By Tom Tobin
August 25, 2013
The County of Monroe Industrial Development Agency has a long name and a simple purpose: use tax relief to spur business and job growth in the Rochester area.
By some measures, COMIDA, as the agency is known, is doing this better than other IDAs in New York state — figures that county officials are happy to promote.
But to detractors, there are still too many instances where projects are funded that offer little or nothing in terms of job creation.
COMIDA projects created a state-leading 1,300 jobs in 2012, stemming from $2 million in tax breaks. According to the state comptroller’s office, the average cost of COMIDA’s tax exemptions in 2011 was $1,364 per job created. That’s about half the state IDA average of $2,575.
“There are some who talk about the cost of COMIDA assistance,” County Executive Maggie Brooks said in her State of the County address in May. “But make no mistake about it, COMIDA projects are an investment that bring our community great return.”
But of the 86 projects the COMIDA board approved in 2010 and 2011, 23 promised no job creation at all, according to data from the state Authorities Budget Office. Another 23 estimated only one job created.
Judy Seil, director of COMIDA and the county’s Economic Development Division, said COMIDA has been focused in recent years on supporting small business, which means fewer jobs will be created to meet the required thresholds. COMIDA has other programs — sales tax exemptions, for example — whereby awards may be made to small business that result in minimal or no job creation.
Nonetheless, such paltry job-creation numbers fuel the criticism that COMIDA’s tax-relief efforts are little more than private handouts disguised as economic development.
“New Yorkers need our job creation programs to actually create jobs,” said Matt Ryan, executive director of the Alliance for a Greater New York.
“Billions of public dollars are spent each year on what amounts to a gamble, not an investment,” Ryan said in a news release that accompanied a critical report on the state’s economic development efforts.
When it works
COMIDA awards millions of dollars every year in state and local tax breaks through an array of programs. Companies line up to receive the benefits, and many thrive because of the deals obtained.
In 2010, Brothers International Food Corp. wanted to move from Batavia to Rochester. The change was deemed essential if the company was to grow. COMIDA provided an immediate cash infusion that helped with the move and the hiring that followed. The company received a total of $35,000 in public funds with a requirement to add six jobs over five years.
“We went right out and hired someone using that money,” said Travis Betters, co-CEO of the company.
In the three years since, Brothers has settled into a Lexington Avenue space and its workforce has nearly doubled since the move, going from about 18 to 36. “And we’re only in year three,” Betters said.
But job creation, which is the quid pro quo for tax relief under IDA rules, has been hit or miss.
The 2013 state Authorities Budget Report noted that COMIDA spent nearly $10.5 million on tax relief over four years on 31 projects approved in 2008. Excluding any payments the firms made in lieu of taxes (PILOTs, in development jargon), those projects generated 902 additional jobs, at a cost of about $11,600 per job.
“We’re only as good as the economy allows,” board chairwoman Theresa Mazzullo said. The COMIDA board makes a point to offset the impact of tax breaks by showing, for each awardee, the positive residual effect on the local economy of the project. But those are unverifiable numbers — projected or supposed benefits rather than solid, factual gains.
Monroe County Legislator Paul Haney, D-Rochester, said he has analyzed COMIDA’s efforts and found some to be wanting.
Haney said he found dozens of projects — particularly Wegmans Food Markets construction in Chili, Penfield, Webster and Greece — where the tax relief resulted in more jobs than pledged. But others, mostly real estate development, cost far more in tax relief than they promised in jobs.
“There are good and bad projects, to be sure,” he said. “A lot of what is done is for local businesses that would do it anyway. They’re not moving out of the area. They’re not being wooed by other states.”
A project to redevelop the former Genesee Hospital in Rochester is an example. Property tax relief of nearly $400,000 was granted to Buckingham Properties, with a promise of one job created. But the project on Alexander Street involving the whole of the former hospital has revitalized what had been a rundown, abandoned site.
“COMIDA’s support has been really good for us,” Larry Glazer, president of Buckingham Properties, said. “We’re committed to the city and we’re bringing in jobs.”
But how many jobs are tax breaks creating? It isn’t always clear.
Under state law, IDAs are required to verify job creation numbers. It’s a fairly new mandate — for years IDAs were allowed to award tax breaks without any verified return from the favored company. Currently, local agencies have to provide some kind of evidence in their annual report to the state that job targets were reached.
For COMIDA, that evidence is the NYS-45 tax form that businesses complete as part of their quarterly unemployment insurance filing. The forms indicate workforce numbers and wages. They don’t readily say how many of the jobs were created as a result of the COMIDA agreement.
But the state Authorities Budget Office is fine with what’s sent. “There are a lot of ways to verify job creation,” a spokesman said. “This is one way.”
When it doesn't work
Clawbacks — getting the money back from companies that did not meet their job numbers — are rare. Seil said a refund was demanded and received only once in the past couple of years, that from a company that moved out of New York after accepting tax breaks. Companies more often voluntarily terminate COMIDA agreements, usually when they move out of the state.
Perhaps the most embarrassing COMIDA-funded project to date is the plan by Scott Congel’s Bersin Properties to rehabilitate the Medley Centre shopping mall in Irondequoit. State Comptroller Thomas DiNapoli cited it in his May report on the state of New York’s 113 IDAs.
DiNapoli reported that in 2009, Bersin was granted $1.5 million in tax exemptions for a $260 million retail project that, to this point, has not produced a single job.
But the story is a mite thicker than that. The taxing agencies, including East Irondequoit schools and the town, receive regular PILOTs from Bersin that local governments are loathe to give up, despite the lack of progress by the developer.
“It’s been difficult, but we badly need the PILOT money,” Irondequoit town Supervisor Mary Joyce D’Aurizio said. “How long can we keep going with this? I don’t know. It’s very important to the town, but we’re an old community with a small commercial tax base and these costs are being absorbed by older residents. That’s not right.”
Seil said she understands the consternation of taxpayers in places like Irondequoit, where hard-earned tax dollars have gone for thus-far failed projects like Medley.
“I’ve sent letters to Scott Congel (principal of Bersin Properties) and I’ve talked with town and school officials,” Seil said. “They want pressure put on the developers, but they also want the PILOT money to continue. If we rescind the deal, those dollars go away.”
Revisions to the state authorities law give local governments a greater voice when deals are negotiated or PILOTs are considered. Still, it’s an advisory voice, not a decisive one.
“Eight percent of our total property value is under COMIDA exemption,” said Andrew Whitmore, executive director of finance for the Rush-Henrietta Central School District. The school district and the town of Henrietta, laden with retail shopping, take umbrage when local taxes are used for hotels, stores or restaurants that create few permanent jobs, are unlikely to go elsewhere no matter what COMIDA does, and are provided without any vote from local government.
“Tops Friendly Markets, for example, is getting sales tax exemption for a new location not far from its current location on Jefferson Road that is being done just so they can have a gas station,” Whitmore said. “It makes no sense.”
Even without voting power, communities are challenging COMIDA’s decisions. The town of Greece threatened to sue the board last year when COMIDA offered a 25-year tax abatement plan to Wilmorite Corp. that would have frozen the taxable value of The Mall at Greece Ridge and held PILOT increases to less than 1 percent a year during the life of the deal. The town argued the relief would cost the town $8 million to $10 million in tax revenue.
The deal eventually was renegotiated to give the school district more money and to revisit the deal after 15 years.
Calls for change
COMIDA isn’t alone in facing criticism about job growth in exchange for tax breaks.
According to the advocacy organization, Getting Our Money’s Worth, 33 percent of statewide IDA spending in 2011 produced either no promise of job creation, no new jobs or a loss of jobs. Since 2003, the tax revenue siphoned off from local communities rose by 74 percent, from $231 million to $401 million 2011.
Schools, which consume the largest share of the local tax bill, have been disproportionately affected. For every dollar in net IDA tax exemptions awarded in 2011, according to Getting Our Money’s Worth, schools lost 52 cents.
Despite the criticisms, IDAs in New York have resisted efforts to undo them.
Gov. Andrew Cuomo tried to take sales-tax-exemption power away from IDAs and move the authority to the regional economic development councils.
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