Sep 2
2025
Podcast: Our economic development follies
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The economy of Western New York, like those of most regions upstate, lags behind most of the nation. Government’s response, at both the local and state level, has been in large part to throw tax breaks and other subsidies at companies in an effort to attract or retain them.
It hasn’t worked.
In the interview below, Investigative Post Editor Jim Heaney discusses economic development with Greg LeRoy, executive director of Good Jobs First, a nonprofit that tracks subsidy programs across the nation. LeRoy is considered a leading expert in his field and is frequently quoted by Investigative Post.
Here are six key takeaways from the interview, which is followed by a full transcript of the conversation between LeRoy and Heaney.
- The upstate economy is among the worst in the nation.
“If you cleave off upstate New York and treat it as a separate state, it’s right down there with Mississippi and some other impoverished states in terms of its economic performance for the last three or four decades.”
- Subsidies usually don’t determine a company’s decision.
“We don’t think subsidies work because they are way too often given to companies to do what they would have done anyway, as opposed to an incentive, which is to create something good that should happen but isn’t happening and won’t happen until public dollars reduce private risk.”
Studies, LeRoy said, have found subsidies make deals happen that otherwise wouldn’t only 6 to 25 percent of the time.
- Erie and Niagara counties have way more industrial development agencies — nine — than most places.
“You’re way off the reservation … I can’t think of another situation in another metro area where you’ve got that many overlapping bodies. It’s a really dysfunctional system.”
“You’ve got competing bureaucracies that can pirate each other and call it economic development. And you’ve got needless duplication of services.”
- Economic development efforts should be consolidated and focused on the region as a whole.
“The meaningful unit of competition in economic development is not the city, it’s not the suburb. It’s the labor market. It’s the metro area. That’s the way the structure of economic development should be physically configured as well.”
- There are more effective strategies than corporate subsidies to promote economic growth.
“Workforce development grants, incentives to create career ladders, to move people up. Continuous learning incentives all the way down to early childhood, pre-K — all those things are proven winners.
- LeRoy’s suggested strategies for reviving the Western New York economy:
“First of all, abolish the IDAs. Create one unified public body in-house, led by elected officials, that oversees economic development for the metropolitan area.”
“Get rid of the perverse incentives to give away the tax base.”
“Announce tomorrow that the share of the property tax that otherwise would go to schools is not on the table anymore. That’s shielded to buttress the school system, because the talent pipeline means everything. The number one site-location advantage for attracting any kind of employer these days is your skilled labor pipeline, and your future skilled labor pipeline.”
“Forget about the megadeals.”
“Take very aggressive stock of what’s here right now … There’s companies here that have promise … Grow your own.”
“I’m reminded as I rode here today about the beautiful housing stock you have in the city, although obviously a lot of it’s ailing, right? A lot of it needs to be weatherized. A lot of it needs to be made much more energy efficient. The decarbonization and efficiency retrofit business here should be going gangbusters.”
Here’s the transcript of the whole interview.
Jim Heaney, Investigative Post: Do subsidies actually create jobs and grow the economy well?
Greg LeRoy, Good Jobs First: The word subsidies is a specific choice for us, as opposed to the word incentive, which is what the official press likes to use, and officialdom likes to use a lot.
We don’t think subsidies work because they are way too often given to companies to do what they would have done anyway, as opposed to an incentive, which is to create something good that should happen but isn’t happening and won’t happen until public dollars reduce private risk.
I mean, if you’re talking about bringing a grocery store to a food desert, or giving a person returning to citizenship from incarceration new skills, or things like that — those are incentives. The private marketplace isn’t going to do that, and we applaud those uses of helping small businesses, etc.
IP: So politicians love subsidies.
LeRoy: They do.
IP: And companies that receive them love them. And a lot of press coverage that’s generated around tax breaks and other subsidies kind of follow this narrative of, we need to do this in order to create jobs, save jobs, grow our local economy. Where did that narrative come from?
LeRoy: So that narrative was born in New York State, in New York City, specifically, in the late 1930s, with the birth of a company called Fantus — originally the Fantus Factory Locating Service — founded by a guy who had left his father-in-law in Chicago and started the first site location consulting business. He basically helped thousands of companies over the next several decades run away from the Northeast and the Midwest to the South, and in some cases offshore.
The system that Fantus created — this guy named Leonard Yaseen and his employees — basically it’s a corporate-dominated structure to control the narrative. That is, companies never actually reveal what made the decision. The public just knows that companies are asking for a lot of money, and one community gets lucky and gets the jobs, even if they put too much money on the table. Because nobody really knows what was in the company’s mind, what was in the real decision-making matrix.
IP: Although there’s been research done, academic research that’s been done, that tries to get at that question. You know, how often would a company have done it anyways? What has that research shown?
LeRoy: So our two favorite academics in that space are Peter Fisher, now retired from University of Iowa, and Timothy Bartik from the Upjohn Institute in Michigan. They found in the range of six to 25 percent — at the very generous outbound of those deals — actually did result from the incentives. The other 75 to 94 percent were windfalls.
IP: So it’s just adding the company’s bottom lines.
LeRoy: We think that’s all too often the case.
A sampling of Investigative Post’s subsidy coverage
Subsidy deal costing $4 million per job
IDA tax breaks costing school districts millions of dollars
Subsidies fail to recharge upstate economy
Fourteen tax breaks for profitable defense contractor
Huge subsidy package for Amazon
Tesla’s solar factory in Buffalo fizzles
Allegations of wage theft at subsidized restaurants
Subsidies for market rate apartments
IDAs have “perverse incentive” to issue tax breaks
Little economic benefit from Bills new stadium
IP: How has the nature of the game changed over the years? You mentioned what began in the ’30s. What’s been the evolution? Or perhaps “de-evolution” would be the better word. How’s the whole game changed?
LeRoy: Well, you know, with the advent of the internet, the site location consulting industry exploded because the barriers to entry crashed. There’s now 300-plus site location consulting firms out there.
Some of them work just in specific industries or regions. There’s a whole site selectors guild that actually sells face time for itself at golf retreats and ski resorts for public officials to come schmooze with people who have their pulse on the thinking of companies that are looking for their next big deal.
IP: So let’s talk about sectors that should never be subsidized — Amazon — and perhaps the types of companies where a subsidy might actually make sense.
Let’s talk Amazon, because … you’ve done a lot of work on Amazon. You know the Niagara County IDA a couple years back gave them one of the biggest subsidy packages that they’ve received, which is saying a lot.
What’s the story on Amazon? They’re masters at getting subsidies. Are they the poster children for people who should not be getting subsidies?
LeRoy: Amazon is the classic case of a company that is getting paid to do what it [would] do anyway.
This dates back to 2012, when the business plan was changing from avoiding sales tax, which had been their big way of gaining market share for many years, to rapid delivery. And when they switched to rapid delivery, they could no longer avoid being forced to collect sales tax because they had to build warehouses. They had to have a physical presence in every state, including those majority of states that have sales taxes in them.
So instead, they said, “We’re job creators. Let’s get paid to build these warehouses.”
And they hired a veteran site location consultant named Michael Grella within their public policy department, which had been their tax-dodging department. And he went on a binge, which to this day continues. They’ve gotten hundreds of incentive deals for data centers and offices. But more numerous are the warehouse deals, including the $124 million from Niagara [County].
And you know, they’re just eating everybody else’s lunch in the retail space. And they’re putting warehouses close to affluent ZIP codes with the most prime households. We have an interactive story map on our website that shows you that it’s really predictable.
IP: So in other words, these warehouses have to be where they have to be in order to promote next-day delivery.
LeRoy: Or even same-day.
IP: So they’re going to do what they got to do, regardless of whether or not they’re going to get subsidies. But everybody’s lining up to give subsidies.
LeRoy: Yeah. The new book, The Everything War by Dana Mattioli, chronicles how one official who was the CEO of Toys R Us in New Jersey, as it was getting driven into bankruptcy by Amazon, was screaming at then Governor Christie, saying, “Why are you giving them warehouse subsidies? They’re eating our lunch. We employ tens of thousands of people in your state because we’re headquartered here. Why? Why would you do this?” And Christie just ignored him.
IP: Let’s talk about maybe the sectors or types of companies where a subsidy might make sense. And let me draw a distinction trying to keep a company in the United States versus offshoring jobs, compared with the kind of War Between the States — and really, in New York in particular, battles from communities against each other within the same region. As you know, we’ve got a multitude of IDAs.
LeRoy: You people have eight IDAs in the two-county metro area!
IP: How unusual, how far off the reservation are we, with eight IDAs s in a two-county area?
LeRoy: You’re way off the reservation. You’re right up there with Westchester County.
IP: In terms of New York State or across the country?
LeRoy: In terms of New York State. I can’t think of another situation in another metro area where you’ve got that many overlapping bodies. It’s a really dysfunctional system you’ve got here, Jim.
IP: What’s the problem with it?
LeRoy: So you’ve got competing bureaucracies that can pirate each other and call it economic development. And you’ve got needless duplication of services, right? I mean, if a company needs help from an IDA, why should it need to go shopping?
There should just be one for the metro area, one for the labor market.
Look, here’s the real answer to your question, Jim. The meaningful unit of competition in economic development is not the city, it’s not the suburb. It’s the labor market. It’s the metro area. That’s the way the structure of economic development should be physically configured as well.
IP: Is that the way it’s done outside of New York State for the most part? Or does it vary?
LeRoy: It varies. Obviously some states have much more powerful county governments, in which case, counties are big dogs, even if it’s a multi-county metropolitan area.
For example, I live in a county in Maryland that has almost a million residents, and there’s just one government for my county, and they do all the economic development. And it’s a very rational, efficient process.
IP: But Greg, there’s much less patronage to dispense one government.
LeRoy: That’s true.
IP: Let’s talk about Micron. They’re planning on building a large plant north of Syracuse with billions of dollars worth of subsidies. It’s not just the feds, but the state and local [governments] are throwing a lot of goodies their way as well. Was there a better way to do that deal?
LeRoy: I think so. Uncle Sam is paying a lot of money for these microchip plants. They’re paying production credits for the microchips, which will shower that company with billions of dollars in refundable corporate income tax credits —cash from Uncle Sam, essentially. The same is true of a lot of battery and EV facilities.
The official guidance — the official notice of funding opportunities that came out from the Department of Commerce — said in fine print that nobody paid any attention to, “We want local governments and state governments to incentivize these facilities.” But they said, “Don’t give the money directly to the company. Use it to make your place sticky for tech. Work on your workforce development strategies, your talent pipeline, your infrastructure supporting tech” — on the public goods, in other words, that will benefit lots of employers that you want to try to gain around these big facilities.
IP: Is New York doing that?
LeRoy: I can’t see it. I mean, I know there’s a lot of feel-good stuff going on in Clay, north of Syracuse. And I’m sure there’ll be a lot of spillover effects, because there’ll be a lot of employer suppliers, and there’ll be a lot of disposable income resulting from those jobs.
I’ll put it this way. We have a coalition called Chips Communities United, and we’re watching the behavior of Micron in New York and Intel in Ohio, and TSMC, the Taiwan semiconductor manufacturing company in Arizona.
In the spectrum of things, Micron is being really quite agreeable. They’re engaging a lot with the community. They’re actually open to talking to everybody there and running a big house. The opposite is true of TSMC in Arizona, for example.
IP: So in that way, maybe we’re doing a little bit better.
Donate to support our nonprofit newsroomWhat are the subsidies that tend to get the best bang for the buck, the best return on investment for taxpayers? And which ones are just dogs?
LeRoy: Workforce development grants, incentives to create career ladders, to move people up. Continuous learning incentives all the way down to early childhood, pre-K — all those things are proven winners.
If you talk to people like Timothy Bartik, if you talk to people like the former vice president of Federal Reserve Bank, whose name I can’t remember right now, who’s been studying the data on this for a long time about our comparative ROIs, those are the big winners.
At the other end of the spectrum are film production tax credits, which your state has now obligated itself to another $700 million on. Or $7 billion — $700 million a year for 10 years.
Even though these production jobs are union — and we acknowledge the International Association of Theatrical and Stage Employees are very big on these programs — there’s no credible research from any place showing that any state has ever gotten back more than 20 cents on the dollar for film production tax credits. They are just guaranteed massive losers.
IP: Do taxpayers ever get a return on their investment that’s equal to what they put in? In other words, does a government ever wind up collecting more in taxes than they laid out in subsidies?
LeRoy: I think there you can go back and look at some deals — even some fairly expensive deals in the early days of the auto industry, for example — where one could argue that taxpayers did make out over time.
By today’s standards, like the Toyota deal in Georgetown, Kentucky, or the Nissan deal in Smyrna, Tennessee — they look really cheap by today’s standards. Or the Mercedes deal in Alabama. These are all back in the late ’80s and early ’90s.
IP: But most deals these days are losers?
LeRoy: The price tag on so many of these big deals today is so high, we just don’t think they can ever break even.
IP: Good Jobs First has done a lot of research in New York State.
LeRoy: It’s a target-rich environment.
IP: So why your interest and what strikes you about New York State? Good, bad or otherwise?
LeRoy: So in our subsidy tracker database, we pay special attention to individual facility deals worth more than $100 million in public money.
IP: Megadeals.
LeRoy: We call them megadeals.
And ever since we’ve started collecting them, two states have stood out as the king and queen of megadeals, and they are New York and Michigan. Two Rust Belt states, so-called, paying a lot of money for retention, especially. And depending on how you slice the data, whether it’s dollars or deals, they are one and two.
So you’ve always been a big spending state.
And then obviously you’ve got the extreme situation of all the companies that have threatened to leave Manhattan, you know, from the ’70s through the ’aughts — threatening to move to Jersey City or Greenwich, Connecticut, and shaking down several mayors for eight- and nine-figure packages to get paid to stay in Manhattan.
And then you’ve got the corruption of the IDA system.
As we know from recurring studies from the Fiscal Policy Institute — when they do The State of Work in New York — if you cleave off upstate New York and treat it as a separate state, it’s right down there with Mississippi and and some other impoverished states in terms of its economic performance for the last three or four decades.
IP: We did a report that you’re actually quoting. If upstate New York was a separate state, making 51 states in the country, our economic growth was fourth worst in the country. We were below Mississippi.
LeRoy: And I lay that at the feet of your IDAs.
IP: What are they doing wrong?
LeRoy: Well, they’re just structured wrong. For example, you shouldn’t have eight of them in one metro area. You shouldn’t have five of them in Rochester. You shouldn’t have whatever the number is in Westchester County — six or eight, or whatever it is.
There should be unified bodies per labor market, which is, I say again, the meaningful unit of competition and economic development.
But also, you know, they’re hammers looking for nails, right? They just do tax breaks. And as we said in a recent study, they — their staffs and their consultants, their law firms — have monetary self-interest in giving away more tax breaks because they take a cut of those transactions and transaction fees, which comprises 80 to 100 percent, typically, of their revenue base for their payrolls.
IP: In other words, if they don’t approve the deal, they don’t get any money.
LeRoy: Correct. And the other big structural problem here — which we have always, always said — is the power to give away tax breaks should never reside with anybody who can’t be held accountable at election time. Because when you give away these tax breaks, you’re making budget decisions, and that’s an elected official’s responsibility.
IP: And the entities that suffer the most are school districts in the form of lost tax revenue, correct? Talk about that.
LeRoy: So we estimated a year ago that schools across the state lose $1.8 billion a year annually to tax abatement programs. New York City loses the most by far, but it’s an epidemic. You’ve got seven school districts in the state losing more than $5,000 per student per year, even after the payments in lieu of taxes, even after the offsetting payment.
IP: That’s a lot, when you consider average per-student spending in New York State, depending on the district, is $20,000 to $35,000.
LeRoy: That’s a big chunk. You could do a lot with that.
IP: How is New York state when it comes to transparency on economic subsidy deals
LeRoy: It’s better than average. Unusually, your state transparency portal captures a lot of data from all the IDAs. I know there’s a history behind that and an active role of your state comptroller’s office.
But it means that, compared to most states, your state transparency portal — and we capture all that data conveniently in subsidy tracker, and even enhance it for users — you get all that local tax break data too. That’s only true in a few other states, like Louisiana and Ohio, historically.
IP: Another big dispenser of subsidies is the state’s economic development agency, Empire State Development. Any particular insights on ESD?
LeRoy: No, I haven’t looked at them recently. I mean, obviously we’ve got past — was it Start-up New York? Was that the other crazy idea of the Cuomo administration that we knew from the get-go was a turkey?
But no, I haven’t looked at them recently. I’m sure they played a big role in the Micron deal.
IP: How should one measure the effectiveness of a subsidy deal? We kind of wrestle with that as journalists. The standard — because it’s easy to calculate — is cost per job. But that’s not always a good barometer, because are we talking a cost per job of a part-time, low-wage job, or are we talking a high-wage, high-benefit job. If you’re a policy-maker or a taxpayer or a reporter, how do you effectively measure the effectiveness of a subsidy package?
LeRoy: Well, so a couple things. One is, was there a means test, so to speak, to even qualify the company. Did the structure of the program — like bringing a grocery store to a clearly defined food desert — was there an eligibility hoop through which the deal had to jump that you can reasonably assume meant that you’re actually causing something to happen that wouldn’t have happened otherwise?
All too few programs meet that anymore. That’s the first question you need to ask. Because if that’s true, then facially, you’re in the good zone, right?
Then cost per job is not a bad metric to start. But then you have to go immediately to the other issues — the ripple effect issues there. And there’s two kinds of ripple effects. There’s upstream, which is to say, the inputs, the suppliers, right?
So we incentivize a data center — not much upstream, besides electricity. It’s not like an auto parts plant where engines and brakes and windshields are getting delivered every day. It’s the opposite of that, in terms of upstream inputs.
And then downstream is your buying power of the direct jobs. If it’s a poverty-wage job, you’re not enabling somebody to buy a home or eat out a lot or stimulate the economy. But if it’s a unionized job in the building trades or manufacturing, and it’s good enough to support a family and stimulate the economy, then you can make better assumptions about ripple effects.
IP: Here’s the big question I wanted to ask you. So you’re the economic development czar of metropolitan Buffalo, and you have unlimited powers to bring back our economy. Western New York went through a really hard time in the ’80s. We were probably hit as hard as anybody in the Rust Belt, with the closing of heavy manufacturing — steel plants, auto plants, whatever. And we’ve been trying to catch up ever since.
We’re doing better than we were, but our economy still lags. Our wages, compared nationally, lag. We have an older workforce. We’re not a headquarters town at all. We’re a satellite town. And you’ve got competition between the states, competition within New York State.
So you’re the czar. What do you do? What’s your advice to policy-makers in Albany and in Buffalo? How to bring this economy truly back? There’s a lot of talk about how we’ve had an economic renaissance, and again, we’re doing better than we used to. But as Jim Morrison once sang, I’ve been down so long that it looks like up to me. So, you know, these days look up, but it’s from the perspective of the dark days of the ’80s.
What would you do if you were in charge?
LeRoy: I’m glad you asked that question in a semi-long-winded way, because I’m sitting here reeling, trying to think of my 10-point program here.
Obviously, first of all, abolish the IDAs. Create one unified public body in-house, led by elected officials — that oversees economic development for the metropolitan area. Not privatized, no perverse incentives to give away the tax break.
Announce tomorrow that the share of the property tax that otherwise would go to schools is not on the table anymore. That’s shielded to buttress the school system, because the talent pipeline means everything. The number one site-location advantage for attracting any kind of employer these days is your skilled labor pipeline, and your future skilled labor pipeline.
And then I would say, “Forget about the megadeals. Stop the buffalo hunting. Look to what you’ve got now.”
I know there’s lots of companies that have been here for a while. I know there’s companies here that have promise. I know you’ve got major research universities here doing great research that could be commercialized and create intellectual property that may create jobs in the future.
I mean, just take very aggressive stock of what’s here right now.
I also think you’ve got this gift of the cheap hydropower, but I don’t know that it’s being harnessed or used in a way.
I’m reminded as I rode here today about the beautiful housing stock you have in the city, although obviously a lot of it’s ailing, right? A lot of it needs to be weatherized. A lot of it needs to be made much more energy efficient. The decarbonization and efficiency retrofit business here should be going gangbusters. This would be an enormously attractive place to live if there are more jobs and if those homes could be energy efficient.
Those two strategies together could be a big advantage for Buffalo, because you’ve got more affordable housing than a lot of markets because of the depressed economic condition. That housing could become a big magnet if there are both jobs and energy efficiency here,
IP: We’ve had an older workforce. When you look in comparison with other metro areas, we’re not doing great when it comes to high-tech jobs and stuff like that, in terms of the new economy with younger people. Anything in particular you would do in that area?
LeRoy: I think place-making, and also cluster analysis. And maybe, hopefully, somebody is already doing this here, right?
But in trying to figure out one’s niche opportunities in high tech, you have to ask yourself, “Where do we already have some advantage?” Either we’re over-represented in some industry already, or we have the potential to be because of our research capacity, or our existing small business space, or whatever. Then work with that and invest in the public goods to support that.
It might be export promotion or quality control or technology diffusion or customized training, or all the above, right? That’s how you build a cluster of small companies that grow rapidly. They’re called gazelles. You want to figure out where your gazelle is and create a system of public goods that nurtures those gazelles — knowing that not everyone will make it, but once one fails, the people will be able to go across the street or across town and work for one of the competitors in the same cluster, because you’ve got a winning cluster. That’s the strategy.
IP: We’re on a Canadian border. We’re an hour-and-a-half from Toronto, which is one of the five largest metro areas/regional economies in North America. Do you see any opportunities for us there?
LeRoy: I hadn’t thought about that, but there must be. I don’t know the answer to that. I don’t know what kind of trade already crosses the border every day or what opportunities present themselves. But yes, okay, why not?
IP: Anything I haven’t asked you that is on your mind? You exhausted my list, but the floor is yours.
LeRoy: Obviously I know a lot of sports fans like the Bills, but we were also very critical of the proposed stadium deal that Governor Hochul and the legislature came through with. We don’t spend a lot of energy on stadiums and Good Jobs First, because — like film production tax credits — everybody knows they’re not really economic development.
I understand they’re important to municipal egos and people’s entertainment diets. But it’s another issue of, like, what else could you have done with that much money?
IP: Opportunity cost.
LeRoy: Back to basics. Quit the buffalo hunting. Abolish the IDAs. Make the policy adherent to people who can be held accountable at election time. Get rid of the perverse incentives to give away the tax base and grow your own.
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