The Business Council's opposition to S.717/A.4319 is limited to the provision that would grant credit unions the authority to accept municipal deposits. This legislation would permit taxpayer funds to be deposited into credit unions that do not pay sales taxes and federal, state and local income taxes. However, The Business Council supports granting savings banks and savings and loan associations the authority to accept municipal deposits.
At a time when the 2010-11 Executive Budget projects a $7.4 billion deficit, and the FY 2011 New York City budget projects a $4.9 billion deficit, the Legislature should not grant tax exempt credit unions the authority to accept municipal deposits.
The sponsors' bill memorandum states that there is no fiscal impact to New York State. However, since credit unions do not pay sales taxes and federal, state and local income taxes, a recent estimate calculates over $15 million in lost revenue to the state if municipal deposits are shifted from tax-paying financial institutions to tax-exempt credit unions. Since credit unions are tax exempt, they do not contribute funds for education, health care, public safety and economic development.
Savings banks and thrifts employ over 250,000 individuals and contribute over $1 billion annually in state income taxes; $1.4 billion in New York City income taxes; and hundreds of millions in income, sales and other taxes to Yonkers and the Metropolitan Transportation District. Conversely, credit unions do not pay these taxes and are exempt from the new MTA payroll tax.
Community banks provide financial services and loans to consumers and businesses contributing to the revitalization of local economies. Employees of community banks are leaders in the neighborhoods, small towns, and counties they serve by supporting public events, charitable organizations, civic groups and other activities.
A punitive change on our taxpaying financial institutions' ability to leverage capital for investment will act as a new and significant drag on our economic recovery. The supporting documentation for this bill lacks any compelling evidence that allowing credit unions to accept deposits from municipalities would be beneficial to the State of New York or local governments.
For the reasons stated in this memorandum, The Business Council of New York State opposes the provision of this bill that would grant credit unions the authority to accept municipal deposits.