In the New York State Senate, my colleagues and I are constantly working to find more effective ways to promote economic growth. Unfortunately, as we implement new data-driven strategies, others remain stuck in the thinking of previous generations. Take industrial development agencies, which give away millions to businesses each year, despite mountains of evidence showing that these giveaways are bad bets made with taxpayer dollars.
A recent letter from executive directors of two local IDAs explaining why they are vital to New York’s economy painted a picture that doesn’t square with reality. The letter was premised on two misleading assumptions: that no IDA-backed projects would go forward without tax breaks, and that no other businesses would come in their stead.
The vast majority of New York’s business development occurs without IDA intervention, and many projects subsidized by IDAs would happen without the tax breaks. Businesses seeking IDA handouts don’t even need to prove they need them. Earlier this year, two fast-food restaurants in Niagara Falls received tax breaks, even after the proprietor admitted he could build the restaurants without them. (A cynic might point out that the IDA gets a cut every time it approves a project.)
The State Comptroller’s Office has been warning us about IDAs for many years. A 2006 report cited a 1999 audit of IDAs in Erie County as an example of “issues regarding IDA operations, accountability and transparency” that persisted despite reforms made in the 1980s. A quarter century later, IDAs remain unaccountable when they underdeliver on their promises.
The only data the state receives regarding job creation resulting from IDA activity is self-reported – and it still doesn’t paint a pretty picture. Rather, when IDAs gamble on businesses with taxpayer money, they often lack an accurate picture of what the payoff will be. According to a report released this month, New York’s IDAs create only 43 jobs for every 100 they project.
Finally, the IDA leaders claimed that we need IDAs to prevent businesses from leaving New York. However, their work incentivizes companies to stick around only as long as they don’t have to pay taxes. In 2013, the Hamburg IDA gave a manufacturing plant 10 years of tax abatements. That plant is closing at the end of this year, costing dozens of local workers their jobs.
Taxpayers shouldn’t be in the business of renting companies for 10 years or making economic bets that pay 43 cents on the dollar. Our economy depends on companies that will be here for the long haul, so we’ll continue our push for smarter economic development policies.