Subsidy Sheet: Rochester Suffers, Amazon Gets Subsidies
19 School Kids Have Been Shot in Rochester This Year. Just Across the Erie Canal, an Amazon Warehouse Gets a $150m Tax Break.
In January of this year, the County of Monroe Industrial Development Agency (COMIDA) approved $134 million in tax abatements for a new Amazon warehouse and distribution center in the tiny town of Gates, NY along the Western border of Rochester. In April, the deal was modified to $150 million. Under the deal, Amazon receives sales, property and mortgage tax exemptions in return for exclusively hiring workers from the region to build the facility – an agreement that Amazon is now trying to back out of, according to Rochester City Newspaper.
Meanwhile the superintendent for the Rochester City School District – just across the Erie Canal – announced that six district students had died and 13 had been injured from gun violence over the past several months (Democrat & Chronicle). These deaths, the story noted, came not long after a quarter of the district’s social workers were eliminated from the City’s budget.
The Amazon facility in tiny Gates (pop. 28,000) will deliver to Amazon customers in bordering Rochester (pop. 205,000). Gates is also home to the HQ for Wegmans, the Upstate supermarket giant. It’s common for American cities to be bordered by very small local governments that have lower commercial taxes – often carved out by businesses – and their own schools and police. Gates has an annual budget of about $10 million, including a $3.5 million police force, and is part of a suburban school district.
Except for NYC, cities in New York are located within counties and surrounded by small localities. These county governments all have Economic and Industrial Development Authorities (IDAs) which have borrowed billions and abated billions more in property and business taxes. These county IDAs do not fund cities – they siphon away tax dollars and jobs from center cities that are struggling to fund schools and other basic services. Good Jobs First’s March 2021 report, Abating Our Future, was an excellent breakdown of just how much these subsidies cost students (we wrote about it here).
Raising Capital Gains Taxes Could Sweeten Opportunity Zone Deals
President Biden recently announced a plan to raise the top capital gains tax rate from 20% to 39.6%. Many progressives hailed the announcement as a step forward for fighting income inequality, but one under-read Bloomberg article noted a potential unintended side effect: more Opportunity Zone tax breaks.
Under the Opportunity Zone (OZ) program, investors receive tax breaks for reinvesting their capital gains in certain lower-income or high-poverty tracts. If the capital gains tax is higher, this means investors will also reap more from the tax break. It’s also possible that more investors will seek out OZ investments to shelter themselves from the higher tax rate. (See our writing on NY’s OZ decoupling here.)
Unfortunately, the OZ program has virtually zero transparency measures in place, so if Biden’s plan is enacted, we may never know what impact it has on the program.
Other subsidy news
- Reinvent Albany and five watchdog groups sent a letter to Empire State Development urging them to publish the database of deals (view the letter here). It has not yet been published, but while you’re waiting, check out our timeline of the push for the database.
What we’re reading
- Indiana’s state economic development arm refuses to say how much in incentives it offered Amazon for HQ2, Pat Garofalo writes at Boondoggle. Thank you for the shout-out, Pat!
- Propmodo writes about enormous state economic development subsidies, particularly in Texas, and the cost to taxpayers.
- A good, quick Good Jobs First thread about how an “accidental” OZ helps big business.
- The Buffalo News Editorial Board thinks the state was justified in giving Tesla an extension to meet the job-creation requirement. The state gave away nearly a billion for 1,460 jobs.
- The title says it all: “Foxconn Finally Admits Con” (American Prospect).
Hat tip to Kasia Tarczynska at Good Jobs First for pointing out to us that Amazon’s COMIDA deal was modified to $150 million.
If you got this from a friend, sign up here. Subsidy Sheet is written by Tom Speaker, Policy Analyst at Reinvent Albany. Please send questions and tips to tom [at] reinventalbany.org. We look forward to hearing from you!