Corporate Tax

NY Faculty Authorities Do not Want To Be Powerless Over Company Tax Reduction (Visitor Opinion)

Connor Rigney holds a Masters of Regional Planning from Cornell University and is a research intern at Good Jobs First, a national nonprofit resource center that promotes fair, transparent economic development. He lives in Ithaca. Christine Wen is the Financial Policy Coordinator at Good Jobs First. She lives in Falls Church, Virginia.

Earlier this year, Good Jobs First published a nationwide study of the revenue impact of corporate tax breaks for public schools. With $ 374 million in lost revenue in fiscal 2019, New York public schools diverted more money than any other state except South Carolina. And that sum doesn’t even include New York City because schools there don’t separate those dates.

Most of the revenue losses in the Upstate are caused by the measures taken by the Industrial Development Agency (IDAs). Founded in 1969 to bolster the present and future vitality of their communities, the nonprofits are unaccountable, whose unelected leaders have tremendous powers to provide tax breaks – often by buying real estate and leasing it to corporations for modest payments Tax rates (PILOTs) are exempt from tax.

According to the latest update from the State Comptroller, there are 109 IDAs overseeing over 4,000 projects exempting nearly $ 800 million in taxes, after considering PILOTs. With property taxes accounting for the lion’s share of education revenues, tax cuts can seriously harm school districts.

Then why do New York school authorities seem so passive when it comes to cutting income from their budgets every year to pay for corporate tax breaks? And do the districts even have a say in discount deals with all the school income that the IDAs give away?

To get some answers, we have set up a focus group with experts from national organizations, associations and universities. Here’s what we’ve found so far about why New York school districts seem so powerless or quiet:

  • Lack of formal authority: The relationships between IDAs and school districts are idiosyncratic; There is nothing in New York State law that requires IDAs or companies to consult school districts when implementing discounts.
  • Lack of representation: IDAs do not need to include community leaders such as school board members or union officials. Article 18-A of the General Municipal Laws of New York State states that the composition of an IDA may (but does not require) membership in social services such as schools or trade unions.
  • Net redevelopment appeal: In New York’s rural boroughs and cities, cuts promise financial gains from unproductive green spaces. Development advocates extol the new revenue from otherwise non-taxable greenfield areas, but such proclamations usually fail to take into account the additional public service costs that the new project will generate. There is a lack of real cost-benefit studies.
  • The appeal of the net zero loss: Some school districts claim they have not missed any income from offsetting through PILOTs and / or increased levies and are therefore happy with the deal. In the end, however, companies that receive discounts can contest and successfully enforce the PILOT amount in the course of a PILOT agreement. And of course, tax increases simply spread the cost of tax breaks among all taxpayers who live in a district, an unfair system that burdens residents who live far from development.

Proponents of corporate tax incentives reiterate the arguments that they can create new jobs, fuel local economic growth, fuel business expansion and revitalize distressed neighborhoods. In reality, a large number of studies have shown that either many reductions do not achieve their stated goals or the development would have been carried out without reductions. It is high time business development agencies thought more fully about the well-being of a community.

Two immediate policy changes could create a level playing field for school districts:

  • Mandate that school districts are consulted and have the final say in the implementation of tax breaks. Economic development coalitions must recognize the symbiotic relationship between schools and cities. Thus, a healthy community coalition would necessarily incorporate the contribution and influence of the local school district. This would give school districts unilateral authority over their own property tax base, rather than transferring authority to an unelected, undemocratic institution like the IDA.
  • Change the legal language to require community services to be represented on IDA boards. Because IDA decisions have an impact on the entire community, from an impact on property prices to an impact on district income, local school districts, unions, neighborhood and other community groups should be involved in decisions about tax cuts for new developments. Therefore, there must be at least one school representative on IDA boards to represent their interests and present potential drawbacks and measures to ensure that economic development policy benefits all institutions within a community.

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