All Things Political: Murky world of L.I. IDA tax break

Adam Haber
Adam Haber, a member of the Roslyn School Board

The Industrial Development Agency in New York State was created in 1969, through an act of legislation.

Currently, there are 109 separate IDAs in New York, eight of which are on Long Island.

Although IDAs are empowered to undertake projects on their own volition, most projects are created for the benefit of an applicant.

The original motivation behind the IDA was to facilitate economic activity and development, and to create jobs. Long Island has somehow twisted this into a benefit for the politically connected, at the taxpayer’s expense.

The purpose of an IDA tax break should be to give a developer assistance to make an otherwise unfeasible project a reality.

The way an IDA tax break is usually granted is through what has come to be known as a PILOT (payment in lieu of taxes), which takes a development project off the tax rolls until the IDA tax break expires.

To make up for the loss of tax revenue, the tax rate on existing residential and commercial property owners is raised.

Some other benefits granted by IDA’s are sales tax exemptions on construction materials, equipment rentals and furnishings, along with a possible mortgage recording tax exemptions.

A typical PILOT lasts for 10 years but can be of any length and is ultimately determined by the local IDA.

According to state Comptroller Tom DiNapoli’s June 2016 report on New York State’s IDA Agencies, there were 4,581 IDA projects throughout the state during 2014, representing $631.6 million in net tax exemptions received by projects. In regions like Long Island, especially Nassau County, with a poor history of fiscal integrity, this leaves plenty of room for abuse.

Some recent examples of IDA tax break abuse on Long Island include car dealerships that can’t pick up and move, self-storage facilities that don’t create jobs and fitness centers (who file for a tax break under the disingenuous IDA loophole of tourism).

All the aforementioned should have applied for a business loan and not looked for taxpayer-funded government handouts. No comprehensive statewide study has been conducted to see if political donors or those politically connected receive a disproportionate share of IDA benefits.

This kind of abuse on Long Island is not just possible, it’s probable, as entree to an IDA board comes via political appointment, not election.

The latest abuse of the IDA process has been by the Town of Hempstead IDA board.

Keeping in mind, IDA tax breaks are meant to attract new businesses to Long Island or retain local businesses from leaving, the Green Acres Mall, which can’t pick up and leave, received an IDA from the Town of Hempstead that was pushed through quickly in an opaque process without community input.

Any new retail construction around the Green Acres Mall will at least partially cannibalize sales and jobs from competing small businesses in the vicinity.

Individual Valley Stream residential homeowners would be footing the bill of the proposed IDA tax break and are looking at a roughly $350 to $750 tax increase, with commercial property owners bracing for a larger tax hike.

Most of the Town of Hempstead IDA board resigned after the outcry from the proposal and the jury is still out as to whether or not the Green Acres IDA will go through.

What’s equally as frustrating is when Long Island loses a business through an IDA to another part of the state or the country and then claims job creation when a roughly equal number of jobs are created through an IDA that brings a different business from the same region where jobs were lost.

The end result is our community nets no new jobs, while the IDA touts job creation as taxpayers foot the bill.

To make matters worse there is no standardized process to review IDA’s in New York to see if a tax break was successful.

If promised jobs aren’t created after an IDA expires, there needs to be a claw back of the taxpayers’ money that was given out as an incentive to create jobs.

Sometimes there is and sometimes there isn’t. Every single IDA granted needs to be audited to make sure the project meets its goals.

To be fair, there are some IDA’s that will be a positive influence on our community and a judicious use of tax dollars.

A worthy IDA tax break expands the tax base and creates good paying jobs.

Examples of projects that may not have gotten done without an IDA but will benefit Long Island by creating jobs are the new Dealertrack headquarters in North Hills and Best Market taking over the abandoned Entenmann’s site in Bay Shore.

Going forward, IDA’s in areas that support business growth and job creation, like Nassau County’s largest employer, the healthcare industry, should be considered.

Thankfully state Comptroller DiNapoli’s legislative program in 2015 helped create a law to standardize IDA oversight of all projects starting after June 15, 2016.

To regain public trust, IDA’s need to be as transparent as possible. Well-publicized public hearings letting affected communities know exactly why an IDA is proposed, and how much their taxes will go up before any tax benefits are granted, is critical to future success. Long Island‘s IDA’s need to be more transparent and stop wasting the communities hard earned tax dollars.

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