State suspends collection of taxes from

IDAs
By THOMAS ADAMS
Rochester Business Journal
April 8, 2010

State officials have decided to suspend the collection of $5 million from

industrial development agencies, the law firm representing the IDAs said
Wednesday.

“New York State has expressly agreed that it will voluntarily suspend
collection activities and enforcement of” the public authorities law directing
each IDA to pay 4.7 percent of its gross revenues, wrote Dennis Lynch of
the Long Island law firm Feerich Lynch MacCartney PLLC in a letter to
Brian McMahon, executive director of the New York State Economic
Development Council.

The law firm is representing 35 IDAs statewide in a lawsuit seeking to block

the collection, which was included in the 2009-10 budget. A hearing had
been scheduled for Friday in state Supreme Court in Albany.

A letter from the state attorney general’s office to the court indicated the two
sides are engaged in efforts to resolve the matter without court intervention.

The state’s suspension of the collection affects IDAs that have not sent
payments to the state Department of Taxation and Finance, Lynch wrote.

IDAs were supposed to send payments by March 31.

“As for the IDAs who have made payment, the state has confirmed all IDAs
shall be treated equally at the conclusion of litigation,” Lynch explained.
“Clearly, the state is concerned about our legal arguments and I would urge
you and the IDAs to appropriately pursue settlement discussions consistent
with the enclosed letter (from the state).

“Our office will continue to assist in this matter. Your courage and that of
the other IDAs to contest this inequitable and illegal action by the state
warrants special recognition. Congratulations.”

(c) 2010 Rochester Business Journal. To obtain permission to reprint this

article, call 585-546-8303 or e-mail service@rbj.net.

Council sues to stop N.Y. from imposing

IDA tax
By THOMAS ADAMS
Rochester Business Journal
March 26, 2010

The New York State Economic Development Council sued the state this
week to block it from collecting $5 million in taxes on industrial
development agencies.

Acting on behalf of some 35 IDAs statewide, the council was expected to

file a complaint Thursday in state Supreme Court in Albany to prevent the
payments to the state Department of Taxation and Finance.

The IDA payments are due next Friday, and the complainants were hoping
to argue the matter in court as soon as today, said council Executive Director
Brian McMahon.

"The attorneys are going to ask for an expedited court date, given the March
31 deadline, and hopefully we will get it," McMahon said Wednesday.
IDAs from Monroe, Genesee, Livingston and Ontario counties, the village of
Fairport and the city of Geneva were on the list of complainants as of
midweek. Orleans County also was joining but was not yet on the list,
McMahon said.

The Wayne County IDA is not on the list.

The Long Island law firm of Feerick Lynch MacCartney PLLC is litigating
the case.

The complaint accuses Gov. David Paterson and the state Legislature of
improperly delegating power by directing the state tax department to
implement the tax, said Donald Feerick Jr., a partner at the law firm. It also
accuses the state of implementing the fees arbitrarily.

"They never announced the methodology by which they would calculate the
aggregate amount due, much less the individual assessments," he said.
"Absent some methodology to identify the calculations, it's arbitrary and
capricious."

The suit seeks an injunction to stop collection of the money.

The $5 million in total payments was included in the 2009-10 state budget.
The payments are for cost recovery of central government services, the tax
department said.

Individual payments are calculated at 4.7 percent of gross revenue for each
IDA in 2008. IDA representatives did not know about the payments until last
month.

"This was buried in the budget from 2009, that there was $5 million that
they were going to assess IDAs," said Judith Seil, executive director of the
County of Monroe Industrial Development Agency and director of the
county's Department of Planning and Development.

"But they never gave a cost basis. They had us submit our budgets to them in
November of 2009, and none of us have allocated any money for it because
how can you allocate something when you don't know what you're going to
be charged?"

COMIDA is being asked to pay $86,808, based on revenue from 2008 fees.

Genesee County, with an assessment of $161,541 based on pass-through

revenues such as grants and payments in lieu of taxes, would take the largest
hit among IDAs in the Rochester area.

"It's been rare that an entity that is built on the fostering of economic
development throughout the state is taxed by the state for the services that
the state allegedly provides to it," Feerick said.

IDAs were told to submit their budgets to the state Division of the Budget by
Nov. 1. Of the state's 130 IDAs, McMahon said, 103 are being taxed.

"They taxed IDAs that reported more than $5,000 in gross revenues for
2008," he said.

Seil said the fees are problematic for agencies whose mission is economic
development.

"Paying out $86,000 when we could put it toward programs is a waste of our
money," she said. "We have programs like the Entrepreneurs Network. We
support Greater Rochester Enterprise. Anytime money is taken away from
us, we can't support other programs in the community."

COMIDA representatives approved 34 projects in 2009, the agency said in

its annual report released last week. Those projects included investments of
$146 million, created 638 jobs and retained 1,910. A list of the top
COMIDA projects appears on page 9.
In 2008, COMIDA participated in 42 projects that totaled $198 million in
investments, created 882 jobs and retained 3,005.

Though the 2009 numbers are down from the previous year, "I still think a
$146 million investment in the community is significant," Seil said.

The 2009 projects included property tax abatements of $9 million over the
next 10 years but will result in $19 million in new property taxes over that
period, she said. Total exemptions for last year's projects total $13 million
over 10 years but will provide a community benefit of $35 million from
income tax, sales tax and construction benefits, the annual report states.

The biggest project approved by COMIDA last year was for $2.8 million in
assistance for the second phase of renovations at the former Genesee
Hospital site on Alexander Street. The total cost of that project is $17
million.

COMIDA also approved $1.2 million in exemptions for the $13.8 million
construction of a Homewood Suites Hotel in Greece and nearly $1.1 million
in breaks for the $7.4 million construction and renovation of an operations
center for the Nixon Peabody LLP law firm.

"I try to make people understand that what we do is important," Seil said.

"There's this myth that we just give away money. The real estate property
taxes are tied into job creation. Yeah, we are abating some, but look at the
increase in property taxes over 10 years. Those are the kinds of things that I
think are lost a lot."

For example, Seil said, Bach Properties LLC invested $2.3 million to buy
and renovate a two-story, 13,000-square-foot office building on Creek Street
in Penfield. The building is leased to insurance broker Bene-Care Inc.

"That was a building that was in dire shape," Seil said. "Then through the
IDA, they've got a new value to it. It looks brand new."

Bach Properties received tax breaks totaling $121,000, with a community

benefit of $293,000.

Another example, Seil said, will provide Spencerport with a grocery store
for the first time since 2006.

Perinton-based Morgan Management LLC was approved last month for

sales-tax breaks of $190,150 on a $3.5 million renovation of 37,000 square
feet in the Village Plaza in Spencerport that will be home to a store of Tops
Markets LLC. The company plans to employ 66 people within three years.
The projected community benefit is $659,007.

Morgan Management is investing $21 million to renovate the plaza, Seil

said.

"A lot of our projects were renovation projects," she said. "The Spencerport
plaza was a dying plaza. Shouldn't the developer that's going to go in be
rewarded for investing $21 million in that property?"

3/26/10 (c) 2010 Rochester Business Journal. To obtain permission to

reprint this article, call 585-546-8303 or e-mail service@rbj.net.