Would you take the advice of a financial advisor who told you to invest in only two or three industries? The answer is — of course not. Most individuals, corporations and institutional investors realize the value of diversity within a portfolio. Yet, as a region, we seem to ignore this principle.
The good news is that we are seeing investment and expansion take place. According to a recent report in The Central New York Business Journal [March 9, 2012 CNY Construction Projects Special Report], there are more than 60 sizable construction projects throughout the area. No doubt, this is a notable indicator of growth.
But before jumping for joy, we need to look at the composition of this growth. Three-quarters of these projects are being built for institutions of higher learning, health-care facilities, governmental agencies, and various not-for-profit organizations. The remaining 25 percent is comprised of companies trying to generate a profit.
This is not merely a snapshot. The 2011 edition of this report revealed a virtually identical breakdown. Employment and job-growth statistics further corroborate this trend.
The fact that universities and health-care institutions are expanding should be of little surprise as “Eds and Meds” have long been seen as the shining sectors for our region. Yet, it is worth examining why these sectors are booming while so many other segments are lagging.
Are organizations in these segments of the economy better run and more solid financially? Or perhaps, based on market demand and demographics, these are the sectors that should be growing. Still, even if these assumptions are true, other factors need to be considered.
Those of us who operate businesses in New York State realize how hostile the environment can be for conducting business. Let’s be honest, our region’s de-facto investment policy is driven by a broad range of oppressive taxes that have a chilling effect on business growth. The 75 percent of the expansion projects, as mentioned above, were mostly being built for and funded by not-for-profit institutions. Of course, the notion that organizations with lesser tax burdens are better positioned for growth is hardly a revelation.
Make no mistake, I am not criticizing these components of our economy. I believe wholeheartedly that the health-care institutions along with the universities and colleges make a positive and significant impact on the quality of life within the region. They not only bring first rate-services to the populace, but also attract highly qualified professionals, provide good-paying jobs and add to the magnetism of the community.
The risk lies, however, in having a business community within a concentrated portfolio of industries. Being too heavily weighted in a narrow range of business sectors can be a formula for disaster — think of Detroit. As with personal investments, a diversified portfolio of economic engines will best create further opportunity for growth while mitigating the risks of an economy concentrated in too few industries.
Without a measurable change in New York State’s prohibitive tax and business policies, we will continue down this path. Last spring, Governor Cuomo said that businesses were leaving the state because of real-estate taxes being too high. He responded by putting forth a cap on property taxes.
This is not a solution. Limiting increases on taxes that are admittedly too high does not solve the problem. It is akin to having the homeowner whose house is engulfed in flames being told by the fire chief that the blaze will not get much worse. That is not enough — you have to put out the fire.
The other mistake the governor has made is the assumption that the problem comes solely from property taxes. The frosty business environment in New York stems from the total tax burden on business combined with workers’-compensation costs, funding public employee pensions at unsustainable levels, and an array of rules, regulations, and fees.
It is time for the governor and the state legislature to recognize the need for having a nurturing environment for all types of businesses. Creating an environment that fosters job growth across many sectors will produce a well-rounded and robust economy providing job security for all in the tax base. That’s a risk we can live with.
David H. Panasci is president of DHP Consulting, LLC in Camillus. Visit his website at www.dhpconsulting.com