The Niagara USA Chamber has been working with various advocacy groups and the County’s IDA office to ask the Governor to withdraw a provision in his executive Budget regarding the ability of IDAs to abate the state portion of New York State Sales Tax. This provision would prohibit IDAs from abating the state sales tax on a project unless that project is eligible to receive Excelsior Jobs tax credits. It would also give the Regional Economic Development Council and ESD the authority to give final approval on any abatement.
As Sam Ferraro, Executive Director of the Niagara County IDA has stated, “As a County IDA one of the main tools we have in assisting our local businesses to expand and in attracting outside investment is our ability to abate sales tax on construction materials, equipment, furniture, and fixtures. Depending on the specific project the abatement often serves to make the entire project viable.” In fact, the Niagara County IDA has recently worked with companies including GreenPac, Franks Vacuum Truck Service, and Olin Chlor Alkali which are important to the economy of Niagara County, and relied on sales tax abatement to move these projects to successful completion. None of these projects, along with several more in the works, would be eligible for tax abatement as they do not qualify for Excelsior Jobs tax credits. Clearly Part J of the Revenue Budget Bill will have a negative effect on the continued success of the IDAs to assist in the economic growth and recovery of our region. This provision must be removed from the Executive budget.
Below is an excerpt of a statement by Andrew Rudnick, President & CEO of the Buffalo Niagara Partnership relating to this issue. Please take a moment to follow the link at the bottom to join all of us in asking the Governor to withdraw this proposal from his budget.
The governor’s 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
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.