In carrying out its mission to assist with economic development in Schuyler County, SCIDA offers various forms of financial assistance that can amount to dramatic savings in the cost of expansion, relocation, retention or redevelopment projects.
So whether you’re looking for opportunities to expand current operations, establish a new venture or make some savvy investments, the best business decision you can make is to consider Schuyler County.
IDAs provide four basic forms of financial assistance for commercial projects that include: (1) mortgage recording tax exemption, (2) sales and use tax exemption, (3) real property tax abatement, and (4) interest rate savings via tax-exempt financing.
New York State defines the categories of “projects” eligible for IDA assistance as any land, building, improvement or facility that is suitable for “manufacturing, research, commercial or industrial purposes or other economically sound purposes.” Courts have interpreted “project” as an “all embracing” term encompassing any number of projects. With respect to commercial projects, the New York State Comptroller’s Office has opined that the word “commercial” denotes a trade or profit-making activity, and courts have similarly found projects are commercial where they are a profit-making business that will create jobs and promote economic prosperity in the area in keeping with the purposes of the IDAs. Generally, the Act provides that the purpose of IDAs are to encourage and assist in the development of projects which promote employment opportunities and prevent economic deterioration in the area served by the IDA.
Under New York statute, an IDA is limited in its ability to provide financial assistance to projects where facilities “that are primarily used in making retail sales to customers who personally visit such facilities constitute more than one-third of the total project cost”.8 This retail restriction does not apply to “tourism destinations” which are defined as locations or facilities which are likely to attract a significant number of visitors from outside the economic development region in which the project is located.
Real Property Tax Abatement.
SCIDA can abate property taxes for eligible projects.
In the State, property owners pay a real property tax based on the assessed value of land and improvements to a site. Any real property owned or controlled by an IDA is not subject to ad valorem real property taxes. However, real property owned or controlled by an IDA continues to be subject to special assessments and user fees (water, sewer, fire, etc.). When an IDA takes title to or a leasehold interest in real property, the property becomes 100% exempt from ad valorem real property taxes. To accommodate the needs of the local tax jurisdictions, however, the IDA generally negotiates a Payment-In-Lieu-Of- Tax Agreement (PILOT Agreement) with the company. The IDA will then direct, or receive and forward, these payments-in-lieu-of-taxes to the affected tax jurisdictions in the percentage that each affected tax jurisdiction would otherwise have received but for the Agency’s involvement. By law, IDAs have the authority to negotiate any PILOT Agreement they deem reasonable. There is no required formula for calculating the payments to be made under a PILOT Agreement. They are, however, required to have specific policies adopted which outline the types of PILOT Agreements they are offering and procedures for deviation from those stated policies (the Uniform Tax Exemption Policy
Although there is no statutory limit to the period or amount of the abatement, the Schuyler County IDA limits the period to no more than 20 years.
Sales and Use Tax Exemption.
SCIDA can provide an exemption from both state and local sales tax during the construction and equipping of a project.
The sales and use tax rates in Schuyler County is 8%. (4% local and 4% State). All purchases made by an IDA or its agents are exempt from sales and use tax. Sales Tax Reporting and Recordkeeping Requirements for Industrial Development Agencies and Authorities, require that agents of an IDA should present a form ST-123 when making purchases for the project. The agent can then acquire the equipment, materials and services needed to acquire, construct, reconstruct and/or equip the project
without having to pay sales or use taxes. The exemption is generally limited to the construction, reconstruction or installation period and cannot cover ongoing operational costs.
Mortgage Recording Tax Exemption.
SCIDA can provide an exemption from Schuyler County’s mortgage recording tax.
Whenever the county clerk records a mortgage in the State, the mortgagor must pay a 1.0% (of the mortgaged amount) mortgage recording tax—a significant expense on projects involving substantial financing. The IDA, however, can qualify a company for a mortgage recording tax exemption. If an IDA (on a non-recourse basis) has an interest in the property (either fee title or leasehold interest) at the time the mortgage is recorded, the IDA will mortgage its interest in the property (exempt from the mortgage recording tax under GML § 874—exemption for taxes and assessments upon any of the property acquired by the IDA or under its “jurisdiction or control or supervision or upon its activities”) and the company will simultaneously mortgage its interest in the property.
Taxable Exempt & Taxable Bond Financing.
SCIDA can act as a conduit for taxable or tax-exempt industrial revenue bond (IRB) financing. IRBs can often be less costly than conventional sources of financing. They are revenue bonds issued by an industrial development agency to finance or refinance the construction or purchase of certain manufacturing, warehousing, industrial or commercial facilities which are then leased or sold to a private user. Although SCIDA is the conduit for the issuance of an IRB on behalf of an applicant, the security for the bonds and the party responsible for repayment is the private user.
Lower Interest Rates for Debt Incurred as Part of the Project (Conduit Bond Issuance)
IDAs are authorized by State law to issue bonds and notes. An IDA can issue tax-exempt bonds, subject to the limitations imposed by the Internal Revenue Code. The proceeds of these tax-exempt bonds can be used to fund all, or substantially all, the costs of a project (excluding certain costs of issuance in excess of 2% of the total amount of the bond issue). If the project meets the strict qualification requirements of the Code, the company should then determine if issuing tax-exempt bonds is a cost-effective method of financing the project.