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A bad idea

We all know that desperate times call for desperate measures, but one should insist on a modicum of common sense nonetheless. In the state’s plan to tax industrial development agencies, it is conspicuously absent.

As Rochester Business Journal reporter Thomas Adams detailed in last week’s edition, the eight IDAs in the Rochester area and more than 100 throughout the state have been told to pay taxes totaling $5 million by the end of the month. The "cost recovery of central government services" is a thinly disguised bid by the state to close a budget shortfall now estimated at more than $9 billion.

As IDA representatives learned one month ago, the agencies have been hit with payments equal to 4.72 percent of 2008 gross revenues. Regionally, the Genesee County IDA is facing a whopping $161,541 payment. For Monroe County’s IDA, the tab is nearly $87,000. By contrast, the Ontario County IDA’s bill is $9,884.

What explains the wide variation? Most of the IDAs’ revenues are pass-through funds such as grants and payments in lieu of taxes that go to entities such as municipalities and companies. And for each IDA these amounts can vary substantially from year to year.

Whether large or small, a tax bill based on pass-through funds makes no sense.

Further, what’s the logic of taxing agencies whose sole purpose is to foster economic development? The state’s dire fiscal situation stems chiefly from the severe recession of the past few years; is taxing IDAs any way to stimulate the growth of taxpaying businesses?

The New York State Association of Counties has called on the governor and state lawmakers to repeal this ill-considered tax, and legislation to do that has been introduced in Albany. But with the end of the month-and the state’s budget deadline-looming, repeal is by no means a sure thing.

Compared with a budget shortfall of more than $9 billion, $5 million is a drop in the bucket. But in terms of the harmful impact it would have on the IDAs’ ability to help create and retain jobs, this tax looms large.

It should be repealed–now.

3/12/10 (c) 2010 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail rbj@rbj.net.

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