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Reining in the IDAs New rules clamp down on free-for-all while offering appropriate flexibility

New rules included in the state budget to reduce the ability of industrial development agencies to give tax incentives to retail projects is in line with what should be happening.

It is especially timely in juxtaposition with the Erie County Industrial Development Agency’s draft redevelopment policy that has been in the works. The county redevelopment policy had two parts – adaptive reuse having to do with buildings, and enhancement zones having to do with sites – with the more controversial involving what town IDAs thought they could do with sites in the enhancement zones.

This budget-related legislation may make moot the enhancement zone issue because it does prohibit retail except in distressed areas, and much of the enhancement zone controversy involved what kind of retail the town could develop on such sites.

The new rules in the state budget, while not making town industrial development agencies happy, will severely limit the type of retail-related projects they have been undertaking in their enhancement zones.

This area has had a dubious tradition of giving out tax incentives to retail projects without regard to merit. And while the new rules do not ban tax breaks for retail projects outright, some change will benefit everyone.

And actually, the new rules were old rules, reviving a ban on industrial development agencies offering tax breaks to retailers that had been in place from 1993 to 2008. When those restrictions expired, it became a free-for-all, with IDAs offering incentives to a slew of businesses that hadn’t before been eligible and probably should not have been when they were given.

For better or worse, the poster child for questionable tax breaks is the deal struck by the Amherst IDA to provide about $585,000 in incentives to Premier Wine and Spirits to help underwrite its move from Delaware Avenue in the Town of Tonawanda to Maple Road in Amherst. It created only 10 new jobs. The money came from all county taxpayers and not just those in Amherst. Even Tonawanda residents helped out on that one.

James Allen, executive director of the Amherst IDA, defended the agreement, noting that it put a vacant building back to use, while the liquor store’s previous location has been taken over by a lumberyard.

Still, the system has been crying out for reform.

The new rules, the result of a compromise to the more severe restrictions that Gov. Andrew M. Cuomo originally included in his budget proposal, better reflect the original intent of the tax breaks.

For example, there are only three instances where retailers can qualify for tax breaks: if the target is part of a “tourism destination” project; if the location is in a highly distressed area; or if the retailer provides a good or service that is not readily available locally.

Even if a project does not meet those criteria, incentives can still be offered if they win the approval of the top elected official overseeing the agency.

If this does what it should then the new rules shouldn’t have much impact on projects that are worthy of taxpayer support.