The Tompkins County Industrial Development Agency (IDA) is clearly in the cross hairs of heated public opinion with respect to its current and past activities on providing tax abatements for development projects in the City of Ithaca.
I served as a member of the IDA Board for seven years as the representative of the Tompkins County Area Development (TCAD) Board of Directors. The recent decision by the Ithaca City School District Board to withdraw from participating in the abatement process will certainly change the impact and value of property tax abatements to IDA projects. Since school property taxes are typically larger than the combined county and city property taxes the loss of the ICSD portion of the abatement does have a significant impact on the amount of financial incentive that the IDA can provide to a project.
Whether the loss of the school portion of the tax abatement is enough to derail a project can only be determined on a case-by-case basis. Based on my years on the IDA Board reviewing the financial models for projects I suspect the ICSD decision will definitely derail some, but not all, projects. I draw this conclusion because some projects are often razor thin in their margins for success or failure.
There are persuasive arguments to be made on both sides of the issue of giving tax abatements to development projects. In my personal view, as a business owner and taxpayer for both a commercial building and my personal residence, the fundamental concept of giving property tax abatements to stimulate economic growth is a good one. However, the current mission and use of the IDA has changed dramatically from the mission and use of the IDA when I was appointed years ago. In my opinion, the current reluctance of the ICSD Board of Education (BoE) to continue participating in the process may be rooted in the way the current IDA is operating.
When I first joined the IDA Board its mission was to use its authority to grant tax abatements and other incentives to attract new businesses to our county that would create new jobs or facilitate the growth and expansion of existing businesses for job creation. One caveat was that the IDA did not use IDA bonding authority or tax abatements to aid retail or other businesses that would directly compete with existing Tompkins County businesses. Toward the end of my tenure on the IDA Board that all changed.
The IDA, as it is now constituted, does use its bonding and tax abatement authority to benefit retail, apartment, hotel, office and other commercial organizations that, in fact, are in direct competition with existing tax paying businesses in the county. Before the IDA changed its mission and operation all of these projects would have generated property tax revenues for ICSD. All of these controversial projects are concentrated in the City of Ithaca and that is why it directly impacts the tax revenues of the ICSD. Therefore, while these projects may stimulate the economy of downtown Ithaca the use of the tax abatements does deprive the ICSD of the opportunity to increase badly needed property tax revenues.
This significant philosophical change in the mission and use of the IDA has a much broader impact than just depriving the ICSD of increased property tax revenues. All other property taxpayers in the county are also impacted by this change since we all must bear the burden of ever increasing property taxes. This is especially true of the taxpaying businesses that must now compete against business that is getting a public financial subsidy through the bonding and tax abatement power of the IDA.
In summary, it is understandable that the ICSD Board would come to the decision that it simply isn't fair to the district to continue to relinquish the opportunity to increase its property tax base. It can also be argued that it is not fair to other property owners that pay full property taxes to ICSD for the district to participate in a program that relieves those projects of paying property taxes at the same time the district must increase its property tax levy on the existing taxpayers.