Get Return on Business Tax Breaks

Post Comment

(June 19, 2007) — The outrage over the County of Monroe Industrial Development Agency subsidy to the Wellesley Inn is a perfect example of why the statewide system governing industrial development agencies needs to be reformed.

Earlier this year, COMIDA accepted an application from Brighton Lodging Associates to renovate the Wellesley Inn. The application was for several hundred thousand dollars in tax breaks but only required the hotel to create one job.

New York state created the IDA system to encourage the creation and retention of jobs through the use of tax subsidies. But at the COMIDA hearing in Brighton in April, speaker after speaker opposed the proposed tax giveaway to the hotel. Residents also complained about the town of Brighton's lack of input in the process.

These objections get to the heart of the IDA problem. There are 115 IDAs in New York state, and in 2005 they gave away about half a billion dollars in school taxes, town property taxes, county sales taxes and mortgage taxes — and without including towns or school districts in the decision-making.

Moreover, there is no accountability built into the system. Businesses that receive these IDA subsidies are not required by New York state law to create the promised jobs. According to a study by Jobs with Justice, in 2005 businesses receiving IDA subsidies across the state failed to create 63 percent of the promised jobs. In fact according to JWJ, over a quarter of the COMIDA-subsidized businesses cut their work forces after receiving tax breaks. And state law does not require businesses to repay the subsidies if they fail to provide the jobs.

Unlike all 10 of the top-ranking "pro-business states" (according to Pollina Corporate Real Estate ranking of business- friendly states), New York has not created any wage standards for businesses benefiting from these IDA subsidies. In fact, IDAs in New York are subsidizing low-wage businesses and allowing them to bring in construction workers from out of state.

Momentum is building for reforming the IDA system. Metro Justice has been working on the "Initiative for Development Accountability" for a few years to change the system. Our nine-point IDA reform plan calls for: