Attracting and keeping businesses in New York is no easy task in light of the state”™s high taxes and fees as well as the demise of the controversial Empire Zones.
Industrial development agencies are now left with the Excelsior Jobs Program, a watered-down version of the incentives that were contained in the Empire Zones.
But some IDAs are looking to enhance PILOTs, the acronym for the payment in lieu of taxes program, in order to come close to competing with the high-powered incentives of other states.
Kevin Bailey, president of the Putnam County IDA, said PILOTs are beneficial to both the municipality and business owner.
“In Putnam, we waive the mortgage recording tax (1.38 percent in Putnam), and it receives a 50 percent first-year reduction on school and municipal taxes. Then it jumps five percent every year, over the life of ten years until their tax reduction is zero. The goal is to bring in a business where there was an empty lot or building producing no income,” Bailey said.
An enhanced PILOT, such as the one the Orange County IDA was permitted by the county to enact in May 2009, offers more savings to the owner or builder, and IDA Chairman Jim Petro said it gives a competitive advantage to the county. The plan adds five more years to the standard 10-year PILOT plan. It begins with a 5 percent assessment on enhancements to existing property and matures to full assessment at the conclusion of the 15-year term.
Under the enhanced PILOT, the savings are approximately 20 percent higher for the business than a regular PILOT program, “but the overall benefits to the community outweigh the cost,” Petro said. “Businesses can and will take companies out of state, and we must be proactive to keep or bring them here. We have New Jersey and Pennsylvania right at our doorstep competing for the same business.”
Neither regular nor enhanced PILOTs allow a break on the land”™s tax, water, sewer or other special district taxes the property may be subject to. “Those are paid in full, regardless of whether it is a regular or an enhanced PILOT,” said Lance Matteson, president and CEO of the Ulster County Economic Development Corp. “In some cases, if it means saving a business from leaving or starting up, it is a way to keep the economic engine going.”
Rockland”™s IDA is prevented by its bylaws from arbitrarily imposing a PILOT program without the taxing jurisdiction”™s approval.
“They have been very cooperative, and most, when they sit down and see the positive economic impact, consider it a benefit,” said Ron Hicks, president and CEO of the Rockland Economic Development Corp.
The same goes for Westchester”™s IDA, according to Terry Waivada, executive director.
“Because we cover such a large number of communities, the Legislature decided not to give us PILOT-making authority. The municipality and the school district must sign off on the PILOT agreement. Our function is to execute the PILOT program.” Â Westchester”™s policy on how its IDA performs has been in place since 1977.
All IDAs must hold a public hearing to discuss the proposed projects and tax benefits with the public; another meeting is then held with the county”™s IDA agency and county officials before the agreement signed off on.
A dispute has arisen between Chester Town Supervisor Steve Neuhaus and Orange County”™s IDA concerning an enhanced PILOT granted to C&S Wholesalers. The distributor, which already had 200 jobs at its existing site, added 200 construction jobs during its expansion process and created an additional 400 permanent jobs when the 500,000-square-foot building was completed in mid-2010. Together with its distribution center in Wallkill, C&S is the largest private employer in Orange with nearly 1,300 employees, Petro said.
According to Neuhaus, the IDA never informed anyone at the 2009 public hearing about plans to give C&S a 15-year enhanced PILOT. Petro countered that the proposed PILOT was discussed extensively but that no one from the town, including Neuhaus, were present.
But Neuhaus believes C&S, one of the nation”™s largest food distributors, would have expanded its distribution center in the town with or without an enhanced PILOT. The town has turned to the courts for relief, challenging both the IDA and C&S Wholesalers on the PILOT agreement.
“We are attracting more companies in Chester than anywhere else in the county because of our location and the money we invested in improving access in and out of our industrial park from future Interstate 86,” Neuhaus said. “We don”™t want to set a precedent for other businesses planning to come here that they will automatically be afforded the same type of ”˜super-enhanced”™ PILOT the IDA gave C&S.”
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“The suit may turn out to precedent setting, or just frivolous; I really can”™t comment,” Hicks said. “Our IDA powers are given to us by the state.”
The county then chooses its members, but IDAs act as an autonomous body; any changes to its bylaws must come from the county legislature or the jurisdiction that created it, not from IDA members themselves.
Orange County”™s IDA granted a “super enhanced” PILOT of 22 years to Competitive Power Ventures, which is ready to build an $800 million, 630 megawatt power plant in the town of Waywayanda, where the local planning board will act as lead agency.
“We worked with the county to create the enhanced PILOT program as a tool to attract business. This is perfect example of a project that could have easily gone elsewhere,” Petro said. “As an IDA, we can create any type of PILOT program with legislative approval. We are working with limited resources to compete with other states. New York is, unfortunately, not a business-friendly climate. Our choice is leaving the property vacant. What would you choose?” Petro asked rhetorically.
While the decision on C&S Wholesalers”™ incentive has not been reached, Putnam”™s IDA president said Orange”™s efforts to be creative in bringing business to its county are trendsetting.
“We are competing directly with Connecticut, which sits right on our border, so we are in the same situation,” Bailey said. “We are also looking at the benefits of offering an enhanced PILOT to certain projects. We need to be proactive when it comes bringing business here.”
