Downside of IDA deals

In late August, the Suffolk County Industrial Development Agency granted 15 years of tax incentives totaling $3.1 million to the 80-room Hampton Inn & Suites planned for the Old Huntington Town Hall. The bulk of the break is a $2.3 million reduction in property taxes. The rest is sales-tax and mortgage-recording tax allowances.

That same week the Nassau County Industrial Development Agency agreed to grant 25 years of tax incentives totaling $49 million for a long-sought Long Beach oceanfront development at the Superblock site: it includes retail, a parking garage, 238 apartments, and 200 condominiums not eligible for tax breaks.

In each case, there was pushback, with some residents questioning why a luxury waterfront apartment complex and a hotel in a thriving business district can’t afford to pay their taxes.

There seem to be only two possible answers: either the tax system is broken or the IDA breaks are unjustified.

Long Island has an unwieldy total of eight IDAs, with the idea behind them ingrained in the name: They were created to foster industry, providing breaks that create significant numbers of jobs or stop those jobs from fleeing.

That makes sense in light of how hard other locales fight for industry. Major employers expect deals, and New York’s extraordinary tax burdens and cost-of-living make our corporations targets for other locales.

But the deals have a huge downside: giving such tax breaks does not lessen the tax burden, it just shifts it to the bills of residents and other businesses. The cost of running Nassau County and Long Beach and its schools and services is not reduced by $49 million because the taxes on this high-end housing are. A savings of $3.1 million for the Huntington Hampton Inn must be recouped with higher taxes on other property owners.

Engel Berman, the developer behind the Long Beach project, says it cannot afford to do the deal without the breaks. Hotelier George Tsunis says the same of his new hotel. But lots of Long Island residents can’t afford to pay their taxes, too, especially when they are elevated by the lowered bills enjoyed by others. And these residents are being wooed by Florida, Arizona and the Carolinas just as surely as businesses are.

The value of the break for the Long Beach deal is $686 per apartment per month. For the hotel, it’s $7 per room daily. And although both will boost the construction trades, neither will create the kind of long-term jobs the IDAs were intended to foster, nor can hotels and apartments relocate to Pennsylvania and serve the same customers.

These businesses, which will count on a prosperous clientele, ought to be able to pay their taxes via their revenues. If they truly cannot do so and make a profit, then our tax system is unsustainable. If they can afford to do so but have found an IDA strategy that allows them to avoid taxes and increase profits, then the system is simply unjust.

— The editorial board