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Bargabos: Welcome to New York, ‘the Vampire State’

IDAs Could be in Real Trouble if Proposed Reforms Implemented As-Is

Martha E. Conway

(Wampsville) Industrial Development Agencies around the state got a nasty and unexpected surprise last week: the non-profits were assessed a tax. In Madison County, the IDA was assessed a “cost recovery assessment” of $12,577.

The bill is due March 31, and Director Kipp Hicks says if the bill has to be paid, it will have to come out of the agency’s dwindling reserves, as their budget had to be completed and submitted to the state last November.

“[Assemblyman] Bill Magee (D – Nelson) and [Senator] David J. Valesky (D – Oneida) are going to bat for us now to get it repealed,” said Supervisor Richard O. Bargabos (R – Smithfield), vice chairman of the Madison County Board of Supervisors and chairman of the IDA Board of Directors. “The IDA brought in $18,000 in revenue last year.”

In a letter dated Feb. 4 from the state Department of Taxation and Finance obtained by the Madison County Courier, Dep. Commissioner and Treasurer Aida M. Brewer wrote “Public Authorities Law Section 2975 establishes a cost recovery of central governmental services to various public authorities. This statute directs the Division of Budget to determine the amount to be assessed to each public authority. The State Treasurer imposes and collects the assessments which are deposited into the State’s General Fund.”

“It’s a money grab,” Bargabos said, “and it’s a tax on a tax. Welcome to New York, ‘the Vampire State.’ They’re sucking us dry.”

According to Hicks, rumors started flying sometime around Feb. 8 that IDAs might be getting letters; he said he received his the next day.

“There was talk about it, but they were going to look for ways to recover costs,” Bargabos said. “We didn’t know if they were actually going to impose this assessment.”

Documentation obtained by the Courier indicates PAL Section 2975 was signed into law by Gov. David A. Paterson April 7, 2009, and effective retroactively to April 1, 2009. The act was included in the 2009-10 budget.

“It was slipped right through,” Bargabos said. “When the letter came and we saw that $12,577 assessment, we started making calls.”

Bargabos said he immediately informed fellow supervisors and Madison County Board of Supervisors Chairman John M. Becker (R,C,I – Sullivan). He said Magee and Valesky’s offices were next.

“Magee first said he didn’t know anything about it, and said he would look into it and see what he could find,” Bargabos said, adding that Troy Waffner of Valesky’s office seemed to know a little more about it.”

“It was buried in the budget bill for 2009, which gave budget authority to assess New York state public authorities a cost recovery fee,” Bargabos said, outraged. “It’s a tax. All these authorities are here for the benefit of people to … keep costs down. The IDA is here to promote economic development, job creation, business expansion and recruitment. We have very limited fee sources.”

Bargabos said what bothers him most is that the assessment was based on 2008 numbers, which included a fairly substantial fee for a deal that had closed that calendar year and the subsidy provided by Madison County.

“The county underwrites – makes a contribution to – the IDA,” Bargabos said. “It is the main source of revenue, which is, of course, from the taxpayers. And that [$12,577] is 4.7 percent of IDA’s total revenue, not revenue less expenses. They used the county’s contribution to the IDA as revenue.”

The county contributes about $100,000 annually to the IDA to cover salaries, Hicks said. Bargabos said the agency actually lost money last year, making the sting of the assessment even worse.

“If we have to pay it, it would have to come out of the agency’s reserve funds and further deplete that account,” Bargabos said, explaining that the board allocated reserve funds last year during the budget process.

Bargabos expressed extreme frustration with the development, coming as it does, he said, on the Legislature’s allowing the IDA Civic Facility legislation to sunset, eliminating IDAs’ authority to issue civic facility bonds – and eliminating a source of fee incoming, such as that earned on recent projects for senior housing, college dormitories and a hospital expansion.

“That was our main source of revenue – issuing bonds for those types of projects,” Bargabos said. “It killed our cash cow by not renewing that legislation, then penalized us with that tax.”

Hicks said IDAs typically have three sources of income – interest on bank accounts, funding from the county that covers staff salaries and fee income.

“We are the county’s lead economic development agency,” Hicks said. “We are a public benefits corporation that has authority to negotiate tax breaks and provide incentives that will help attract new business and expand existing businesses to help them grow and become more competitive.”

According to Hicks, assessments around the state ranged from a low of about $900 to a high of more than $600,000.

“This is one more way the state is trying to close the gap in the state budget,” Bargabos said. “When they killed the Civic Facilities Act, that was our bread and butter.

Bargabos said IDAs probably aren’t alone.

“I’m sure [the state is] looking at all the cash sitting out there in bank accounts – towns, villages, cities, schools, IDAs and public authorities – and they have the authority to confiscate it,” Bargabos said. “Unappropriated fund balances – that’s what they will probably go after next. They are just an arm of New York state government. The state has a lot of power if it wants to exercise it.”

In a press release received by the Courier Feb. 3, Buffalo Niagara Partnership Senior Director of Public Policy Craig Turner asserted a proposed IDA reform bill will result in job losses in the state.

“There is a current push by special interests to have previously rejected IDA ‘reform’ legislation included in the 2010-11 state budget,” Turner wrote. “Beware! In 2010, reform means changing existing legislation to do what your specific interest group wants. Proposed IDA reform is … an attempt to impose an expensive prevailing wage mandate at the request of organized labor on any employer utilizing or indirectly impacted by IDA programs in New York state.”

Turner said prevailing wage mandates hit particularly hard in Upstate.

“A 2003 study by the Center for Governmental Research reports that in Upstate New York, such a requirement raises the cost of construction projects by 28 percent,” Turner said. “What employer would want to save 10 to 15 percent – the typical IDA benefit – if that was more than offset by a 28-percent increase to his or her construction costs?”

Turner said in Ulster County, after implementing a prevailing wage requirement in 2007, the county’s IDA had attracted no projects under the regulation and suspended it in 2009.

“In the two months following, UCIDA administered three projects,” Turner said. “Competition for private-sector investment nationally and globally is cutthroat. Thus far, Albany has been unable – or, more accurately, unwilling – to address spending issues that have kept New York lagging behind. To mitigate the sting of the factors that continue to make us uncompetitive – high taxes, burdensome regulation and an expensive cost of doing business – we’ve established economic development programs such as IDAs, the Brownfield Cleanup Program and low-cost hydropower. In a perfect world, our business climate would be attractive enough without them; in real life, it’s definitely not.”

According to Turner, that’s why the Upstate business community has referred to the proposed IDA reform legislation as “job-killing.”

“It takes a necessary and worthwhile business attraction program and renders it completely useless,” Turner said. “If this legislation passes, employers interested IDA incentives as a possible tipping point in New York’s favor will end the conversation before it begins. Why? Because other states aren’t forcing the same mandates on them. Other states aren’t telling employers that we only want you if you play by our highly-regulatory rules. No, they’re inviting them – and the job opportunities they bring – with open arms. In 2010, job creation has become so important in America that it even nudged health care reform out of the top spot as Washington’s No. 1 priority. In the budget or as standalone legislation, this bill is a job killer, and any state legislator supporting it should be ready to wear that badge through Election Day.”

2 Comments on "Bargabos: Welcome to New York, ‘the Vampire State’"

Howard C. Schnettler on Wed, 17th Feb 2010 6:21 pm

I personally think the IDA’s should be reined in, there power is enormous, and all Villages and townships lose out on the leaseback agreements, they normally are the lender of first choice for the well-heeled and well-connected.

LouHarv on Thu, 18th Feb 2010 3:45 pm

In the unfriendly business environment of NY State, IDAs are often the only thing allowing businesses to grow and expand. Without IDAs, NY will begin to look more like Appalachia than the Empire State.

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Bargabos: Welcome to New York, ‘the Vampire State’

IDAs Could be in Real Trouble if Proposed Reforms Implemented As-Is

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