New York State is bleeding money, we get that fact. But what we don't "get" is the logic

behind taxing the very agencies designed to bring new businesses into an already highly taxed

state.

With a looming multibillion-dollar budget hole, the state is planning a fee for "cost

recovery of central government services" from industrial development agencies.

The approximate $5 million that this action is expected to produce is a drop in the bucket

to a Legislature that's dealing with an overall state budget of more than $136 billion, but

when allocated among 105 agencies that received assessments, it's punitive and the impact is

significant.

This money grab — better known in Albany as an "assessment" — is based on 2008

revenues, the most recent self-reported data available to the state, and because it was

assessed a full two years later, there's little chance an IDA could have budgeted for this

charge.

Further, much of the revenues this tax is being assessed against are pass-through revenues

that include payments in lieu of taxes — state and federal grants where the agency is

simply the custodian of the funds that ultimately get passed on to local taxing jurisdictions

and those funds are being taxed even though the IDA derives no benefit from them.

These agencies often fund their operation and many economic development activities through

generated revenues, and that includes supporting their operations, funding infrastructure of

economic development projects, building business and technology parks, running job fairs and

running marketing programs. Those activities will be significantly diminished or dismantled if

this tax is allowed to stand.

The assessment could not have been passed down to the customer this year because it is a

retroactive tax applied to gross revenues but, certainly in the future, if an IDA thinks the

assessment will apply then it will have to budget and pass those costs on to businesses it has

been trying to attract to New York State.

The state has put itself in a preposterous situation by taxing the very institutions

designed to develop local economies. It's no wonder the New York State Economic Development

Council, which represents more than 900 professionals, calls the decision a harmful,

confiscatory, flawed and ill-conceived tax.

It's true the state is facing a multibillion-dollar deficit and this is one of many actions

designed to close that hole. This cost assessment is already in place on many authorities, but

the industrial development agencies did not pay that cost recovery. This could be seen as

promoting equity across the authorities, except for the fact that the IDAs are local

authorities that finance private projects as opposed to statewide authorities that serve the

interest of the state and serve public projects.

The state is willing to have a discussion about how to calculate the assessment going

forward, as well as alternatives to hitting the $5 million mark and allocation across the

IDAs, if that helps. The conversation should have been held a long time ago, because the state

clearly had no idea how to implement this cost recovery. There is never a good time to tax

economic development agencies.

Sure, the state is facing an enormous fiscal plight, but taxing economic development

agencies is counterproductive. Extending the IDA nonprofit law, which was allowed to sunset

two years ago, would have netted more than $60 million both in bond issuance fees the agencies

would have to pay and income taxes from construction workers and permanent employees.

There are many ways to generate revenue for the state, but harming economic development

agencies is certainly not an advisable method. The Legislature could repeal the action and,

here's a thought, tighten its own fiscal belt so that the agencies designed to attract

businesses can do their jobs.