What is an IDA?
IDA is an acronym for Industrial Development Agency or Authority. So, for example, COIDA is an acronym for County of Otsego Industrial Development Agency. IDAs were created in the State of New York back in 1969 for the express purpose of developing industry within an IDA’s particular jurisdiction.
An IDA is created by legislation (the Otsego IDA was created by an act of the Otsego County Board of Representatives in 1973). It is a public benefit agency. There are actually quite a lot of public benefit agencies and authorities and we’re sure you’ve heard of some of them — like the Port Authority of New York and New Jersey, New York City’s Metropolitan Transportation Authority, and the New York Power Authority.
One of the biggest differences between being a department of the county government and being a public benefit agency is that an IDA is not funded with taxpayer dollars. Agencies like IDAs get their operating budgets from service fees and administrative fees. Fairly often, some portion of their programming budgets come from various kinds of State and Federal grants.
What does an IDA do?
An IDA does economic development. Its main purpose is to create well-paying jobs for the area it serves.
More specifically, since IDAs were originally created to “develop industry” in a certain jurisdiction, thereby creating jobs there, the kinds of projects most IDAs work with are large-scale projects. In addition, the kinds of tools that IDAs are statutorily armed with are not really worthwhile to small businesses because of the fee structure involved. IDAs can offer eligible businesses:
- Sales and use tax exemptions during the construction phase of a project;
- Mortgage recording tax exemption in cases where a real estate purchase is financed as part of the project;
- Property tax abatements (these usually come with PILOTs, which we’ll explain in an upcoming article); and
- Tax-exempt bonds.
These incentives essentially reduce the cost to a business of locating in a certain taxing jurisdiction, bringing jobs and (one hopes) increased cash flowing through the local economy.
Another thing IDAs can do is buy, own and sell real estate. For example, the Otsego IDA owns the site of the former National Soccer Hall of Fame, and some land within the Pony Farms Industrial Park. Owning land allows an IDA to perform all the preliminary legwork to get a site “shovel-ready” for business development, which encourages private-sector investment in our communities.
Who is a typical IDA client?
A typical IDA client is a company looking to expand operations in the IDA’s jurisdiction, or to relocate there.
Over the years, of course, there have been changes made in allowable clientele for IDAs, as is explained in this excerpt from the article “What is an IDA?” by Tracy Verrier:
Currently, IDAs are not able to provide incentives that would relocate or replace a manufacturing or industrial facility from one part of New York State to another, or to retail projects unless certain conditions apply. IDAs may only provide incentives to retail projects if they are tourism destinations (meaning they will bring many visitors from outside of the region), they are providing a good or service that is not already reasonably available within the community, or they are located or locating in an area with poverty rates exceeding a specific level.
Beyond that … in general, jobs are the name of the game. Firms interested in receiving any or all of the various kinds of assistance available to IDAs need to fill out an application (usually found on the IDA’s website) with information about the company, the project, costs and other financial projections, and (very important) job creation projections. In a sense, you might say that companies earn these tax incentives by bringing employment and upping the flow of cash through the communities into which they move.