Governor Cuomo’s proposed 2013/2014 state budget contains an unfortunate provision regarding Industrial Development Agency sales tax abatements which will hurt economic development in Buffalo Niagara and across the state.

The background:
Governor Cuomo’s 2013/2014 proposed budget contains an item which restricts IDAs in abatement of state sales taxes on economic development projects.

His proposal would 1) prohibit state sales tax abatements unless a project is in a specific industry eligible for Excelsior tax credits (think ‘bureaucracy’ and ‘hurts small business’ here…), 2) require additional approvals by the relevant Regional Economic Development Council (REDC) and Empire State Development (think ‘unnecessary oversight and delays’ here…), and 3) shift the abatement of state sales tax to a refund that might be issued sometime down the road (think ‘uncertainty’ and ‘cashflow’ here…).

Some of the basic problems in the Governor’s proposal are:

  • Another round of required approvals which will delay projects: projects which have already been approved by the relevant REDC will also need to be sent to ESD for further review
  • The specifics of qualifying for Excelsior credits are especially difficult for small technology companies needing to purchase equipment for R&D
  • State sales tax abatements on equipment are often viewed by banks as owner equity, and are needed to secure conventional funding
  • There are limitations on smart growth projects which are summarized below

The Partnership has a long and strong track record of working for collaboration among Buffalo Niagara’s IDAs, especially regarding their tax abatement policies and their emphasis on economic and smart growth development projects. Consistent with the Governor’s expressed approach (which started with the Regional Economic Development Council concept), we believe economic development policies and tools need to be targeted to the specific projects Buffalo Niagara needs, and thus decided at the regional level – and certainly not in Albany.
While we all can agree that some tax abatement retooling is in order to stop enticing retailers to move from one municipality to the next, the Governor’s proposal stops many “placemaking” projects this region has strongly embraced.
Moreover, Cuomo’s proposal, if it had been in effect from 2010-2012, would have prevented support for more than 70% of the Erie County IDA’s approved projects located in the City of Buffalo, including those such as the acclaimed Hotel @ the Lafayette.
We hear the Governor’s people tell him this proposal is an opportunity to recoup $1 billion in state sales taxes annually that would otherwise be lost. But considered differently, that’s $1 billion in spending that would stimulate private investment and growth, but is now proposed to sit on the sideline.
Over 2+ years, Governor Cuomo has built a strong track record of which he should certainly be proud. Indeed, his proposed 2013/2014 budget includes several good economic development policies such as an extension of state historic preservation tax credits- something whose impact will be almost completely negated by this ham handed IDA proposal. So, I ask that you join us in strongly encouraging the Governor to stop this IDA proposal in its tracks.
Specifically, join us in telling Governor the unintended consequences of this proposal are reason to drop it altogether.