Gov. Andrew M. Cuomo’s plan to crack down on dubious economic development incentives is as sensible as it is worrisome. With hardly a second thought, local industrial development agencies provide state tax breaks to projects that have little chance of spurring economic development – such as pizza restaurants – misusing the precious resource of state tax dollars.
With the state having ever-increasing difficulty in paying its bills, it is no surprise that Cuomo wants to exercise some control over who is doling out these incentives for what purposes and at what rate. His concern is appropriate.
The problem is that, under the change that Cuomo tucked into his proposed state budget, tax breaks for large-scale projects that do help to spark the economy will also come under threat. That’s troubling and it requires careful consideration.
Under Cuomo’s proposal, the value of sales tax incentives for retail projects would be nearly halved, and their remaining value would be paid only as a rebate, not provided as an up-front cost saving. But the proposal could also reduce the incentives for other, more-valuable projects. The restoration of the Hotel Lafayette, for example, which received $2 million in sales tax incentives and helped put a vacant building back into use.
“That can make or break a project,” said developer Rocco Termini, the developer of the renamed Hotel @ the Lafayette that is now a downtown jewel.
Tellingly, though, Termini recognized the problem. “If the IDAs would only police themselves, we wouldn’t have this problem,” he told News columnist David Robinson.
It is obvious that the state has a problem with its many industrial development agencies. That emphatically includes Western New York, where, in addition to the county IDA, there are five municipal IDAs working to pilfer businesses from neighboring communities – and getting state taxpayers to help foot the bill.
It would be better to vest all local control in the countywide industrial development agency, but the politics of that becomes difficult. Thus, Cuomo’s proposal to limit the costs run up by IDAs.
This is government operating with a sledgehammer, as Termini put it. It’s how government often operates, but in this case, it could do unwarranted damage to Buffalo, just as it is showing new signs of life. Cuomo needs to revise his plan to protect legitimate projects, including those that put long-vacant buildings back to productive use.
One possibility could be to exempt from the proposal non-retail projects that are given sales tax incentives by the county IDAs, which tend to be more careful about the tax breaks they award than their local counterparts. That would help to preserve funding for projects like the Hotel @ the Lafayette and others that are helping to fill in the urban landscape here.
It might not be exchanging the sledgehammer for a scalpel, but it would at least do a better job of distinguishing between projects that benefit the shop owner and those that benefit the entire community.