Every month I will be communicating with the public about all the great things that are going on in the whole of Chautauqua County related to economic development.
This could include a discussion of specific public interest projects that are running or have been completed, where they are, and how they will be carried out when they are completed. It could also include a discussion of initiatives being taken at various government agencies or at the county level, including, but not limited to, the Chautauqua County Industrial Development Agency, the Chautauqua County Economic Growth Partnership, the Planning and Development Department of the Chautauqua district. The Chautauqua County Land Bank Corporation, the Workforce Development Board, the Chautauqua County Visitors Bureau, educational institutions, or one of the many agencies whose mission makes them an important partner for economic development across the county.
I didn’t want to start my articles for the Building Chautauqua series, which began in October 2020, with an educational piece as it probably won’t be as interesting to most people as a story about a new company settling here, investing capital, and jobs create. In this case, I have waited until now to explain in lay terms the various tools that the Chautauqua County Industrial Development Agency (CCIDA) has at its disposal to promote economic development. Most importantly, I want to try to clear up some common misconceptions related to what is known as the PILOT (Payment Instead of Tax) agreement, and to discuss some additional tax relief and lending programs that are supported by the CCIDA.
First, let me dispel a common myth: a PILOT does not limit payments for any of the taxes currently paid on a property, it only increases them. A second misconception is that developers who are approved for PILOT contracts receive payment, which they also don’t. Developers do not receive funding from CCIDA through a PILOT agreement, but rather the PILOT agreement changes the future tax payments they pay for a period of time. There is often confusion and dismay about giving companies PILOTS (tax breaks) on projects, and it is sometimes interpreted that these incentives are depriving or taking away the required revenue from the tax territories. The tax breaks I am referring to are mortgage registration taxes, sales taxes, and property taxes. The CCIDA, along with over 100 IDAs across the state, is authorized by New York State to offer these incentives for the purpose of promoting development. While some people believe that tax breaks are unnecessary, unjustified, or too generous (corporate welfare), there is no doubt that without them we would be extremely disadvantaged compared to ours “Competitors” in other parishes.
The concept of the PILOT programs is that the tax cuts encourage and stimulate existing local businesses and new businesses to invest and create or maintain jobs by offsetting costly construction and renovation costs while maintaining the cash flow for running the business increase. Without these programs we would expect far less new investment and job retention / growth. The CCIDA competes with the other IDAs throughout the state, not to mention Pennsylvania and Ohio, as well as all other states across the country and worldwide. These tax breaks help create a level playing field.
First and foremost, I think it is important to explain what a PILOT is in a simple way. Most of us know our property tax bill and the amount that is calculated based on the valuation of the property. When we invest in new builds, renovations or other improvements, our valuation often rises and we owe more property taxes on the property due to its higher value. In its simplest form, a PILOT (paying instead of taxes) reduces the amount of those NEW taxes that would be owed for a period of time due to property improvements. However, the original amount remains unaffected and will continue to be invoiced and paid. In other words, this has to do with new money being invested in projects that lead to an increase in the property’s appraised value. This is often millions or hundreds of millions of dollars in new capital investments at the enterprise level. Instead of the owner being taxed immediately on the new full assessment, a PILOT allows the tax increase to be increased over a period of time (often 10 years) until it is paid at the full rate. This gives the company time to get its business going. From that point on, they can financially bear the burden of the increased tax levy resulting from their investment. In summary, it can be said that a PILOT does NOT take away any of the existing property taxes paid. Rather, the tax base is increased, which is new money for the tax courts (district, city, village and school districts). The granting of PILOTS also requires the creation or retention of jobs as part of the approval process and is only carried out if the municipality approves it.
The CCIDA also has several revolving loan funds that provide risky, low-interest financing to companies in all sectors. These include the AL-Tech Revolving Loan Fund, the CCIDA CARES Loan Fund, and the Chautauqua Revolving Loan Fund. The CCIDA usually takes a subordinate pledge position for collateral, often behind traditional lenders. This leads to higher risk loans for new developments, startups, expansions and projects as the financial risk is reduced for conventional lenders knowing they can get an initial collateral position prior to CCIDA.
The CCIDA may also issue tax-exempt Small Issue Manufacturing Revenue Bonds to fund certain facilities listed in Section 142 of the Internal Revenue Code, including certain airport facilities, docks and wharves, water and sewerage facilities, solid waste facilities and low-income rental facilities, and certain other entities.
The structure and governance authority of the CCIDA is independent from Chautauqua County in that it is an agency (a creature of New York State), has its own voluntary board of directors, and makes its own decisions with the CCIDA intent not to have political influence. The Board of Directors examines the merits of a given project, i.e. investment, job creation, cost /
Utilize, etc. in relation to the policies of each program and the New York General Municipal Law and make their decisions accordingly. That being said, the county executive appoints the administrative director and appoints the directors, whose terms can be extended by two years. Most CCIDA board members, however, are long-term. The chairman of the planning and economic development committee of the legislature is the only member who is ex officio on the CCIDA board.
The CCIDA also liaises with other external funding sources for projects and typically coordinates activities involving other local, state or federal entities, as well as interacting with the NYS Small Business Development Center at JCC and the SUNY Fredonia Technology Incubator for Start up Company .
Mark Geise is Deputy District Manager for Economic Development / CCIDA CEO.
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