The effectiveness of firm-specific state tax incentives in promoting economic development: Evidence from New York State's industrial development agencies

Economic Development Quarterly

Volumn 10, Issue 1, 1996, Pages 57-68

  Lynch, Robert G ^a   Fishgold, Gunther ^b   Blackwood, Dona L ^c  

^a STATE UNIVERSITY OF NEW YORK   (United States)

^b STATE UNIVERSITY OF NEW YORK   (United States)

^c NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0030521976     PISSN: 08912424     EISSN: None     Source Type: Journal    
DOI: 10.1177/089124249601000108     Document Type: Article

References (43)

1. Testimony of New York State Comptroller Edward V. Regan, in New York State Assembly and Senate Standing Committees on Local Government, A Joint Public Hearing into Local Industrial Development Agencies, Albany, New York, January 14, 1992, p. 8.
2. Industrial Development Agency Act of 1969 (Article 18-A of the General Municipal Law, sec. 852 through 928).
3. Prior to 1987, interest on most IDA bonds was exempt from federal income taxation, as well as New York State income taxation. As a result of changes in federal law, most IDA bonds no longer enjoy the federal tax exemption. New York State, however, continues to guarantee that interest on bonds used to finance IDA projects is exempt from state personal income taxation.
4. New York State Legislative Commission on State-Local Relations, New York's Local Industrial Development Agencies: A Closer Look (Albany: New York State Legislative Commission on State-Local Relations, 1989) (An Interim Report), pp. 15-7, 24, 25, 44, 96-102.
5. Ibid., p. 57.
6. Ibid., p. 46.
7. See, for example, D. Feenberg and J. Poterba, "Which Households Own Municipal Bonds? Evidence from Tax Returns," National Tax Journal 44, No. 4 (1991): 93-103.
8. See the annual reports entitled Overall Real Property Taxes (Albany: New York State Office of the State Comptroller, 1986-1992).
9. Data on the tax-exempt value of each county's property are from New York State Board of Equalization and Assessment, Exemptions from Real Property Taxation inNew York State: County, City, and Town Assessment Rolls (Albany, NY: New York State Office of State Controller, 1986-1992).
10. See the reports submitted to the New York State Comptroller's Office in 1991 by the IDAs of Cattaraugus, Clinton, Erie, Franklin, Jefferson, Montgomery, Saratoga, Suffolk, Warren-Washington, Wayne, Glens Falls, Troy, Amherst, Guilderland, Islip, and Lancaster.
11. For example, the share of the value of IDA bonds issued that was spent on sales-taxable items was assumed to be 31.9% by the Albany County IDA (1991), 32.4% by the Saratoga County IDA (1990), 39% by the Warren County IDA (1991), 40% by the Niagara County IDA (1991), 45% by the Troy IDA (1990), 54% by the Islip IDA (1990), 59% by the Washington County IDA (1990), 65% by the Amherst IDA (1990), 76% by the Lancaster IDA (1990), and 100% by the Genesee County IDA (1991).
12. F. Pordum, Time for a Change: Final Report of Public Hearings on Local Industrial Development Agencies (Albany: New York State Assembly, Committee on Local Governments, 1992), p. 16.
13. New York State Legislative Commission on State-Local Relations, New York's Local Industrial Development Agencies, pp. 48-9.
14. Public Policy Institute of New York State, Economic Development: How Industrial Development Agencies Have Helped Generate Jobs and Tax Revenues for New York State and Its Localities (Albany: Public Policy Institute of New York State, 1993), p. 1.
15. Ibid., p. 31.
16. We cross-referenced data from New York State Department of Commerce's Industrial Migration Study (Albany: New York State Department of Commerce, 1986) with data from New York State Department of Economic Development's Industrial Development Agency Bond Issues (1970-1986) (Albany: New York State Department of Economic Development, 1970-1992) ana Selected Expansions, New Firms, Closings and Moves Reported to New York State Department of Economic Development as Planned, Under Way, or Completed, New York State 1977 through 1986 (Albany: New York State Department of Economic Development, 1992).
17. We cross-referenced data from New York State Department of Commerce's Industrial Migration Study (Albany: New York State Department of Commerce, 1986) with data from New York State Department of Economic Development's Industrial Development Agency Bond Issues (1970-1986) (Albany: New York State Department of Economic Development, 1970-1992) ana Selected Expansions, New Firms, Closings and Moves Reported to New York State Department of Economic Development as Planned, Under Way, or Completed, New York State 1977 through 1986 (Albany: New York State Department of Economic Development, 1992).
18. We cross-referenced data from New York State Department of Commerce's Industrial Migration Study (Albany: New York State Department of Commerce, 1986) with data from New York State Department of Economic Development's Industrial Development Agency Bond Issues (1970-1986) (Albany: New York State Department of Economic Development, 1970-1992) ana Selected Expansions, New Firms, Closings and Moves Reported to New York State Department of Economic Development as Planned, Under Way, or Completed, New York State 1977 through 1986 (Albany: New York State Department of Economic Development, 1992).
19. See, for example, Roger Wilson, "State Business Incentives and Economic Growth: Are They Effective? A Review of the Literature," (Lexington, KY: Council of State Governments, 1989), pp. 7-22; or J. Blair and R. Premus, "Major Factors in Industrial Location: A Review," Economic Development Quarterly 1 (1987): 72-85. For some counterevidence, see T. Bartik, Who Benefits from State and Local Economic Development Policies? (Kalamazoo, MI: W. E. Upjohn Institute for Employment Research, 1991).
20. See, for example, Roger Wilson, "State Business Incentives and Economic Growth: Are They Effective? A Review of the Literature," (Lexington, KY: Council of State Governments, 1989), pp. 7-22; or J. Blair and R. Premus, "Major Factors in Industrial Location: A Review," Economic Development Quarterly 1 (1987): 72-85. For some counterevidence, see T. Bartik, Who Benefits from State and Local Economic Development Policies? (Kalamazoo, MI: W. E. Upjohn Institute for Employment Research, 1991).
21. See, for example, Roger Wilson, "State Business Incentives and Economic Growth: Are They Effective? A Review of the Literature," (Lexington, KY: Council of State Governments, 1989), pp. 7-22; or J. Blair and R. Premus, "Major Factors in Industrial Location: A Review," Economic Development Quarterly 1 (1987): 72-85. For some counterevidence, see T. Bartik, Who Benefits from State and Local Economic Development Policies? (Kalamazoo, MI: W. E. Upjohn Institute for Employment Research, 1991).
22. See, for example, R. Pomp, "The Role of State Tax Incentives in Attracting and Retaining Business" (New York Economic Development Working Paper No. 4, Nelson Rockefeller Institute of Government, Albany, 1987), p. 2; or New YorkState Council on State Priorities, Report to the Governor (Albany: New York State Council on State Priorities, 1982), p. 204.
23. See, for example, R. Pomp, "The Role of State Tax Incentives in Attracting and Retaining Business" (New York Economic Development Working Paper No. 4, Nelson Rockefeller Institute of Government, Albany, 1987), p. 2; or New YorkState Council on State Priorities, Report to the Governor (Albany: New York State Council on State Priorities, 1982), p. 204.
24. New York State Council on State Priorities, Report to the Governor, p. 204.
25. U.S. General Accounting Office, Industrial Development Bonds: Achievement of Public Benefits Is Unclear (Washington, DC: U.S. General Accounting Office, 1993) (Report to the Chairman of the Human Resources and Intergovernmental Relations Subcommittee of the Committee on Government Operations, U.S. House of Representatives), p. 3.
26. Ibid., p. 3.
27. Expiring Tax-Exempt Bond Provisions: Small Issue IDBs and Mortgage Revenue Bonds (Washington, DC: Congressional Research Service, 1989) (CRS Report for Congress), p. 2.
28. See, for example, T. Swanstrom, The Effect of State and Local Taxes on Investment: A Bibliography (Monticello, IL: Vance Bibliographies, 1988); or Wilson, "State Business Incentives and Economic Growth," pp. 17-22.
29. See, for example, T. Swanstrom, The Effect of State and Local Taxes on Investment: A Bibliography (Monticello, IL: Vance Bibliographies, 1988); or Wilson, "State Business Incentives and Economic Growth," pp. 17-22.
30. IDA employment claims up to 1986 are from New York State Department of Economic Development, Industrial Development Agency Bond Issues, p. 305. IDA employment claims since 1986 are from Public Policy Institute of New York State, Economic Development.
31. "KeyCorp Contradicts Claim of 800 New Jobs," Albany Times Union, September 23, 1992, p. A-1.
32. We cross-referenced data from Financial Services Corporation of New York City, IDA Annual Employment Report, Fiscal Year Ending June 28, 1985 (New York: Financial Services Corporation of New York City, 1985), with data provided to us by the New York State Department of Economic Development.
33. See the Erie County Industrial Agency's Erie County Industrial Development Agency 1991 Job Survey (Buffalo, NY: Erie County Industrial Development Agency, 1991).
34. New York State Industrial Development Agency Act of 1969. Codified as Article 18-A of the General Municiapl Law, sec. 862.
35. See, for example, Swanstrom, The Effect of State and Local Taxes on Investment, p. 2.
36. We cross-referenced data from New York State Department of Commerce's Industrial Migration Study with data from New York State Department of Economic Development's Industrial Development Agency Bond Issues.
37. We cross-referenced data from New York State Department of Commerce's Industrial Migration Study with data from New York State Department of Economic Development's Industrial Development Agency Bond Issues.
38. See testimony of District Union Local One of the United Food and Commercial Workers (Report to the Assembly and Senate Joint Committee on Local Government, Syracuse, NY October 3, 1991), p. 3 (reproduced in F. Pordum, Time for a Change); Franz Leichter, A Kingdom All Their Own: New York State 's Industrial Development Agencies (1992), pp. 15, 16.
39. See testimony of District Union Local One of the United Food and Commercial Workers (Report to the Assembly and Senate Joint Committee on Local Government, Syracuse, NY October 3, 1991), p. 3 (reproduced in F. Pordum, Time for a Change); Franz Leichter, A Kingdom All Their Own: New York State 's Industrial Development Agencies (1992), pp. 15, 16.
40. See testimony of District Union Local One of the United Food and Commercial Workers (Report to the Assembly and Senate Joint Committee on Local Government, Syracuse, NY October 3, 1991), p. 3 (reproduced in F. Pordum, Time for a Change); Franz Leichter, A Kingdom All Their Own: New York State 's Industrial Development Agencies (1992), pp. 15, 16.
41. Pordum, Time for a Change, p. 2.
42. Our estimate of $39,000 for the per-job cost of IDA activity from 1987 through 1991 is probably an underestimate. The $1.373 billion in lost tax revenues from 1987 through 1991 is due, in part, to IDA activity prior to 1987 and is not just a consequence of IDAactivity from 1987 through 1991. In this sense, $39,000 may overstate the per-job cost of IDA activity from 1987 through 1991. On the other hand, the IDA tax breaks granted in 1987 through 1991 will continue to cause property and income tax revenue losses for many years - in the case of some projects, for 30 years. In this sense, $39,000 may understate the per-job cost of IDA activity from 1987 through 1991. However, given that (1) the annual volume of bonding activity from 1987 through 1991 was, on average, much greater than it was in earlier years and (2) property tax rates have been steadily rising, it is probable that $39,000 is an underestimate of the per-job cost of IDA activity from 1987 through 1991.
43. Chapter 356 of the Laws of 1993: "An Act to Amend the General Municipal Law and the Public Authorities Law in Relation to Industrial Development Agencies."