Industrial development agencies fight state tax plan

Industrial development agencies are the tools counties and towns rely upon to help stimulate the economy, encouraging companies to build businesses locally by offering tax and other incentives.

What is angering local business people is that the administration of Gov. David A. Paterson, backed by the State Legislature, is trying to place a tax on the IDAs in an effort to help close New York's $9-billion budget deficit.

The IDAs are fighting back.

The 116 IDAs across the state -- including eight on Long Island-- filed suit in State Supreme Court in Albany in late March to halt the imposition of a tax of 4.7 percent of each agency's gross revenues. The revenues come from fees IDAs charge to companies, as well as interest and investment earnings.

The state was projecting to raise $5 million from the tax.

The tax bills - Suffolk's IDA, for example, was $94,863, according to county IDA executive director Bruce Ferguson - were to be paid April 1. Ferguson said Suffolk's IDA, like many others in the state, did not pay. The reason, he and others said, is that they had heard the state attorney general's office was going to step in and attempt to resolve the controversy.

Late last week, it did, temporarily anyway.

Assistant Attorney General Charles J. Quackenbush, in a letter to the clerk's office at State Supreme Court in Albany, said the Paterson administration and the IDAs "are engaged in efforts to resolve this matter" and the attorney general would return to the court by June 11 to report any progress.

For the time being, the attorney general's office said, the state will voluntarily suspend collection of the taxes.

But local IDA officials and town officials are still mad, and concerned.

"I'm relieved that finally somebody in state government is thinking with their head," said Brookhaven Supervisor Mark Lesko. "We're trying to create jobs in a very hostile economic environment." Brookhaven did not pay its $195,000 bill, Lesko added.

What really needs to be done, Ferguson said, is for the legislature to repeal the bill, which it passed last year.

He said Suffolk's IDA revenues amounted to about $2 million. But after all accounting adjustments, the county IDA wound up with a $25,000 operating loss in 2008, the beginning of the recession. Yet the state wanted its tax money.

"You can't make this stuff up," Ferguson said.

At a glance

What:

Industrial Development Agencies

How many:

116 across the state, including eight on Long Island

What they do:

Help attract and retain businesses in their areas by offering tax and other incentives

What's the problem:

The Paterson administration, backed by the State Legislature, wants to impose a 4.7 percent tax on the IDAs to help cover New York's $9-billion deficit.

What would the state get:

$5 million

What's going on:

The IDAs have filed a suit against the state to stop the taxes, which were to be collected April 1. The attorney general's office has secured a promise from the state to halt any collecting process.