Our Services Yonkers Industrial Development Agency The City of Yonkers Industrial Development Agency ("YIDA") was established as a not-for-profit by an act of the New York State Legislature in 1982, as a body corporate and politic of the State of New York, under Section 903 of the General Municiple Law. The Agency has the ability to undertake:
The Yonkers Industrial Development Agency provides financial assistance in connection with the acquisition, construction and/or equipping of such projects. Under New York State law, industrial development agencies ("IDAs") may provide financial assistance to a project in the form of:
1 . Mortgage Recording Tax Exemption Whenever a county clerk records a mortgage in New York State, the Mortgagor must pay a .75% to 1.5% (of the mortgaged amount) mortgage recording tax -- a significant expense on projects involving substantial financing. The IDA can, however, qualify a Company for a mortgage recording tax exemption. If an IDA is in title (either fee title or leasehold interest) at the time the mortgage is recorded, the IDA will mortgage its interest in the property and the Company will simultaneously mortgage its interest in the property. The mortgage recording tax in Yonkers is 1.75% or $1.75 for each $100.00 secured by the mortgage. As an alternative, the IDA and the Company can execute one mortgage with the IDA agreeing to pay the mortgage recording tax. Either arrangement can save a substantial amount of money for the Company – from $7,500 to $15,000, for example, on a $1 million mortgage. 2. Sales and Use Tax Exemption The Sales and Use Tax in New York State generally ranges from 7% to 8.5%. All purchases made by an IDA or its agents are exempt from the Sales and Use Tax. The IDA can issue a sales tax exemption letter to the Company, authorizing it to act as an agent for the IDA. The Company can then acquire the equipment, materials and services needed to acquire, construct, reconstruct and/or equip the project without having to pay sales or use taxes. The exemption is generally limited to the construction, reconstruction or installation period and cannot cover ongoing operational costs, however, continued coverage is now available through the New York State Empire Zone program. A Company in the Yonkers Empire Zone can benefit from both the IDA sales tax exemption (exempts both the local and State portion for purchases of equipment and materials) and the Empire Zone sales tax exemption (exempts State portions only, but also exempts operational costs for up to 10 years). Contact Mary Alice Brady at Maryalice.brady@cityofyonkers.com for more information on the Empire Zone program. Depending on the size of the project, the cost savings for the Company under this arrangement can be significant. On a project where $1 million of the costs are subject to the Sales and Use Tax, the exemption can result in a savings of $70,000 to $85,000. When the lease or installment sale agreement expires, the IDA transfers any personal property that is involved in the project to the Company without the payment of any Sales or Use Tax. 3. Real Property Tax Abatement In New York State, property owners pay a real property tax based on the assessed value of improvements to a site. Any real property owned or controlled by an IDA is not subject to ad valorem real property taxes. However, real property owned or controlled by an IDA continues to be subject to special assessments and user fees. When an IDA takes title to or a leasehold interest in real property, the property becomes 100% exempt from ad valorem real property taxes. To accommodate the needs of the local taxing jurisdictions, however, the IDA generally negotiates a Payment In Lieu Of Tax Agreement ("PILOT Agreement") with the Company. The IDA will then direct, or receive and forward, these payments in lieu of taxes to the affected taxing jurisdictions. By law, IDAs have the authority to negotiate any PILOT Agreement they deem reasonable. They are required to have specific policies outlining the types of PILOT Agreements they are offering and procedures for deviation from those stated policies. Although there is no statutory limit to the period or amount of the abatement, IDAs generally limit the period to between 10 and 20 years with the assumption that the abatement generally results in more revenue for the taxing jurisdictions than was generated by the property before the IDA's involvement. Some PILOT Agreements provide a specific dollar amount to be paid each year for the term of the PILOT Agreement. The mere predictability provided by such a PILOT Agreement can be invaluable to a developer. A Company in an Empire Zone may benefit from a refund of real property taxes paid on payments made under a PILOT Agreement. Where Companies qualify for a 100% refund from the State, the IDA will often negotiate a payment in lieu of tax equal to full taxes and allow the increment (difference between full taxes and otherwise negotiated amount) to be used to repay debt service related to certain infrastructure improvements (referred to as "PILOT Increment Financing" or "PIF"). 4. Lower Interest Rates for Debt Incurred as Part of the Project The Yonkers IDA is authorized by New York State law to issue bonds and notes. The Yonkers IDA can issue tax exempt bonds, subject to the limitations imposed by the Internal Revenue Code of 1986. The proceeds of these tax exempt bonds can be used to fund all, or substantially all, of the costs of a project (excluding certain costs of issuance in excess of 2% of the total amount of the bond issue). If the project meets the strict qualification requirements of the Code, the Company should then determine if issuing tax exempt bonds is a cost effect method of financing the project. The Yonkers IDA itself provides no credit enhancement and issues bonds on a non-recourse basis. For that reason, the ability to sell bonds depends solely on the creditworthiness of the Company (or the credit rating of the credit enhancement supporting the transaction). State law does not allow the Yonkers IDA to loan the net proceeds directly to the Company as is done in other states. Because the Yonkers IDA does not have the statutory authority to "loan" money (as is the case in many other states), bond proceeds are used by the Company to build the project in the name of the Yonkers IDA. The project is then leased or sold by the Yonkers IDA to the Company for an amount equal to debt service on the bonds issued. The Company's rental payments under the lease agreement or installment purchase payments made under the installment sale agreement to the Yonkers IDA (or bond trustee) are used to pay principal of and interest on the bonds. The property involved is generally used as collateral and the Company's direct guaranty is generally required. It may be necessary to provide some form of credit enhancement, such as a letter of credit issued by a bank or other qualified financial institution, bond insurance, or FHA insurance, depending on the market where the tax exempt bonds are sold and on the creditworthiness of the Company. Before proceeding with a bond transaction, the Company should conduct a cost benefit analysis weighing the cost of financing through traditional means and that of a bond transaction. Does it pay to finance the project with funds that are at an interest rate that is generally two to three percentage points lower than the cost of borrowing money directly through a taxable transaction? Or, will that benefit be outweighed by the additional costs of documenting a bond transaction such as bond counsel fees and, potentially, letter of credit fees of .75% to 1.5%, underwriter discount fees of 1% to 3%, underwriter counsel fees, letter of credit and issuer counsel fees, trustee fees and other incidental costs? Structure of a Yonkers Industrial Development Agency Transaction Any entity -- either for-profit or not-for-profit -- that wants to undertake a construction or expansion project in the City of Yonkers, in general, is to be considered a qualified applicant. The Yonkers IDA usually participates by taking title to or a leasehold interest in the real and/or personal property involved in the project. The Yonkers IDA then leases the property under a lease agreement, or sells the property under an installment sale agreement to the Company undertaking the project. The payment under the lease or installment sale agreement is usually a nominal consideration, plus debt service on any money the Yonkers IDA borrowed to fund the project. At the time of closing, the Yonkers IDA will generally charge an administrative fee ranging from .5% to 1.5% of the total project costs. If the Company owns the property before starting the project, it transfers title (either fee title or a leasehold interest) to the IDA without paying a transfer tax. If a third party owns the property, the Company must arrange for the transfer of an interest in the property to the Yonkers IDA. The length of time the Yonkers IDA stays in title depends on the financial assistance being provided to the Company. When financial assistance is limited to the issuance of a tax exempt bond and/or a mortgage recording tax exemption, the Yonkers IDA need only stay in title for a period as short as one day. When providing a sales tax exemption, the Yonkers IDA must remain in title through the construction or installation period. The Yonkers IDA will stay in title for upwards of 20 years or more when offering a real property tax abatement. Limitations on Yonkers IDA Assistance and Other Requirements
While it is the purpose of the Yonkers IDA to promote the economic welfare and prosperity of the City of Yonkers' residents and to actively attract and encourage the development of such activities, Article 18-A of the GML does place some restrictions on the Yonkers IDA's ability to participate in certain types of projects. In addition, there are certain statutorily required prerequisites the Yonkers IDA must comply with prior to undertaking a project.
For projects listed under (A), (B) or (C) above, the IDA must make an additional finding that the project will preserve permanent private sector jobs or increase the overall number of permanent private sector jobs, which finding must be confirmed by the Chief Executive Officer of the municipality for whose benefit the IDA was created. The foregoing section is intended to highlight certain sections of the GML that must be addressed prior to commencing any project seeking Yonkers IDA assistance. Despite the requirements of the GML, the vast majority of projects, whether new construction, expansion, renovation or equipment acquisition will qualify for Yonkers IDA assistance.
Sequence of Obtaining Yonkers Industrial Development Agency Assistance
|
|