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Audit: $211M NY Ad Campaign Shows No Tangible Results

Cornell University

New York State Comptroller Tom DiNapoli has released an audit critical of the millions spent to promote Governor Andrew Cuomo's Start-Up NY and other programs.

Start-Up NY designates selected college campuses, and some off-campus sites,  as tax-free zones for businesses using a school's educational mission to create private-sector jobs. In return for those jobs, businesses avoid paying all state corporate, income and sales taxes for 10 years. Cuomo touted the initiative during a visit to Cornell University campus on July 10, 2013.    "Zero taxes, eliminate taxes, that would be the solution.  That's what the Start-Up NY program does. It eliminates taxes in a large part of Upstate New York."

The state Legislature gave the program its blessing, and it went into effect January 1st.  But it failed to gain much traction.

The message in the Comptroller's audit is clear: the Empire State Development agency spent $211 million in advertising "with no tangible results." 

Tom DiNapoli:    "Now that the economy has certainly been in a recovery mode, it's certainly not as strong as we'd like it to be in many parts of the state, I think now is a good time for us to look not only at this program, but at the various economic development dollars that we've spent over the past few years to see what kind of return we've been getting on those taxpayer dollar investments. So this is part of what will be an ongoing effort on our part, the Comptroller's office, to look more closely at these economic development dollars and seeing what kind of return New Yorkers are getting for those dollars."

There were hints of trouble. In April, the Department of Economic Development released a report indicating companies last year created just 76 of the nearly 2,100 new jobs promised over five years in return for tax breaks under the program.

And just 30 companies began operating in 2014 among 54 initially approved for the program. Again, Comptroller DiNapoli:    "You know if you look at the number of businesses that have actually been accepted as applicants to the program, we estimate that thus far for the applications in the period we looked at, something $25,000 per job that's projected to be created, just for advertising expenses alone. In fairness, it's a new program and hopefully there'll be more applicants coming in, and more jobs being created. But at least at the front end, it doesn't appear that the advertising provided the kind of return that was intended."

DiNapoli’s office recommended future strategic and marketing plans include performance measures for monitoring outcomes to determine if the cost generated a return for the investment.

The Cuomo administration did not reply to a request for comment.

Statement from Empire State Development Spokesman Jason Conwall on Comptroller’s Audit of Open for Business Campaign

“It’s disappointing that the Comptroller’s Office, which spent close to a year on this audit, has chosen to ignore every metric put into place to measure the effectiveness and impact of the multiple advertising campaigns run by ESD. The facts, as confirmed by ongoing independent quantitative research, show our efforts have made great strides in improving perceptions of New York State,  creating greater awareness of our economic development programs, increasing the perception that New York is a good or excellent place to do business by 122 percent among executives from out of state, as well as attracting more tourists to spend their vacations here. Despite these glaring omissions, the Comptroller’s primary finding was that ESD has effectively managed this contract. We agree.”

Highlights from Russell Research Report:

·         Marketing has been very successful at driving traffic to the website with a 530% increase compared to periods in the same year when New York State did not run advertising.

·         ESD’s marketing efforts have successfully reached business executives with one-half of New York State-based executives (52%) and one-quarter from out-of-state (26%) recalled having seen one or more commercials from the START-UP NY campaign.

·         There has been a strong positive shift in perceived momentum of New York State’s business climate. One-half of professionals (50%) believe the State is moving in the right direction, a 72% increase in just 12 months after the launch of the campaign.

·         A majority of executives (55%) believe that New York State is an excellent or very good place to do business – a 62% increase since October 2013. This increase was more pronounced out-of state, with a 122% increase in the same time frame (23% - 51%).

·         More than three-fifths of NY State executives (63%) would consider New York as a place to do business, a finding that has not statistically changed over time. However, a slight majority of out of-state executives (51%) indicate they would consider opening or relocating a business to New York State, a 132% increase since October 2013 (22%), which is statistically significant.

DiNapoli’s office is also currently auditing the Excelsior Jobs program, which replaced the Empire Zone program in 2010.

See ESDC Marketing Service Performance Monitoring or https://www.osc.state.ny.us/audits/allaudits/093015/14s10.pdf

See ESDC contract with BBDO or https://www.osc.state.ny.us/contracts/contractnoC201101.pdf

Dave Lucas is WAMC’s Capital Region Bureau Chief. Born and raised in Albany, he’s been involved in nearly every aspect of local radio since 1981. Before joining WAMC, Dave was a reporter and anchor at WGY in Schenectady. Prior to that he hosted talk shows on WYJB and WROW, including the 1999 series of overnight radio broadcasts tracking the JonBenet Ramsey murder case with a cast of callers and characters from all over the world via the internet. In 2012, Dave received a Communicator Award of Distinction for his WAMC news story "Fail: The NYS Flood Panel," which explores whether the damage from Hurricane Irene and Tropical Storm Lee could have been prevented or at least curbed. Dave began his radio career as a “morning personality” at WABY in Albany.
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