Tax Abatement Programs
The major activity the IDA has used to help businesses acquire, construct and equip their facilities and thus create and retain jobs, and provide for economic development, growth, and stability in the community is the Straight Lease transaction. Straight leases enable companies to receive the benefits of the IDA project status. Through a lease agreement, the Agency takes title to the property and/or the machinery and equipment and can provide property, sales and mortgage tax relief to the company.
1) Real Property Tax Exemptions
If real property owned by the applicant is transferred to the Agency as part of a straight lease transaction or of a bond transaction, the Agency becomes the “owner of record” of the property. As a tax-exempt agency, any property owned by the Agency is exempt form normal real property taxes, including school taxes. Therefore, the Applicant will not be required to pay normal real property taxes for as long as the title of the property is in the name of the Agency. In such cases the Agency will negotiate a payment in lieu of tax agreement (“PILOT”) with the Applicant.
The PILOT will usually require the Applicant to pay a portion of what it would normally pay in real property taxes, especially in the earlier years of the project. This benefit affords the Applicant initial tax relief for its capital investment in Sullivan County. The Agency will attempt to balance the cash flow needs of the Applicant with the local municipality’s need for a stable and secure tax base.
Special assessments and special ad valorem levies, such as assessments for water, sewer, lighting and fire districts, however, are fully taxable and payment for such assessments shall become the responsibility of the Applicant as if the real property were in the name of the Applicant and not the Agency.
Absent unusual circumstances, the payment in lieu of tax agreement policy of the Agency provides for a reduced real property tax payment based on a schedule of abatement applicable to County, municipal, and school taxes. The Agency’s Policy results in a tax schedule for an approved project starting at a base amount and increasing over the full period of the exemption to 100% payment of the assessed value of the project. PILOT payment schedules will not extend beyond a twenty-year period. The tax payments received are divided among the taxing jurisdictions in a prorated fashion.
2) Sales and Use Tax Exemptions
All purchases of construction materials and equipment rentals and purchases of a project related equipment and furnishings are made as agent for the Agency, and are therefore afforded full exemption from local and New York State Sales and Use Taxes. Operating and maintenance expenses of project are not incurred as agent of the Agency and no sales tax exemption is provided for those expenses. Letters of Sales Tax Exemption will be issued by the Agency for a predetermined length of time, or until the project certificate of occupancy is issued whichever is a shorter period.
Applicants are required to file a statement with the Department of Taxation and Finance annually concerning the value of the sales and use tax exemptions for the project.
3) Mortgage Tax Exemptions
The Agency can exempt the mortgage recording tax on all project related financing to the full extent permitted by New York State Law.
ISSUANCE OF BONDS
Besides the Straight Lease, the IDA can issue Bonds (federally tax-exempt or taxable) to provide low-cost financing. The borrower agrees to make payments to retire the bond obligations pursuant to a contractual agreement with the Agency and a Lender. There is a financing agreement and usually a Lease or Installment Sale Agreement. Depending on the size of the bond issue and other factors, placement of the bonds may be made privately or publicly. In some cases, interest on the bonds issued by the Agency is exempt from federal income tax. Bond Counsels are retained concerning document preparation and opinion letters regarding the financing and tax exempt status of the bond issue.
The County of Sullivan IDA entertains applications from individuals for interested companies on a first come-first served basis. Benefits to the applicant will be considered if the project is eligible under existing NYS legislation and if the project receives the Agency’s approval after consideration of its Uniform Tax Exemption Policy.
Only facilities that qualify as a “project,” as defined in the New York State Industrial Development Agency Act, may be approved by the Agency. These include both industrial and non-industrial projects. In addition, the project must be shown to serve a public purpose by creating or retaining employment. Additionally, State restrictions on applicants include prohibitions to projects that are extra-territorial (GML Section 854(4)), governmental projects (GML Section 854(B)), projects raided from outside Sullivan County except as allowed under GML Section 862(1), and the limitations on the Agency’s ability to provide assistance to retail projects (GML Section 862(2)). Additionally, all applications must include a Cost/Benefit Analysis, as required by law, and all State Environmental Quality Review requirements must be met.
It is the general policy of the Agency not to grant real property tax exemptions to retail projects, except for those approved as tourism destination facilities. The Agency will grant sales tax and mortgage tax exemptions to eligible retail projects, as limited by GML Section 862(2).
Once the completed application is delivered to the Agency, a Preliminary evaluation and determination is made by the Executive Director. Copies of the application are forwarded to Agency Board Members and Counsel.
Counsel proceeds with PILOT and fee negotiations with the applicant. If the financial assistance to be provided by the Agency involves $100,000 or more, a public hearing is necessary. The Executive Director schedules a public hearing.
Following the public hearing, the Agency members meet and take official action by way of an Inducement Resolution. The Inducement Resolution declares the intention of the Agency to proceed with that project, and authorizes the formal Agreement between the Agency and the Applicant.
Action of the Agency is subject to the State Environmental Quality Review Act. An environmental determination needs to be made by the Agency as part of the review process. The Agency conducts an Environmental Assessment Review after receipt of the application. After review, the Agency then makes its preliminary environmental determination.
Once the inducement resolution has been adopted and the environmental determination has been made, the Agency approves the final resolution authorizing the transactions stated in the inducement resolution. A date to execute final documents in a closing is set.
A non-refundable application fee to the Agency of $250.00 is required to be submitted with all project applications. An additional upfront fee of $5,000 is to be submitted with each application to cover the Agency’s initial costs to conduct the environmental review, etc. A one time Agency fee and a yearly administration fee are negotiated. Agency attorney fees are billed to the applicant as incurred.
Contact the office for more information and for application forms.