By GREGORY ZELLER //
Legislation prohibiting local industrial-development agencies from abating taxes used to fund transit authorities has been signed into law by Gov. Andrew Cuomo.
Economic-development engines like the Suffolk County Industrial Development Agency will still be able to offer incentives packages to attract out-of-state enterprises and discourage established Suffolk businesses from leaving for other regions – but the percentage of a mortgage recording tax earmarked for transit agencies is off limits, according to the new law.
Industrial development agency incentives packages routinely include exemptions for mortgage recording taxes, as well as property- and sales-tax breaks. The new legislation, cosponsored by state Sen. John DeFrancisco (R-Syracuse) and Assemblyman Sean Ryan (D-Buffalo), amends that by prohibiting IDAs from exempting MRTs imposed on properties within the Metropolitan Commuter Transportation District – which covers Long Island and the rest of the Greater New York region – and other individual transit districts around the state.
Revenues from those taxes are used to support “various transit services,” according to the governor’s Memorandum of Approval, and prohibiting the IDAs from exempting those taxes “will ensure that the transportation districts continue to have the resources necessary to provide these critical services.”
Suffolk IDA Executive Director Tony Catapano said he appreciated the governor’s viewpoint regarding “funding to support the infrastructure the state is trying to create.”
“I understand what they’re trying to do,” Catapano told Innovate LI.
And the exec didn’t foresee a tremendous impact on the work of his IDA or the content of its incentives packages, which are designed to make it easier for businesses to move to Suffolk County or expand existing Suffolk operations, most commonly through new real estate purchases or leases.
“I don’t think it will have [a huge effect],” Catapano said.
But that’s not to say the new law won’t have any effect. With a Suffolk County mortgage recording tax rate of 1.05 percent, Catapano noted that every million dollars mortgaged equals $10,500 in mortgage taxes – and in a county where mortgage loans routinely stretch well into the millions, that could start to add up fast.
“For companies taking out larger mortgages, it will have an impact,” Catapano said. “The companies will have to plan for that.”
One saving grace built into the new law, from the local IDA’s point of view, is that it won’t take effect until July 1, 2017, to avoid screwing up incentives packages already in play or those being negotiated now. Without that chapter amendment, agreed to by Cuomo and the state legislature, the law would have taken effect immediately.
The New York State Economic Development Council tried to get the governor to veto the legislation, according to a statement from NYSEDC President Brian McMahon, and after that failed attempt, “an extended effective date is the next best outcome we could have hoped for.”
“The extended effective date will allow projects to be completed without the effect of the legislation,” McMahon said.
Although prohibiting certain MRT exemptions could have a dampening effect for IDAs that work often with companies negotiating eight-figure mortgages, the Suffolk IDA won’t look to make up the difference by reworking other formulas in its incentives packages, according to Catapano.
“I don’t think that it’s going to be made up in other ways,” the exec said.
And while he was careful to avoid making politically charged comments, Catapano did suggest some misgivings about the precedent set by the new law, and what it means for future efforts of IDAs around the state.
“It’s just the idea that it’s an entrée into the restricting of certain things,” he said. “That’s really the concern.”
This is not the first time Cuomo has found himself at odds with the NYSEDC and the functionality of local IDAs. Most recently, in January, the governor and McMahon sparred over Cuomo’s latest attempt to centralize control of local economic development by requiring that all local IDA projects financed by tax-exempt Private Activity Bonds be approved by the governor’s handpicked Public Authorities Control Board.
Previously, the governor attempted to introduce rules that would require IDA incentives packages involving state sales-tax abatements be approved by Empire State Development, Albany’s main economic-development engine – a proposal ultimately shot down by McMahon and the NYSEDC.