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START-UP NY: Big boost or big giveaway? 

New York has a problem.

The state's public and private universities produce well-educated students and foster plenty of technological innovation, but out-of-state companies are often the ones to benefit. It's a trend that state government and business leaders have tried, with limited success, to reverse for years.

But some elected leaders and economic development officials say that the state's new START-UP NY initiative could turn that imbalance around.

START-UP is an incentive program for participating businesses to receive substantial state tax breaks. But it also links entrepreneurs and businesses with the state's public and private colleges and universities.

Connecting business and academia in a low or no tax environment provides job opportunities, says state Assembly Majority Leader Joe Morelle, and could mean more university research in New York. Morelle, an early supporter of START-UP NY, says the program is "an opportunity that has not come along before and can really propel us."

But some critics question the program's potential, wondering whether companies will stick around when the incentives end. Others worry that the tax benefits give unfair advantages to START-UP companies and their employees.

Regardless, local interest is building. During a recent Brockport village board meeting, Mayor Margaret Blackman said that a company, Precision Optics, has leased space on Market Street in the village's downtown. The company is working with SUNY Brockport — a company founder is a graduate of the college — to enter the START-UP NY program, she said.

To participate in the program, SUNY Brockport has to submit a plan to SUNY and state officials for approval. Until the approvals are acquired, college officials aren't supposed to discuss the plan or have formal discussions with businesses, says SUNY Brockport spokesperson John Follaco.

Blackman learned about Precision Optics because colleges and universities are required to consult local officials as they develop their START-UP plans. But she says the fact that the company is leasing a vacant storefront downtown could be a good thing for the village.

And Blackman says she sees potential for the college to help fill other vacant or underused properties in the village. In particular, she says the college and the START-UP program could help put a large brownfield property on State Street into productive use.

"This is just in its real infancy," Blackman says. "And so I think it's a kind of wait-and-see thing, and we want to work with the college with doing this."

The state Legislature passed the laws authorizing START-UP last spring, and Governor Andrew Cuomo officially launched the program in October. State officials are still in the process of putting the framework together, however — an effort that includes finalizing the membership of an oversight board.

Like most of New York's economic development programs, START-UP is complicated.

The effort centers on plans drafted by colleges and universities across New York. The plans spell out the properties that the institutions want to designate as "tax free" and what kind of businesses they want to attract. SUNY schools must get their plans approved by SUNY and Empire State Development. Private schools have to submit their plans to Empire State Development for review, but the ultimate decision rests with the START-UP NY board.

Once a college or university's plan is approved, a business can apply for START-UP. If the institution approves, Empire State Development reviews the application to double-check eligibility.

Interested businesses have to meet a list of criteria: they have to be a new start-up, a company relocating to New York from another state, or an existing company that's expanding and adding jobs, not simply moving existing ones. And they have to fit with a school's academic mission. That could mean offering relevant internships or cooperating with the institution on research of mutual interest.

They also have to generally locate in space on a university campus or within one mile of it, though there are exceptions.

If the businesses qualify, they'll receive tax incentives lasting a decade, including the elimination of income taxes, sales taxes, and franchise fees. And their employees get a five-year break on income taxes, too.

In addition to SUNY Brockport, Monroe Community College, SUNY Geneseo, Genesee Community College, and Finger Lakes Community College are eligible to participate in START-UP projects. Rochester Institute of Technology and University of Rochester are working to be included, too, Morelle says.

And Morelle negotiated special language in the authorizing legislation that allows UR and RIT to designate more space for businesses than other upstate private colleges.

One major question looming over START-UP, which is authorized through 2020, is what happens when the incentives run out? Will companies stick around? Will they seek new subsidies?

Morelle says that time will tell. But he and many other state officials are optimistic. He says START-UP gives the state an opportunity to draw in and nurture companies, and convince them of the virtues of doing business in New York. By the time the companies' incentives run out, he says, they'll have established roots in the state and may find it harder to leave.

Many critics say that New York is not friendly to business, citing primarily taxes and regulation. Morelle says that START-UP could buy the state some time to make changes to tax policy.

And if officials find that companies and communities benefit from START-UP's aggressive incentives, he says, the state may be able to make targeted changes to benefit startups.

And the program will also give state and local officials time to establish business clusters, Morelle says, which would help with long-term retention. When clusters of similar businesses form, he says, they develop relationships that make it easier for them to innovate.

That's why Morelle says it's important to get RIT and UR involved in the program. The institutions may be able to get companies to further develop their research, and to do it locally. For example, companies may be able to capitalize on RIT's sustainability innovations, he says, or on UR's medical device research.

"I think if we're going to make this conversion from an industrial to a knowledge-based economy," Morelle says, "this is exactly the kind of program we need."

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