Six industrial development agencies in the Hudson Valley region have joined in legal action to stop New York state officials from levying a new tax on the agencies”™ gross revenues, calling it counterproductive and capricious.
The 102 IDAs in the state in February were surprised to receive bills for “central governmental services” from the state Department of Taxation and Finance. Totaling $5 million statewide, the annual assessment was authorized by the state Legislature last year and included in the 2009-10 budget. Local agencies, however, were billed more than three months after their deadline to report their current budgets to the state.
Agencies were taxed at 4.7 percent of their gross revenue for 2008, which includes pass-through revenues such as state and federal grants and payments in lieu of taxes, or PILOTs, that IDAs pass on to municipalities.
The suit was filed in state Supreme Court in Albany by the New York State Economic Development Council (NYSEDC), a 900-member lobbying and promotional group for economic development professionals, and more than 35 IDAs. Also included are county IDAs in Ulster, Dutchess and Orange counties and the Peekskill IDA. Orange County had one of the highest cost recovery assessments in the state, at $120,758.
“For some IDAs, the amount of tax exceeds their net income for 2008,” NYSEDC Executive Director Brian McMahon said in a statement announcing the group”™s court challenge. “For others, the tax exceeds their operating budgets for 2010. This tax is punitive, arbitrary and wholly unfair, and it will do material damage to local economic development efforts.”
In their court filing, the IDAs claim they are exempt under state law from taxes and assessments. They also argue that because IDAs cannot pay such levies without passing on the charge to IDA-backed development projects, the state in effect is illegally taxing those projects.
Development officials also claim the $5 million the state aims to generate from the tax has “no rational basis.” They noted the state Authority Budget Office, which oversees IDAs and other state authorities, has an annual budget of only $1.3 million and already is funded by another statewide tax on public authorities. There is no relation between the amount charged and the services the state provides to individual IDAs, they said.
“As we fight our way out of this recession,” said Peekskill Mayor Mary Foster, “we need fewer burdens from Albany, not more,” The Peekskill IDA was billed $6,851 by the state.
IDAs had until March 31 to pay the new state assessment. McMahon said some IDAs were awaiting the outcome of the court case before paying. A hearing was scheduled April 9 before Judge Joseph C. Teresi.
