BUFFALO, NY - In his budget plan, NY Gov. Andrew Cuomo is proposing that if a local Industrial Development Agency (IDA) wants to include a break on the state's four percent share of sales tax as part of an incentive package to a particular business, the project will have to meet new criteria.
"For every break that is given there's money that has to be paid for it," Lt. Gov. Bob Duffy told WGRZ-TV, regarding the new guidelines Cuomo is proposing.
The incentive waves state sales tax on goods purchased by a business seeking IDA assistance in order to operate.
For example, for every $1,000 a business might spend on office equipment or other items to function, it would save $40 by not having to pay the state portion of sales tax on those items.
If the business is large enough, the savings can become quite substantial, as a large scale operation, purchasing one million dollars worth of computers, copiers, desks, chairs, and other items to outfit its operation, would save $40,000.
Under Cuomo's proposal, however, only ventures involved in scientific research and development, software, agriculture, back office operations, distribution centers, or financial services would be eligible going forward.
Coincidentally or not, these have all been identified as areas of growth upon which Western New York should be concentrating, according to its Regional Economic Development Council, which among other things was charged by Cuomo with stewardship of his "Billion to Buffalo" program.
"The governor is trying to be very strategic in terms of investments," Duffy said.
This would also eliminate the sales tax break for such small-scale ventures as donut shops, car dealers, and liquor stores, examples of which we have highlighted in our past reports, exploring the amount of money and assistance extended to certain projects, and the number of jobs created as a result.
"What the governor is trying to push in times of very limited money is to make sure our investments have returns," said Duffy.
While one member of the Cuomo administration privately confirmed to us the Governor's desire to rein in some of the practices of local IDAs, the Lt. Governor stopped short of saying so.
"No, I think what the governor is doing is making sure there's a consistency in what we're doing across the board."
With that consistency, however, comes another catch.
If the break on state sales tax is to be granted, then the Regional Economic Development Council, the members of which are appointed by the Governor, must also approve the project.
"There are many things I agree with Governor Cuomo on, but on this he's just wrong," said Steven Walters, Supervisor of the Town of Hamburg, and who also serves as Chairman of its IDA.
Hamburg's IDA previously offered the sales tax incentives to the owners of downtown buildings to help rehabilitate their historic structures, and who would not be eligible for such breaks in the future if the Governor has his way.
However, that's not Walters' biggest concern for businesses seeking IDA assistance under the proposed new rules.
"This would mean that after we have worked with someone and approved their project, we'd have to tell them, 'now you have to go to this other board, and you have to go through this whole process again. So those attorneys you hired, and those consultants you hired...they've got to make this presentation again ...and you gotta pay 'em all again."
David C. Hartzell Jr , who serves as both Supervisor and IDA Chairman in the Town of Clarence expressed similar concerns, regarding adaptive reuse projects and the inability to provide the sales tax incentive to those seeking to undertake them.
Hartzell also believes that decisions for local projects would best be left to the local IDA, which he contends would know best, what is best for its community.
When pressed by Channel 2 about that point, Duffy responded by pointing out the members of the Regional Council are all local residents as well. "It would probably be a rarity where there would be a divergence of opinion between the regional councils and the local IDA," Duffy said.
However, the break on the state's portion of sales tax is just one of but many incentives IDA's offer. And a business which chooses to waive the state sales tax portion of its package could simply seek the approval of the local IDA and not have to present its plan to the regional council.
"If it's a small enough amount, I could see them doing just that," said Walters. "But if it's a big enough project, with hundreds of potential jobs...the type we'd all hope to see here, then it's just it's just one more layer that a new business has to go through. And it's going to get to the point where they say, 'you know what? It's just not worth it anymore'."
Click on the video player to watch our story from 2 on Your Side Reporter Dave McKinley and Photojournalist Scott May. Follow Dave on Twitter: @DaveMcKinley2