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Legislative Memo

Ken Pokalsky
Vice President of Government Affairs
T 518.465.7517 x205
www.bcnys.org

BILL:

S.2682 (Ranzenhofer) / A.1358 (Hawley)

  Support

SUBJECT:

IDA Assessments

 

S.2682 (Ranzenhofer) / A.1358 (Hawley)

DATE:

March 2, 2011

 

The Business Council supports this legislation that would repeal 2009 legislation - S.59-B / A.159-B (Budget), Part UU – that in effect imposed a tax on economic development projects supported by Industrial Development Agencies. Specifically, this legislation imposed a state “cost recovery” tax on IDAs of up to $5 million per year in aggregate, based on individual IDA’s “gross revenues.”

We believe the 2009 legislation was ill-advised and counterproductive toward the state’s economic development efforts, and support its repeal.

By imposing a tax on IDA’s gross revenues, the tax impacts pass through revenues such as PILOT payments and governmental grants.  In doing so, the tax has an increased adverse impact on the operating budgets of IDAs.

The tax will require either the reduction of IDA economic development activity, or force municipalities to increase their financial support for local IDAs – in effect another unfunded mandate on local government.  In either case, we believe the outcome is to make development efforts more expensive, and less effective.

While the overall impact of this assessment is $5 million or less, the impact is felt most significantly on those IDAs that are most active in supporting local economic development. For these entities, the tax imposes a significant new cost, and by definition is diverting local resources away from economic development efforts.

Importantly, projects assisted by IDA issued bonds are already subject to state bond issuance charges that are intended to reimburse the state for services provided by the state related to that IDA activity. As such, the 2009 “cost recovery tax” represents a double taxation on certain IDA activities.

In summary, the 2009 legislation imposed a tax on local economic development efforts, and as a result took away local development resources. For these reasons, The Business Council supports the repeal of Public Authorities Law Section 2975-A, by supporting approval of S.2682/A.1358.