A New York state lawmaker is weeks away from introducing a bill that would allow New York City to award up to $250,000 in tax credits over four years to life-science companies that plan to build new facilities or create jobs in the Big Apple, he said last week.
Assemblymember Mark Weprin (D-Little Neck) told BioRegion News he was working with the office of City Council Speaker Christine Quinn, who originally proposed the bill, and other city and state officials to finalize language for the refundable tax credit legislation.
"We hope to do that within the next couple of weeks. We're working on exactly how to word it," Weprin said. "This is a chance for us to reach out to some emerging markets. We have the best hospitals and medical centers in the country, and we should be the one leading on world-class research in the biotech area."
Asked if the potential changes to the bill include the dollar size of the proposed tax credit, Weprin said that may change depending on the view of the measure's state Senate sponsor, Tom Duane (D-Manhattan). However, he hinted that he did not foresee such a change.
"This was [Quinn’s] idea. She proposed the number to me. It sounds like a fine number to me, but I have not spoken to Tom yet about his bill,” said Weprin. "I'm sure than Senator Duane and I will both be happy to put in this bill as the council feels they can support."
According to Quinn, the tax credit would help New York City "create nearly a thousand high-tech and high paid jobs."
New York City's difficulty in parlaying its sizeable base of research institutions into a top-tier life-sci cluster has been a longtime source of frustration for industry leaders and entrepreneurs. Despite being home to 58 research centers that draw more than $1 billion in National Institutes of Health research grants each year, the city has lost most of its life-sci startups to other parts of the state, as well as neighboring New Jersey and other states.
Individual companies continue to draw sizeable venture capital. For instance, Vivaldi Biosciences relocated its HQ from San Francisco to New York and raised $23 million in a round led by Bay City Capital and NGN Capital, with contributing cash from the New York City Investment Fund and Alexandria Real Estate Equities. But Vivaldi was the only one of eight biotech companies based in the city to have secured a venture-capital round during the fourth quarter, according to the quarterly MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, using ThomsonReuters data. The firm won a total $108 million during the three-month period, while six companies that also managed to secure private equity capital were from New Jersey, and one was based in Yonkers, NY, just north of the city.
Weprin said the biotech tax credit is one of several actions by which New York City could diversify an economy long anchored on the financial-services industry — an economic cornerstone that has eroded since the current financial downturn picked up steam last September.
Indeed, between October 2007 and December 2008 the city lost 19,200 financial-services jobs — just over 10 percent of that work force — which now numbers 168,600, state Comptroller Thomas DiNapoli said last month.
New York City Mayor Michael Bloomberg has said publicly he expects the city to lose another 46,000 financial-services jobs through the second quarter of 2010. On Feb. 18, Bloomberg unveiled an 11-point plan to spend $45 million toward retraining unemployed Wall Street workers in entrepreneurial skills, which includes opening at least three incubators, one of which has begun operation.
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"New York City has relied too heavily on Wall Street in the past, and we need to start looking at where our next businesses are going to expand,” Weprin said. “Certainly in the hospital and medical research community, there's no place better than New York, and we want to attract anyone doing this type of research to do that in New York City."
The economic upheaval has also left the state with a $1.6 billion budget shortfall to plug for the current fiscal year, which ends March 31; and a $13 billion hole for the 2009-10 fiscal year starting April 1. Weprin said he did not foresee that dooming the bio tax-credit bill. "This is not something that's going to cost us an enormous amount of money. These are real jobs being created, paying real money to be spent in New York City. This is a penny-wise and pound-wise move."
The city's job-attraction agency, the New York State Economic Development Corp., told BRN it was "pleased to partner” with Quinn to “support bioscience in New York City.”
"Bioscience is an important component of our efforts to diversify the city’s economy and Speaker Quinn’s proposal demonstrates her commitment to this vital sector,” the agency stated. “We look forward to continuing to work with her to find creative ways to promote it and bolster the city’s economy.”
Quinn is seeking an "annual, four-year tax credit" for life-sci companies carrying out "research and development, facilities [construction], and staff training," her spokeswoman, Maria Alvarado, told BRN.
Weprin said that around the time he introduces the tax credit legislation sought by Quinn, state Sen. Tom Duane (D-Manhattan) is expected to introduce a companion bill in the state Senate.
Weprin and Duane must act because New York state law bars municipalities from adjusting any taxes beyond property taxes without a "home rule" message from the state Legislature in Albany.
Duane could not confirm the timing of the bill's introduction in the state Senate. His office did not respond to a telephone message and an e-mail message from BRN last week seeking comment.
Coring the Big Apple
The tax credit proposal was introduced by Quinn during her annual State of the City address on Feb. 12. She noted that while New York City has long been a mecca for medical research, "when it comes time to turn that new discovery into a new drug, New York loses out.
"Instead of creating jobs and economic activity here, biotech companies leave our city for places like Boston or San Diego," Quinn said during her address. "Now I have to apologize to the nice folks in San Diego and Boston because we’re going to start stealing those jobs, and bringing them back to New York."
Quinn is among those NYC elected officials who have embraced the city's nascent life-sci industry — whether by celebrating employer expansion, like the International AIDS Vaccine Initiative's recent expansion move within Brooklyn, to 36,000 square feet at the Brooklyn Army Terminal; or by approving new venues, such as the East River Science Park, whose first tower of 16 stories totaling almost 320,000 square feet is now being built by Alexandria
Real Estate Equities.
The city has approved $13.4 million in capital funds for East River Science Park, while the city Industrial Development Agency approved a $5.6 million mortgage tax exemption for the project, whose second tower has been delayed due to the ongoing financial turmoil. ERSP, which has a projected $700 million cost, has been approved for 1.1 million square feet of life-sci space.
ERSP has projected it would generate 1,800 construction jobs, followed by about 2,000 permanent jobs for researchers and other bioscience professionals. In return for the jobs, the project has received not only the city subsidies, but $27 million in state infrastructure funding, $500,000 from the office of Manhattan Borough
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President Scott Stringer, and $2 million from the US Department of Commerce's Economic Development Administration.
In addition, the New York City Investment Fund, the economic development arm of the 200-CEO Partnership for New York City, has agreed to spend $10 million for ERSP tenant improvement work.
To be sure, Quinn's proposed tax credit is dwarfed by the menu of incentives available to life-sci companies across the Hudson River. For instance, New Jersey offers a key tech tax break, called the Technology Business Tax Certificate Transfer Program, which allows state-based life-sci and tech businesses with fewer than 225 employees to raise cash for growth and operations by selling unused net operating losses and R&D tax credits to other profitable New Jersey corporations for at least 75 percent of their value.
And last fall, New Jersey approved a request by 80 life-sci and tech companies to sell a combined $60 million in tax credits, or roughly $750,000 per company. Of the total, $10 million is set aside for companies based in the Garden State’s lower-tax Innovation Zones in Camden, Newark, and the New Brunswick area.
New Jersey also has two significant grant programs for life-sci companies. The Edison Innovation Fund, launched by Gov, Jon Corzine in 2006, is a series of grants for R&D activity, tech commercialization, salaries for recent doctoral graduates, and worker training. Sample grants can reach up to $200 per instructional hour, with the average cost per employee capped at $1,500; employers must match at least half the grant amount.
The second program lowers the minimum job-creation requirement life-science companies must meet in order to qualify for the state’s Business Employment Incentive Program. Under that program, such companies must promise to add 10 new jobs over two years compared with 25 jobs in two years the state requires of other employers.
BEIP typically awards companies up to 50 percent of the total amount of state income taxes withheld from newly hired employees each year for up to 10 years, though some businesses can win up to 80 percent if they follow "smart" growth principles such as redeveloping existing areas.
In return for the money, companies certify that the award was a "material" factor in their growing in New Jersey; that their project is financially viable; and that they will keep the new jobs in New Jersey for 1.5 times the number of years their grant is in effect.
"New Jersey has a lot to offer, and certainly these two [grant] programs are at the top of the list,” said Glenn Phillips, a spokesman for the New Jersey Economic Development Authority. They're used by technology and biotechnology and life sciences companies every year." He said the agency had no comment on Quinn's tax-credit plan
Other Life-Sci Incentives
New York City's proposed tax credit would be one of two industry-specific incentives the city would promote to life-sciences employers. The other one is the state's Qualified Emerging Technology Companies incentive, available to life-sci startups generating up to $10 million in annual revenue. This program offers a maximum $250,000 tax credit per year, or $1.25 million over five years, as well as a $50,000 credit for job training.
Part of the budget bill would allow companies that employed as many as 100 full-time staffers when they were approved for QETC credits to keep receiving the credits even if they add employees as long as three-quarters of those companies' workforces are based in the state.
The bill would also give investors credits of up to 10 percent of their investment in emerging life-sci and tech companies if they hold on to that bet for four years, versus the current five years, and a 20-percent credit for investors who hold on for at least nine years, versus the current 10 years.
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Another QETC bill, introduced by Assemblymember Joseph Morelle (D-Irondequoit), would set more generous credits of 20 percent for investments held for three years, with half of the credit allowed during the taxable year the investment was made and one-quarter of the credit allowed during each of the next two years.
Morelle's bill, A-1892, would also allow a 20 percent credit over three years for investments in venture capital funds that make equity investments in QETC; and create a 40 percent credit over three years for pre-commercial "seed" equity investments.
Morelle's bill differs from a QETC expansion measure he introduced last year, which passed the Democratic-controlled Assembly but died in the state Senate, then Republican-controlled but now run by a narrow Democratic majority.
"For the city, I think it would be a real boon," Nathan Tinker, executive director of the Empire State's life-sci industry group, the New York Biotechnology Association, told BRN last week. He said he had provided Quinn's office with background on the city's life-sci industry in the days before her address.
"It's always nice to have targeted tax credits. They're pretty hard to come by in New York, so the fact that the City Council is even looking at it is a step in the right direction," Tinker said. "We need to get the mayor to look at it, too, and move in that direction."