Some initial thoughts on Tax-Free NY

Gov. Cuomo's somewhat dramatic announcement of Tax-Free NY today has added a new wrinkle to New York's economic development climate.  More information on Tax-Free NY.  While the program may have a significant impact in a few small areas of the state, it will not address most of the key problems facing Upstate New York.

The Proposal:

• The proposal would create "tax-free communities" at and around SUNY campuses, private colleges and certain state owned properties.
• Qualifying businesses located in these tax-free communities would be exempt from sales tax, property taxes and business/corporate taxes.
• Employees working at these businesses would not pay income tax.

Comments:

• While the overall footprint is large (an asserted 120 million square feet), with campus space often very limited, the available footprints may be limited, perhaps primarily the proposed 200,000 sf around SUNY campuses (of which there are 64) and one would expect a similarly limited scope around private colleges and the designated state properties.  Some important questions: (1) Who will decide what 200,000 sf will be designated? (2) Will this become a bonanza for certain strategically located real property owners? (3) Will 200,000 sf allocated to a campus surrounded by residential neighborhoods go to waste? (4) How will rural schools utilize 200,000 sf? (5) Will SUNY institutions and private colleges become the landlord of choice for businesses of all shapes and sizes?
• What impact will this have on the local property tax base?  A 200,000 sf development could have a significant impact on local services in some of the smaller college-towns.  Without property taxes from private enterprise, how will this burden be funded?
• What impact will this have on existing (but excluded) businesses?  Is it fair to subject a long-standing local business (that has been paying sales taxes, property taxes and income taxes and supporting the local community for years) to contrived competition from a business free of the hassle of paying taxes?
• How much of a say will local officials have in defining the designated areas and the types of businesses receiving the benefits?

Conclusions:

It is reassuring that state government is recognizing the economic development hurdles faced by Upstate New York.  Since 2005, economic development efforts Upstate have been, in general, under attack in Albany.  The tide may be turning.  However, the proposal seems to fall far short of what Upstate needs.  Since the demise of the Empire Zones Program, there has been little concerted, strategic effort invested in improving Upstate's distressed urban areas.

Tim Lynn
tim@bhlawpllc.com
(315) 701-6426