years or until they have repaid their debt. Virginia, ranked by Forbes magazine as the top statefor business for several years in a row, has clawbacks in its Major Business Facility Jobs TaxCredit.
New York’s economic development programs have very few clawback provisions. The IDA
statute lacks them entirely. A company may keep all of its tax exemptions even if it utterly fails
to deliver on its promises of jobs or other benefits to the region. Erie County’s Countywide IDAPolicy includes a clawback for cases of intentional, material falsehood in the company’sapplication, but it also states that “the failure of an appli
cant to meet any specific employmentnumbers set forth in the application . . . shall not be deemed to be false or misleading in any
material aspect.” In other words, the company is not allowed to lie, except about how many jobs
it will create or retain! That is truly a clawback with no claws.Despite their name, Industrial Development Agencies are not at all limited to industrial projects.In 2009, finance, insurance, and real estate projects captured almost 30% of net tax exemptions.Transportation, communication and sanitary services projects received 26% of net exemptions.Manufacturing received some 15%, and services received some 11%.Another popular misconception about IDAs is that they use their incentives to lure businessesfrom out of the area. Of the 71 tax exemption deals that the IDAs of Niagara County, ErieCounty, and the Town of Amherst did in 2010, only one appears to involve a company comingfrom out of state (Triad Recycling). All the other deals appear to be expansions or relocations of companies that were already in the region.
Where are the Jobs?
The 274 IDA subsidy agreements that ended in 2009 were based on promises to create 21,113 jobs. Instead, 4,957 jobs were lost. Some blame this on the dire economic climate of the time, butsuch a retort falls short. Of the 217,000 jobs promised by IDA applicants for 2005, only 79,000were actually created. One-fourth of IDA supported projects actually cut jobs in 2005, a greatyear for the American economy.There are many local examples of IDA assisted projects not creating any jobs. For instance,Fisher-Price, subsidiary of International giant Mattel, received a $1.4 million tax break in 2004and another $1.75 million in 2008 from the Erie County IDA to upgrade its offices in EastAurora without creating a single job.In assessing whether a benefit package is helping grow the economy, perhaps the most difficultquestion is whether the government aid is necessary, or whether the company would have donethe project anyway. Erie County Executive Chris Collins expressed this point succinctly whenhe (unsuccessfully) obj
ected to an ECIDA award of $74,000 in sales tax exemptions for Martin’sFantasy Island amusement park to build two new rides: “They’re going to put these rides inregardless. What company wouldn’t like a freebie, and this is a freebie.”
HSBC Bank, headquartered in Europe, is a good example of lavish tax breaks with little localbenefit. In 2006, the Amherst IDA granted HSBC $79 million in tax breaks to expand a datacenter, a subsidy worth $6.6 million per job created. Now HSBC is dramatically reducing its