Assemblyman Ryan Challenges Industrial Development Agencies

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.”

ida.jpgRyan 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

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17 comments
BuffaloNiagaraPlanner
BuffaloNiagaraPlanner

IDA incentives helped attract Yahoo to WNY (though NYPA power incentives were the main attractor). Some criticized the deal as too generous, but the project is reshaping the image of the region, which is something you cannot put a price tag on. It also created over 100 skilled, high-paying tech sector jobs. That’s not mentioned in this article or by Mr. Ryan.

I think we just need to be smarter about how we give out incentives. We need a regional approach that emphasizes planned development, encourages New Economy industries, and discourages intra-regional competition. We also need to stop subsidizing dying industry sectors.

The Kettle
The Kettle

I have to disagree with Mr Ryan over the merits of using IDA funds to assist the expansion of NT Lexus on Sheridan. Had Amherst not provided incentives for NT to renovate the former Chrysler dealership, they would have likely moved their operation to their Autoplace property in Clarence leaving an albatross behind.

I realize IDAs are far from perfect, but using them to steer investment to older parts of the region is a smart policy.

grad94
grad94

don't feed the trolls, people.

whatever
whatever

Partly good for Mr. Ryan, with room for improvement.

First, some in his column of supposedly good examples don't create jobs either. How would # of car repair jobs grow just because a school is moved or expanded? And what long term jobs result from Theater District new residential units? How is that industrial?

Second, was it a fluke that his other column of 5 bad examples have only suburban projects (Premier, F Price, HSBC data center, Clarence chamber, Ntown Lexus)?

IDA aid to those deserves criticism for sure, but I'd be more impressed if Ryan also included city bad examples of IDA type help - like calling out aid to a few restaurants (Chef's, Empire Grill, Termini's new restaurant tenants in Lafayette, etc.), and aiding of moving law firm from one downtown building to another, and examples of aided retail, residential, etc. Will he call out bad IDA projects even in the city, and in his district?

MaterialGirl
MaterialGirl

Tax the 1% and all our problems will be solved

KangDangaLang
KangDangaLang

Well said, a certain section on this site are unable to see the realistic outcome of some of the points they make. Ps if we're leveling the playing field that means no more historic tax credit handouts to developers in Buffalo.

sobuffbillsfan
sobuffbillsfan

This would be a nice sarcastic comment if it wasn't for the $79 million given to HSBC. They should sue them for that money but wait, that would be business unfriendly. We have given BILLIONS of dollars to foriegn automakers to build factories in this country so they didn't pay tariffs. Then after those subsidies have to pay to keep the big three to survive because the failure of the big 3 alone would have bankrupted the federal US pension insurance.

You comment seems simple and clever to you, in the real world it's are naive and counter productive.

MaterialGirl
MaterialGirl

NY State should just ban all companies. Business is evil

BuffaloNiagaraPlanner
BuffaloNiagaraPlanner

While I do not disagree with this story, a couple of clarifications should be made:

1.) I do not believe Mr. Ryan is the author of this report. BRO should do a better job investigating the source of this information. I believe it may have come from the Citizens Budget Commission, a nonprofit think-tank, via this report: www.cbcny.org/sites/default/files/REPORT_RegionalCouncils_09132011.pdf

2.) The article does not explain how IDA tax exemptions work. IDAs abate taxes on the value-added improvements to a property. The property owner makes “payments in lieu of taxes” equivalent to the taxes paid on the property prior to the improvements. Taxes are only abated on the improvements. The exemption “thaws” over a period of time until the property owner is paying taxes on the full value of the property including the improvements. When it is explained in the press, this detail gets lost leading people to believe that IDAs exempt 100% of payments.

3.) The article does not mention how many BILLIONS of dollars companies invested in New York State in materials, equipment, and labor including construction jobs. The article only highlights the value of the tax breaks.

4.) IDA incentives are often used to convince a company to stay and/or expand their operations in New York State. Given the cost of doing business in New York State, it’s a wonder any businesses are here at all. IDAs were originally created to level the playing field with other states where the cost of doing business is lower. Unfortunately, the side effect has been competition within the state.

I think that if the story is going to be told, a fair argument needs to be presented. Again, I do not disagree with this story. I just think the issue needs to be presented with all of the facts. It’s written in a very “evil empire” fashion. There are pros and cons to the work of IDAs, but only the cons seem to be listed here. Personally, I’m on the fence, but I agree that reform and a regional approach to development are absolutely necessary. Communities need to stop poaching businesses from one another in the “race to the bottom.” When a business plays two communities off of one another, only the business wins.

Buffalo All Star
Buffalo All Star

What would Lancaster and Clarence do with out their IDAS...or Cheektowaga even? One would assume there would be a regional..all you hear about in Amherst and their IDA is about a project that would be built anyways. But they still manage to get the exemption.ODD

Tax break to move a liquor store..really WNY..is this what we've come to?

flyguy
flyguy

How about just one regional IDA merging all others?

LouisTully
LouisTully

Eh, he'll probably take his shirt off on craigslist or something. Hopefully not. I can't recall the last time a local politician had an idea that made sense.

grad94
grad94

well done, sean ryan. this is a fight worth fighting.

Black Rock Lifer
Black Rock Lifer

IDA's need to be abolished nationwide to effectively level the playing field. IDA's have proven to be ineffective and inefficient in creating jobs and the original intent has been subverted to benefit the chosen few. Suburban IDA's have a long history of pirating business from Buffalo, now they are even going after the first ring suburbs. This is nothing more than another transfer of wealth to the most affluent and powerful. It is time to end this corporate welfare, every dollar these recipients avoid paying is simply extracted from the rest of us.

Travelrrr
Travelrrr

I am not sure the current IDA's would know business development if it hit them in the face. Enabling one company to be poached to another part of the city is hardly economic development.

Good for Sean Ryan for calling them on the carpet.

STEEL
STEEL

This is a smart guy. Maybe there is some leadership in WNY after all!

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