KEEPING VISION WITH WHAT THE PEOPLES PLAN ARE
- Catherine M Macera
- Nov 26, 2019
- 5 min read
I do not wish to debate the merits and or concept of tax incentives as a good or bad policy. It is my belief that this practice is an unfortunate reality of a competitive business environment and communities competing for jobs and revitalization. Each municipality and each potential individual agreement have pros and cons; it is incumbent upon elected officials, school districts, residents and other interests to determine and negotiate the best possible agreement for them at the particular moment, and opportunity. What does aid in these decisions however is for a community to have in place a comprehensive plan or vison for the community and an active planning and zoning boards tasked to assist in working with potential business and developers. Ilion has none of these currently and whose current development and revitalization efforts are totally reactionary.
In the case of Duofold, the Village owns the property, but has a Memorandum of understanding with the IDA for marketing and developing. A memorandum of understanding with no comprehensive plan, vision, or input from the people on what they would like their downtown and community to look like. We have experience and history to look back on in regard to the IDA and they being the major marketing tool for development. Unlike most of the IDA's revitalization and developments located in business parks, this property is in the middle of a village in mixed zoning (residential, commercial etc.). In the Town of Frankfort, the 5s business park and the IDA's attempt to revitalize was met with much opposition. Remember the push back on developing the site as a major meat processing center. Do we want the same marketing and lack of community concerns in the IDA marketing of the Duofold site? Their interests and those of the community are inherently different and conflicted.
Village of Ilion residents should strongly consider what they want their downtown and community to look like. Yes, we need jobs and development, but this has to be balanced with a community that offers amenities of quality of life, opportunities for small businesses, affordable quality housing, and retains its small-town atmosphere. The Duofold property could perhaps be a more universal asset encompassing most if not all of these wants, needs and desires, we will not know however if we continue to push forward without vision, a plan, a purpose. The Village and its resident must retain control over their public assets.
The IDA can assist but should not be allowed to control marketing and conversation, this should be reserved for the people. WE must not have a blank check to hand over to developers out of desperation but rather work with them, to find mutual benefit.
Therefore, local investors would work best, going to Los Angeles for marketing makes no sense for the Village of Ilion. We should be seeking and pursuing local business and development, I for one have not given up hope that entrepreneurialism still exists in Herkimer County and upstate New York.
David Murray
START THE PROCESS OF THE LEARNING PROS AND CONS OF NEGEOTIATING IN THE BEST INTEREST OF THE TAXPAYERS PROPERTY
Why City Governments Give Tax Incentives to Businesses
Updated August 11, 2019
Attracting businesses, keeping them and getting them to expand operations often involves a city providing tax incentives. While this seems to some like corporate welfare, cities do not simply give away money to corporations in these deals. Cities weigh the expected benefits with expected costs to determine whether they should proceed with a particular tax incentive package.
It would be nice for citizens if local governments paid them to stay maintain residence within a city, but that’s just not going to happen. One household coming to a city is not going to make a noticeable impact on the city’s economy. Hundreds coming to a city will.
Cities usually task their economic development directors with crafting policies that allow for cities and businesses to enter into mutually beneficial agreements on tax incentives. Cities adopt these policies so that they do not have to go back to the drawing board each time a business wants to come to town or expand. Having tax incentive policies allows a city to be up-front with businesses, accountable to citizens and mitigate the appearance of cronyism. Policies allow cities to stick to what they have already determined in their best interest while enticing new businesses and retaining existing ones.
Leveraging Economic Benefits
When businesses can boost the local economy, they use that as leverage. They even play cities off one another like individual planning to buy a car will play two dealerships off one another. As soon as one city offers five years of tax abatement, a business will go to other cities seeking ten years.
Businesses try to get cities to offer more than what their policies provide. City leaders must weigh the pros and cons of sticking to policy versus offering more for a really good deal.
When added up over time, providing tax incentives is bad for taxpayers, but in individual situations, cities will compete with each other. When the cities are located in different states, state officials may lend a hand in attracting business. As long as cities are willing to play the game, businesses will keep seeking tax incentives for activities they would likely do without any assistance from the local government.
While tax incentives are an important reason businesses choose to locate in one city over another, businesses also consider non-financial factors in their decisions. The political climate, housing prices, education, parks, and arts are other inputs into the decision-making process.
Analyzing the Costs and Benefits
When tax incentives are considered, city staff project what the city stands to gain by the business coming, staying or expanding. These benefits are predominantly property tax revenue and other tax revenue associated with added employees that are expected to relocate to the city or be hired from the city’s existing population.
If a new business buys a tract of land and builds a factory on it, the business increases the city’s property tax base. The factory adds value to the otherwise vacant land. The business may propose to the city to allow it to pay a reduced property tax rate for the first few years the factory is open. This helps the business lower its tax liability while other operating costs run unusually high.
Keeping with the factory example, say that the factory expects to employ 1,000 people, 900 of whom are expected to be people who move to the town because of factory jobs. The city will experience an increase in property values because of all the new home buyers. It will also receive more sales tax and user fee revenue because these people move to town.
Such benefits are considered along with costs the city will incur because of the business activity. Those costs include infrastructure expansions and additional city employees necessary to serve the growth in population. Infrastructure costs could include widening streets, installing more street lighting, extending sewer lines and building a new fire and police stations. Additional city employees could include more police officers, firefighters, and employees needed to support a larger organization such as accountants and administrative assistants.
Doing the Deal
Cities try to stick to their economic development policies because those policies have been thoroughly vetted through economic analysis, legal opinions, and the local political climate. Cities risk making mistakes when they move away from what they have carefully planned.
If a city believes a tax incentive package is a good deal and that other cities may entice the business away, the city will likely make the deal even if they have to deviate from policy. The city’s goal is to at least break even. City officials want the expected revenue to exceed the costs of foregone tax revenue and added operating costs.
The city’s economic development director is usually the city’s chief negotiator in tax incentive deals. When the economic development director believes that straying from the policy may be prudent, the director gathers input from other local officials and business interests such a local economic development boards, school officials and chambers of commerce. When the policy is followed, additional input is not really necessary. The city manager approves any deals before they are submitted to the city council for final approval.
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