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Editorial: Go slow on tax breaks
The Independent
04/18/2008
WHO DESERVES BLAME for the rotten economy? How about greedy, sub-prime mortgage lenders? Or why not the Federal Reserve? Don't forget China, climate change, video games, fast food, big oil and the war in Iraq. Widewaters, too.
Well, probably not Widewaters, although the way some people feel about the company, you'd think it was the master of economic doom. Widewaters plans to build the $73-million Greenport Commons, a multiple big-box shop-opolis with 565,000 square feet of retail space off Route 9 in northern Greenport.
Until last year the company insisted it would not seek any tax breaks for the project. But last week a Widewaters official said that a worsening economy meant the company had to cut costs. Guess what followed.
Widewaters now wants a deal that would lower its property tax payments substantially over the next decade. It also wants a holiday from paying sales tax on construction materials and no bill from the county for its mortgage tax. In effect, the company has asked town and the county taxpayers, through the county Industrial Development Agency (IDA), to become partners in this enterprise.
A few years ago, in rosier economic times, the company built a plaza in Kinderhook, with the Hannaford supermarket as the anchor tenant. That project generated intense opposition from some local residents. Although the residents failed to stop that plaza, their efforts did improve the plan. Today, the community has a popular, well-constructed shopping area that appears to complement the economic vitality of nearby Valatie. Widewaters did not ask for or receive tax breaks for that project.
Critics fault Widewaters for changing its mind about tax breaks in Greenport. So? Do you know anyone who hasn't changed his or her mind once in a while, especially when conditions take a turn for the worse? Only nincompoops and oil companies wouldn't look for ways to reduce expenses these days.
State law gives Widewaters the right to have its property taxes "structured" over the next decade, so that its tax burden starts at around half of the normal amount, with the payment gradually increasing to the full price after 10 years. All businesses that build large projects are entitled to this, so it seems unfair to fault Widewaters for playing by rules it didn't make.
By contrast, the company's request for sales and mortgage tax exemptions brings up another matter: fairness. Widewaters has said it would like to have a Lowe's home improvement store as one of its tenants. But Dunn's, a local company just down Route 9 from the plaza site, sells many of the same items. Herrington's, another local firm, plans to purchase Dunn's. If Widewaters receives sales and mortgage tax breaks, it means the people of this county may end up subsidizing a chain store that will draw business away from local firms that have made substantial economic and social contributions to this community. If Lowe's sees an opportunity, let it open a store here and compete. But why should government intervene in the marketplace to favor one competitor?
The carrot held out to the IDA is money. Widewaters predicts the county will receive over $5 million in new sales tax revenues from this project. At the same time, the company admits the economy has faltered. It has approached lots of chain stores, but only Wal- Mart, which will move from just across the highway, has signed up. Small wonder. The New York Times reported this week that two of the first five retail chains that Widewaters lists as possible tenants—Lowe's and J.C. Penney—have announced cutbacks or delays in opening new stores. Other chains in the list face even bigger problems.
Times are tough, but Widewaters started Greenport Commons because it thinks it can make money here. If the company calls it quits, the economy will be the culprit, not a lack of tax abatements. If the project succeeds, taxpayers should reap the full benefit rather than surrender revenue to more tax breaks.
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