Fort Drum project’s tax break could cause county financial stress

Jefferson County legislators say exempting a $75 million Fort Drum housing project from sales tax could further contribute to county financial stress.

The Jefferson County Industrial Development Agency may be able to bypass sales tax exemption approval from taxing jurisdictions through a 2005 Residential Communities Initiative between Fort Drum Mountain Community Homes and the county. The agreement gives the company a 50-year lease on all Fort Drum housing and exempted sales taxes on construction. The county also received $4.2 million over seven years following the agreement’s inception in exchange for exempting the initiative from sales and property tax.

If the IDA can indeed use the agreement to exempt the new project from sales tax costs, legislators say it would take life out of revenue stream for the county.

Jefferson County Board of Legislators Chairman Scott A. Gray said housing should not be used as a means for economic development, and the 2005 housing agreement was done at a time when it would help Fort Drum grow.

The demands of that agreement, Mr. Gray said, have since been met.

Legislator Jeremiah J. Maxon, now a member of the IDA board, said enough housing already exists in the area to accommodate 17,000 Fort Drum troops. Now, troop levels have dropped to around 15,000. Over the last 10 years, he said, the housing market has changed enough to make the proposed project unnecessary.

“Homeowners are seeing their equity just dissolve because of government interference in housing, and now we have another out-of-state developer who wants a sweetheart deal for more housing we don’t need,” Mr. Maxon said.

If it turns out there is some discretion in the agreement, Mr. Maxon said, the county cannot approve an exemption for the project.

He said approving such an exemption would be “woefully irresponsible” at a time when the county continues to pay for increasing state-mandated costs.

Mr. Gray agreed. And considering recent decreases in sales tax revenue, he said, the county’s only true revenue stream would be property taxes.

“The more we deplete sales tax is more pressure on the property tax levy,” he said.

The county’s 2016 budget included a property tax levy increase of 5 percent with the hope that it will help restore some of the county’s dwindling fund balance. The county sales tax rate was also bumped up to 4 percent last year.

JCIDA CEO Donald C. Alexander said financial conclusions can be drawn once the IDA has found whether it’s possible to move forward with the project without county approval.

“We are going to make sure, legally, we are in the right ballpark, and proceed from that position,” he said.

Mr. Gray said constantly handing out exemptions to developers puts the tax burden onto those who cannot afford it.

“When you start just handing out exemptions, it is clearly, in this situation, becoming a tax shift,” he said. “It’s clearly being shifted to people who cannot pay for it. My intent is to protect these people.”

Mr. Gray added that it’s time to start closely evaluating incentives being handed out to developers to ensure they are being properly used as economic development tools.

By Brian Molongoski, Watertown Daily Times