Start-Up NY: $59M in spending and tax breaks but just 1,100 jobs in 3 years

People with dreams occupy Binghamton University’s Start-Up NY office pod.

And Shailesh Upreti may be the biggest dreamer of all.

As chief executive of the fledgling Charge CCV, his cramped office at Binghamton University Innovative Technology Center is the hub for a company aiming to revolutionize lithium ion batteries by increasing their capacity and doubling their lifespans.

“We have this infrastructure next door,” Upreti said. “We didn't have to buy this multimillion-dollar equipment.”

The company is what Gov. Andrew Cuomo envisioned when he launched Start-Up NY in 2013, and it is one of the bright spots for a program widely criticized for a national, $53 million advertising campaign that has produced few new jobs.

The program lets companies pay no taxes for 10 years if they locate in a designated zone associated with a public or private college.

So far, the 156 companies created just 1,100 jobs in three years, well below the yearly ceiling of 10,000 jobs for personal income tax exemptions and below the 3,300 expected. And only 22 of the companies have more than 10 employees.

The state has provided the companies about $6 million in tax breaks over the three years, according to a review of records by the USA Today Network's Albany Bureau.

Advocates say the initiative needs time to mature. Critics say it is a bad policy — made worse this year by Cuomo's decision to stop requiring companies to report publicly the jobs they create, a move lawmakers want to undo.

"This is really all about the public’s right to know about the effectiveness of this flagship program," said Assemblyman Robin Schimminger, D-Kenmore, Erie County, who heads the chamber's Economic Development Committee.

Big hopes, still

Upreti's company is how Start-Up NY is supposed to work. He uses a modern, well-equipped university lab for a small fee so he can test batteries before they go into production.

Upreti said Start-Up provided critical assistance to allow the company to transform from a one-man operation to an entity that employs seven, including recent graduates from Carnegie Mellon, Cornell University and Binghamton University.

Pairing the state's colleges with private businesses has been at the heart of Start-Up NY, and some supporters said it is too early to gauge its effectiveness.

"People should a little more patience and recognize that to build brand new companies literally linking college students to technology takes time," Assembly Majority Leader Joseph Morelle, D-Irondequoit, Monroe County, said May 8 on "The Capitol Pressroom," a public-radio program.

When unveiled in 2013, Cuomo hailed Start-Up NY as a method to attract entrepreneurs to New York, rather than have them flee to more attractive locales where the business climate is far more inviting to start-ups.

“It will take us to a level that we deserve to be at and will make this state the Empire State again,” Cuomo said when introducing the what was then called “Tax-Free NY” in May 2013. Cuomo referred to it as “the greatest economic savior” for upstate.

That hasn't been the case. For example, it hasn't even generated enough jobs statewide to make up for private-sector jobs lost in Binghamton alone since it started.

A slow start

From the beginning, Start-Up New York was the subject of intense criticism.

Existing business complained they were getting short-shrift, saying they too could have benefited from tax breaks, but were overlooked in favor of trendy technology companies with dubious prospects.

“SUNY has been a shiny object that has distracted people from the real issues fueling New York’s dismal business climate,” said Ken Girardin, a policy analyst from the Albany-based Empire Center for Public Policy, a frequent Start-Up critic.

The ad campaign, which included a wide national component, added to the complaints. Comptroller Thomas DiNapoli openly questioned whether “this money would be better spent," saying the ads weren't tied to benchmarks.

New York economic development officials continue to urge critics to hold off, wait for the program to take hold and then pass judgment. Rebranding a state with a less than desirable reputation takes time, they said.

Howard Zemsky, head of Empire State Development, which runs the program, said the goal is to link colleges with the private sector, building off upstate's strengths in higher education.

"If you’ve got as one of your top one, two or three assets, your colleges and universities, the SUNY system, the research, how do you not try and leverage that into economic development, particularly when you look at the phenomenon of Austin and Silicon Valley?" Zemsky said.

Successes found

Indeed, there have been some positive results, and the program continues to add jobs each year.

The poster child for Start-Up is Rochester’s Datto Inc., a Norwalk, Connecticut, data protection business founded by a Rochester Institute of Technology alumnus.

By partnering with RIT and lured by Start-Up incentives, Datto picked Rochester for a new office in 2014 over competing locations in Atlanta and Research Triangle, North Carolina.

Over the course of five years, Datto expects to create nearly 300 jobs at its 12,000-square-foot office.

“The company's close ties to RIT has been tremendously beneficial as we have been able to hire the tech talent we need to continue our fast-paced growth,” said R. Brooks Borcherding, Datto’s chief revenue officer.

Among the winners in the Start-Up program are Erie and Monroe counties, where the jobs totals attributed to the program are 467 and 184, respectively.

Twenty-six were created in Tompkins County, but Broome and Ulster counties each had just about half of that, records show.

Though there were program participants in Dutchess County, it was one of six counties where the initiative failed to create a single new job in the first two years of operation, based on numbers provided by the state.

Struggles continue

Other companies, though, haven't fared so well, and state officials were knocked for how some companies, despite already existing in New York, could be eligible for the perks.

Last October, for instance, the governor’s office announced that i3, an Endicott, Broome County company, could enroll in Start-Up, promising 140 new jobs with a $8.2 million investment.

But i3, which acquired microelectronics business of IBM-Endicott in 2002, had long struggled, going from 2,000 employees, down to 400 when it rebranded itself in Chapter 11 two years ago.

Start Up couldn't revive the company: It dropped out last winter with no explanation.

“There is no way to optimize this thing to give it the returns that were promised.” Giradin, from the Empire Center, said.

Moving forward

State officials have argued that the program has few risks.

If companies create jobs and get the tax breaks, then they will benefit the communities in which they are located. If not, there is no upfront cost to New Yorkers.

But it's clear, critics say, that Cuomo and his aides have sought to distance themselves from the program.

Tucked into his budget proposal in January, the Democratic governor sought to rename the program and fold it into other existing economic-development efforts.

Lawmakers rejected the changes, but one revision was included in the state budget approved April 9: The state would no longer have to report publicly the jobs created in the program.

Cuomo's office initially claimed the change was a mistake and would be fixed, but lawmakers questioned whether that was the case.

Zemsky said reporting for the program would not be changed, saying the proposal to drop the Start-Up name was merely to coordinate the program with other existing business incentives.

"It doesn’t matter what name you give it," he said. "The point is, we need to continue to drive innovation and entrepreneurship by leveraging our institutions of research and higher education and connecting those to businesses."

The state is planning to issue a report each year on its economic-development programs.

"We are going to report on Start-Up and every other aspect of economic development in a comprehensive report," Zemsky said. "We’re very comfortable with the trajectory of Start-Up NY. I think that is now indisputable."

Still, Democrats and Republicans in Albany are trying to pass a bill that would restore the job-reporting requirement and toughen the standards for Start-Up.

The legislative session runs until late June.

"The bulk of this bill is simply reinstating language that the governor himself included in his program bill of 2013 – the heralded Start-Up NY program which was hailed far and wide as a game changer," Schimminger said.

USA Today Network Albany Bureau Chief Joseph Spector contributed to this story.