Recently a Village resident asked some questions on Industrial Development Agency (IDA) and Tritec. Here’s what I learned.
The Industrial Development Agencies (IDA) are supported/sponsored
by NYS authority, see:
http://www.osc.state.ny.us/localgov/pubs/research/idabackground.pdf.
Suffolk County and the Town of Brookhaven both have IDA’s. Patchogue does not
have an IDA. Tritec worked with Suffolk County (see http://www.suffolkbetterforbusiness.com/business-community/suffolk-county-ida/index.php)
The IDA has various programs/incentives to encourage businesses to develop projects in an area. One of the programs is real estate tax abatement. This abatement incentive is negotiated when the developer/investor is taking substantial risk and is willing to invest large sums. The abatement reduces the risk somewhat by allowing investors to gradually ramp up to the fully assessed tax burden on the property value they've created. The obvious benefits to the municipality are an increased tax assessment on the development and increased tax assessments on adjacent legacy properties affected positively by gentrification; the initial investment becomes the catalyst for more investment and a wider tax base for the municipality.
Tritec requested and received various tax abatements for the development of New Village in Patchogue from the Suffolk County IDA. A tax abatement means that the owner of a property does not pay the taxes on the full assessed valuation on a property until some point in the future. Starting day one, upon ownership of a property, the developer pays property taxes as if the property was not developed. This figure is likely the same tax levy that was in place prior to acquiring the property. The developer pays at this rate until the property gets a new “Certificate of Occupancy” after the development is completed and ready to be occupied. When the “Certificate of Occupancy” is issued, a new assessed valuation is determined by the government, in this case the Village of Patchogue and Town of Brookhaven. The tax abatement becomes effective at this point in time. The abatement for Tritec is different for the residential and commercial sections of the development.
For the commercial sections, the retail and office space, a ten-year abatement was granted. The commercial abatement requires the developer/investor to pay the base tax levy that they were paying plus 50% of the tax due on the increase in assessed valuation in the first year after the property enters the tax rolls. The percentage increases by 5% each year for 10 years when the owner/developer pays 100% of the taxes due.
For residential sections, a fifteen-year abatement was granted. The residential abatement requires the owner/developer to pay the base levy for the first five years. After five years, in year 6, the levy increases by 10% of the taxes due on the increase in assessed valuation. In each of the subsequent years for the remaining years, the levy increases by 10% and reaches 100% after 15 years, 5 years with no increase and ten (10) years with 10% increases each year (year 6 = 10%, year 7 = 20%, year 8 = 30%, etc.
The Village of Patchogue (and Town of Brookhaven) will receive no less than they received before the development, and the tax received will increase each year for 15 years.
Here’s an example.
(Author's Note: Sorry about the spacing here!)
Base Tax
$1,000
Increase in Tax after Occupancy
$10,000
Based on new Assessment
Total
$11,000
Year 1
Year 2
Year 3
-------
Year 9
Year 10
Year 11
Commercial Property Tax
$6,000
$6,500
$7,000
$10,000
$10,500
$11,000
Abatement on New Assessment
50%
45%
40%
10%
5%
0%
Year 1
-
Year 5
Year 6
Year 7
Year 14
Year 15
Year 16
Residential Property Tax
$1,000
$1,000
$1,500
$2,000
$10,000
$10,500
$11,000
Abatement on New Assessment
100%
100%
95%
90%
10%
5%
0%
Does the IDA have jurisdiction over our Village in regard to taxation? Yes
Is our Village compensated by IDA for the loss of revenue due to their decision? No
Did the Village participate in the process of reviewing and granting the Tritec application to the IDA? No
