At the Orange County Industrial Development Agency, the notice in the February mail from a state Department of Taxation and Finance official came as an unpleasant surprise. The surprise was shared by other IDA offices around the state.
The IDA in Goshen was being newly assessed for “central governmental services” the state provides to IDAs and other public authorities. The administrative services bill from Albany came to $120,758. Send payment by March 31, Aida M. Brewer, the taxation department”™s deputy commissioner and treasurer, wrote.
“I don”™t think anybody”™s sending them a check,” Orange County IDA Executive Director James O”™ Donnell said recently.
O”™Donnell was referring to the 102 IDAs statewide that received similar “cost recovery” bills from the state. The new assessments range from $653,716 billed the New York City Industrial Development Agency to $320 owed by the Town of Montgomery IDA in Orange County.
Of the six industrial development agencies in Westchester County, the Yonkers IDA received the highest assessment at $86,171, followed by the county IDA in White Plains, which was billed $62,874. The Port Chester IDA had the third lowest assessment in the state at $331.
Seeking repeal
The assessment was authorized by legislation adopted last year and included in the 2009-2010 state budget. Legislators directed the state Division of the Budget to determine the amount assessed to each agency. The total statewide assessment cannot exceed $5 million annually.
Based on that $5 million cap, state budget officials arrived at a formula that requires each IDA this fiscal year to pay 4.7 percent of its gross revenues reported for 2008, a budget division spokesman said. Bills were mailed out in early February, three months after IDAs had prepared their current budgets to meet the state”™s Nov. 1 budget reporting deadline.
“We got rumors three, four, five months ago that they were looking for $5 million,” said O”™Donnell. But IDAs did not know their individual assessments until the February notices arrived, he said.
“It”™s $120,758 less that you have to spur economic development,” said O”™Donnell. That money could be used instead, he said, for a revolving loan fund the IDA plans to assist startup businesses at its Orange County Business Accelerator at Stewart International Airport.
“This assessment is too arbitrary,” said Brian McMahon, executive director of the New York State Economic Development Council, a 900-member lobbying and promotional group for economic development professionals in Albany. “It”™s completely unfair. It”™s punitive. We certainly are trying to convince the Legislature to repeal this.”
In Mount Vernon, “We would join that fight to repeal this egregious tax,” said Yolanda Robinson, chief of staff to Mayor Clinton I. Young Jr. The Mount Vernon IDA last month was billed $23,957 by the state.
“Where is it coming from?” Robinson said. “It”™s a little disappointing that we were not given any prior notice. If we had some prior warning, we could certainly budget for this. This was just never on our radar.
“We”™re a relatively small IDA,” Robinson said. “We have about 10 projects going and this (assessment) is going to have a tremendous impact on the IDA as well as the city. We”™ll certainly look at our options and join with other municipalities to get this reversed.”
”˜An insidious tax”™
The IDAs are being taxed on gross revenues that include pass-through revenues, such as PILOT payments ”“ payments in lieu of taxes from IDA-assisted companies that are passed on to local taxing municipalities ”“ and “clawback” funds, money regained by IDAs from companies that fail to fulfill their PILOT agreements that is partly or fully passed on to taxing entities. State and federal grants earmarked for development projects also count as gross revenue.
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Even if the assessment applied only to fees charged by the IDAs for their services, “It still is an insidious tax,” said McMahon, “because those are the funds that IDAs use to be self-sufficient” and operate their development programs. “They are going to be able to do less of that because of this tax. The impact on local economic development is very, very significant.”
For some IDAs, said McMahon, the new assessment is greater than their reserve funds and they will not be able to pay it.
In a letter to the state budget division”™s director, McMahon said the current tax is applied against an IDA”™s 2008 revenues, which may have already been reinvested in other economic development projects and activities. He also said the state failed to notify IDAs of their assessments by Nov. 1, as required in the legislation passed last year.
McMahon also pointed out the $5 million collected by the state to recover administrative costs is more than three times higher than the total budget of the Authority Budget Office, the administrative agency that oversees IDAs.
”˜A backwards approach”™
In Yonkers, IDA President and CEO Ellen Lynch said officials there too had “absolutely no idea” the city IDA would be billed more than $86,000 this winter for state services.
The assessment next year, if again based on an agency”™s gross revenues, will be inflated by pass-through federal stimulus funds the IDA received when it took over administration of the Yonkers Workforce Investment Board in 2009, Lynch said. Those grant funds totaled approximately $519,700 in 2009 and are estimated at about $1.3 million this year.
“They”™re taxing revenues that are not even ours,” Lynch said. “I think even the concept of taxing the revenue that is ours is ridiculous. In this economy, why would they want to tax the prime economic development vehicle in New York state?”
Both Lynch and McMahon said the state would reap far more revenue than the $5 million targeted from this “cost recovery” assessment if it restored IDAs”™ expired authority to issue bonds for civic or nonprofit facilities.
McMahon told state budget officials the state is losing $15 million to $17 million on bond issuance charges from nonprofits”™ construction and expansion projects that have been stalled since the law expired two years ago. He said those IDA-assisted projects also would bring the state about $60 million in personal income tax revenue from construction workers and permanent workers.
With the state”™s budget deficit projected at $8.2 billion this year, the $5 million assessment is “a drop in the bucket” for the state treasury, Lynch said. “For the individual IDA, it”™s a huge amount of money,” especially in the current economy where development projects have stalled, she said.
“It”™s sort of a backwards approach to this,” Lynch said.
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At a Glance
Industrial development agencies statewide have until March 31 to pay a new state assessment based on their gross revenues. Here are the levies for IDAs in the Hudson Valley region:
Orange County, $120,758.
Yonkers, $86,171.
Westchester County, $62,874.
Mount Vernon, $23,957.
Dutchess County, $16,156.
Peekskill, $6,851.
Rockland County, $5,631.
Middletown, $1,218.
Putnam County, $635.
Port Chester, $331.
