In recent years, donut shops, car dealerships and doctor’s offices have received tax breaks from industrial development agencies in western New York.
Now, first-term Assemblyman Sean Ryan (D-Buffalo) has crafted a bill to halt such deals. He joins a growing chorus of critics who argue IDAs have lost their way since being created in the 1960s to generate high-paying manufacturing jobs.
Ryan hopes the legislation becomes a model for the rest of the state. But it’s far from being put to a vote.
Preventing “stinky deals”
Last fall, in the first press conference of his legislative career, Ryan planted a podium on a sidewalk next to a busy road in Tonawanda.
Behind him stood a large liquor store called Premier Wine & Spirits.
“There’s nothing wrong with Premier. I shop at Premier, it’s a good store,” Ryan told the small gathering. “But as you can see, it’s 10 o’clock in the morning and we have a full parking lot here. So it’s a thriving business.”
As of May 1, Premier packed its bags and moved to a shopping center a few miles away in Amherst.
The Amherst IDA catalyzed the move with $500,000 in tax breaks.
Ryan claims local IDAs are increasingly rubber stamping almost all tax breaks because they need fees to survive.
“If no good deals come along during the calendar year, [your IDA] would die. Your organization would go out of business,” Ryan says. “So you’ve got this perverse incentive to subsidize something every year in order to keep the lights on and keep the salaries paid.”
While all of New York City has one IDA, the much smaller Erie County has six. This creates an environment where almost any business can shop around and find tax break, Ryan says.
A possible fix?
In response, Ryan has written legislation to strip the county’s five town IDAs of the power to grant most tax breaks - like county sales, property and mortgages taxes. Just one, the Erie County Industrial Development Agency (ECIDA), would retain full powers.
Still, ECIDA could grant a pass on these new restrictions if its board members agree a project is worthy of an exception. And town IDAs could still offer property tax abatements on town taxes. (In that case, they would need the approval of local school boards whose tax revenues would be affected.)
Ryan argues that channeling most IDA deals through one body will limit projects and make oversight easier.
“It’s hard to pull, shall we say, a stinky deal, through [ECIDA],” Ryan says. “Because someone will flag it as not good economic development.”
But recent attempts to pass statewide IDA reform have stalled in Albany.
Most of those efforts were led by former Buffalo Assemblyman Sam Hoyt, whose retirement last year opened the door for Ryan to win the seat. As a result, Ryan has used part of Hoyt’s playbook and relied on some of the same political connections to help craft his arguments and legislation.
For example, Ryan’s bill was developed in part by new Erie County Deputy Executive Richard Tobe. His boss, County Executive Mark Poloncarz, won election last fall thanks to an economic development message that promised IDA reform.
But since reform can only be accomplished in Albany - IDAs derive power from state law - the Poloncarz administration has relied heavily on Ryan to wrangle support in the legislature.
But while Ryan has been prepping a bill for months, it still hasn’t been introduced.
For why, look no future than the five town IDAs that would be hamstrung by the legislation.
“I think this is completely unnecessary,” says Steven Walters, supervisor of the town of Hamburg.
Tax breaks from IDAs have resulted in dozens of businesses moving into vacant buildings in Hamburg, Walters says. Through a provision known as “adapative reuse,” a business can receive a tax break for filling an empty space.
Walters says critics should not disparage the jobs that are created as a result - even if they’re at donut shops or liquor stores.
“[Critics] try to simply look at the business itself and say, ‘That kind of business should not be incented,’ ” Walters says. “They don’t want to talk about the benefits.”
Hamburg’s tax base has improved because of tax breaks, claims Walters.
Hamburg IDA Chairman Michael Bartlett agrees. Many of the 45 projects his IDA has helped over the past five years would not have happened without tax giveaways, he says.
“These jobs may not be paying $20, $30 an hour. But these jobs are important to [people in town],” says Bartlett. “I bet you some of these people are able to pay their rent, send their kids to school and put food on their table because of these jobs.”
Loud opposition to Ryan’s bill by Hamburg and the other town IDAs has spooked would-be Senate sponsors, says Andrew Rudnick, CEO of the Buffalo Niagara Partnership. Without a sponsor, the bill goes nowhere.
Rudnick says the town IDAs are fighting for their lives.
Without the ability to abate most taxes, the five town IDAs would likely go out of business. Rudnick says that might be the point.
“Do I think somewhere that’s in the minds of people who crafted [the bill], that over time you’d end up with one IDA by attrition as opposed to by legislation? I’m pretty sure that’s part of the thinking,” says Rudnick.
Meanwhile, the clock is ticking.
With the legislative session over in June, Ryan has only a few weeks to find a co-sponsor, secure votes and push the bill through Albany.
Rudnick says it still has a chance, but he wouldn’t bet on it.