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Thread: Free Buffalo News Alert on IDAs--a draft for discussion

  1. #1
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    Free Buffalo News Alert on IDAs--a draft for discussion

    This is a draft of a report on IDAs for discussion prior to publication.

    Free New York News Alert No. 10

    Comptroller’s Audit Proves IDAs Must be Abolished

    By James Ostrowski

    Draft--May 20, 2006

    Abolishing Industrial Development Agencies was part of the initial Free Buffalo package of proposals in 2004-5.

    Subsequently, we issued News Alert No. 6—“Public Authorities Have Failed the Public.” That report stated:

    It is time to recognize that the authority system of public administration in New York has failed. . . . The authority system failed because authorities are not subject to the discipline of the marketplace or the ballot box. When things go wrong, those in charge are neither voted out of office nor do they lose their investment.. . . authorities, like all government agencies, are bureaucracies, that is, organizations governed by rules and not by the desire to earn profits by satisfying customers. Authorities share with other government agencies all the defects of bureaucratic management but have one major additional defect: you can’t vote the managers out of office.

    This much can be said with certainty today: get rid of the IDAs (Industrial Development Agencies). They are unnecessary, unproductive, wasteful and a violation of the concept of equal protection of the laws—facts which, in a less decadent political climate, would be obvious to all.
    Well, the political climate in New York is getting less decadent all the time as evidenced by two reports released this week by the State Comptroller Alan Hevesi:

    • Industrial Development Agencies’ Project Approval, Evaluation and Monitoring Efforts
    • Industrial Development Agencies in New York State: Background, Issues and Recommendations
    The substance of these reports fully supports Free New York’s position that IDAs should be abolished. If the concluding recommendations of the reports do not say as much, that’s a mystery only the Comptroller’s office could explain.
    These reports, taken together, offer the following facts and inferences:
    • IDAs generally underproduce on promised job creation.
    • Both IDAs and their clients keep poor records.
    • This prevents any reasonable cost-benefit analysis of their activities.
    • IDAs don’t “recapture” tax breaks when companies fail to create new jobs.
    • There is no unbiased study that demonstrates that IDAs accomplish their stated mission of improving the economy of New York.
    • IDAs do consume considerable economic resources in personnel, independent contractors and labor costs.
    • IDAs shift the tax burden from their clients to the vast majority of citizens who are not their clients.

    These reports are a devastating critique of IDAs in every aspect of their activities.

    When one turns to the recommendations of these reports, one expects to read: The 36-year experiment with IDAs has been a failure. No one has or can prove their worth. Abolish them!

    Instead, a series of dubious reforms are proposed. None will work because none creates incentives for the IDAs to do what they are supposed to do: improve the economy. The simple fact is that IDAs are very good at closing development deals because that’s the trigger for getting paid a percentage of the deal as their fee. Once they are paid, they have little financial incentive to follow-up with their clients to see if they have fulfilled their job-creation projections.

    Statewide, IDAs spend over $90 million shifting $388 million in taxes from a small number of businesses, mostly larger ones, and onto all state taxpayers, without any proof that this is helping the economy. Not included in this figure are costs such as delays in development projects caused by bureaucratic inertia and paperwork, and the costs of clients maintaining records (haphazardly).

    Simple math tells us that if we took the $90 million the IDAs take from developers to save them $388 in taxes, the total cost of IDAs is $478 million annually (based on 2004 figures). Abolishing IDAs could return nearly half a billion dollars to New Yorkers each year in the form of across-the-board tax cuts. Those funds would themselves stimulate economic activity and employment. The difference is that this stimulus would be market-driven—awarding the most efficient entrepreneurs--as opposed to the IDAs politically-driven investment decisions that reward the politically-shrewd and well-connected.

    IDAs distract our attention from the real work that needs to be done to revive the New York economy: reducing the cost of state and local government. New York government spending is at least twenty percent higher than Pennsylvania’s. Twenty percent of New York’s state and local spending (about $190 billion) is about $38 billion! Thus, in terms of making New York competitive with Pennsylvania, not to mention Texas, North Carolina, India, and China, our IDAs are inconsequential. Their main effect is to dampen support for generalized tax cuts among influential business leaders who might otherwise lead the charge for such cuts. IDAs are thus serving to prop up the stagnant status quo in New York’s political economy.

    Summarizing a 1992 report by State Senator Franz S. Leichter, the Comptroller’s second report cited above states, and Free Buffalo agrees:
    “IDAs routinely provide support to projects that would have been completed without such assistance; existing relationships between developers and IDAs often determine which projects are granted assistance; politically connected contractors, consultants, attorneys, and IDA board members similarly benefit from and determine which applications for IDA assistance are approved; piracy is commonplace; and IDAs, whose fees are based on a percentage of project-related bond issues, are induced to support large projects.”

    Would a private corporation suffer a failed division like the IDAs for 36 years?

  2. #2
    Tony Fracasso - Admin
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    I'm only going to say this once.

    I only want the value of IDA's discussed in this thread.

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    Quote Originally Posted by WNYresident
    I'm only going to say this once.
    .
    That means he's feeling serious at the moment

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    Quote Originally Posted by WNYresident
    I'm only going to say this once.

    I only want the value of IDA's discussed in this thread.
    I understand your concern, however there is one major problem. The IDAs have no value. That is the whole point.
    The path is clear
    Though no eyes can see
    The course laid down long before.
    And so with gods and men
    The sheep remain inside their pen,
    Though many times they've seen the way to leave.

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    Quote Originally Posted by WNYresident
    I'm only going to say this once.

    I only want the value of IDA's discussed in this thread.
    ---------

    35 page audit
    http://www.osc.state.ny.us/localgov/...wr/2006ms2.pdf

    the 43 page policy report
    http://www.osc.state.ny.us/localgov/...background.pdf

    24 page complete responses from each of the audited IDAs
    http://www.osc.state.ny.us/localgov/...aresponses.pdf

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    Member tronix75's Avatar
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    The first line of Alan Hevesi's EXECUTIVE SUMMARY proves one thing right off the bat, that IDA'a produce jobs. (government jobs that is)

    "There are 115 Industrial Development Agencies (IDAs) in the towns, villages, cities and counties of New York State."

    The rest of the report proves the Free New York analysis and what many of us have said all along, that they are useless, ineffective, economically unsound, and a grievous waste of taxpayer dollars.
    So you want to know why your taxes are so high here in NYS? There’s 115 reasons why to start with. Imagine if we bulldozed all the other 100’s of other useless political bureaucracies / patronage dumps and turned the savings into low taxes for everybody.
    That would be a real incentive for business and job growth in NYS.

  7. #7
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    Hevesi's report does an adequate job exposing the problems with IDA's. It also, as Jim pointed out, falls far short of making any actual recommendations to fix the problems. It appears that it is not possible for a politician to objectively analyze a situation and suggest solutions that are in conflict with the pattern of bloated government.
    The path is clear
    Though no eyes can see
    The course laid down long before.
    And so with gods and men
    The sheep remain inside their pen,
    Though many times they've seen the way to leave.

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    Member tronix75's Avatar
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    Quote Originally Posted by DelawareDistrict
    Hevesi's report does an adequate job exposing the problems with IDA's. It also, as Jim pointed out, falls far short of making any actual recommendations to fix the problems. It appears that it is not possible for a politician to objectively analyze a situation and suggest solutions that are in conflict with the pattern of bloated government.
    I'm sure that Hevesi, at least in his own mind could not but come to the conclusion that the IDA's are a failure. No private sector company would tolerate such incompetence and waste of resources in one of it’s own departments without shutting it down.
    But for him to come out publicly and call for their demise would be political suicide in light of the foul climate in state government. Too many politico’s owing too many people patronage favors, too many people on the friends and family plan living off the productive sector. A middle class social welfare system, I would call it.

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    Tony Fracasso - Admin
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    IDA's are also the perfect example why bloated governments are bad for business in WNY. WHen you come down to the bottom of it, it's all about money. The larger and more bloated our local/county/state governments gets the more money it cost us.

    They say businesses can't operate unless we have IDA's.

    Idas are examples of removing the cost of government. THEY give tax incentives so these chosen businesses are not effected by a large bloated government costs and have a chance to grow.

    I think it's unfair to use incentives to help my competition or any other persons competition in a local area. I though we were all in the same boat here.

  10. #10
    Member tronix75's Avatar
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    Quote Originally Posted by WNYresident
    IDA's are also the perfect example why bloated governments are bad for business in WNY. WHen you come down to the bottom of it, it's all about money. The larger and more bloated our local/county/state governments gets the more money it cost us.

    They say businesses can't operate unless we have IDA's.

    Idas are examples of removing the cost of government. THEY give tax incentives so these chosen businesses are not effected by a large bloated government costs and have a chance to grow.

    I think it's unfair to use incentives to help my competition or any other persons competition in a local area. I though we were all in the same boat here.
    Very true and unfair it is, and immoral.
    Many people don't see us all being in the same boat, they want a special boat.

    There are two kinds of people as I see it:

    1.) One that wants as little intrusion by government into their lives as possible or necessary, wants nothing from government except that they stay to their proper constitutional function which is to protect the rights, liberty and property of the individual from those that would violate another’s rights, liberty and property.

    2.) One that wants government intrusion into their lives, to use government to seek advantage over another person, or subsidize their life and endeavors with someone else’s money. For them, government is a weapon to crush their competition and give them unfair advantage in the market. To pander this kind of person, government has to violate equal protection under the law, violate the rights, liberty and property of one person and give to another, something that is not morally theirs to give. In essence, it’s legalized robbery.

    As long as #2 is considered a legitimate function of government, the number of laws that enable legalized theft will continue to grow, and the size and scope of government and it’s intrusions into our lives grows.

    The emergence of the IDA’s were just one result of decades of bad laws and incompetent and/or crooked politicians. They are the result of all the damage done to the economy done by repeated legalized theft. One more foolish last ditch effort at legalized plunder to stem the tide of business’s leaving the state along with the people following the jobs, trying to escape the growing thievery.

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    Erie County Industrial Development Agency
    • Who we are: The Erie County Industrial Development Agency (ECIDA), as a public benefit corporation created in 1970 by act of the New York State Legislature to promote and assist private sector industrial / business development thereby advancing job opportunities and economic welfare to the people of Erie County, is the economic development corporation for Erie County. ECIDA is self-funded; 90% of our budget comes from fees.
    • What we do: ECIDA is in business to grow business in Erie County by helping business be competitive and profitable.
    • Our key personnel, who are bottom line driven, possess an entrepreneurial, can-do attitude with the resolve to close deals and complete projects quickly; and have a commitment to responsiveness and service.
    • ECIDA also enters into cooperative agreements with the County of Erie, the cities and towns of Erie County, and other economic development agencies including the State of New York, Export-Import Bank of the United States (Ex-Im), Small Business Administration (SBA) and the Economic Development Administration (EDA).

    http://www.ecidany.com/about_us.asp

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    STATE OF NEW YORK EXECUTIVE CHAMBER - ALBANY 12224

    July 3, 1997
    MEMORANDUM filed with Senate Bill Number 6795-A, entitled:

    #14
    (Chapter 173) "AN ACT to amend the general municipal law, in relation to the membership of the Erie county industrial development agency"

    APPROVED

    The bill amends General Municipal Law Section 891-a to expand the membership of the Erie County Industrial Development Agency Board of Directors to include the President of the Erie County Association of School Boards as a voting member.

    Article 18-A of the General Municipal Law authorizes the Erie County Industrial Development Agency (IDA) to grant property tax exemptions and abatements, as well as to enter into agreements for payment in lieu of taxes (PILOT) with property owners for the purpose of creating and retaining jobs. The IDA's power to grant tax exemptions and to enter into PILOT agreements extends to all state and local taxes within Erie County, including taxes imposed by local school districts.

    While the power to grant tax exemptions and enter into PILOT agreements is an extremely useful tool to attract and retain business, it necessarily results in the short-term in a lower level of available funding for local school districts. By extending the membership of the IDA's Board of Directors to the President of the Erie County Association of School Boards, this bill fittingly gives local school districts in Erie County a voice in determining which projects will receive these tax exemptions.

    The bill is approved.

    (signed) GEORGE E. PATAKI

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    Summary of 1997 Real Property Tax Legislation

    F. Industrial Development Agencies

    Chapter 444 generally relates to the powers of Industrial Development Agencies (IDAs). It contains, among other things, provisions which are intended to give local governments greater input into the granting of real property tax exemptions for projects that are supported by an IDA.

    Since 1993, IDAs have been required to establish a "uniform tax exemption policy, with input from local taxing jurisdictions, ... [and to] provide guidelines for the claiming of real property [and other] tax exemptions" (General Municipal Law (GML), §874(4), as added by L.1993, cc.356 and 357). Chapter 444 requires each IDA to review and readopt its "uniform tax exemption policy" by April 1, 1999, after holding a hearing for the purpose of receiving comments from the "affected tax jurisdictions." Prior to the hearing, the IDA must provide notice of the hearing to each such tax jurisdiction, as well as a report containing certain information about the projects which the IDA has supported during the prior five years.

    The law also places additional constraints upon an IDA's ability to "deviate" from its "uniform tax exemption policy." In particular, an IDA will be required to give each tax jurisdiction notice at least 30 days before it meets to act on the "proposed deviation." The IDA will then be obliged to "review and respond to any correspondence received from any affected tax jurisdiction" on the issue, and will have to allow any representative of such a tax jurisdiction to speak at the meeting at which the issue will be considered.

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    INDUSTRIAL DEVELOPMENT AGENCIES APPLICATION FOR REAL PROPERTY TAX EXEMPTION
    (Real Property Tax Law, Section 412-a and General Municipal Law, Section 874)

    http://www.orps.state.ny.us/ref/forms/pdf/rp412a.pdf

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    MEGA Flop

    NYS isn't the only state where IDA's have failed. Surprised?

    Michigan’s Lemon Industrial Policy

    http://www.mackinac.org/article.aspx?ID=7652

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