Do property tax breaks for retail make sense? The answer isn't simple, though critics and some researchers generally say they don't. Tax breaks for retail often amount to government subsidizing one store or restaurant at the expense of another, they say.
The County Industrial Development Agency has some thinking to do.
After the Greece Central School District protested a property tax break for Greece Ridge Mall, COMIDA delayed a decision on the deal. The school district says it stands to lose at least $6 million in tax money over 25 years, based on a study it commissioned. COMIDA has a different analysis that says the district won't lose money. The tax breaks would come through a payment in lieu of taxes agreement.
But there's a broader question: Do property tax breaks for retail make sense? The answer isn't simple, though critics and some researchers generally say they don't. Tax breaks for retail often amount to government subsidizing one store or restaurant at the expense of another, they say.
Retail businesses are dependent on the market. They locate where they think they'll draw enough customers to be profitable, and they generally draw from a fixed spending pool, says Kent Gardner, president of the Center for Governmental Research.
In other words, if a store locates in a mall, it's pulling from the same group of customers as other local stores. For that reason, new retail isn't likely to increase total retail spending in the Rochester region. The exception: if it taps into markets that aren't served at all.
Dennis Wilmot, an executive with the mall's owner, Wilmorite, told the COMIDA board that renovation plans for the mall's former Bon-Ton store won't proceed without the PILOT agreement. Wilmorite plans to redevelop the former store into smaller spaces.
The company is trying to keep the mall viable and attractive to tenants, Wilmot said.
To that end, a PILOT may actually help, not necessarily because of the lower taxes but because of "tax certainty," Gardner says. Wilmorite would know exactly what it'll pay in taxes for, in this case, the next 30 years. That allows the company to tell potential tenants what their lease payments will be years in advance.
But even then, there's still a question of whether the tax breaks will give the mall an unfair competitive advantage over other plazas and retail spaces.