Local economic development officials are turning up the heat on the state to repeal a new $5 million industrial development agency tax that critics say will put a damper on efforts to spur business growth in the Buffalo Niagara region.

Nearly two dozen local economic development officials and politicians lined up Friday to register their support for efforts to repeal the new tax that was imposed on the agencies in last year’s state budget.

“In this difficult economic time, the worst thing we can do is undermine economic development activity,” said Assemblyman Robin L. Schimminger, D-Kenmore, who plans to introduce a bill in the Assembly to rescind the 4.7 percent tax on the agencies’ revenues.

“It is a tax that is both unwise and unfair,” said Schimminger, whose bill will be a companion to legislation that six Democrats, including State Sen. Antoine M. Thompson, D-Buffalo, introduced earlier this week in the State Senate. Assemblyman Sam Hoyt, D-Buffalo, also introduced a bill this week to repeal the tax.

Officials from several local development agencies appeared at a news conference with Schimminger to criticize the tax, which they said would wipe out most, if not all, of their agencies’ profits or push them into a deficit.

The tax, which is calculated on 2008 revenues, would cost the Erie County agency $226,000, while the Niagara County agency faces a nearly $220,000 bill. The Chautauqua County agency’s assessment exceeds $90,000, and the tab for the Amherst agency is $44,000.

Agency officials complained that the formula for calculating the tax includes grants that flow through the agencies to companies, as well as repayments for fed-

eral loans administered by the agencies.

About $100,000 of the Erie County agency’s tax results from $2 million in grants that the agency passed on to companies, said Alfred Culliton, the agency’s chief operating officer. Roughly $25,000 of the Chautauqua County agency’s assessment is based on payments that companies made through the agency for a pair of federally funded loan programs, said William Daly, the agency’s chief executive officer.

“The whole thing is horribly flawed,” Daly said. “Everybody suffers because of this money grab by the State of New York.”

Officials said the new assessment could prompt changes in the way the development agencies do business. They could increase the fees they charge companies receiving incentives through the agency to recover the additional assessment, potentially adding $10,000 to $12,000 to a developer’s costs, said John Cappellino, the Erie County agency’s executive vice president. Those fees now average around 1 percent of a project’s value.

Agencies also could stop serving as pass-through agencies that funnel federal or state grant money to companies.

Schimminger said he hopes the efforts to rescind the tax will succeed, noting the groundswell of opposition to the tax that has arisen since the agencies received letters last month detailing how much they owe.

“I don’t have an expectation. I have a hope,” he said.

While the state faces a $8 billion budget deficit, Schimminger said repealing the tax would not noticeably worsen the fiscal crisis and might help in the long run if the agencies are able to use the funds for efforts that lead to new jobs.

“This is $5 million. This is a very small amount of revenue for New York State that has the potential to have an exponential impact on job creation,” he said.

Erie County Executive Chris Collins said Albany should repeal the tax and fill the budget gap by curbing the “cancer of spending” that he said also has contributed to the growing budget deficits.