By Maryellen Tighe
July 20, 2011
The state has powerful business incentives that could be used to promote urban reinvestment and slow down sprawl, advocates of reform say, but current policies prevent that.
Industrial development agencies are funded by the deals they make, so numerous large plans are sought, and that prevents smaller local companies from benefiting, Sam Magavern, co-director of the Partnership for the Public Good, said Tuesday at a forum hosted by the group.
“IDAs don’t get paid direct state funding, . . . so they want to do as many deals, and as big deals, as possible,” he said. “We keep subsidizing these projects that are so far out [of the city], people cannot get to them by public transit, and we’re using up our farmlands and woodlands and wetlands.”
Buffalo is home to 30 percent of Erie County’s population but receives only 17 percent of the property tax exemptions granted by the region’s IDAs, Magavern said. There are 21 IDAs and local economic-development corporations in Erie County.
Across the state, more than $1.55 billion is given directly to businesses every year, Magavern said. An additional $8.2 billion is given in tax breaks.
“The New York State comptroller just released his annual audit of IDAs and found that, once again, they are not effective tools for job creation,” said Allison K. Duwe, executive director of the Coalition for Economic Justice. “They’re sort of isolated from public scrutiny in the way they operate.”
She said the tax breaks, low-cost energy and other subsidies are not yielding enough benefits to residents, she said.
Development subsidies in New York have not given real return to the community, Magavern said. They often go to companies that would have made the investments, anyway.
“You want to know that you’re only helping a business if they need you to,” he said. “It’s almost always impossible to tell if they would have done it, anyway.”
The lack of transparency in the process also makes it difficult to monitor the impact subsidies have, Magavern said, or to hold businesses accountable for promised job creation.
New York City has begun to enforce the job-creation commitments,
and has won back some money from large corporations that did not create the promised jobs, said Bettina Damiani, project director for Good Jobs New York.
“The reality is that there needs to be a guarantee that there will be a benefit to the local community,” she said.
Subsidies should bring jobs that pay above the poverty level in industries that export goods and services from the region, Magavern said. Giving subsidies to businesses that cater to only the local economy just gives one business an advantage over the others, he said.
“You’re not growing the economy; you’re just favoring one business over another,” he said.
Subsidies also are creating bidding wars between communities that lower taxes to attract businesses from neighboring towns, Magavern said. Some of the tax breaks given by local IDAs are actually paid for by taxpayers across the state.
“In general, what needs to happen is a real cost/benefit analysis,” Duwe said. “Someone is paying to make sure we have the revenue in the state. . . . Businesses [that do not get the benefits] and average ordinary taxpayers are picking up the tab.”
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