IDAs upset by new state tax

A new state tax cuts into grant and payments-in-lieu-of-taxes money that industrial development agencies pass on to local municipalities and businesses.

The state Department of Taxation and Finance has levied a 4.72 percent assessment on gross revenues from every industrial development agency in the state. The assessment, approved as part of the 2009-10 budget, brings $5 million into state coffers.

IDA officials complain they did not receive adequate notification of the fee and that it unfairly taxes items that aren't really earnings for the agencies.

Gross revenue includes collections of payment-in-lieu-of-taxes and grant revenue, but IDAs don't actually keep any of that money. They pass the money directly on to local municipalities and businesses or programs that they serve as the applicant for.

"The state is biting its arm off," said Donald C. Alexander, chief executive officer of Jefferson County Industrial Development Agency.

JCIDA got a bill for $89,006, St. Lawrence County IDA was charged $27,912 and Lewis County IDA estimated their bill will be $28,000, though they haven't received it yet.

"We just think it's a bad idea," said Raymond H. Fountain, chief executive officer of St. Lawrence County IDA. "I would be surprised if our state representatives think putting a tax or something that looks like a tax on economic development is the best way to move forward. It's a disincentive to seek grants and other revenue sources for businesses."

"It is recovering the costs associated with overseeing these authorities," said Matthew C. Anderson, spokesman for the state's Division of the Budget.

The state has increased oversight and reporting requirements on IDAs because of the Public Authorities Accountability Act, passed in 2005.

"Now they're taxing economic development," said Jack T. Bush, chairman of the LCIDA board. "To me, that's taking a few steps backward."

LCIDA does have money invested that could be used to pay the new tax, Mr. Bush said. "But we've got plans for it, and we do have overhead," he said.

IDAs were told they could be charged a fee but would be notified by Nov. 31 if it was coming, Mr. Alexander said.

Instead, the first they learned of the fee was from letters dated Feb. 4 with the charged amount.

"I don't know where we're coming up with it," Mr. Alexander said.

The charge will be made annually, Mr. Anderson said. The percentage and what type of revenue it covers could change.

"Going forward, administering the particular assessment is based on the $5 million," he said. "We're open to discussions on how it is implemented going into the future."

The state will find resistance among IDAs to paying the fee. Lewis County legislators at their March 2 meeting will be asked to pass a resolution opposing the IDA tax, said Mr. Bush, also legislative chairman. Mr. Fountain said St. Lawrence County IDA members at Tuesday's board meeting will vote on a resolution opposing the fee, although it will likely be paid.

"I'm sure every IDA in the state is rethinking how they handle their bookkeeping," he said.