Bringing Business back to NY

Forty- Nine.

That is Ron Guidry’s number, the atomic number of indium and the ranking of New York State in the 2022 Tax Foundation’s list of least business friendly states in the nation.

New York State is the 49th worst state in the Nation for businesses.

Ron Guidry’s number is immortalized and, as a habit, I do not toy with indium, whatever indium may be. We can, however, change New York’s pathetic ranking for business.

Here is one solution.

Every County and many municipalities in New York State have an Industrial Development Agency (IDA). ?An IDA offers financial assistance to businesses in the form of real property tax abatements; mortgage recording tax exemptions; sales and compensating use tax exemptions and bond financings through the issuance of taxable and tax-exempt bonds.

An IDA will exempt an eligible business from being required to pay local property taxes for a period of years. The IDA usually requires the business to make a Payment in Lieu of Taxes (PILOT) to the affected taxing jurisdictions. On vacant property, the amount of the PILOT is usually much more than the existing property taxes, but less than the property taxes that would be paid on a completed project.[1]

The perceived delta between what the taxes would be on a completed project and the amount of a PILOT is often politically challenging for the locally affected tax jurisdictions. Many potentially great projects are never built because of the opposition of school districts and local governments. The end result is that jobs are not created; businesses go elsewhere and local governments and school boards toast each other and celebrate Pyrrhic victories in empty parking lots.

The reality of perpetually vacant lots is because projects will not get built without the property tax breaks.

To stop this cycle, New York State should adopt a brand new tax credit that will attract new business to New York State and encourage in-state businesses to expand. It would work like this:

1.?????A PILOT Syndication Board is established by state law.

2.????The PILOT Syndication Board would establish the net present value of the difference between what the Real Property Taxes would be on a completed Project and the amount of the PILOT.

3.????The PILOT Syndication Board would award an income tax credit to (a) out of state businesses that locate in New York State or (b) business in New York State that expand.

4.????The amount of the income tax credit would equal a multiple of the net present value computed by the PILOT Syndication Board.

5.????The new business coming to New York State or the business expanding in the state would pay the PILOT Syndication Board the amount equal to the net present value computed by the Board.

6.????In exchange for this payment, the paying business would receive an income tax credit equal to a multiple of the amount paid by the business to the PILOT Syndication Board.

7.????The multiple of the tax credit received would be increased based on the number of created jobs, the type of business and the location of a business.

8.????The PILOT Syndication Board would invest the funds received by the businesses and distribute the funds to the locally affected taxing jurisdictions to make up the perceived difference of the delta between what the taxes would be on a completed project and the amount of the PILOT paid by the owner of the project.

The implementation of this strategy would result in projects being built locally; local property taxes being increased at no cost to the developer and business would be encouraged to grow in New York.

Jobs will be created; property taxes will be stabilized and we would lose that dismal ranking of where to do business in America. ?

[1] On improved property, the PILOT will approximate the real property taxes but will provide certainty to the owner of the building without being dependent on a constantly changing assessment system.?