Auburn officials disagree on tax breaks for developers

2012-05-07T03:05:00Z 2012-05-14T19:37:05Z Auburn officials disagree on tax breaks for developersNathan Baker The Citizen Auburn Citizen
May 07, 2012 3:05 am  • 

With hundreds of thousands of dollars in tax exemptions for a $6.75 million downtown development project on the negotiating table, the acronym "PILOT" will echo through Auburn Memorial City Hall today.

The Auburn Industrial Development Authority is set to discuss, and possibly vote on, a request for a 25-year payment in lieu of taxes agreement made by JBJ Real Property, the developer of the downtown project.

The merits and ills of such tax incentive programs have long been the target of public debate, both on the local and state levels of government.

Jennifer Haines, executive director to both the city planning office and the AIDA board, said industrial development agencies serve to spur economic activity by enticing companies to relocate or remain in their communities with several available tax exemptions.

She said by properly wielding mortgage recording tax and sales and use tax exemptions and real property tax abatement programs, AIDA has brought in and retained a number of local jobs and added to Auburn's assessed value, which defines the city's tax base.

"We have a very good record of economic development," Haines said. "AIDA is very thorough in its consideration of projects that apply for incentives to make sure they are beneficial to the city."

But State Comptroller Thomas DiNapoli has recently taken the state's 114 IDAs to task, closely analyzing their annual job creation statistics and calling for reforms in their transparency and accountability.

In a report released last week outlining the 2010 statistics submitted by the IDAs, DiNapoli said taxpayers' investments fell short of the economic benefits promised by incentive receiving developers.

Making his case for reforms, DiNapoli said local taxpayers paid $483 million for IDA-supported projects, but job gains decreased by 22,000 and the cost per job increased 9 percent from 2009.

"The comptroller wants to ensure that taxpayers can see that their money is supporting job creation," Brian Butry, a spokesman for the comptroller's office said. "He's proposed a bill in the state Assembly that would require better reporting and hold companies to the jobs figures they claim when asking for incentives."

In the bill, DiNapoli proposes requiring IDAs to publish an annual report card with detailed information on each supported project and recommending IDAs to write clawback provisions into each PILOT forcing companies to repay benefits if job creation goals are not met.

Haines said AIDA is already required to publish annual reports detailing many of the figures the comptroller mentioned.

In DiNapoli's release, AIDA fares well among other similiar sized cities, creating 526 jobs in 2010 with a cost per job of $433. Glen Cove's IDA grew 231 jobs at $12,397 per job, and Poughkeepsie spent $2,257 per job for 388 new jobs in 2010.

The 2010 report lists eight AIDA projects. Since that year, the board has added three projects, which some say represent a trend moving away from the board's mission.

City Councilor and AIDA board member William Graney said PILOTs granted to the developers of Logan Park Lofts and the Hilton Garden Inn should have gone to industrial projects instead of retail and residential.

"PILOTs are strictly for job creation," he said. "It's the Industrial Development Authority, it should be used to grow industry, that's the intent.

"Once you open the door for retail, you have to open it for everybody. We have other programs to assist retail, commercial and residential."

Graney said commercial and retail jobs tend to be part-time and lower paying than the highly sought after full-time manufacturing jobs. The less valuable jobs put too much of a burden on the taxpayers in the city, county and school district with little benefit.

But Haines said the commercial and residential projects provide benefits to the taxpayers that aren't measured by the comptroller's reports.

"One of the things that is not represented in IDA reports is sales tax," she said. "It's a great indicator of a project's success, but we have not been able to get sales tax numbers from the state broken out by vendor. The cost per job figure used for review IDAs is a good indicator, but I feel we will lose many good projects that benefit the community if we can't always point to a huge number of jobs."

Bill Andre, another AIDA board member and a member of the Auburn Enlarged City School District, said the project proposed by JBJ also helps eliminate blight downtown.

"This downtown project is something that would spur economic development and prevent these buildings from completely decaying," Andre said. "I don't want to see the school district or the city lose tax revenue — times are tough now — but the alternative is even worse.

"If these buildings continue to sit empty and decay, they will totally go off the tax roles some day. I would rather see them renovated and vibrant again and bringing in even more tax revenue in the future."

According to City Assessor Michael Burns, PILOT exemptions in 2012 cost the city, county and school district approximately $1.1 million in net tax revenues.

That equates to an added $102 per year on the tax bills of an average $90,000 home in the city.

If granted, the JBJ PILOT would subtract $76,006 from the assessable value in the city, Burns estimated.

"Any time you have an exemption, it decreases the amount of taxable value," Burns said. "That is going to cause the tax rate to increase."

But Burns said the difference between PILOTs and other exemptions is the increasing payments near the end of their terms.

PILOTs slowly add revenue back into the equation and eventually add to the city's taxable value, he said.

Burns added that in his 15 year tenure at the city, the total exemption rate has hovered near 30 percent. This year it was 33 percent.

"From what I've seen in other communities that are county seats like Auburn, there are a lot of exemptions from courthouses and city structures and that 30 percent figure is fairly standard," he said. "We do not deviate from that much in any given year."

Staff writer Nathan Baker can be reached at 282-2238 or Follow him on Twitter at CitizenBaker.


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(3) Comments

  1. patchwork
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    patchwork - May 07, 2012 11:10 am
    "One of the things that is not represented in IDA reports is sales tax," she said. "It's a great indicator of a project's success, but we have not been able to get sales tax numbers from the state broken out by vendor."

    Sales tax that very well maybe the result of taking sales revenue from existing businesses, who now may not only have to compete with a subsidized business, but is actually paying for part of the subsidies. One of the so-called highlights of this project is residential, rental property does not generate sales tax dollars in itself. The office of the state comptroller has more than once pointed out that tax incentives given to retail projects do not create additional revenues to the community but instead usually create a net loss for the area. Is anyone paying attention to the detailed studies and recommendations that have been put together in the best interest of our communities?

  2. patchwork
    Report Abuse
    patchwork - May 07, 2012 10:43 am
    "Graney said commercial and retail jobs tend to be part-time and lower paying than the highly sought after full-time manufacturing jobs. The less valuable jobs put too much of a burden on the taxpayers in the city, county and school district with little benefit."

    Thanks Mr Graney, it's refreshing to see that at least one AIDA board member has done their homework and has an understanding of the bigger picture. If the rest of the board is so blinded by the "promises" of good jobs and economic prosperity, then at the very least, please put a recapture agreement in place to protect the taxpayers if the promises aren't fulfilled. A strong "clawback" provision with accountability defined and timelines spelled out with serious penalties imposed on the developer if the project doesn't meet pre-determined expectations should be attached to every PILOT and is an important protection for taxpayers that has been recommended by the comptroller's office for several years and not always followed.

  3. patchwork
    Report Abuse
    patchwork - May 07, 2012 9:55 am
    Good article. For years people have not been paying attention to IDAs and the extra costs that they have pushed onto the laps of the overburdened NY taxpayers. Their mission may be important but too many times they have stretched their purpose and in many cases have caused damage to the local economy, even putting existing non-subsidized businesses at an economic disadvantage. Mr Andre, the same board member who admitted that for 13 years he never even examined at a line item budget, is misguided at best. His role in AIDA is to represent the best interests of the Auburn School District, and reduced revenues at this time most certainly is not and if he votes to approve then he has failed the taxpayers, students and staff once again. JBJ has already purchased the properties, there have been grants applied for on many of the buildings and the project will most likely move forward without ANY PILOT, to give tax incentives just to speed up the project is wrong on so many levels.
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