The Erie County Industrial Development Agency is preparing to clawback tax breaks given to a now-struggling Cheektowaga company that cut its workforce due to falling sales of the equipment it makes for use by energy companies. The move is unfortunate for the company, but necessary.
Companies that receive tax breaks on the promise of creating jobs need to be held accountable if those promises are broken. The ECIDA’s effort to link tax breaks to specific job targets would become meaningless if companies are allowed a pass. This is a tough stance, but one that the agency has to be prepared to take.
Cheektowaga manufacturer API Heat Transfer pledged to maintain a minimum of 287 local jobs. It also promised to create six new positions in return for $159,000 in tax breaks on a $1.7 million expansion project at its Walden Avenue factory and headquarters in November 2013.
As News business reporter David Robinson wrote, the steep decline in drilling activity because of the drop in oil and natural gas prices has contributed to API’s losses.
The company had 247 jobs at the end of last year. Since then, the company has notified the IDA of an “anticipated decrease in employment.”
API Heat Transfer could face the repayment of more than $86,000 in sales and use tax breaks for the 2013 expansion, along with $12,379 in property taxes.
The ECIDA has tough rules in lace. Those allows clawbacks “if a company fails to come within 80 percent of its job creation or investment promises.” It did just that when it canceled tax breaks that were about to be implemented for Cheektowaga-based Derrick Corp., a maker of oil and gas equipment that cut more than 100 jobs.
The company was given two years to restore the jobs and meet its obligations. Derrick has since decided to return $509,000 in sales and use tax breaks and has asked the agency to terminate its property tax incentives.
As noted in Robinson’s article, County Executive Mark C. Poloncarz has argued against ignoring the recapture policy when businesses fall short of their promises. He is right. Doing so would render the policy toothless and leave taxpayers on the hook. It is regrettable but the ECIDA has little choice.