By extending the life of a property tax break for Tanger Outlets at the Arches in Deer Park, the Babylon Industrial Development Agency has blown an unexpected hole in the budget of the Deer Park Union Free School District. And that's only part of what was wrong with this decision.
Until just a few years ago, the state law governing industrial development agencies ruled out tax breaks for retail establishments -- with a few exceptions. One of them covered stores that are a tourist destination. That's the provision that allowed the Babylon IDA to give property tax help to Tanger in the first place. But even the Tanger folks acknowledge that it has not yet become a tourist hot-spot.
In the years since then, the section of the law about retail establishments has lapsed. But the ideas behind it are still valid. One of them is that helping one retail establishment is bound to give it a competitive advantage over other stores. So, it's a zero-sum game. Another strike against it is that tax breaks for retail produce mostly low-paying jobs -- not the kind that our regional economy really needs.
What Tanger did argue was that, despite the tax break, its taxes have been going up too fast. The original 15-year deal cut taxes by 60 percent and provided for annual increases of 6 percent, until Tanger would pay its full tax burden. With the extension that the IDA tacked on, only halfway through the original deal, the center will be paying only 2 percent more a year, not 6.
So, Tanger says, it will still be paying more taxes, and it will invest $26 million and hire 300 more employees.
But that's cold comfort for Deer Park schools, which will get almost $500,000 less in tax revenue in the next two years than it had counted on for its budget. This comes on the cusp of a year, 2013, when all school districts are expected to really feel the pinch of the state's 2 percent cap on property tax increases.
To be fair, this bad decision by an IDA is not unique. In general, these agencies are too generous with tax forgiveness -- with too little job growth in return. But this transaction will do for now as a cautionary tale.