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Another Voice: Budget offers modest reforms, but more is needed

By Jennifer Diagostino

Western New Yorkers have seen our six industrial development agencies give tax exemptions to projects that fail to create quality jobs or grow our region’s economy. Dollar stores, luxury auto dealerships, restaurants and hotels have all received significant tax breaks from IDAs, but have provided a poor return on the public’s investment.

Across the state, there are 114 industrial development agencies that offer state and local tax breaks in the name of job creation or retention. This system is failing to deliver the jobs New Yorkers need. More than half of all IDA projects completed in 2010 failed to create a single job, and nearly $500 million in tax revenue is lost each year due to these deals.

It would be one thing if these subsidies were building a better future for all New Yorkers by creating new wealth and equitable economic growth. But most IDA deals are not growing our economic pie, they are simply reslicing it – granting tax breaks that aid one local competitor while giving away revenue that could be used to improve schools, roads, public transit and other services we all rely on.

Gov. Andrew M. Cuomo and the State Legislature wrestled with how to bring greater accountability to an expensive program that too often fails to deliver quality jobs.

Reforms in the just-completed state budget include additional reporting requirements for IDAs, and limits on tax breaks for retail outlets. In addition, it institutes clawback measures to recapture state sales tax revenue from businesses that fail to live up to their end of the agreement.

This is a modest step in the right direction. State sales tax exemptions represent only a small percentage of spending by IDAs, making up 12 percent of all net IDA tax exemptions. Only 48 of the 595 projects subsidized by IDAs in Erie County in 2010 included state sales tax breaks. That’s just $2.2 million out of $20.4 million in total net tax exemptions.

With local governments and communities feeling the strain as a result of revenue lost to IDA tax breaks, it is clear that more needs to be done to improve the performance of IDAs and the many other economic development agencies that take billions of dollars a year out of our communities.

It’s time our leaders in Albany get serious about fixing this problem. They can start by ensuring that companies that receive subsidies create quality jobs and have a positive impact on our communities. When companies fail to create the jobs they promised, they should be required to give the money back – including money received from local communities and schools. And a report card for all companies that receive subsidies should be available for anyone to check.

The public deserves nothing less.

Jennifer Diagostino is executive director of the Coalition for Economic Justice.