Thursday, October 14, 2010

Council wary of tax exemption policy

The Watertown City Council is looking for clarification from the Jefferson County Industrial Development Agency as to how much control it will have in determining tax exemptions granted for economic development projects.

JCIDA is updating its uniform tax exemption policy, which covers payment-in-lieu-of taxes agreements and sales and mortgage recording tax breaks that can accompany such agreements. JCIDA has asked each potential affected taxing jurisdiction for input on the plan.

The three council members attending a work session on the matter Tuesday — Mayor Jeffrey E. Graham, Councilman Joseph M. Butler Jr. and Councilwoman Teresa R. Macaluso — generally voiced no opposition to aspects of PILOT agreements that grant projects real property tax exemptions.

It is sales tax exemptions that cause the most consternation for Mr. Graham. These exemptions allow a developer to pay no sales tax on materials bought for the construction of a project, including equipment and furnishings.

Mr. Graham said that such exemptions should be subject to the approval of an elected body, specifically the county Legislature, as it is the county that imposes the tax and collects it before distributing it to the municipalities.

He said that as municipalities increasingly rely on sales tax revenues when preparing budgets, and with large-scale projects such as wind farms being considered for PILOT agreements, sales tax exemptions should be "seldom used."

"If you give a $50,000 sales tax exemption to a developer, are you going to cut the city's budget by $50,000? No, you're going to ask others to pick it up," he said. "You're basically selling the exemptions for a fee. I don't know any other way to put it."

Mr. Butler said there appear to be inconsistencies in the language of the proposed exemption policy that allows JCIDA to deviate from the policy to provide enhanced benefits for certain projects on a case-by-case basis at JCIDA's discretion. He said in one section of the policy it appears that such affected taxing jurisdictions will be notified of such deviations, while elsewhere it appears no such notification will be required.

Mr. Butler also said the policy is not clear as to how or if a municipality can recapture benefits provided to a project should the project not fulfill its obligations under a PILOT agreement.

City Assessor Brian S. Phelps said that with the end of the state's Empire Zone program the city can expect to see an increase in the number of requests for PILOT agreements. City Attorney James A. Burrows said that since most development in the county is occurring in and around the city and toward Fort Drum, future PILOT agreements will "affect city residents far more often than those in other municipalities."

Mr. Butler said the "outreach" done by JCIDA in giving municipalities input on its proposed policy is "a positive," but Ms. Macaluso said she is concerned that the council's concerns will have little impact on the policy.

"I think no matter what we suggest, it's going to fall on deaf ears," she said.

Councilman Jeffrey M. Smith and Councilwoman Roxanne M. Burns were absent from Thursday's work session. The remaining council members decided to discuss the policy further at Monday's regular meeting, and possibly during a work session later this month, before giving direction to City Manager Mary M. Corriveau as to what information it wants to forward to JCIDA for consideration.

JCIDA will hold a public hearing on the changes to its policy at 7 p.m. Nov. 3 at the amphitheater at Jefferson Community College, Coffeen Street. The board could vote on the policy Nov. 4.

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