Project and which is also home to ZEA beneficiary Ernst & Young, which collaborated closely with the former mayor to launch Giuliani Partners in 2002. (See press release at http://www.giulianipartners.com/press_ey_011502.aspx)”
While the names of the firms certified to receive ZEA benefits are available through the Freedom of Information Law, information is not available regarding (1) the cost of the ZEA program to the state, (2) the value of the program to individual firms, (3) the number of employees (and the number of “targeted low-income employees for whom firms receive larger benefits under the ZEA program) for whom recipient firms are receiving benefits, or (4) the range of wages paid to employees for whom firms are receiving ZEA benefits.
Good Jobs New York is a joint project of the Fiscal Policy Institute (www.fiscalpolicy.org) with offices in Albany and New York City and Good Jobs First (www.goodjobsfirst.org), based in Washington, DC. Good Jobs New York promotes accountability to taxpayers in the use of economic development subsidies. Our website, (www.goodjobsny.org) contains the only publicly available database of the city’s large corporate “retention” deals, and last year we released a report Know When to fold `Em: Time to Walk Away from NYC’s “Corporate Retention” Game, detailing the failure of commercial subsidy agreements negotiated by NYC Industrial Development Agency in the 1990s to produce job growth.
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