A new tax incentive package meted out by Orange County Industrial Development Agency triggered an investigation by Sen. James Skoufis (D-N.Y.) on Feb. 22.
The Industrial Development Agency, or IDA, is a public benefit corporation empowered by state law to use tax incentives to spur economic development and job growth.
In December, the Orange County IDA approved about $3 million in tax incentives for a longtime Goshen-based food manufacturer to expand its operations, despite the applicant saying the project would still carry on—though likely at a slower pace—even without the incentives.
To Skoufis, that amounts to giving away tax dollars to a business that doesn’t need them and doling out corporate welfare at taxpayers’ expense, according to a Feb. 22 press conference.
“So today we are announcing an investigation into the Orange County IDA over this project,” Skoufis said. “We are going to get to the bottom of why they gave these incentives.”
Skoufis represents the 42nd district that covers most of Orange County and chairs the State Senate Committee on Investigations and Government Operations.
He also finds the incentives unnecessary because the cost of the expansion, at about $18 million, is only about one-tenth of the estimated revenue the expansion will create in the first three years.
As for the 50 new jobs to be created by the expansion, he finds it not as good as it sounds because most are entry-level manufacturing jobs paying only $35,000 a year.
“Good luck living anywhere in Orange County at $35,000, and thank you, Orange County IDA, for subsidizing $35,000-a-year jobs,” he said.
IDA Responses
In response to the investigative move, Orange County IDA issued a statement saying that the approval came after a robust cost-benefit analysis using an industry-standard model.
The agency’s analysis shows a cost-to-benefit ratio of 1:28.
Costs are the tax incentives granted to Mack Bros., including around $2 million in property tax savings over 15 years, $487,500 in sales tax exemptions, and $75,000 in mortgage recording tax waivers.
Local benefits, according to the county IDA’s calculations, include temporary construction jobs, 50 permanent new jobs, and increased property taxes, totaling $67 million.
Per IDA policy, the manufacturer must hire most of its construction workers from the Mid-Hudson region.
During a November public hearing, the manufacturer’s representative Roy Makinen said that almost all costs had increased due to inflation and that the incentives would help the company grow faster.
“We want to grow, and we want to stay here,” Roy Makinen said of the 240-employee company. “We can bring people in a lot quicker with your help.”
Goshen Town Supervisor Joseph Betro asked at the hearing if the manufacturer could guarantee that at least half of the 50 new jobs would go to town residents, who bear the bulk of the tax incentives.
Makinen said the company’s goal is to hire locals—if they apply.
IDA Reform Legislation
Meanwhile, Skoufis is also looking at investigations into other IDAs in Long Island and upstate.
These investigations should take several months and conclude before the end of the current legislative session in June to inform lawmakers on IDA issues, he said.
Currently, a separate, independent audit of all economic development incentives and tax breaks offered by Empire State Development—the parent group of local IDAs—and its subsidiaries is ongoing and will conclude later this year.
In the past, Skoufis sponsored several IDA reform bills in the Senate to block elected officials from serving on the board, mandate clawbacks in the event of failure to fulfill promised benefits, and further de-incentivize local IDAs from luring companies from one part of New York to another.
In 2019, his investigation into Medline’s application to local IDAs eventually led the company to forego the pursuit of a $17 million property tax break.
