By Neale Gulley<br><a href="mailto:gulleyn@gnnewspaper.com">E-mail Neale</a>
A new state tax aimed at generating $5 million in revenue could threaten the existence of many of the state’s industrial development agencies.
That was the message delivered at a press conference held Friday morning at the offices of the Erie County Industrial Development Agency, which featured a speech by state Assemblyman Robin Schimminger, D-Kenmore, calling for a repeal of the tax aimed at such organizations statewide.
Under Gov. David Paterson’s 2010 budget — which seeks cuts or additional revenue anywhere it can be found — a 4.7 percent tax would be assessed to gross revenues at all state IDAs, as well as the kind of payments in lieu of taxes and grants the agencies merely hold for a time before passing them on to cities and municipalities. The tax is retroactive to 2008.
The problem, Schimminger said, is that county IDAs throughout the state are largely self supported. That means operating budgets are usually minimal, and in some cases the tax could exceed the money such agencies leverage every day to help businesses take hold.
David Kinyon, who heads up the Town of Lockport Industrial Development Agency, said the organization recorded a net operating loss in 2008, but were nevertheless assessed a tax for $926.
“The Town of Lockport Industrial Development Agency is reflective of many smaller (IDAs) across the state,” Kinyon said.
For 2009, he said, considering an increase in funds related to bringing Internet giant Yahoo into town, that tax would go up some 400 percent, and the agency expects to be docked $3,500.
“The bottom line is IDAs are a public benefit ... job creation, etc,” he said. “Now we’re attempting to drive income for the state by (taxing) this public benefit, which in my estimation is terrible public policy.”
Schimminger is introducing legislation to rescind the tax as part of the ’09-’10 state budget. It is identical to legislation introduced to the Senate earlier this week by Sen. David Valeski, D-Oneida.
Scores of representatives from development agencies representing all of Western New York, were on hand for the speech.
Schimminger said the Erie County IDA, where the address took place Friday, had a net income of just $251,000 in 2008, yet was assessed for $226,000 in tax alone.
“In other instances, the tax represents 100 percent or more of an IDAs operating budget,” Schimminger said. “In these difficult times, we need to do all we can to encourage economic development and job creation, not undercut such efforts.”
Because the Erie County IDA, for instance, does not keep most of the money it handles, the effective taxation relative to its’ operating budget for 2008 will be about 90 percent.
Similar agencies statewide, it should be noted, apply what little they earn almost immediately back into initiatives to promote and sustain business growth through the use of payments in lieu of taxes that increase to full value over time. The goal is to help startup businesses, for instance, or by making low-interest loans available to the same businesses they can use to match state or federal grants.
Representatives from such groups argue the value they create is far in excess of what they themselves earn.
“This tax is unwise and unfair,” Schimminger, who voted against the budget and is chairman of the Assembly Committee on Economic Development, Job Creation, Commerce and Industry, said.
The tax is being assessed on gross revenues, as well as what he called “pass-through revenues” like the PILOT payments, even though that money is forwarded almost immediately to the cities where the businesses exist.
Of the other initiatives such IDAs undertake using their base revenues, like hosting job fairs, administering business marketing programs and other economic development activities, Schimminger said: “The IDA tax will diminish or cripple these efforts.”
Schimminger and Kinyon both said there is growing bipartisan support for a repeal of the tax.
IDAs are largely self supported and do not receive any public tax funding.
Contact reporter Neale Gulley at 693-1000, ext. 114.
