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Surprise Fees

Area IDAs hit with 4.7 percent tax by state

February 21, 2010
By MICHAEL ANICH, The Leader-Herald

JOHNSTOWN - Industrial development agencies across New York state, including those serving Fulton and Montgomery counties, are being hit with thousands of dollars in fees by the state, which is taking a piece of IDA revenues for itself.

Complaints among IDA officials are starting to mount and lawyers and state legislators are being consulted.

Under legislation passed in 2009, the state is billing some IDAs a fee of 4.7 percent of their operating revenues, which are due March 31. Area officials say they haven't heard of the fees, which were part of the state budget passed in April 2009. They also wonder what "service" the state is providing IDAs.

Article Photos

The Leader-Herald/Bill Trojan

Above, the entrance to the Crossroad’s Business Park on Decker Drive is shown in Johnstown on Wednesday. The park is owned by the Fulton County Industrial Development Agency, which draws revenue from lot sales in the park. The state is taxing area IDAs 4.7 percent of their yearly revenue.

Industrial development agencies realize their revenues mainly through lot sales made on industrial-park land they own and use to create jobs. IDAs also issue industrial development bonds, and payments are the responsibility of the company borrowing the money.

New state fees imposed on the Montgomery County IDA, according to Administrative Director Kenneth Rose, amounted to $92,469.

Fulton County IDA Executive Director James Mraz said the new state fees for his agency for 2009-10 amounted to just under $4,000.

Both IDA officials said they are not big fans of the fees, which were detailed in letters issued this month to IDAs from the state Department of Taxation and Finance.

"No one knew what they were going to assess," Rose said. "We had no idea until we got the letter."

For the Montgomery County IDA, Rose said the state assessed fees on pass-through money onvolving Payments In Lieu Of Taxes, or PILOT agreements. He said he wouldn't have a problem with the law if it was assessed in an accurate way. He said while the Montgomery County IDA's operating revenue last year was $1.9 million, $1.2 million of it was PILOT pass-through payments to taxing jurisdictions. He said the $1.2 million isn't revenue and merely represents pass-through accounts.

"That's where we really got hit hard," Rose said.

He said his IDA is now working with attorneys and state legislators to try to clear up some of the confusion.

Northampton Supervisor Linda Kemper, chairwoman of the Fulton County Board of Supervisors' Economic Development Committee, criticized the new state fees against IDAs.

"Nobody has budgeted for this," she said. "I think it's insane. I think it's another example of a dysfunctional state."

She said she attended a meeting of the Inter-County Legislative Committee of the Adirondacks on Thursday in Essex County, and one county representative was very upset about his county hit with a similar $10,000 fee.

Kemper said it's a "no brainer" that the state needs to encourage business, not hamper development.

Mraz said the Fulton County IDA sent letters dated Wednesday to state Sen. Hugh T. Farley, R-Niskayuna, and state Assemblyman Marc W. Butler, R-Newport, and copies to others asking them to look into repealing what he termed the "new tax" imposed on IDAs.

"This tax was never discussed or talked about," Mraz said. "It's just infuriating the state wants to tax public authorities."

The Fulton County IDA - as did other IDAs across the state - received a Feb. 4 letter from the state Division of Taxation and Finance's Division of the Treasury -informing them of the new fee on revenues.

The letter from Deputy Commissioner and Treasurer Aida M. Brewer to Mraz notes that the Public Authorities Law, Section 2975 establishes a "cost recovery" of central governmental services to various public authorities. She said the new statute directs the state Division of Budget to determine the amount to be assessed to each public authority. The state treasurer imposes and collects the assessments, which are deposited into the state's general fund.

Brewer wrote to Mraz indicating the state's 2009-10 "administrative services assessment" on the Fulton County IDA is $3,923 - payable to state Division of the Treasury staffer William Bloodgood in Albany by March 31.

Brewer's office referred The Leader-Herald's questions to the state Division of Budget press office in Albany, which didn't return a phone call seeking comment.

Mraz said the Fulton County IDA owes the state much less money than the Montgomery County IDA because of the difference in the way each handles its billing.

He called it "crazy" and "irresponsible," anyway, that the state wants to tax agencies serving the public whose sole purpose is to provide jobs for the area. He said he has made the Fulton County IDA Board of Directors aware of the new state fees and he formulated a response.

"They're not happy about it," Mraz said of his board's response to the fees.

In addition to Farley and Butler, Mraz sent copies of the protest letter to Paterson, Lt. Gov. Richard Ravitch, Division of Budget Director Robert Megna, New York State Economic Development Council Executive Director Brian McMahon, IDA members and IDA attorney J. Paul Kolodziej.

"The Fulton County IDA requests that the Legislature immediately repeal this new state tax and mandate," Mraz wrote.

The IDA official noted in his letter that the IDA recently received a letter from the state Department of Taxation and Finance advising that the IDA was being "hit" with a new state tax for 2009-10.

"The IDA cannot comprehend what services the state claims to be providing to public authorities that it now schemes to tax public authorities for," Mraz wrote. "The IDA finds the theory of the state taxing public authorities for providing public services to be irresponsible. It's really infuriating to have New York state tax public authorities for the 'privilege' of having the state impose the burdensome and expensive state mandates that are destroying public authorities like the IDA."

Mraz acknowledged in his letter that the Empire State has "massive" budget problems, but it is "incomprehensible" that the state Legislature still believes budget problems are "revenue-based." He said lawmakers "must therefore dream up new schemes and gimmicks to bleed more revenue out of taxpayers, local governments and now public authorities."

"It is inexplicable that the Legislature can't recognize what everyone outside of Albany clearly recognizes - that the state's budget problems are caused by excessive spending and the Legislature's absolute inability and reluctance to do anything meaningful about it," he wrote.



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