In its first full year of operation, the effort created fewer than 100 jobs. It has, however, attracted entrepreneurs like Brian Heidel, the self-described dung beetle of the mining industry.
Mr. Heidel has big plans for his company, Mid-Island Aggregates Distribution, which recycles mining waste. He and his three employees, one of whom is his wife, are set to move from Connecticut to New York. The company plans to create at least five jobs and invest $1.5 million.
The state’s pitch for the program, Mr. Heidel recalled, was irresistible: “Move here, expand here or start a new business here and pay no taxes for 10 years,” the ads for Start-Up New York say.
Despite the offer, in 2014 54 businesses were given the go-ahead to begin operating under the program. Of those, 30 companies started operating, creating a total of 76 new jobs.
State officials say the program is working precisely as planned: By eliminating the tax burden for hungry companies looking to expand in New York, the state will attract more businesses and create more jobs. They say the program attracted mostly small companies in the first year, but will draw bigger ones now that it is established; as evidence, they pointed to 56 new companies already approved in 2015, and some 3,150 new jobs committed over all. It also reinforces a larger message, they said, that the state is business friendly.
One administration official, when asked about the program’s promise, furnished a children’s poem about a blossoming garden: “Dig In,” by George Shannon. “Plant a little. Plant a lot,” the poem reads. “Plant the seeds and bulbs you bought.”
There is little question that the state expects a bountiful return, in companies native to New York and imported. Of the businesses currently running, however, just four came from out of state. In some cases, the companies have not even crossed county lines.
Sensored Life, for example, in Penn Yan, N.Y., moved one mile to qualify for the program: from a spot on Penn Yan’s Main Street to a business park owned by a county development agency, which leases space to Keuka College, a small Finger Lakes school.
Sensored Life, which sells automated home-monitoring equipment, has promised to hire 17 people and invest $140,000 over the next several years. But it has three employees at the moment, including a co-founder, Michael O’Brien, a 63-year-old “serial entrepreneur” whose previous start-ups have included companies that made lacrosse goals and a slip-resistant footware.
Mr. O’Brien said he hadn’t yet sold “a heck of a lot” of his newest product —the MarCell, a temperature, humidity, water and power monitor — but was a big fan of Start-Up New York, which exempts him from paying state sales and income taxes.
“We’re a small business at this point,” he said, “but we have high hopes.”
Start-Up New York was one of Mr. Cuomo’s marquee projects in his first term as governor, born out of his desire to create and keep jobs in New York, among the states with the highest taxes in the country. The program’s launch was steeped in rhetoric, setting expectations high. At one point the governor predicted Start-Up New York would be “the greatest economic savior for upstate New York.”
At a public event in late 2013, one Start-Up New York official said the program had “very ambitious” goals, adding the governor “would like to have up to 10,000 jobs per year added to the program.” The Start-Up official, however, says the 10,000 figure instead referred to the annual cap of how many jobs could qualify under the program.
Mr. Cuomo’s confidence in the program has been unshakable. Since late 2013, the state government has advertised Start-Up New York nationwide, spending $46.9 million to promote it between December 2013 to March 2015, according to Empire State Development Corporation, the government agency that administers the program.
In order to qualify for the program, businesses must locate at least some operations in designated tax-free zones around the state located on or nearState University of New York campuses, create new jobs and have a business vision that aligns in some way with the university. Pharmaceutical companies, for instance, would fit in on a campus that has a strong medical program. Restaurants, banks and law practices do not qualify. If companies fail to reach their job creation targets, their tax benefits will be prorated, according to Empire State.
Thomas P. DiNapoli, the state comptroller, is concerned that programs like Start-Up — and others promoting the state — are not generating an adequate rate of return. On Monday he released a report concluding that Empire State Development Corporation has spent $211 million on an advertising to promote various economic development programs in New York that have produced “no tangible results.” His office is also considering a separate audit on the Start-Up NY program itself.
“It is time for us to look at the return for the tax dollars going in,” Mr. DiNapoli said. “We need be asking ‘What are your goals and how are you going to measure it?’ If you fall short, do we continue to throw money into it? Those are the type of questions we haven’t asked enough.”
In an interview, Howard Zemsky, the chief executive of Empire State Development Corporation, called criticism of Start-Up New York “shortsighted.” He predicted the program would eventually create hundreds of millions of dollars in investment, and thousands of jobs.
For the near term, however, he described the program as a tool “in our economic development toolbox,” adding that the marketing of it and other programs have burnished the message that the state is “a place that has now got its act together.”
“We have changed perceptions,” Mr. Zemsky said. “New York is back in the game.”
Mr. Zemsky likened the program to a rocket. “It takes a lot of thrust to get it off the ground,” he said. “And then five miles in the air, you know, it’s less of a heavy lift.”
The list of approved businesses is an eclectic mix, but are often more mom-and-pop companies than those on the Fortune 500. It includes Simply Natural Clothing, a small clothing line in Buffalo — with two full-time employees — selling items like a $395 baby-doll-style dress made out of alpaca fiber; Sonic Blocks, a Binghamton-based business that aims to develop customizable speaker systems and was founded by a father-and-son team (who are also currently its only employees, and unpaid); and Americord Registry, a New York City-based company specializing in “umbilical cord blood, cord tissue and placenta tissue banking.” Now in its seventh year, Americord has seven employees.
Scott Wilker, the chief executive of Sonic Blocks, says his website will launch soon, but that he and his son, a teenager, are still building prototypes — and their business. “We’re still in stealth mode,” he said.
Some companies have handsome websites, complete with corporate histories, mission statements and job listings.
Datto Inc., a Connecticut-based company that provides data backup services, was the busiest creator of jobs in 2014, according to Empire State, with 26 new positions. Michelle McComb, Datto’s chief financial officer, said that the hiring had continued into 2015 at the company’s new office in a building owned by the Rochester Institute of Technology.
And last week Mr. Cuomo participated, by telephone, in an event announcing a multi-million-dollar investment by the billionaire Tom Golisano in Bak-USA, a Buffalo company, promising more than 250 jobs.
Others, however, are more works in progress.
Last July, for example, the governorannounced that a company called Vader Systems, which aims to make metal 3D printers, would create 15 jobs and invest $1.4 million at the Innovation Center at the Buffalo Niagara Medical Campus. Nearly a year later, though, the company hasn’t moved and is still hunting for financing. It has no employees.
“Such is the life of a technology start-up!” Scott Vader, one of its founders, said in an email.
Another company, Advanced Material Analytics, described by the governor in a news release as “new analytical laboratory instrument manufacturing business” on the Binghamton University campus, used a stock photo of afuturistic, multicultural board room to illustrate its website and lists offices in New York, Canada, Britain and Kazakhstan.
But Swasti Dey, the president, said those foreign outposts are not open yet, though he said he had hired four people in India.
Several Start-Up projects praised the availability of the eager — and inexpensive — help of college students and interns at their partner colleges. And in the case of Mr. Dey’s company, all five of his full- and part-time employees in New York are university students.
“The hours vary a lot during exams, projects and assignments,” he said. His monthly payroll is $3,500 to $4,500. He does not take a salary himself.
Still, Mr. Dey — who said he was on a two-month trip to take meetings and provide customer services — said “the relentless support provided by SUNY Binghamton and the Start-Up NY initiative” have left him feeling bullish.
“We feel confident going forward,” he said, “which is a key for any start-up.”