In the New York State Senate, my colleagues and I are constantly working to find more effective ways to foster economic growth. Unfortunately, As we implement new data-driven strategies, Some remain trapped in the mindset of previous generations. Consider the example of an industrial development agency. Despite mounting evidence that these perks are bad bets with taxpayer dollars, they donate millions of dollars to businesses every year.
A recent letter from two local IDA executives explains why the IDA is vital to the New York economy. I drew a picture that deviated from reality.letter It was based on two misleading assumptions. One is that IDA-backed projects cannot go forward without tax cuts, and the other is that other companies will not enter without tax cuts.
Most of New York’s business development has taken place without IDA intervention, and many of the IDA-funded projects will be done without tax breaks. Employers seeking IDA benefits do not even have to prove their need. Earlier this year, two fast-food restaurants in Niagara Falls received a tax cut, even though the owners admitted they could build the restaurant without the tax cut. (A cynic might point out that IDA gets a split bill every time it approves a project.)
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The State Comptroller’s Office has been warning about IDA for years. A 2006 report cited the 1999 audit of Erie County’s IDA as an example of “issues with IDA operations, accountability, and transparency” that persisted despite reforms in the 1980s. A quarter century later, IDA remains not liable if it does not fulfill its promises.
The only data states receive on job creation from IDA activities are self-reports, which still do not represent accurate information. Rather, when IDA uses taxpayer money to bet on companies, it often doesn’t know exactly what the return will be. New York’s IDA is creating just 43 jobs for every 100 planned jobs, according to a report released this month.
Finally, IDA leaders argued that IDA was needed to prevent companies from leaving New York. But their work encourages businesses to survive as long as they don’t have to pay taxes. In 2013, the Hamburg IDA gave manufacturing plants a 10-year tax break. The factory closed at the end of the year, leaving dozens of local workers out of work.
Taxpayers should not engage in this kind of work rent the company for 10 years, or Make an economic bet that pays 43 cents per dollar. Our economy depends on long-lived businesses, so we will continue to push for smarter economic development policies.
Sean M. Ryan is a New York State Senator, District 61.