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Taking a closer look at tax breaks

If your company gets tax breaks through the Erie County Industrial Agency, you just might have a visitor in the coming months.

The IDA is planning to take a big step in ramping up its scrutiny of the companies that receive tax breaks and whether they’re living up to the promises they made to win the incentives.

And that means having IDA staffers take a look for themselves.

The agency is hashing out the details of what agency officials are describing as a six-month pilot program, where staff members make scheduled visits to some of the companies that received tax breaks to see where things stand.

“We want to ask about the main criteria: Did they meet what we were expecting,” said Steven Weathers, the IDA’s chief executive officer.

“We want them to succeed,” he said. “We want to know, if they promised 20 jobs and there are 12, why that is.”

Until now, the IDA relied on surveys it sent to companies, asking them how many jobs they had and to update the agency on their progress in the physical portion of their taxpayer-aided project, be it building an addition or a new facility, or buying new equipment.

“We don’t physically go out and visit the project,” said Theresa Carpenter, the IDA’s assistant treasurer.

Weathers and other IDA officials take pains to say the visits aren’t meant to be intrusive or a threat to the companies. They portray them as a way that agency officials can start to work more closely with those businesses, learning about their needs and any difficulties they might be having. They say the visits will be scheduled in advance, and at least during the pilot period, will focus on companies that were involved in some of the IDA’s biggest projects.

If, for instance, a company is having trouble finding qualified workers, agency officials might be able to put the firm in touch with one of the many job training programs operating in the region – resources that the executives might not know exist or how to use.

“It’s not an ‘I’ve got you’ ” kind of visit, said Frank Messiah, an IDA board member. He views the visits as a way that the IDA can offer “support on various issues.”

But there is also no question that the in-person visits are a way to significantly ramp up the agency’s efforts to monitor companies and make sure they are delivering on what they’ve promised. Did they create the jobs they said they would? Did they buy all the equipment or build as big of an addition as they told the IDA they would?

And the initiative comes at a time when there is growing scrutiny over the effectiveness of IDA tax breaks and whether companies are delivering their promised jobs and investment.

A little more than a week ago, community activists, led by the Coalition for Economic Justice, protested outside the offices of PHH Mortgage Corp. in Amherst, which plans to lay off 135 workers. Just 16 months ago, PHH and the project’s developer, Zaepfel Development, received tax breaks totalling $4.55 million from the Amherst Industrial Development Agency after it pledged to preserve 400 local jobs and potentially create 400 more.

But now, with the company cutting jobs, rather than creating them, critics are citing PHH as a poster child for IDAs to include strong claw-back provisions in their tax break agreements. The Erie County IDA in January adopted a policy for new projects receiving incentives that allows it to recapture tax breaks if a company doesn’t meet 85 percent of its employment or investment targets. But the county’s suburban IDAs have balked at following suit, arguing the Erie County IDA policy is too harsh.

That means clawing back PHH’s tax breaks isn’t an option for the Amherst IDA, since the incentives were improved at a time when its recapture policy only covered instances where the agency can prove that a company outright lied or deceived the agency in its request for tax breaks. That’s the extent of the Amherst IDA’s claw-back policy today.

Compare the IDA’s tax breaks with another big part of PHH’s incentive package – $3 million in tax credits through the state’s Excelsior Jobs Program – which are granted only if the company meets its job performance targets. In this case, PHH won’t get any of the state tax credits unless it keeps 400 jobs and creates at least 300 net new jobs.

That’s the way it should be.

It’s a similar story at Ingram Micro, which received about $1 million in tax breaks from the Amherst IDA last July for an $11 million expansion that was expected to create 250 jobs at the local operations. The company is moving ahead with the expansion plans, but it also said last month that it is cutting 40 jobs in Amherst, even as it recruits to fill other positions.

When the Amherst IDA approved the tax breaks last summer, board member Stuart Shapiro was the lone opponent. He noted that when Ingram Micro first received tax breaks through the IDA in 1991, it ultimately expected to have 2,000 at its Amherst location. When the latest expansion project was approved, the company was about 500 employees short of that goal. It still is today.

With IDAs handing out hundreds of thousands, if not millions, of dollars in taxpayer money – forcing the rest of us to pay more than our fair share to make up the difference – taxpayers deserve to know that they’re getting their money’s worth from every company that comes to an IDA with its hands out, even if it means knocking on some doors.

“I like the idea of sending people out to take a look.” said Erie County IDA board member Richard Lipsitz.

After all, accountability is a good thing.