Home > ADVOCACY > Where We Stand > IDA Service Charge Letter

February 24, 2010


Hon. David Paterson
Governor, State of New York
Executive Chamber
State Capitol
Albany, NY 12224

Dear Governor Paterson:

On behalf of the 2,500 employer members of the Buffalo Niagara Partnership, I urge you to retract the statewide “cost recovery” tax that was imposed on industrial development agencies (IDAs) in the 2009-10 state budget. This burdensome tax is an impediment to economic development in any communities served by an IDA, especially those in Upstate.

There are a number of reasons that the tax should be retracted:

• The “cost recovery” charge is unfair and flawed: The tax is applied against 2008 revenue for 2009 - 2010 services provided to IDAs – there is no conceivable way an IDA could have budgeted for this charge. In addition, the statute had as a condition precedent that DOB notify IDAs by November 1, 2009 (the date IDA budgets were due under PARIS) of the costs to be recovered and methodology for the charge. That notice was not given. 

• Trust revenues are taxed: The fee is being imposed upon “revenues” that, either by statute or agreement with another government, are required to be passed along, either to another government or a contractor. “Pass through” revenues of an IDA are not revenues of the IDA.

• The “cost recovery charge” is arbitrary and redundant: IDAs already are required to pay the Bond Issuance Charge, which was enacted as a cost recovery source of revenue for the state, thereby making the subject tax duplicative in purpose and excessive in application.

• The “cost recovery charge” is punitive: The assessment will require sponsoring already-strapped municipalities either to make larger contributions to support their lead economic development organizations simply to pay this tax, or to reduce economic development services. Neither outcome should be acceptable to the State of New York.
•  Future impact: The lack of economic activity in the state due to the recession, to the state’s uncompetitive business climate, and to the sunset of the IDA nonprofit law in 2008 have caused income of IDAs to fall significantly. Consequently, next year’s assessment on IDA gross income will have to apply a much greater percentage tax in order to generate $5 million. This will deplete IDAs of operating capital; limit their ability to be self-sufficient; and harm to local economic development efforts.

• The “cost recovery charge” is bad public policy: IDA fee-based income is used to support important local job creation initiatives, including paying for the operation of the IDA; paying for infrastructure of economic development projects; building industrial and technology parks; administering business marketing programs; and conducting job fairs, to name a few. The State assessment will dismantle these programs at a time that IDAs are being asked to support local efforts more than ever due to the recession and cutbacks at the state and local levels.

Two things need to happen:

(1) Stated simply, New York State must lower the cost of doing business. “Cash-grab” policies such as this one created to fill budget gaps at the expense of job creation will only further the state’s economic problems. Albany must learn that tax revenues will only grow when the state demonstrates an environment that is fruitful for private sector investment and job creation, rather than sapping those employers and employees who remain through new and increased taxes, fees and assessments.

(2) The elimination of the IDA’s ability to help finance not-for-profit projects three years ago has cost New York substantial tax revenues. The legislation, mired in a political battle over special interest-backed wage mandates, has kept nearly $2.3 billion in not-for-profit construction and expansion projects from commencing. By allowing this law to lapse, the state is losing $15-17 million in Bond Issuance Charges that otherwise would be paid, and approximately $60 million in personal income tax revenue that would be paid by construction and permanent workers of IDA-assisted nonprofit projects.

While other states – competing for the same jobs that we are – are investing in their economic development programs, New York state government seems hell-bent on destroying ours. The IDAs are an integral part of attracting and retaining business in Upstate New York. I urge you to retract the ill-advised “cost recovery” tax and refocus policy-making surrounding the state’s IDAs on encouraging private sector investment and job creation.


Sincerely,

Andrew J. Rudnick

cc:    WNY State Delegation
         Robert Megna, NYS Division of Budget