IDA Reforms Are in Place But Not Active as Yet

There has been much talk in Albany about tightening up the tax exemptions granted by IDAs, but while reforms were included in the new state budget, including a ban on tax breaks for retail projects and claw backs to recover money from projects that don’t deliver the jobs they promise, they are not in force as of yet.

The reform package won’t be activated until the State Commissioner on Taxation and Finance adopts the necessary regulations to implement the reforms, and that has not yet happened.

Assemblyman Sean Ryan of Buffalo has urged Commissioner Thomas Maddox to adopt the regulations “so that the reforms we passed in the state budget this year can be implemented as soon as possible.”

State Comptroller Thomas DiNapoli also remains concerned about the performance of IDAs across the state and in his sixth annual report on IDAs released in May, made the following observations:

“At a time when many counties, cities and towns are facing serious challenges and stagnant economies, the need for IDA projects to generate jobs for New Yorkers and expand the local tax base is especially urgent. IDAs have made modest improvements in terms of job creation and openness, but more accountability is needed to ensure benefits are provided to those projects with the greatest potential to fuel local economies. Tax breaks come at a price and IDAs need to deliver on their promises to taxpayers.”

The new reforms provide for more accountability by granting the Commissioner of Taxation and Finance (CTF) the power to audit and investigate IDAs, but until the CTF adopts the regulations needed to implement the reforms, nothing has changed.

According to the Comptroller’s latest report, IDAs supported nearly 4,500 projects and provided $560 million in net tax exemptions in 2011, increasing estimated job gains by 36,000 from the previous year.

The report found the state’s 113 active IDAs provided $1.5 billion in total tax exemptions in 2011. Local property taxes accounted for $680 million of total IDA tax exemptions while school property tax breaks accounted for $439 million. Other exemptions included state and local sales tax, county property taxes and mortgage recording taxes.

The exemptions were partially offset, according to DiNapoli’s report, by $917 million in payments-in-lieu of taxes, leaving total net exemptions for the year at $560 million, an increase of 16 percent from 2010 ($17 million).

The job creation numbers for Niagara County from 2008, according to a recently released state report, were pretty good compared to the Erie County IDA.

According to the report from the state’s Authorities Budget Office, the 14 projects that received more than $13 million in tax breaks from the Niagara County IDA created 274 new jobs, four more than promised. In Erie County, five years after the IDA gave out $3.7 million to 18 businesses, there were less than three dozen new jobs created when 450 were promised.

That’s why the claw back provisions in the new reform package are so important, according to Assemblyman Ryan, so taxpayers can recover incentives from businesses that don’t produce the jobs they promise.

It seems that IDAs are handing out tax breaks every day, if you read the daily newspapers, but given New York’s standing as the highest tax state in the nation, it is not surprising that developers and investors seek tax breaks before putting a shovel in the ground in the Empire State, and that’s probably especially true in the Western New York region.