The following appears in the June 26-July 2, 2015 issue of the Long Island Business News:
Back in 1969, the governor and state legislature approved the Industrial Development Agency Act that permits local municipalities to create agencies that “promote, develop, encourage and assist in the acquiring, constructing, reconstructing, improving, maintaining, equipping and furnishing industrial, manufacturing, warehousing, commercial, research and recreation facilities….”
These agencies were also empowered to issue bonded debt and to buy, own and dispose of real property and to offer financial assistance to attract, retain and expand businesses.
Today in New York there are 178 state-authorized IDAs. The total value of the 4,709 projects on IDA books is $76.8 billion.
Typically, a business applies to an IDA to support its plans to construct, expand or renovate its facility. If the plan is approved, the IDA generally receives title of the real property of the project and it becomes exempt from property taxes. (Project operators generally pay to the local municipalities PILOTS – payments in lieu of taxes – that are much lower than similar properties on the tax rolls.)
The state comptroller’s office reports that in 2013, statewide IDA-granted tax exemptions totaled $1.38 billion. That figure, according to the comptroller, “represents the estimated value of taxes that would otherwise have been collected on the properties had they not been IDA projects.” With total PILOT payments on these new projects coming in at $723 million, the net tax exemption cost the municipalities $660 million in revenues. In other words, 52.3 percent of the tax revenues were recovered.
I was not surprised to learn that in our region, Nassau County had the highest exemptions, the lowest PILOT payments and the worst projected job creation on its new IDA projects in 2013.
What does it mean? It means that Nassau’s IDA is giving away the store. It means that struggling businesses without sweetheart IDA exemptions must pay more in taxes. And it means that the politically connected get tax breaks that are not only unfair but may violate the intent of the state IDA statute.
Here are a couple of examples of dubious Nassau IDA projects that have been reported in newspapers during the past year: In August 2014, a physical fitness gym received a 20-year property tax reduction and a $2 million sales tax exemption from the Nassau County IDA even though the law specifically forbids the granting of such exemptions to retail businesses. The IDA skirted the law by concluding the gym would attract tourists from outside the county because tourist destinations can receive exemptions. The IDA used that excuse in granting tax relief to an automobile dealership in Lynbrook, claiming buyers would travel from New York City. And in April, it was reported that the IDA gave tax breaks to a Valley Stream car dealership utilizing the tourist destination exemptions “because 50 percent of its business comes from Queens.”
This kind of abuse is outrageous and should be investigated by the Nassau district attorney or the state attorney general. Here are a few questions government investigators should ask:
Do the clients of politically connected lawyers or lobbyists get special treatment from the IDA?
Are any outside professionals retained by the IDA for advice (its general counsel, for example) incentivized to get deals done regardless of the merits because they get a percentage of approved projects that close?
For decades, the agendas of Nassau’s special interests – lobbyists, consultants, lawyers, political hacks – have come before the best interests of the general public. This helps explain why Nassau County is broke and its citizenry overtaxed. But don’t expect any genuine reforms until after there are indictments or Nassau becomes insolvent.