Assemblyman Sean Ryan held a press conference yesterday at 3445 Delaware Avenue in front of Prime Wines and Spirits to discuss the wasteful use of tax dollars to finance ill conceived projects. Projects he says that cost this region millions of dollars with only modest positive affect. This is because each of Erie County’s six IDAs pull in different directions, competing against one another, all at the expense of Erie County according to Ryan.
Assemblyman Ryan is calling for IDAs to approve projects that reflect a regional growth model. “Projects that result in a net gain of jobs and bringing new businesses to Erie County should be encouraged. However, too often tax breaks are given to already thriving Erie County businesses or to businesses that produce few, if any, new jobs,” says Ryan. Premier Liquor’s subsidy to assist with its move from Tonawanda to Amherst is a prime example of Erie County communities pirating businesses away from one another he says.
Ryan continues to say that “thriving Erie County businesses must make decisions based on their business models, not by the IDAs competing in a race to the bottom to see who can give away more tax dollars. A regional focus gives the greatest benefits to Erie County; this has never been more apparent than after we were awarded the Regional Economic Development Council Grant.”
Ryan Lays Out the Details
New York has 115 IDAs in 62 counties. There are nine IDAs in the Buffalo-Niagara Region alone. Comparatively, 45 counties have only one or two (The whole of New York City has only one). IDAs have grown consistently more active over the decade. In 2003, IDAs statewide assisted 3,294 projects with $354 million in net tax exemptions; by 2009 they assisted 4,577 projects with $496 million in net tax exemptions.
The most powerful tool IDAs have is the property tax exemption. The tax exemptions affect the revenues of local governments and school districts, as well as New York State. For example, in 2009, of the sales tax exemptions, $67.9 million were from State sales tax, and $48.4 million were from local, of which the majority goes to the county and local school districts. Of the property tax exemptions, $367.9 million were from school district taxes, $119.8 were from county, and $676.8 were from local.
Additionally, the overlapping IDAs each cost a considerable amount of money to function. The 2010 expenditures for Erie County IDA were $6.6 million, for Niagara County IDA $1.2 million, and for Amherst IDA $0.7 million. The top salary at the Amherst IDA is $169,000 – almost exactly the salary of the Governor of New York (by contrast, the Mayor of Buffalo makes about $105,000 per year).
Despite their name, Industrial Development Agencies are not at all limited to industrial projects. In 2009, finance, insurance, and real estate projects captured almost 30 percent of net tax exemptions. Transportation, communication and sanitary services projects received 26 percent of net exemptions. Manufacturing received some 15 percent, and services received some 11 percent.
Another popular misconception about IDAs is that they use their incentives to lure businesses from out of the area. Of the 71 tax exemption deals that the IDAs of Niagara County, Erie County, and the Town of Amherst did in 2010, only one appears to involve a company coming from out of state (Triad Recycling). All the other deals appear to be expansions or relocations of companies that were already in the region.
The 274 IDA subsidy agreements that ended in 2009 were based on promises to create 21,113 jobs. Instead, 4,957 jobs were lost. Some blame this on the dire economic climate of the time, but such a retort falls short. Of the 217,000 jobs promised by IDA applicants for 2005, only 79,000 were actually created. One-fourth of IDA supported projects actually cut jobs in 2005, a great year for the American economy.
A town can form its own IDA, appointed by and accountable only to that town board, with the power to give exemptions from taxes owed not only to that town, but also to the school district, county, and state. It would be one thing for the Town of Clarence to subsidize a Dash’s supermarket with its own money; it is quite another thing for it to subsidize the market with money from Erie County. Residents of Buffalo, therefore, help foot the bill when Clarence subsidizes the “New Buffalo Shirt Factory,” formerly located in Buffalo, now located in Clarence.
The six IDAs of Erie County have adopted a Countywide IDA policy that attempts to address some of these issues. For example, it makes retail, medical, and for-profit educational projects generally ineligible. Unfortunately, the exceptions to the policy are so broad and the enforceability of it so lacking that Amherst’s 13 projects in 2010 included four retail projects, three medical projects, and one for-profit educational project.
Governor Cuomo has laid out a statewide economic development platform that relies on regions to come together and coordinate their actions. The WNY Regional Economic Development Council, spearheaded by UB President Satish Tripathi and developer Howard Zemsky, successfully brought together economic and political minds from across five counties to unite in a unified plan that will bring over $100 million in New York State funding to Western New York, facilitating hundreds of millions more in private investment. The focus on human capital, clustered development, and entrepreneurial incubators is the type of investment the original charter of Industrial Development Agencies meant to create. According to Ryan, there is new life in WNY, it is time to reform and rejuvenate IDAs so that they contribute to the sustainable growth of the region.
Entry image: Assemblyman Ryan