NEWS

IN THE HOLE: NY doing little to keep businesses in state

Jeff Platsky and Craig Wolf
  • For every job created in the Start-Up NY program in 2014 the state lost 60 jobs from companies moving or closing
  • Other states consider New York businesses ripe for the picking because of the state's reputation for high business costs.
  • Despite a multi-million dollar campaign to change New York's branding, it lags in independent assessments of business climates.

From Queens to Buffalo, companies are closing operations and relocating facilities as other states target New York's existing businesses with lures that often are hard to pass up.

In 2014 alone, New York companies filed Worker Adjustment and Retraining Notice documentation with the state disclosing nearly 7,000 job eliminations at commercial and industrial concerns, according to an analysis of the WARN notices. Not every job necessarily was lost, as companies sometimes file notices calling for greater layoffs that ultimately materialize.

The WARN database, made public on the state Labor Department's website, reads like a death list of New York businesses.

There are 17 WARN notices so far this year that include sites in Labor Department's seven-county mid-Hudson region.

Dutchess County's Ron Hicks, deputy commissioner for strategic planning and economic development, said that by the time a WARN notice is filed, it's too late, and that the right strategy is to "get in front of them" before that point.

"I think the company has clearly made their decision and they're doing the formal legal notification to the state. I don't think at that point you have much opportunity to change their minds."

Sometimes, it's just a merger or other deal in which the affected workers just wind up on another payroll. That happened with Mid Hudson Medical Group in 2014 when it announced that the staff would all move over to be part of Mount Kisco Medical Group.

But then, it can mean actual job loss, as happened June 1 when Mount Kisco Medical gave pink slips to 109 workers and shifted their back-office work to an outsourcing company located elsewhere.

IBM Corp. rarely issues WARN notices, but did in 2013 when the volume of 697 people was enough to trigger the report.

For companies big and small, the climate in New York is not business friendly.

Gov. Andrew Cuomo's chief economic development officer, Empire State Development chief Howard Zemsky, leads the agency. In a telephone interview, Zemsky admitted that New York has a long-standing reputation for shabby treatment of its customers — the private businesses that employ millions across the state.

"In a competitive situation we do what we can," Zemsky said, adding that he is well aware that in the nationwide competitive battle for industrial development there are going to be winners and losers. "Government cannot take full responsibility for the growth or the decline."

Carolyn Wright measures a garment against a list a specifications as part of a quality check at the Carlisle Etcetera distribution facility in Westminster, Md.

For 14 years, a Queens warehouse housed the distribution center for Carlisle Etcetera, an upscale New York fashion house, and its 63 employees.

Faced with high leasing costs and the other financial headaches of doing business in New York, the owners looked elsewhere and in January 2014 officially informed New York state government they were getting out.

They fled from New York into the open arms of Maryland, which offered tax credits and training grants to get the jobs. "We're going to roll out the red carpet for them," said Karen Hood of the Maryland Department of Business and Economic Development, an aggressive player in attracting out-of-state businesses.

How hard did New York government fight to keep the company and its jobs here? Not at all.

"Never did anyone (from New York) reach out to us," said Lucile Mavrokefalos, a human resource consultant for Carlisle Etcetera. "You think they would do something."

Daniel Jean-Joseph, director of warehouse operations for Carlisle Etcetera, in the middle of the company’s new distribution center in Westminster, Md., where it relocated after years in New York.

Hicks says the correct strategy includes reaching out to companies long before they make a decision to leave. That retention effort is being stepped up in Dutchess, he said. Hicks is the county's deputy commissioner for strategic planning and economic development.

Meet the company and do research, he said. "Find out, what can we do to help you compete in this area," he said. "Put together a package to try and retain them."

Carlisle Etcetera complied with state law and filed a WARN with the state Labor Department. The company told the state it was laying off its New York workforce and the WARN notice stated: " Business relocation to Westminster, Maryland."

New York's official state response to the announcement by Carlisle Etcetera — and many other small- and medium-size businesses also moving out — was to quickly and efficiently send in state Labor Department workers to let the company's laid-off staff know how to collect unemployment insurance.

One economic development program that's highly touted by Cuomo's is Start-Up NY, which is aimed at nurturing new or smaller businesses in the state. That program has spent $53 million but produced only 73 jobs so far — a fact severely criticized in an audit by the state Comptroller's Office in May.

Yet only new jobs are the goal for Start-Up NY. Little is offered for those existing New York companies trying to maintain their operations in the face of a tax burden that ranks among the nation's highest.

"Start-Up NY is not a job-retention program," the program's chief, Leslie Whatley, readily acknowledged.

"Retention has always been the poor stepchild of economic development," said Kent Gardner, chief economist for the Center for Governmental Research based in Rochester.

A decline in employers and employees has been long and relentless for upstate New York.

Private-sector employment across the United States grew nearly 7 percent over the past 10 years and New York City enjoyed a 20 percent explosion.

Meanwhile, the upstate communities have failed to keep pace, either falling, remaining flat or increasing at a fraction of the national rate.

"I do not believe New York had any strategic vision for growing the economy," acknowledged Zemsky, New York's top economic development officer.

Zemsky, a successful Buffalo-based real estate developer who is paid $1 a year, expressed optimism that policies initiated by Cuomo — particularly the property tax cap — will begin to produce growth in high-paying jobs across the Southern Tier and the rest of upstate New York.

By empowering 10 regional economic development councils with directing efforts within a tightly focused geographic region, Zemsky said long-ignored retention strategies should rise up the list of priorities.

"These places have struggled for more than a few decades," Zemsky said. "It will take more than a few years for a turnaround."

Cuomo's office did not respond to a request for an interview.

Many business leaders contacted about the business exodus and the economic environment in general shake their heads.

"You're almost penalizing companies that are playing by the rules," said Ron Deutsch, executive director of the union-backed Fiscal Policy Institute in Albany.

Site Selection, a trade magazine that covers corporate relocations and expansions, placed New York 24th out of 35 states in its recent state rankings.

"The perception is that New York is a high-cost state in which to locate because of labor and cost of living considerations," Brett Bayduss, executive vice president of the Site Selection Group with offices in Manhattan, said in a telephone interview. "Unless there is a reason that they have to be in New York, it would not make the filter."

But other, more business-friendly states eagerly and aggressively jump in and raid longtime New York companies.

Maryland gave Carlisle Etcetera a $250,000 conditional loan based on job creation. Carroll County, which now hosts the new distribution center, chipped in another $30,000 to help train new employees.

Indiana's Economic Development Corp. offered Penguin Random House, which recently closed its 286-employee distributions center in Kirkwood, conditional tax credits of $700,000 and $100,000 in training grants, plus the city of Crawfordsville approved additional incentives to bring more than 300 jobs to an expanded center.

For clothing company Carlise Etcetera, Maryand's money sealed the deal.

"A significant part of our decision to relocate our national distribution center from Long Island City, N.Y. to Westminster was the assistance provided by the State of Maryland and Carroll County Economic Development, which is helping us to hire and train new employees at the center," Jim Brubaker, chief executive of Calisle Etcetera, said when announcing the move.

With an annual lease of $1.4 million annually, the warehouse just minutes from three major New York City highways, was far too pricey even if it was just a $25 cab ride from the company's midtown headquarters. Brubaker was trying to economize after assuming control of the company following a bankruptcy.

His staff searched for similar space in Queens. They found nothing affordable. They searched in Nassau County. They found nothing. They toured sites in Brooklyn. Same result.

Orange and Rockland counties? They, too, came up short.

Relocating the warehouse outside the New York City area was the only option.

New York state had no response to a Maryland incentive package that lured the company 220 miles south.

Others also report that New York's economic development staff never made contact after the company posted WARN notices.

Doyle Bhattacharyra of Aegis USA, a provider of business outsourcing services, said the state representatives never reached out to her after the company filed a notice that it would lay off 190 in New York City.

Jay Austrian, president of Jasco Industries in Long Island, said even though he worked with the state previously, there was no response from state economic development officials after he filed a WARN notice last year.

FINDINGS

A vigorous strategy to retain businesses in New York has taken a back seat while the state promotes its new jobs program, Start-Up NY.

In 2014, WARN notices New York lost nearly 7,000 in industrial and commercial entities alone, while at the same time boasting the creation of less than 100 jobs from Start-Up NY in 2014.

Other states, such as Maryland and Texas, are targeting New York companies with packages aimed at lowering operating costs, known to be abnormally high in New York.

7,000

Number of workers

given WARN notices

from commercial

and industrial

entities in 2014

76

Number of jobs created by Governor Cuomo's Start-Up NY initiative, despite more than $50 million spent on the program.