COMIDA, subsidizing retail businesses and tying both invisible hands behind your back
While I’m at it -
Why are we providing COMIDA benefits for retail business? Isn’t there a free market or something - Some guy’s invisible hand? Well maybe - in a perfect world.
But welcome to the world of Corporate Welfare where risk is transferred to someone else. Well, not really someone else - YOU.
A world where a large and connected Property Management company can receive $13.2 million dollars in Sales Tax exemption to build a retail project where, already, retail exists.
Do we need this new retail and why is the government in the form of COMDIA subsidizing creation of these retail establishments over existing retail establishments?
That isn’t fair.
Where is the biggest bang for the dollar to be had? Definitely not retail
Isn’t that against the IDA law, unless the company is threatening to locate outside of NYS?
Hey Robina - love the TAP work.
Which IDA law are you talking about? I’m not sure there is one. Actually COMIDA isn’t supposed to dive funds to retail but they get away with it because they are called tourist destinations. AKA the Wellesley Inn.
There was a “reform” to the IDA-authorizing legislation back in the last century (late 1980s? Early 1990s?) that was actually informally referred to as “closing the Wegman’s loophole.” (Wegman’s had racked up about 2 dozen COMIDA projects by then to move their stores out of the city and into the ‘burbs). It made it not OK to subsidize a retail entity going from one place to another– on the very reasonable basis that the MARKET in a County or other large area will determine how many retail outlets are needed. The exception was for stuff that would otherwise go out-of-state– that is probably your “tourist destination” example.
Read this Metro Justice report on COMIDA - and if you don’t want to read - just scroll down a bit and look at the photos of the COMIDA Welfare Grant projects:
http://www.metrojustice.org/COMIDA%20report.htm
RETAIL PROJECTS
IDAs are also generally prohibited from providing fi nancial assistance for retail projects (defi ned as projects where facilities or property that are primarily used in making retail sales to customers who personally visit such facilities constitute more than one-third of the total project cost). This definition covers retail stores, as well as other operations such as hotels, motels, legal and medical offices.
Retail ventures are treated differently because they usually do not increase the level of regional jobs or economic activity and can damage local competitors or put them out of business. For example, a chain store opening up in a community generally will not increase the overall demand for retail goods and may lure shoppers away from already established (often smaller and independently-owned) stores, potentially putting them out of business. Providing tax expenditure benefits for these “jobs-neutral” types of economicactivity generally results in a net financial loss for the community.
Although assistance for retail projects is generally prohibited, statute allows for a number of exceptions to the rule. The exceptions include “tourism destination projects,” (17) projects operated by not-for-profit corporations, as well as other projects located in highly distressed areas. Moreover, financial assistance may also be provided to retail projects where “(i) the project occupant would, but for the assistance provided by the agency, locate the related jobs outside the state, or (ii) the predominant purpose of the project would be to make available goods or services which would not, but for the project, be reasonably accessible to the residents of the city, town or village within which the proposed project would be located because of a lack of reasonably accessible retail trade facilities offering such goods or services….” Thus, these exceptions, all of which are applied at the discretion of local IDA boards, can make the retail prohibition ineffective.
Since the application of these exceptions is determined at the discretion of each IDA, these criteria are sometimes subject to expansive interpretations. For example, OSC’s audit of IDAs in Erie County cited two instances in which motels were provided assistance under the IDA’s determination that they could be considered a “tourism destination” because of their proximity to an airport, local mall and Thruway exit. (18)
In another example, the Amherst IDA agreed to provide $1 million in tax breaks to an orthopedics practice for a new office and surgery center in the Amherst area. The project came under scrutiny not only because it would relocate doctors and staff from Buffalo and Tonawanda, but also because critics charged that it violated statutory provisions that forbid the granting of IDA assistance to retail projects. The current provisions governing IDA retail project assistance expires on July 1, 2006.
(17) “Tourism destination” is defined for this purpose as a location or facility that is likely to attract a significant number of visitors from outside the “economic development region,” as established by §230 of the Economic Development Law, in which the project is located.
(18) Industrial Development Agency Activity in Erie County,
Office of the State Comptroller (99-P-1).
http://www.osc.state.ny.us/localgov/pubs/research/idabackground.pdf
This is a MUST READ:
http://www.harrisbeach.com/files/IDAALL.pdf
Explain why there is no conflict of interest? Take a look at some of the names…
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