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Here in New York, industrial development agencies (IDAs) are one of main job creation mechanisms for local communities.In 2009, IDAs gave away close to half a billion dollars in tax breaks to companies in the name of economic development.IDAs are known as "public benefit corporations" - they're supposed to help their local communities, and create jobs.But in their four decades of existence, they've been accused of everything from failing to comply with state laws, to simply being inefficient.You can follow the Innovation Trail's investigation into how IDAs spend your tax dollars by subscribing to the RSS feed on the right.

Report: IDAs generate waste, need reform

Daniel Robison
The Holiday Inn Express in Niagara Falls was the backdrop for a press conference about a report detailing the lack of job creation by IDAs.

Government endorsed job creation mechanisms, like industrial development agencies (IDAs), get a stern condemnation in a new report from the Partnership for the Public Good (PPG), a Buffalo-area think tank.

Generating Waste: Problems with NYPA and the IDAs and How to Solve Them,” released Wednesday, charges that businesses receiving tax breaks and public money are not held accountable when they fail to create jobs.

Poor jobs, out-of-town profits

Standing on a sidewalk outside a new Holiday Inn Express in Niagara Falls that received tax breaks from the Niagara County IDA in 2007, PPG Director Sam Magavern called for the reform of government programs that promise to create jobs.

“They’re not even required to produce jobs in return for the tax incentives. So you can have an IDA project that produces zero jobs and it will still meet state law,” Magavern says.

New Yorkers are too often on the hook for projects like doctor’s offices, hotels, and car dealerships that hire a non-local construction firms, create poor quality jobs, and send earnings away to faraway corporate headquarters, Magavern says.

In the case of Holiday Inn (page 28 of the report): the hotel was constructed by an Athens, Georgia firm, pays its housekeeping staff around $18,000 a year, and the franchise’s central office is in Los Angeles, according to the report.

“When you look at examples like the Holiday Inn Express here, I think there’s going to be a pretty broad consensus [that it’s] not quite working. We’ve got to stop subsidizing projects that don’t grow the economy and we have to focus in on quality jobs,” Magavern says. “We can’t afford not to when we’re cutting all kinds of programs across the state. We can’t be wasting money on corporate welfare.”

Erie County has six IDAs alone, and competition between them leads to the approval of many questionable projects, according to the report. 

“The Amherst IDA did 13 deals in 2010. That included two supermarket deals, three doctors offices and one Lexus car dealership. That’s a poster child for bad subsidy deal,” Magavern told the crowd of mostly union representatives and workers.

Governor Andrew Cuomo has attacked ineffective state spending on economic development projects, but not IDAs specifically. Recently, Comptroller Thomas DiNapoli issued a study that questions IDA job creation claims

Legislative packages that would build in great accountability measures for IDAs have come close but ultimately failed to pass over the past few sessions. Come January, Albany will likely again consider IDA reform and Magavern says the governor’s influence could make the difference. 

Cross party appeal

But Albany’s loudest voice for IDA reform, Assemblyman Sam Hoyt, resigned this summer. And the reform message is up against a long history, and strong momentum, to do deals. In August, the Niagara County IDA approved a 10-year tax break for a $6.2 million new Hampton Inn in Wheatfield. 

In the meantime, the PPG and New York Jobs with Justice will continue to lobby legislators to take up the IDA reform mantle, arguing the all tax paying New Yorkers would like to see their money spent in more productive ways.  

“If you’re kind of a Libertarian then you could say: what is this big government picking and choosing winners instead of the market doing it?  If you’re conservative you should say: why are these sprawling bureaucracies getting involved with economic development,” Magavern says. “If you’re liberal you should say: why are we subsidizing sprawling development and poverty level jobs? Across the spectrum there should be an interest in this.”

WBFO/Western New York reporter for the Innovation Trail.
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