Industrial development agencies in New York are still committing abuses, despite reform legislation, and are granting exemptions that hurt economically pressed local governments, according to a report issued by a labor-backed advocacy group.
The report by the NY IDA Coalition, which includes the Coalition for Economic Justice and New York Jobs with Justice, used the Beech-Nut project in Montgomery County as a case study outlining IDA abuses.
Beech-Nut, the baby food company, received $104.5 million in tax exemptions in 2008 from state and local programs, including the Montgomery County IDA. It used the exemptions to build a $124 million state-of-the-art manufacturing facility in the town of Florida — 22 miles away from an older facility in Canajoharie.
The relocation of Beech-Nut means Canajoharie will lose more than $130,000 a year in sewer and water revenues from the company. The total amounts to $2.6 million over 20 years, the length of the payment-in-lieu-of-taxes (PILOT) agreement Beech-Nut signed with the Montgomery County IDA.
Under the terms of the PILOT agreement, it’s possible that local municipalities will receive no payments from Beech-Nut until the final years of the agreement. The municipalities signed off on the PILOT agreement. Also, Beech-Nut is in line to receive state incentives worth millions.
Ken Rose, executive director of the Montgomery County IDA, defended the PILOT agreement, saying it kept Beech-Nut, its 500 jobs and its $24 million payroll in Montgomery County.
“The question I pose is that the community of Canjoharie and Montgomery County would have been hurt a lot more with the relocation of the project out of state,” Rose said. “The county IDA fulfilled the obligation [to create and retain jobs] wholeheartedly.”
Rose said the jobs Beech-Nut created and retained are good-paying jobs as well.
“It is our largest private-sector employer of unionized employees,” he said. “A lot of the time, the argument is IDAs create and retain below-living-wage jobs, which is not the case here.”
Rose also said the coalition’s report about the Beech-Nut deal contained numerous errors.
“It is basically an opinion paper. The coalition is an organization with a cause; they are trying to smear IDAs,” he said.
Kristi Barnes of the NY IDA Coalition called the Beech-Nut deal “a free lunch. This is a time of a serious budget crisis and nearly 10 percent unemployment. We really need to make sure the programs are creating jobs and not harming the communities they are supposed to help.”
The coalition report states the governor’s office is working to develop a financial assistance plan for Canajoharie.
“Ultimately, taxpayers are paying twice — once for an unnecessary relocation and once for the devastation such a relocation causes to the town left behind,” it said.
Barnes said the report found that IDAs have increased their spending on net tax exemptions by 82 percent since 2003, from $354 million in 2003 to $645 million in 2008. She said that more than 80 percent of IDA spending has resulted in net revenue losses to local governments. The report also found that IDAs waste $135 million a year on businesses that create no new jobs and even cut jobs. In addition, it said, IDAs created 31,518 fewer jobs in 2008 than in 2007, despite increasing net tax exemptions by $61 million over the same period.
Assemblyman Richard Brodsky, a Westchester County Democrat running for state attorney general, said the coalition’s report “confirms what we have been saying for years, that public money has been given out with little identifiable benefit. We should be as diligent in looking at corporate welfare as we are in looking at social welfare.”
Brodsky authored the Public Authorities Reform Act, signed into law in December 2009, which sought to bring accountability and reform to New York’s system of public authorities.
Barnes said the reform act revealed deep flaws in IDA accountability and transparency but it does not fix all of the problems. The coalition said a key measure of accountability is to bring municipalities and school district affected by PILOT agreements into the negotiation process. Currently, many IDAs do this as an option.