IMPORTANT NOTICE: The answers to the questions contained in this application are necessary to determine your firm’s eligibility for financing and other assistance from the Town of Bethlehem Industrial Development Agency. These answers will also be used in the preparation of papers in this transaction. Accordingly, all questions should be answered accurately and completely by an officer or other employee of your firm who is thoroughly familiar with the business and affairs of your firm and who is also thoroughly familiar with the proposed project. This application is subject to acceptance by the Agency.
Uniform Tax Exempt Policy
SECTION 1701.PURPOSE AND AUTHORITY.Pursuant to Section 874(4) (a) of Title One of Article 18-A of the general municipal Law (the “Act”), Town of Bethlehem Industrial Development Agency is required to establish a uniform tax exemption policy applicable to the provision of any financial assistance of more than one hundred thousand dollars to any project.
SECTION 1702.DEFINITIONS.All words and terms used herein and defined in the Act shall have the meanings assigned to them in the Act, unless otherwise defined herein or unless the context or use indicates another meaning or intent. The following words and terms used herein shall have the respective meanings set forth below, unless the context or use indicates another meaning or intent:
(A)“Administrative fee” shall mean a charge imposed by the Agency to an applicant or project occupant for the administration of project.
(B) “Agency fee” shall mean the normal charges imposed by the Agency on an applicant or a project occupant to compensate the Agency for the Agency’s participation in a project. The term “Agency fee” shall include not only the Agency’s normal administrative fee, but also may include (1) reimbursement of the Agency’s expenses, (2) rent imposed by the Agency for use of the property of the Agency, and (3) other similar charges imposed by the Agency.
(C) “Applicant” shall mean an applicant for financial assistance.
(D) “City shall mean any city located in the county.
(E) “County” shall mean the county of Albany.
(F) “PILOT” or “Payment in Lieu of Tax” shall mean any payment made to the Agency or an affected tax jurisdiction equal to all or a portion of the real property taxes or other taxes which would have been levied by or on behalf of an affected tax jurisdiction with respect to a project but for tax exemption obtained by reason of the involvement of the Agency in such project, but such term shall not include Agency fees.
(G) “School District” shall mean any school district located in the county.
(H) “Tax Exemption” shall mean any financial assistance granted to a project, which is based upon all or a portion of the taxes, which would otherwise be levied and assessed against a project but for the involvement of the Agency.
(I) “Town” shall mean any town located in the County.
(J) “Village” shall mean any village located in the county.
SECTION 1703.GENERAL PROVISIONS.(A) General Policy.The general policy of the Agency is to grant tax exemption as hereinafter set forth to any project which has been or will be financed by the issuance by the Agency of bonds, notes or other evidence of indebtedness with respect thereto.
In determining whether an applicant is eligible for financial assistance, the Agency considers the following general factors:
- 1.The nature of the proposed project (e.g., manufacturing, commercial)
- 2.The nature of the property before the project begins (e.g., vacant land, vacant buildings)
- 3.The economic condition of the area at the time of the application
- 4.The extent to which a project will create or retain permanent, private sector jobs
- 5.The estimated value of tax exemptions to be provided
- 6.The impact of the project and the proposed tax exemptions on affected tax jurisdictions
- 7.The impact of the proposed project on existing and proposed businesses and economic development projects in the Town of Bethlehem
- 8.The amount of private sector investment generated or likely to be generated by the proposed project
- 9.The likelihood of accomplishing the proposed project in a timely fashion
- 10.The effect of the proposed project upon the environment
- 11.The extent to which the proposed project will provide additional sources of revenue for the municipalities and school districts in which the project is located
- 12.The extent to which the proposed project will provide a benefit (economic or otherwise) not otherwise available within the Town of Bethlehem
- 13.Whether affected tax jurisdictions shall be reimbursed by the project occupant if a project does not fulfill the purposes for which an exemption was provided
- 14.The demonstrated public support for the proposed project
- 15.The extent to which the proposed project will require the provision of additional services, including but not limited to additional education, transportation, policy, emergency medical or fire services
- 16.Whether financial assistance is necessary in order for the applicant to undertake the project
(B) Exceptions.The Agency reserves the right to deviate from such policy in special circumstances. In determining whether special circumstances exist to justify such a deviation, the Agency may consider factors which make the project unusual, which factors might include but not be limited to the following factors: (1) the magnitude and/or importance of any permanent private sector job creation and/or retention related to project; (2) whether the affected tax jurisdictions will be reimbursed by the project occupancy if the project does not fulfill the purposes for which tax exemption was granted; (3) the impact of the project on existing and proposed businesses and/or economic development projects; (4) the amount of private sector investment generated or likely to be generated by the project; (5) demonstrated public support for the project; (6) the estimated value of the tax exemptions requested; and (7) the extent to which the proposed project will provide needed services and/or revenues to the affected tax jurisdictions. In addition, the Agency may consider the other factors outlined in Section 874 (4) (a) of the Act.
(C) Application.No request for a tax exemption shall be considered by the Agency unless an application and environmental assessment form are filed with the Agency on the forms prescribed by the Agency pursuant to the rules and regulations of the Agency. Such application shall contain the information requested by the Agency, including a description of the proposed project and of each tax exemption sought with respect to the project, the estimated value of each tax exemption sought with respect to the project, the proposed financial assistance being sought with respect to the project, the estimated date of completion of the project, and whether such financial assistance is consistent with this part.
(D) Removal or Abandonment. If the proposed project involves the removal or abandonment of a facility or plant within the state, the Agency will notify the chief executive officer or officers of the municipality or municipalities in which the facility or plant was located.
SECTION 1704. SALES AND USE TAX EXEMPTION.(A) General.State law provides that purchases of tangible personal property by the Agency or by an agent of the Agency, and purchase of tangible personal property by a contractor for incorporation into or improving, maintaining, servicing or repairing real property of the Agency, are exempt from sales and use taxes imposed pursuant to Article 28 or the Tax Law. The Agency has a general policy of abating sales taxes applicable only to the initial acquisition, construction, reconstruction and/or equipping of each project with respect to which the Agency grants financial assistance. The Agency has no requirement for imposing a payment in lieu of tax arising from the exemption of a project from sales and/or use taxes applicable to the initial acquisition, construction reconstruction and/or equipping of such project, except (1) as described in subsection (E) below or (2) in the circumstance where (a) a project is offered sales tax exemption on the condition that a certain event (such as the issuance of bonds by the Agency with respect to the project) occur by a certain date and (b) such event does not occur, in which case the Agency may require that the applicant make payments in lieu of sales tax to the New York State Department of Taxation and Finance.
(B) Period of Exemption.Except as set forth in subsection (A) above, the period of time for which a sales tax exemption shall be effective (the “tax exemption period”) shall be determined as follows:
(1) General. Unless otherwise determined by the Agency, the tax exemption for sales and use taxes shall be for the tax exemption period commencing with the issuance by the Agency of bonds, notes or other evidences of indebtedness with respect to the project and ending on the date of completion of the project.
(2) Early Commencement. The tax exemption period may, at the discretion of the Agency, commence earlier than the date of issuance by the Agency, of the Agency’s debt relating to the project, provided that (a) the Agency has complied with the requirements of Section 859-a of the Act, (b) the Agency thereafter adopts a resolution determining to commence such period earlier, said resolution to be substantially in the form of Appendix 17A attached hereto, (c) the applicant agrees to the conditions of such resolution and supplies to the Agency the materials required to be supplied to the Agency thereunder, and (d) the (Chairman) (Executive Director) (General Counsel) of the Agency acknowledges satisfaction of all conditions to the granting of such tax exemption set forth in such resolution.
(3) Normal Termination. The tax exemption period will normally end upon the completion of the project. On construction projects, the parties shall agree on the estimated date of completion of the project, and the tax exemption shall cease on the earlier of (a) the actual date of completion of the project or (b) the date, which is six (6) months after the estimated date of such project. On non-construction projects, the parties shall agree on the estimated date of completion of the project, and the tax exemption shall cease on the earlier of (a) the actual date of completion of the project or (b) the date, which is three (3) months after the estimated date of completion of the project. If the Agency and the applicant shall fail to agree on a date for completion of the project, the Agency shall on notice to the applicant make the determination on the basis of available evidence.
(4) Later Termination.The Agency, for good cause shown, may adopt a resolution extending the period for completion of the project and/or extending the tax exemption period.
(C) Items Exempted.The sales and use tax exemption granted by the agency shall normally extend only to the following items acquired during the tax exemption period described in subsection (B) above:
(1) items incorporated into the real property;
(2) tangible personal property including furniture, furnishings and equipment used to initially equip the project or otherwise forming part of the project, if purchased as agent of the Agency;
(3) the rental of tools and other items necessary for the construction, reconstruction and/or equipping of the project, if rented as agent of the Agency; and
(4) office supplies, fuel and similar items consumed in the process of acquiring, constructing, reconstruction and/or equipping the project, if purchased as agent of the Agency.
(D) Items Not Exempted.A sales and use tax exemption shall not be granted for the following:
(1) purchases occurring beyond the tax exemption period described in subsection (B) above
(2) repairs, replacements or renovations of the project, unless such repairs, replacements or renovations constitute major capital-type expenses approved by the Agency as a separate project in the manner contemplated by the Act; or
(3) operating expenses, unless such operating expenses constitute major capital-type expenses approved by the Agency as a separate project in the manner contemplated by the Act.
(E) Percentage of Exemption.Unless otherwise determined by resolution of the Agency, the sales and use tax exemption shall be equal to one hundred percent (100%) of the sales and/or use taxes that would have been levied if the project were not exempt by reason of the Agency’s involvement in the project. If an exemption of less than one hundred percent (100%) is determined by the Agency, then the applicant shall be required to pay a PILOT to the Agency equal to the applicable percentage of sales and/or use tax liability not being abated. The Agency shall remit such PILOT within thirty (30) days of receipt by the Agency to the affected tax jurisdictions in accordance with Section 874 (3) of the Act.
(F) Confirmation Letter.The final act of granting a sales and/or use tax exemption by the Agency shall be confirmed by the execution by an authorized officer of the Agency of a confirmation letter by the Agency. Such confirmation letter shall be in the form of either Appendix 17B (where the exemption is permanent, because the Agency is satisfied that any conditions precedent to such tax exemption, such as the issuance of bonds by the Agency, have been satisfied) or Appendix 17C (where such exemption is tentative, because there remain conditions precedent to such tax exemption which have not been satisfied). Each such confirmation letter shall describe the scope and term of the sales and use tax exemption being granted.
(G) Required Filings.The New York State Department of Taxation and Finance requires that proper forms and supporting materials be filed with a vendor to establish a purchaser’s entitlement to a sales tax exemption. For example, TSB-M-87(7) outlines the materials that must be filed to establish entitlement to sales tax exemption as “agent” of the Agency. It is the responsibility of the applicant and/or project occupant to ensure that the proper documentation is filed with each vendor to obtain any sales tax exemptions authorized by the Agency.
(H) Required Reports and Records.Pursuant to section 874(8), the applicant and/or project occupant is required to annually file with the New York State Department of Taxation and Finance a statement of the value of all sales and use tax exemptions claimed under the Act by the applicant and/or the project occupant and/or all agents, subcontractors and consultants thereof. The project documents shall require that (1) a copy of such statement will also be filed with the Agency and (2) that the project occupant shall maintain, for a period ending seven (7) years after the last purchase made under the sales and use tax exemption, and make available to the Agency at the request of the Agency, detailed records which shall show the method of calculating the sales and use tax exemption benefit granted by the Agency.
SECTION 1704.MORTGAGE RECORDING TAX EXEMPTION.(A) General.State law provides that mortgages recorded by the Agency are exempt from mortgage recording taxes imposed pursuant to Article II of the Tax Law. The Agency has a general policy of abating mortgage-recording taxes for the initial financing obtained from the Agency with respect to each project with respect to which the Agency issues debt, which will be secured by a mortgage upon real property. In instances where the initial financing commitment provides for a construction financing of the Agency to be replaced by a permanent financing of the Agency immediately upon the completion of the project, the Agency’s general policy is to abate the mortgage recording tax on both the construction financing and the permanent financing.
(B) Refinancing.In the event that the Agency retains title to a project, it is the general policy of the Agency to abate mortgage recording taxes on any debt issued by the Agency for the purpose of refinancing prior debt issued by the Agency, and on any modifications, extensions and renewal thereof, so long as the Agency fees relating to same have been paid.
(C) Non-Agency Projects.In the event that the Agency does not hold title to a project, it is the policy of the Agency not to join in a mortgage relating to that project and not to abate any mortgage recording taxes relating to that project.
(D) Non-Agency Financing.Occasionally, a situation will arise where the Agency holds title to a project, the project occupant needs to borrow money for its own purposes (working capital, for example), and the lender will not make the loan to the project occupant without obtaining a fee mortgage as security. In such instances, the policy of the Agency is to consent to the granting of such mortgage and to join in such mortgage, so long as the following conditions are met:
(1) the documents relating to such proposed mortgage make it clear that the Agency is not liable on the debt, and that any liability of the Agency on the mortgage is limited to the Agency’s interest in the project;
(2) the granting of the mortgage is permitted under any existing documents relating to the project, and any necessary consents relating thereto have been obtained by the project occupant; and
(3) the payment of the Agency fee relating to same.
(E) Exemption Affidavit.The act of granting a mortgage recording tax exemption by the Agency is confirmed by the execution by an authorized officer of the Agency of an exemption affidavit relating thereto.
(F) PILOT Payments.If the Agency is a party to a mortgage that is not to be granted a mortgage recording tax exemption by the Agency (a “non-exempt mortgage”), then the applicant and/or project occupant or other person recording same shall pay the same mortgage recording taxes with respect to same as would have been payable had the Agency not been a party to said mortgage (the “normal mortgage tax”). Such mortgage recording taxes are payable to the County Clerk of the county, who shall in turn distribute same in accordance with law. If for any reason a non-exempt mortgage is to be recorded and the Agency is aware that such non-exempt mortgage may for any reasons be recorded without the payments of the normal mortgage tax, then the Agency shall prior to executing such non-exempt mortgage collect a PILOT equal to the normal mortgage tax and remit same within thirty (30) days of receipt by the Agency to the affected tax jurisdiction in accordance with Section 874 (3) of the Act.
SECTION 1706.REAL ESTATE TRANSFER TAXES.(A) Real Estate Transfer Tax. Article 31 of the Tax Law provided for the imposition of a tax upon certain real estate transfers. Section 1405 (b) (2) of the Tax Law provided that transfers into the Agency are exempt from such tax, and the New York State Department of Taxation and Finance has ruled that transfers of property by the Agency back to the same entity which transferred such property to the Agency are exempt from such tax. The general policy of the Agency is to impose no payment in lieu of tax upon any real estate transfers to or from the Agency.
(B) Real Property Transfer Gains Tax.Article 31-B of the Tax Law provides for the imposition of a tax upon gains derived from the transfer of certain real estate in New York State. Certain transfers are exempt from such tax. It is the policy of the Agency to comply with the law, and to file the appropriate documentation with the New York State Department of Taxation and Finance to obtain pre-clearance by that department for any documents transferring real property to or from the Agency.
(C) Required Filings.It shall be the responsibility of the applicant and/or project occupant to ensure that all documentation necessary relative to the real estate transfer tax and the real estate transfer gains tax are timely filed with the appropriate officials.
SECTION 1707.REAL PROPERTY TAX ABATEMENT (PILOT)Projects eligible for New York State Empire Zone benefits must first utilize the real property tax benefits associated with the Zoneprogram before seeking real property tax abatement from the Agency.
In NYS, property owners pay a real property tax based upon the assessed value of improvements to a site.For IDA eligible projects, the property becomes 100% exempt from ad valorem real property taxes.In consideration of the local taxing jurisdictions, the IDA enters into a Payment In Lieu of Taxes (PILOT) agreement with the applicant.
(A) General. Pursuant to section 874 of the act and Section 412-a of the Real Property Tax Law, property owned by or under the jurisdiction or supervision or control of the Agency is exempt from general real estate taxes (but not exempt from special assessments and special ad valorem levies). However, it is the general policy of the Agency that, notwithstanding the foregoing, every non-governmental project will be required to enter into a payment in lieu of tax agreement (a “PILOT Agreement”), either separately or as part of the project documents. Such PILOT Agreement shall require payment of PILOT payments in accordance with the provision set forth below.
(B) PILOT Requirement. Unless the applicant and/or project occupant and the Agency shall have entered into a pilot Agreement acceptable to the Agency, the project documents shall provide that the applicant and/or the project occupant shall be required to make PILOT payments in such amounts as would result from taxes being levied on the project by the taxing jurisdictions if the project were not owned by or under the jurisdiction or supervision or control of the Agency. The project documents shall provide that, if the Agency and the applicant and/or project occupant have entered into a PILOT Agreement, the terms of the PILOT Agreement shall control the amount of PILOT payments until the expiration or sooner termination of such agreement.
(C) PILOT Agreement. Unless otherwise determined by resolution of the Agency, all PILOT Agreements shall satisfy the following general conditions:
(1) Amount of Abatement. The general policy of the Agency is not to provide the applicant and/or project occupant with any abatement other than (a) a Standard Abatement or (b) an Enhanced Abatement:
(a) Standard Abatement.This is the standard abatement program that the majority of applicants will be entitled to. The Standard Abatement commences at 50% of the increase in assessed valuation resulting from a project and then declines by 5% per year for a ten year period. This abatement is designed for projects that are eligible for IDA assistance and meet a standard level of economic impact including job creation, business development and tax generation. This abatement program provides abatement against the Town, County and School District taxes throughout the Town.The abatement schedule is as follows:
As with all Agency PILOT programs, the abatement is against the increase in assessed valuation resulting from the completion of the project. It also assumes that the abatement program begins after the completion of construction and a Certificate of Occupancy (CO) has been issued for the project.
A separate application will be used for the Enhanced Abatement program. To be eligible for the Enhanced abatement, an applicant must demonstrate the project’s ability to substantially meet the following criteria:
1.Extraordinary new job creation or capital investment
2.Net new business investment in the Capital Region
3.Reuse or redevelopment of abandoned or underutilized real estate
4.Consistency with the Town’s comprehensive plan recommendations
5.Market penetration; potential for catalytic effect for subsequent projects
6.Consistency with regional target industries
7.Business development that promotes economic diversification
In addition, applicants will be required to submit an economic impact analysis in a form that is acceptable to the Agency that demonstrates the project’s economic benefits based on the Enhanced Abatement schedule. In addition, the application should include information that demonstrates the applicant’s relevant experience in undertaking similar projects, as well as their credit worthiness and financial strength. Also, applicants will be required to indicate that in the absence of the Enhanced Abatement incentive, the project will not proceed.
(2) Special District Taxes. As indicated above, the Agency is not exempt from special assessments and special ad valorem levies, and accordingly these amounts are not subject to abatement by reason of ownership of the Project by the Agency. The PILOT Agreement shall make this clear and shall require that all such amounts be directly paid by the applicant and/or project occupant.
(3) Payee. Unless otherwise determined by resolution of the Agency, all PILOT payments payable to an affected tax jurisdiction shall be assessed, billed and collected directly by the same officials which assess, bill and collect normal taxes levied by such affected tax jurisdiction. Pursuant to section 874(3) of the Act, such PILOT payments shall be remitted to each affected tax jurisdiction within thirty (30) days of receipt.
(4) Enforcement. An affected tax jurisdiction which has not received a PILOT payment due to it under a PILOT Agreement may exercise its remedies under Section 874(6) of the Act. In addition, such affected tax jurisdiction may petition the Agency to exercise whatever remedies that the Agency may have under project documents to enforce payment and, if such affected tax jurisdiction indemnifies the Agency and agrees to pay the Agency’s costs incurred in connection therewith, the Agency may take action to enforce the PILOT Agreement,
(5) Recapture of Tax Exemptions.If the Agency's approval of a project is predicated upon achievement by the project of certain minimum goals such as minimum employment levels, the documents will provide that the tax exemptions granted to the project will be reduced, eliminated or re-captured if, in the sole judgment of the Agency, the project fails to achieve such minimum goals.The events which will trigger a recapture of the tax exemptions are as follows:
(i)failure to complete the acquisition, construction and installation of the Project Facility; (ii)failure by the Company to meet at least eighty percent (80%) of the Employment Level requirements required by the documents; (iii)liquidation of substantially all of the Company’s operating assets and/or cessation of substantially all of the Company’s operations; (iv)relocation of all or substantially all of Company’s operations at the Project Facility to another site, or the sale, lease or other disposition of all or substantially all of the Project Facility; (v)transfer of jobs equal to at least fifteen percent (15%) of the Company’s Employment Level out of the Town of Bethlehem, New York; (vi)failure by the Company to comply with the annual reporting requirements or to provide the Agency with requested information; (vii)sublease of all or part of the Project Facility in violation of the Basic Documents; (viii) a change in the use of the Project Facility, other than the use proposed in the application for financial assistance and other directly and indirectly related uses; (ix) failure by the Company to make an actual investment in the Project by the Project's construction completion date equal to or exceeding 80% of the Total Project Costs as set forth in the Company's application for Financial Assistance.
If a recapture event occurs during construction of the Project or in the first year of the real property tax abatement, the amount of tax exemptions to be recaptured shall be 100% of the actual tax exemptions received by the Company.If the recapture event occurs after the first year of the real property tax abatement, the amount of the tax exemptions to be recaptured shall decline by 10% each year.
If the Agency determines that a Recapture Event has occurred, it shall give notice of such determination to the Company.The Company shall have fourteen (14) days from the date the notice is deemed given to submit a written response to the Agency's determination and to request a written and/or oral presentation to the Agency why the proposed recapture amount should not be paid to the Agency.The Company may make its presentation at a meeting of the Agency.The Agency shall then vote on a resolution recommending (i) a termination of Financial Assistance, (ii) a recapture of Financial Assistance, (iii) both a termination and a recapture of Finance Assistance, (iv) a modification of Financial Assistance or (iv) no action.
(D) Required Filings. As indicated in subsection (B) above, pursuant to Section 874 of the Act and Section 412-a of the Real Property Tax Law, no real estate tax exemption with respect to a particular project shall be effective until an exemption form is filed with the assessor of each county, city, town, village and school district in which project is located (each, a “Taxing Jurisdiction”). Once an exemption form with respect to a particular project is filed with a particular Taxing Jurisdiction, the real property tax exemption for such project does not take effect until (1) a tax status date for such Taxing Jurisdiction occurs subsequent to such filing, (2) an assessment roll for such Taxing Jurisdiction is finalized subsequent to such tax status date, (3) such assessment roll becomes the basis for the preparation of a tax roll for such Taxing Jurisdiction, and (4) the tax year to which such tax roll relates commences.
(E) Real Property Appraisals. Since the policy of the Agency stated in subsection (C) (1) is to base the value of a project for payment in lieu of tax purposes on a valuation of such project performed by the Assessor of the applicable Taxing Jurisdiction, normally a separate real property appraisal is not required. However, the Agency may require the submission of a real property appraisal if (1) the assessor of any particular Taxing Jurisdiction requires one or (2) if the valuation of the project for payment in lieu of tax purposes is based on a value determined by the applicant or by someone acting on behalf of the applicant, rather than by an assessor for a Taxing Jurisdiction or by the Agency. If the Agency requires the submission of a real property appraisal, such appraisal shall be prepared by an independent MAI certified appraiser acceptable to the Agency.
SECTION 1708.PROCEDURES FOR DEVIATION.(A) General.In the case where the Agency shall determine that any policy of the Agency as herein established is inappropriate or unfair, the Agency may determine:
(1) the amount of the tax exemption, the amount and nature of the PILOT, the duration of the exemption of the PILOT and whether or not an exemption of any kind shall be granted and shall impose such terms and conditions as shall be just and proper; and
(2) the Agency shall give written notice of the proposed deviation from the policy set forth herein to each affected Taxing Jurisdiction setting forth the terms and conditions of the deviation and the reasons therefore. *(After receipt of notice of the proposed deviation, and prior to a final vote on such deviation each affected tax jurisdiction will be given ten (10) days in which to file written comments in the Office of the Agency).
(B) Troubled Projects.Where a project is owned and operated by the Agency or has been acquired by the Agency for its own account after a failure of a project occupant, the project shall at the option of the Agency be exempt from all taxes in accordance with law.
(C) Unusual Projects.Where a project is unusual in nature and requires special considerations related to its successful operations as demonstrated by appropriate evidence presented to the Agency, the Agency shall consider the granting of a deviation from the established exemption policy in accordance with the procedures provided in the title. The Agency may authorize a minimum PILOT or such other arrangement as may be appropriate.
SECTION 1709.ANNUAL REVIEW OF POLICIES.(A) General.At least annually, the Agency shall review its tax exemption policies to determine relevance, compliance with law, effectiveness, and shall adopt any modifications or changes that it shall deem appropriate. Unless otherwise provided by resolution, such annual review shall take place at a regular meeting of the Agency, notice for comments on such policies shall be circulated as provided by law for input from affected Tax Jurisdictions, and adoption of any changes shall take not less than 10 days thereafter. The (Executive Director/Chairman) shall be responsible for conducting an annual review of the tax exemption policy and for an evaluation of the internal control structure established to ensure compliance with the tax exemption policy which shall be submitted to the Agency for approval. The thirty (30) day comment period shall not apply to the adoption of the original policies of the Agency, which said policies shall become effective as herein provided.
Tax Exemption Policies
The Town of Bethlehem Industrial Development Agency (BIDA or the Agency) was established by an act of the New York State Legislature in 1973, as a public benefit corporation of the State of New York, under Section 895-d of the General Municipal Law. The Agency has the ability to undertake manufacturing, warehousing, commercial, industrial, research, industrial pollution control, recreation, railroad and civic facilities projects and issue its bonds, either tax-exempt or taxable, to help finance such projects.
2. IDA GENERALLY
Industrial Development Agencies were created in New York State and throughout the nation to attract and enhance industrial and economic development, help create and retain jobs and maintain economic stability within municipal or regional boundaries. Because many state constitutions, including New York’s prohibit municipalities from making gifts or loans to private companies or individuals, the creation of IDA’s provided a viable mechanism to accomplish industrial development goals. Support of a healthy economy, the creation and retention of jobs, on local, regional and State levels is an important public policy objective.
3. PURPOSES AND POWERS
In New York State the legislative intent was to promote economic welfare, recreation opportunities, prevent unemployment and economic deterioration, ensure the prosperity of the State’s inhabitants, and promote tourism and trade. Agencies were not given taxing authority but were granted other broad powers, notably, to acquire and dispose of property and to issue debt. When an agency issues debt, either in the form of bonds or notes, interest on that debt is exempt from personal income taxes on interest income imposed by the State and all political subdivisions.
4. MAJOR ACTIVITIES
a. ISSUANCE OF BONDS
Issuance. The major activity of IDAs has been the issuance of bonds (federally tax-exempt or taxable) to provide low-cost financing for businesses to acquire, construct and equip their business facilities and thus create and retain jobs, and provide for economic growth and stability in the community. The borrower (e.g. a corporation, partnership or sole proprietorship) agrees to make payments to retire the bonds obligations pursuant to a contractual agreement – usually a Lease or Installment Sale Agreement. Depending on the size of the bond issue and other factors, placement of the bonds, may be made privately or publicly.
The real property and the machinery are technically owned by the Agency. However, the borrower indemnifies the Agency against all claims and is wholly responsible for debt repayment.
Tax-exempt Status. The Internal Revenue Code of 1986, as amended, identifies two categories of bonds for federal purposes: private activity bonds and all other or “governmental bonds.” A bond is potentially a private activity bond if any entity other than a state or local governmental entity benefits directly or indirectly from the issuance of the bonds.
A tax-exempt issuance is one in which interest on the bond(s) is exempt from gross income for federal income tax purposes. In most instances federally tax-exempt bonds issued by IDAs are limited to Ten Million Dollars and are subject to all federal regulations and prohibitions governing tax-exempt status.
Bonds issued to provide facilities for 501 (c) (3) organizations such as not-for-profit corporations (Code Section 145), bonds issued to provide for manufacturing facilities (Code Section 144), and bonds issued to provide for facilities listed under Code Section 142, such as airports, docks, wharves, mass commuting facilities, and solid waste disposal facilities, to name some, qualify for tax-exempt status. Companies interested in bond financing should inquire regarding eligibility and additional requirements for tax-exempt financing.
In addition, all bonds issued in New York State will continue to be exempt from State personal income tax on interest income and sales tax. (See comparable benefits of tax-exempt and taxable issues in Section C. below).
b. SALE-LEASE TRANSACTIONS
In addition to the issuance of its bonds, an IDA can avail itself of another primary financing tool to encourage project development, namely, a straight lease transaction. Straight leases (also known as sale-leases) enable companies to receive the benefits of IDA project status without the need for the IDA to issue debt. Through a lease agreement, the Agency takes title to the property and/or the machinery and equipment and provides property and sales tax relief to the Project Company.
B. ADVANTAGES AND DISADVANTAGES OF IDA FINANCING
a. Ability to borrow at significantly lower interest rates.
b. Borrowing money through the issuance of tax-exempt or taxable industrial development bonds enables the borrower to access the public market.
c. Exemption from mortgage recording tax.
d. Potential real property tax modification. (See Attachment A).
e. Exemption from sales tax for acquisition of construction materials and machinery and equipment.
a. Number of parties involved in the transaction and the amount of additional documentation required.
b. Restrictions on the types of projects permitted.
c. Additional closing costs.
C. COMPARISON OF TAX-EXEMPT AND TAXABLE BONDS
FEATURE TAX-EXEMPT TAXABLE
Interest Rate Subject to market. Approximately 70% Of Prime with Investment bank, 90-95% with Commercial bank. Subject to market. Similar to commercial rates: Prime to Prime plus 2.
Federal Income Tax Interest Income Exempt Applicable
NYS Personal Income on Interest Income Exempt Exempt
NYS Sales Tax Exempt Exempt
NYS Franchise Tax Applicable Applicable
Mortgage Recording Tax Exempt Exempt
Real Property Tax Abatement Eligible Eligible
Depreciation 40 years 31 1/2 years
Other Considerations Subject to all Federal Reg. & Requirements, & Prohibitions N/A
1. APPLICATION PROCESS
BIDA entertains applications from developers on a first-come first-served basis, tax-exempt, financing, either public or private placement, will be offered unless federal legislation prohibits it.
a. BIDA FEES
Payments of all fees and associated closing costs may be paid for with a portion of the proceeds of the bond issue, subject to federal limitations.
A non-refundable Administrative fee of $500.00 is charged on all applications. In addition, the Agency charges a general Agency fee, payable at time of closing, as follows:
o Tax Exempt Bond: ¾ of 1% of the bond amount
o Taxable Bond: ¾ of 1% of the bond amount
o Straight Lease: ¾ of 1% of the cost of the project
o Not-for-profit: ¾ of 1% of the bond amount
o 501(c)(3) Not-for-profit that directly supports enhanced high priority
services needed by the Town of Bethlehem as determined by the Agency,
(e.g., low income affordable housing); ½ of 1% of the bond amount or
cost of a straight lease project.
The Agency will also charge an administrative fee for post closing modifications/ amendments of transactions. Such fees shall be determined by the staff of the Agency and reviewed and approved by the Agency. The minimum administrative fee for a post closing modification/amendment of transaction shall be $250.00.
The developer is also responsible for payment of the Agency’s counsel fee and bond counsel’s fee.
b. ELIGIBLE PROJECTS
Only facilities which qualify as a “project” as defined in the New York State Industrial Development Agency Act, may be financed by the Agency. These include manufacturing, warehousing, research, commercial or industrial facilities; or industrial pollution control, recreation, educational, cultural, horse racing, railroad and civic facilities. In addition, the project must be shown to serve a public purpose by creating or retaining employment.
The Agency may not finance a project which results in the removal of a facility from one area of the state to another, or the abandonment of a plant, unless such removal or abandonment s reasonable necessary to preserve the competitive position of the project occupant in its industry.
Included within the Agency’s application is a general policy statement regarding fees and disclosure requirements, a hold harmless agreement and an environmental assessment form which describes the impact of the project on the environment. Also included is a form required by the State outlining specific job opportunities to be created as a result of project completion.
Once a completed application is delivered to the Agency, the Agency members will convene to review the application, and if approved, pass an Environmental Resolution and an Official Action (“Inducement”) Resolution. The project is subject to an environmental review under the State Environmental Quality Review Act (“SEQR”). State law generally requires a public body to make an environmental determination prior to taking official action.
Once the SEQR and Inducement resolutions have been adopted, the developer may receive benefit of the tax-exempt status of the Agency for exemption from payment of sales tax on purchases of project machinery and equipment and/or construction materials. However, in the event that project does not close, the company is responsible for paying all applicable sales taxes to the State of New York.
2. OUTLINE OF PROCEDURES
1. Review of Project with the company.
2. Determination of tax-exempt eligibility.
3. Completion of Application and Long Form Environmental Assessment.
4. Delivery of Application to Administrative Director of Agency, Agency Counsel and Bond Counsel for review.
5. Schedule a meeting of the Agency and prepare public notice of meeting.
6. Preparation of SEQR and Official Action Resolutions.
7. Convene meeting and adopt resolutions.
8. Preparation of Public Hearing Notice and Public Approval Resolution for the Town Board.
9. Publication of Public notice at least 14 days prior to the scheduled date of the Public Hearing.
10. Public Hearing held. Minutes of the hearing forwarded to the Town Board for its meeting and consideration.
11. Meeting of the Town Board after public notice and adoption of Public Approval resolution.
12. Payment in lieu of tax (PILOT) negotiations. (Subject to Uniform Tax Exemption Policy – see Attachment A)
13. Company obtains commitment letter from institution providing financing (Underwriter and/or Bond buyer).
14. Preparation of draft bond documents and Volume Cap Allocation Request Form.
15. Ongoing negotiations and preparation of final Bond documents and Bond Resolution.
16. Reflecting the Town’s desire to create jobs, preparation of NYS Employment Registration data. Arrangements made with NYS Job Service and Private Industry Council for employer interview.
17. Agency convenes to adopt Bond resolution.
18. Closing scheduled. Bonds delivered and proceeds made available to the Company for the Project.
19. IRS Form forwarded to NYS Department of Economic Development and the IRS.
20. Closing transcript prepared and distributed to all parties to the transaction.
21. Closing: Bond Sale and all documents including PILOT Agreement signed.
22. Within 15 days of closing a copy of the PILOT Agreement is delivered to each affected taxing jurisdiction.
23. On or before the taxable status date BIDA will submit to the Assessor a copy of the PILOT Agreement and an application for exemption on form EA-412-a describing the terms of the PILOT Agreement. BIDA will simultaneously mail or deliver a copy of the application form to the chief elected official of each school district, city, county, town and village within which the project is located.
24. Administration of file and retention of Records including case file, application, status reports, etc., and Official Transcript. (Records must be retained for a period of at least six (6) years after denial of application or final payment of debt. Official transcript is a permanent record). All IDA records and reporting is done pursuant to New York State reporting guidelines and requirements.
E. PAYMENT IN LIEU OF TAX (“PILOT”) AGREEMENTS
If real property owned by the Company is transferred to the Agency as part of the Bond transaction, the Agency becomes the “owner of record” of the property. As a tax-exempt agency, any real property owned by the Agency may be exempt from normal real property taxes, including school taxes in accordance with the Agency’s Uniform Tax Exemption Policy. (See Attachment A.)
Special assessments and special ad valorem levies, e.g. assessments for water, sewer, lighting and fire districts, however, are fully taxable and payments of such assessments shall become the responsibility of the Company as if the real property were in the name of the Company and not the Agency.
F. SALES AND USE TAX EXEMPTIONS
Under New York State Law, industrial development agencies are authorized to grant certain State tax exemptions including exemptions for mortgage recording tax, real property taxes (see Sec. E. above and the Agency’s Uniform Tax Exemption Policy Attachment A), and sales and use taxes for bond projects.
The past practice of the agency has been to grant the sales and use tax exemption benefit to companies for use in the acquisition of construction material and machinery and equipment only. The Agency does not condone or permit the exemption to be used by companies for operating expenses.
This policy and procedure has been incorporated into these guidelines in its entirety and may be found in Attachment B. Companies interested in obtaining this benefit should become familiar with its applications and limitations.
G. BOND COUNSEL
The Agency has selected Hodgson Russ LLP, 677 Broadway, Suite 301, Albany NY, 12207 as Bond Counsel.
These Guidelines and Procedures were adopted February 6, 1995 by unanimous vote of the members of the Bethlehem Industrial Development Agency.