The one-percenters

For the first time, the Ulster County Industrial Development Agency intends to ask local agencies and organizations to compete for $75,000 or more to provide job-creating services to new or existing businesses in 2017. Jan. 31, 2017 is the tentative due date for responses to the proposed request for proposals.

For at least the past 15 years, IDA funds have been awarded in a less formal way. The Woodstock-based Hudson Valley Film Commission and the Hudson-based Hudson Valley Agribusiness Development Corporation have been recipients of annual IDA funding for many years. They appear before the IDA, make their pitches and get awarded the money. Other grantees have been one-shots or more sporadic in nature. Is this the best way to distribute IDA funds?

Probably not. At its October meeting, the IDA firmed up its new policy for existing recipients. Chairman Mike Horodyski warned, “The top end is probably what was provided last year.” The implication was that what would be awarded could be less than the top end.

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Almost the entirety of the IDA’s funding comes from the 1 percent of project costs it charges applicants as its fee for the multi-year reduction in property taxes and the forgiveness of other costs they get for creating new jobs or retaining existing jobs. “That’s how we gathered the $400,000 plus change we have now,” explained Horodyski.

Because of Ulster County’s prolonged slowdown in job-creating activity in the past few years, there have been very few IDA applicants. The IDA’s bank accounts have been severely diminished. The $75,000 it projects distributing in 2017 will come from these accounts, which the IDA hopes will be replenished with fee income from new projects.

The one percent fee in some other counties have been fattening the coffers, allowing for more spending on economic development. The Orange County IDA has more than ten million dollars in its bank accounts, with much more from new projects (Lego, Brooklyn Brewery) not a sure thing but in the pipeline.

Vinnie Cozzolino appeared before the Ulster IDA’s Nov. 9 meeting to ask for $20,000 as part of a proposal for setting up and equipping a food processing facility next year in partnership with the Arc of Ulster-Greene. The venture would provide ready-to-use equipment, a trained workforce and management and other support services, he explained.

Horodyski encouraged Cozzolino to return with a more detailed proposal at the next IDA meeting. Significantly, the IDA chair ventured the thought that he saw funding for this project as separate from the $75,000 IDA pot being proposed for 2017. No other member commented on that position.

Cozzolino has been involved with the Hudson Valley economy his entire adult life. With an associate’s degree from SUNY Ulster and two bachelor’s degrees from SUNY New Paltz (in physics in 1983 and in electrical engineering in 1989), Cozzolino worked for IBM for 30 years, holding significant management positions. He retired from IBM in 2007 to found The Solar Energy Consortium. As CEO of Fala Technologies from 2010 to 2014, he broadened his involvement with advanced manufacturing and in 2013 founded the Center for Global Advanced Manufacturing.

The next year he co-founded and became managing partner of a Kingston-headquartered consulting and management firm called Galileo Technology Group, which among other things has a management contract to run the Orange County Business Accelerator at Stewart Airport. Galileo gets a $100,000 annual fee from the Orange IDA.

That accelerator without walls brings consulting services and equipment to companies struggling with problems threatening their survival. It’s being funded by $220,000 from fees collected by the Orange IDA. It also has received state grants.

According to its website, the Orange Cozzolino-managed accelerator “takes great pride in supporting the food cluster and what it means to enhance this thriving market.” It provides the means, the website explains, to expand small producers “into a space equipped with today’s modern food processing needs.” The artisan foods manufacturing facility can “help your small business grow with quality, consistency and authenticity.”

The withdrawal of state funding to support an Arc operation resulted in the closure of a food processing operation similar to that which Cozzolino is now proposing.

Cozzolino has ties to several Ulster County manufacturing businesses, such as Sono-Tek in Milton and the Highland lighting manufacturers Zumtobel and Selux.

He’s well-placed politically. Among other responsibilities, he serves as chairman of the state Workforce Investment Board, which involves him in major issues of workforce development. He’s also a member of the state-created Mid-Hudson Regional Economic Development (REDC) Council.

Four projects were on the November agenda on the IDA website the evening before the meeting. By the time of the meeting at eight o’clock the next morning, one, an accommodations and “agri-tourism business facility” called The Greenhouses proposed by Doug Posey in April for Brunswyck Road in Shawangunk, had been removed from the agenda. Costs for that unpresented project were estimated at $2.556 million, meaning among other things the IDA fee would have been $25,560.

A second involved a change in the ownership entity for the Institute of Family Health offices on Main Street in New Paltz. Since it was only a paper transaction, the IDA approved the assignment unanimously. No IDA fee.

The agency board voted unanimously to authorize IDA support for the Star Estate Development Group, LLP’s plans for a distillery and restaurant off Route 9W in Esopus, followed in a later phase by a boutique hotel on the same property. Principals Charles Ferri and Paul Seres outlined their plans, for which they have local approval from the Town of Esopus. Papers show project costs of $5,606,381, meaning an IDA fee of $56,063.81.

Chris Silva of the Bardavon 1869 Opera House outlined plans for a $4.76 million capital project to provide air conditioning and other improvements at its Ulster Performing Arts Center (UPAC) on Broadway in Midtown Kingston. The transformative project would, if successful, shore up UPAC’s finances and be a major asset for the Midtown Arts District. The income side of the project is contingent, however, on a state grant that is not a sure thing, on cash from operating income, and on securing an investor to buy about $1.4 million of federal tax credits for historic properties.

In order to get the tax credits, the facility would temporarily become for-profit, meaning it would need an exemption from various taxing authorities such as the school district, the county and the City of Kingston. A committee of the Kingston Common Council may vote on a tax exemption this week.

Silva’s request that he’d like the IDA to re-invest part or all of its fee to the cause proved awkwardly timed. Chairman Horodyski indicated that he himself had “a lukewarm response at best to that request.” He said the agency wanted to hear from the other jurisdictions.

There is one comment

  1. Paul Brown

    The “1 percent of project costs it charges applicants as its fee for the multi-year reduction in property taxes and the forgiveness of other costs they get for creating new jobs or retaining existing jobs.” represents a serious flaw in the entire IDA funding methodology.

    In order to survive themselves the IDA board members must approve projects which reduce property taxes for businesses and transfer the tax burden to individual tax-payers. The “one-percent” fee acts as an incentive for board members to look more favorably upon projects, especially expensive ones. The ‘one-percent’ creates a bias toward project approval that can cloud the judgment of board members.

    Once the IDA gets the one-percent, they then give part of it away to other businesses. Now the IDA admits that as funds shrink, the past methodology of giving away funds was flawed. As public scrutiny from the NYS Comptroller’s office increases more and more problems are being uncovered with the methodologies and functioning local IDAs, such as the Ulster County IDA.

    Just last week, “All but one member of the Town of Hempstead Industrial Development Agency stepped down from their seats on Monday, pre-empting Town Supervisor Anthony Santino’s movement to remove them.” As the ‘heat in the kitchen’ of closer scrutiny increases around New York State, you can expect to see more board members resigning and ‘getting out of the kitchen’. The meals being prepared in those kitchens are tainted and unfair to taxpayers. Whatever conditions existed almost 50 years ago in 1969 when IDAs were made possible by an act of the NYS legislature have long since changed. IDAs and the projects they have subsidized with taxpayer monies have simply not produced the jobs they were promised to produce.

    In New Paltz, the new Hampton Inn was built the old-fashioned way. Entrepreneurs risked their own capital and constructed a wonderful new hotel. New Paltz and New Paltz Central School District taxpayers were not asked to subsidize the profits of the entrepreneurs. The risk-reward formula worked.
    In other Ulster County and Orange County Towns, taxpayers have subsidized the profits of private developers? Why? It makes no sense.

    It is time for the Ulster County Legislature to take a serious look at the need for the existence of the Ulster County IDA.

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