Industrial Development Agencies (IDAs) were authored by Governor Nelson Rockefeller in 1969 for the purpose of incentivizing business activity in New York State through the use of tax breaks. Today, the most substantial -- and controversial -- tax break provided by IDAs are payments in lieu of taxes (PILOTs), but other incentives, such as mortgage and sales tax breaks are also frequently granted.
Reasonable incentives are occasionally necessary to attract or retain business in New York State. What we have seen in the Hudson Valley and around New York State, however, is anything but reasonable. Far too often, community input is hardly a consideration and multi-million dollar tax breaks are handed out with minimal scrutiny. Many PILOTs don't pass a basic smell test -- some stink to high heaven.
Let's take Medline, an enormous company that, for the past decade, has distributed equipment throughout the Northeast from a distribution warehouse near Middletown. With ten years of property tax breaks expiring, it's no coincidence that Medline has suddenly decided to relocate to Montgomery -- and, of course, start a new cycle of tax breaks. Even putting aside these suspicious circumstances, I've opened an investigation to determine whether basic, fundamental questions have been asked of Medline:
Medline has already received or is entitled to $25 million in local and state incentives for their new project -- and that's before any PILOT. What incentives, if any, have other states offered to Medline that would prompt them to walk away from $25 million in existing incentives?
Medline has already purchased a $17 million piece of property in the Town of Montgomery. If Medline is genuinely considering abandoning New York, why spend so much on a new site?
Medline stands to make over $74 million in profit - in year one - without a dime of IDA incentives. With a PILOT, they'll net $76 million in their first year. Who makes up that $2 million difference? You guessed it: Montgomery’s taxpayers. God forbid Medline, a company that purports to be a good neighbor, only makes $74 million out of the gate.
Medline argues that they are a family-run business that manufacturers important equipment. That’s true, but it’s also completely irrelevant to whether incentives are warranted. IDAs need to stop giving out freebies to every company that demands one and start asking the tough questions that determine whether a corporation truly requires an incentive -- or is full of you-know-what.
That's exactly why we need to inject accountability into a process that sorely lacks it. I've introduced a package of IDA reform bills and, further, have been investigating IDA practices around the state. Hundreds of millions in taxpayer-funded subsidies are handed out each and every year - and it's long past time more New Yorkers were made aware of what's happening with their money.
In the meantime, the Town of Montgomery IDA has an opportunity to send a strong message to Medline: pay your damn taxes.
New York State Senator