INDUSTRIAL DEVELOPMENT AGENCY ENABLING STATUTE
In 1969 New York State enacted legislation providing for the creation of Industrial Development Agencies (IDAs) to facilitate economic development and to improve economic conditions in their respective localities, in order to improve economic conditions, IDAs work to attract, retain and expand businesses within their jurisdictions through the provision of financial incentives to private entities.
IDAs are legally empowered to buy, sell or lease property and to provide tax-exempt financing for approved projects. Real property owned or controlled by IDAs is exempt from property and mortgage recording taxes, and the value of these exemptions can be passed through to assisted businesses. Additionally, purchases related to IDA projects can be exempt from State and local sales taxes. While IDA properties are tax exempt, businesses occupying IDA-owned properties typically make payments-in-lieu of taxes (PILOTs) that are shared with the affected local tax jurisdictions.
Each IDA is legally required to annually submit a financial report to the New York State Authorities Budget Office which includes data related to the number of jobs created or retained, the amount of tax exemptions required, and other important information.
ULSTER COUNTY INDUSTRIAL DEVELOPMENT AGENCY
The Ulster County Industrial Development Agency (UCIDA), is a public benefit corporation created on July 24, 1976, by an act of the New York State Legislature to promote and assist private sector industrial/business development thereby advancing job opportunities and economic well-being to the people of Ulster County (see also https://www.nysenate.gov/legislation/laws/GMU/923).
Appointments to the Ulster County Industrial Development Agency are made via resolution by the membership of the Ulster County Legislature. Members serve at the pleasure of the Legislature. The Members of the Agency constitute the governing body of the Agency (the “Board”), and have and responsibly exercise all of the powers prescribed by Article 18-a of the General Municipal Law of the State of New York (the “Act”) and other applicable law, including but not limited to Chapter 766 of the 2005 Laws of the State of New York (the “PAAA”).
All UCIDA funding is derived from administrative fees collected from project applicants. The UCIDA receives no funding from any taxing authority. In addition, the UCIDA has no staff. At this time, the UCIDA contracts with and pays Ulster County for all administrative services. Legal fees are paid by project applicants directly to Counsel. Annually, project applicants are required to report their numbers of full-time equivalent (FTE) employees for filing with the New York State Authorities Budget Office.
BYLAWS AND POLICIES
Public Authorities Law requires IDAs to have numerous policies, which are posted on the UCIDA’s website. The policies include, but are not limited to the Uniform Tax Exemption Policy and the Enforcement Policy.
UNIFORM TAX EXEMPTION POLICY
The Uniform Tax Exemption Policy (“UTEP”) outlines the various benefits provided by the Agency; most specifically sales and use tax exemption; mortgage recording tax exemption; real estate transfer tax; and real estate tax exemptions (PILOTs).
Any change to the Uniform Tax Exemption Policy requires a Public Hearing, a Notice of Public Hearing published in the newspaper, Posting of the Notice of Public Hearing in all municipal town/village/city halls within the Agency’s jurisdiction, certified letters transmitting the Notice of Public Hearing to all taxing authorities within the Agency’s jurisdiction and an official transcript of the Public Hearing. Representatives of all taxing authorities and members of the general public are encouraged to attend the public hearing for purpose of public comment. Additionally, there is a prescribed period for written public comment.
ENFORCEMENT POLICY AND CLAWBACK
The Enforcement Policy outlines the project applicant’s requirements for compliance and the enforcement actions for failure to comply.
There are two types of IDA projects: leaseback and bond projects.
NEW YORK STATE TAX EXEMPTIONS
The UCIDA offers both taxable and tax-exempt bond financing. Both types of financing give you the following New York State tax exemptions:
- Mortgage Recording Tax Exemptions: New York State law imposes a mortgage recording tax in Ulster County of 3/4% of the amount of the loan secured by a mortgage. Financing your project with bonds issued by the IDA would exempt any mortgage securing the bonds from this tax. On a project involving a mortgage securing a UCIDA bond in the amount of $1,500,000, the mortgage recording tax exemption results in savings of $11,250.
- Sales and Use Tax Exemption: UCIDA exempts purchases from the New York sales and use tax of 8%. This exemption extends to all equipment purchased by the benefited company, as an agent of the UCIDA, and all materials incorporated into the facility, as well as items consumed in the construction of the building (such as fuel) and tools rented for the purpose of construction. On a project where $1,000,000 of project costs is subject to sales and use tax, the sales tax exemption results in a savings of $80,000.
- County, Municipal, and School Real Property Tax Abatement: UCIDA also provides your project with an abatement of real property taxes. By entering into a Payment in Lieu of Taxes (PILOT) agreement, your company will receive abatement consistent with the UCIDA’s Uniform Tax Exemption Policy. These payments will be directed to the affected taxing jurisdiction. The amount of the real property tax abatement is determined according to the following formula, where X is the existing assessed value and Y is the increase in assessed value caused by undertaking the project. For New York State guidance on how PILOTs are factored into and impact the property tax cap see http://www.p12.nysed.gov/mgtserv/propertytax/taxcap/docs/Tax_Cap_Guidance_final.pdf
The UCIDA is authorized to issue taxable and tax-exempt industrial development revenue bonds for qualified projects (typically not-for-profit corporations and manufacturing projects, although other certain projects qualify for tax-exempt bonds). All bonds issued by UCIDA are “conduit” in nature and the responsibility for debt service is exclusively that of the applicant. If considering such financing, contact should be made with UCIDA’s counsel and bond counsel to determine whether the project qualifies and to discuss the process. By using letter of credit-backed taxable or tax-exempt industrial development revenue bonds, companies can sell their debt in the public market without incurring the cost of registration with the Securities and Exchange Commission, allowing them to obtain affordable long-term, fixed-rate financing.