More Questions Needed Before Granting Abatements
It is unfortunate that Rae Foods in Westfield has closed its doors a little more than a year after opening.
The pierogi maker opened its doors in 2014 to great fanfare. Rae Foods was going to bring 50 new jobs to the area over five years. The county Industrial Development Agency approved a 10-year Payment in Lieu of Tax schedule that went beyond the IDA’s standard tax exempt policy; $640,000 in AL Tech Revolving Loan Fund financing for working capital, machinery and equipment; abatement of sales tax during the construction period and also abatement of the mortgage recording tax. Additional economic incentives were also approved by Empire State Development.
Those incentives and breaks kept Rae Foods afloat for roughly 13 months. It is a blow to Westfield, which could have used a decent-sized taxpaying business. It is a blow to the county IDA, which is now sitting on more than a half a million dollars of unpaid loans. It is a blow to a workforce in Chautauqua County that is crying out for work.
Rae Foods’ closure doesn’t mean the IDA shouldn’t give incentives to business. Tax incentives are sometimes necessary to entice businesses to locate in New York state, especially given New York state’s high-tax, high-regulation environment. Much good development wouldn’t have happened without the availability of incentives of one sort or another.
That doesn’t mean area development officials shouldn’t ask some very pointed questions before approving incentives. A business closing in less than a year shines a light on a business plan that must have had some holes. It would certainly appear the company was under-capitalized. Much like the Saturn Petcare debacle, we wonder how development officials at all levels didn’t see the flaws coming. It is important that incentives and tax breaks be given to projects that actually have a chance of success because every dollar of a tax exemption or abatement is a dollar that has to be made up by other taxpayers or is simply lost to the local government, in the case of sales taxes or mortgage recording taxes. It is lost money that has to be recovered on the backs of neighbors’ property taxes.
It’s wonderful to be able to say yes when a new business comes knocking. Sometimes, it makes more sense to say no.