STARTUP-NY offers upstate New York economic renaissance

Step aside, Silicon Valley, because upstate New York is the new frontier for startup ventures. Thanks to Gov. Andrew Cuomo’s recent launch of STARTUP-NY, we can now hope to see the state make use of its resources that lie among over 300 higher education facilities, both public and private. Set to take action in January 2014, STARTUP-NY, or SUNY Tax-free Areas to Revitalize and Transform Upstate New York, aims to encourage startups or “high technology businesses” on or near college campuses with the guarantee of a 10-year tax break; that means 10 years without income tax – at least until an individual hits $200,000 – along with sales, property or business taxes.

Before anyone criticizes STARTUP-NY, let us examine upstate New York, and why we need something – anything – to encourage post-graduate students to stay in the area.

According to the United States Census estimates, between 2010 and 2012, 35 upstate counties decreased in population, while downstate counties increased. Further, according to the STARTUP-NY report, only three-quarters of New York state college graduates remain in the state.

Thus, students are either leaving the state or flocking to the New York metropolitan area, leaving upstate New York and its valuable research facilities as untouched but valuable entrepreneurial locations. The main cause, according to Cuomo, is New York’s high tax rate.

It is an offer that may sound both risky and unusually favorable to certain businesses, but encouraging activity in places like Binghamton, Geneseo, Buffalo and other upstate locations is necessary. While these towns and cities once thrived on small businesses, and still do so today by playing host to college campuses, the attraction is dissipating.

STARTUP-NY is a program that will retain college graduates in upstate towns while strengthening higher education and its offerings for a more well-rounded and perhaps applicable experience at the undergraduate and graduate level. The state spends $4 billion on research but only attracts 4 percent of venture capital investment – something needs to change, or we have a lot of sunk costs to manage.

Startups on State University of New York and private campuses could potentially be untapped breeding grounds for economic development. A Cleveland State University study examined the impact of Ohio tech-based startups that received financial assistance. The study found that 127 companies generated $270 million in statewide economic benefits and helped to create and retain 1,100 jobs.

The legislation does its best to minimize loopholes and address the risks of fraudulent or unwanted results, including crowding out of local businesses and “shirt changing,” or starting a company under a different name to receive public benefits. Further, because the educational institutions, rather than their host towns, decide the allocation of property to companies, it looks like anything that falls in line with a college’s mission is fair game – and that says a lot.

The bill says that it “builds on the State’s rich tradition of positioning colleges and universities as centerpieces for upstate economic development.”

Take Geneseo and its mission for example: “It combines a rigorous curriculum and a rich co-curricular life to create a learning-centered environment” and develops “socially responsible citizens with skills and values important to the pursuit of an enriched life and success in the world.” What can’t you do with that?

By placing startups where students and post-graduates can learn and work without the concern of high New York state taxes for 10 years, we can hopefully see a shift in the way upstate New York is led alongside business development that is lasting and has an impact.