Monthly Archives: October 2013

Payment in Lieu of Taxes (PILOT) by Randy Hurst

There is much debate about commercial property tax abatements such as PILOT (Payment in Lieu of Taxes) agreements and mortgage tax, sales tax exemptions and other financial incentives, e.g., lease agreements, as a means to attract businesses and foster job creation here in Orange County and New York State as well.  This week, it was brought up at the debate for Orange County Executive at the Chester High School and both candidates echoed the pros and cons.  There were questions about the actual benefit.  It is often pointed out that these tax reduction incentives generate only a fraction of the taxes larger corporations would otherwise be required to pay relative to their profit margins. Many corporate entities pay less per square foot then we pay for our homes. These projects claim to bring needed revenue, construction jobs and permanent jobs to the area but research demonstrates that these claims rarely, if ever, materialize. Moreover, while larger corporate projects reap tax benefits, small businesses, which are the “backbone” of our economy as well as “existing smaller businesses” that currently provide employment, see little or no tax relief and, thus, have no “incentive” to come here or stay.

In a study, entitled, “Examining the Feasibility of Converting New York State’s All-Purpose Energy Infrastructure to One Using Wind, Water and Sunlight” Dr. Mark Jacobson, a senior fellow of Stanford Woods Institute for the Environment and the Precourt Institute for Energy, with Cornell University Professor of Engineering, Anthony Ingraffea, Cornell Professor of Ecology and Evolutionary Biology, Robert W. Howarth, and Mark Delucchi, a research scientist at the Institute of Transportation Studies at UC Davis, among other notable scholars demonstrated among other things that the Shale Gas and Energy Industry frequently exadgerates the need for their facilities, overestimate the economic benefits of their projects, while understating the adverse environmental and consequent economic losses, which are borne by taxpayers.

Orange County’s IDA (Industrial Development Agency) works with local municipalities, such as Wawayanda and Middletown to bring new businesses to our communities ostensibly to improve the economy.  The Competitive Power Ventures (CPV) Valley Energy Center to be located between Route 6 and I84 on 120 acres of  farmland is an example.

In fact, it may prove to illustrate exactly the concerns people are raising and scholarly research is bearing out.  It also raises the question as to whether the Orange County IDA and our present municipal leaders have the capacity to represent the interests of their constituents, or whether they are willing to sacrifice the future of our communities for short lived false promises.

Excerpts from a press release issued by Competitive Power Ventures in regard to their Sentinel Energy Center project in southern California state, “The CPV Sentinel project is located near Desert Hot Springs, five miles northwest of Palm Springs. . . .The project will provide an estimated $30 million in sales tax during construction and an estimated $6.4 million in annual property taxes once operational.”  Given the projected 30-year operational life expectancy of the plant, CPV’s Sentinel project would, thus, generate approximately $222 million dollars in tax revenue during that period for that community, which if true, seems wonderful.

On the other hand, in another excerpt regarding their Valley Energy project in the Town of Wawayanda,  CPV’s press release declares: “The project will also provide more than $30 million in local tax revenue, with the majority going to the local school system, which has been hit hard, in recent years by budget cuts.”  Efforts to glean factual information regarding the status of the “Deal” CPV has negotiated with Wawayanda Town Supervisor Rozzano, Town Board Members and representatives of the Orange County IDA have proven fruitless.  Both Supervisor Rozzano and OCIDA representatives have stated that the “deal” has not been finalized and thus is not available for public scrutiny or FOIL request.

However, last month with minimal public notice, the OCIDA held two “public hearings”  on the same day, one in the morning at Wawayanda Town Hall and the other at Middletown’s Thrall Library in the afternoon,  to entertain public comment regarding a proposed OCIDA purchase/lease back arrangement of the proposed project property to CPV, Mortage Tax Exemption and Sales Tax Exemption.  Two town residents who learned of the hearing presented testimony opposing these additional  financial and tax considerations at the morning hearing and one opposed in the afternoon; no town resident spoke in favor of these proposals.

If it is not too late, it would be prudent for present town leaders to take another  harder look at the “deal” being negotiated and reconsider if, given the green house gases and toxic pollution the proposed power plant will emit on an annual basis, the adverse impact on the health and welfare of our community, our quality of life and property values, are really worth it.

An additional consideration should also be subject to re-negotiation.  CPV promises to provide many construction jobs over the 30 months of construction planned for their facilities and 25 permanent jobs once the plant is operational.  However, based on current information and understanding, there is nothing in contract that would require them to actually deliver the quoted number of jobs.  Yet they would still reap the tax benefits of the “deal” they negotiated; if the promised jobs do not materialize, it would seem “fair” for CPV to be subject to additional taxation and/or re-negotiation of the “deal”.

In addition to the CPV Valley Energy shale gas and diesel fueled power plant recently approved by the Wawayanda Planning Board, with variances provided by the Wawayanda Zoning Board of Appeals, two other large industrial are in the works. One is the Brookline car crushing and metals recycling facility to be located on Dolsontown Road.  Another already approved and operating is a heavy industrial equipment training school that will pay little or no taxes, as it is a not-for-profit organization. All of these projects are in or near residential neighborhoods.  All will produce numerous health and safety hazards as well as adverse environmental impacts that we the taxpayers must endure.  All will cause property values to decline further than they already have.

While our elected officials justify the industrialization of our town by claiming that “they” are delivering “ratables,” the tax “deals” would seem to argue otherwise and the projects jeopardize not only our health and safety but also the rural residential and agricultural character of our town. We are against projects such as these. Many of us would like to see “ratables” more consistent with the character of the town we have cherished so many years. And, we say NO PILOT AGREEMENT or mortgage and sales tax exemptions for corporations that can easily afford to pay their fair share of the tax burden.  Giving away our tax base only produces less revenue, which in turn means higher taxes for all property owners.

We need to end the practice of PILOT AGREEMENTS  and

TAX ABATEMENTS for these industrial “ratables.”


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