Provides for accountability and efficiency of industrial development agencies

Summary of provisions

Preparation and filing of "report cards" - Section 1 of this bill would amend Section 859 of the General Municipal Law by adding three new Subdivisions 4, 5 and 6 that require IDAs to prepare an annual "report card" containing a summary and assessment of financial activities and, operations for the prior fiscal year of the agency. The IDA would be required to prepare the report card within ninety days following the close of each fiscal year and to include information for each project for which exemptions from taxation were claimed during the preceding fiscal year as a result of the agency having title, possession or control (by lease, license or otherwise) of the property or equipment of the project occupant, or which was financed, in whole or in part, by the proceeds of outstanding bonds or notes issued by the agency. The bill would require that the report card include, for each project, among other things, a description of the project, the total projected capital cost of the project, the total number of jobs for the project, the total projected amount of tax exemptions for the project, a. schedule of any payments in lieu of taxes (PILOTs), including amounts outstanding, and an assessment of the esti- mated economic impact of the project. IDAs would also be required to assess the economic impact of projects completed during the prior fiscal year. Specifically, for every completed project, the report card would be required to contain, if applicable, the actual final project cost, total amount of tax exemptions actually provided and total PILOTs paid over the life of the project, and an evaluation of whether job creation/retention goals were met.

Additionally, Section 1 of this bill would require that, within thirty days of completion, a copy of the report card be filed with the govern- ing body of the municipality for whose benefit the agency was created, the State Comptroller and the Department of Economic Development, at the same time and together with the audited financial statement required by Subdivision 1 of Section 859 of the General Municipal Law. Also, the IDA would be required to make the report card publicly available by trans- mitting it to local newspapers of general circulation within the munici-

pality and by posting it on the websites, if any, of the IDA and the municipality for whose benefit the IDA was created.

Further, this Section would provide that if an agency fails to file or make publicly available a report card and continues to so fail for a period of 120 days after the day on which the report card is required to be filed and made public, the agency would be prohibited from offering financial assistance which provides exemptions from State taxes until the report card is filed.

Public hearings - Section 2 of this bill amends Section 859-a of the General Municipal Law to require that any public hearing required under that section be held before a quorum of members of the IDA and that no final determination on a project or the financial assistance being contemplated by the agency be made until at least thirty days after the public hearing. It would also add back into Section 859-a provisions that had sunset on January 31, 2008, requiring at least ten days notice of the hearing, describing information that must be in the notice and requiring that notice be given to the chief executive officer of each taxiing jurisdiction.

Standard application form - Section 2 of this bill would also add a new Subdivision 4 to Section 859-a of the General Municipal Law to require the Department of Economic Development, in consultation with the State Comptroller, to develop a standard application form for requests for financial assistance from IDAs. The form, which would be certified by or on behalf of the applicant, would be required unless a waiver is granted by the Department of Economic Development. The amendment would require that the form contain various information, including the name and address of the. applicant, a description of the proposed project, the amount and type of financial assistance requested, the total projected capital cost of the project, a statement of the projected terms and conditions of any proposed financing, the projected number of full time equivalent jobs that would be retained or created if the request for financial assistance is granted and certain other information relating to such jobs. The IDA or the Department of Economic Development could require additional information, including supporting documents and information provided by or on behalf of the applicant.

Uniform evaluation criteria - Additionally, Section 2 of this bill would also add a new Subdivision 5 to Section 859-a of the General Municipal Law to require each IDA to develop uniform criteria for the evaluation and selection of projects for which financial assistance would be provided. At minimum, prior to the approval of the provision of any financial assistance, the IDA would be required to conduct certain reviews and make certain determinations. Among other things, a standard- ized, written cost-benefit analysis would be required, as well as a determination that employment projections are reasonable and the devel- opment of benchmarks to evaluate whether the project has met projected goals and targets, including those related to job creation and retention.

Uniform project agreement - A new subdivision 6 of Section 859-a of the General Municipal Law is added by Section 2 of this bill to require the Department of Economic Development, in consultation with the State Comp- troller, to develop a uniform IDA project agreement, that would set forth the terms and conditions under which financial assistance would be provided. The uniform agreement would be required to be used, unless a waiver for good cause shown is granted by the Department of Economic Development. The agreement would be required to contain certain provisions, including: a description of the project and financial assistance; a requirement for an annual certification by the project occupant of jobs created and retained and payments in lieu of taxes made; a schedule for PILOTs; a requirement that payroll documents and other books and records necessary to confirm job and salary information be retained and made accessible to the IDA and any individual or enti- ties auditing the IDA; a provision for the discontinuance of financial assistance or a modification of PILOT agreements in the event of a mate- rial violation of the terms and conditions of the agreement; a provision for the return of financial assistance in the event of material short- falls from job creation and retention projections; and in the case of a "speculation" building, a provision for the phasing-in of benefits based on the amount of space occupied. Various appendices would also be included, such as a record of the public hearing.

Investigations of complaints - This bill adds a new Subdivision 7 to Section 859-a of the General Municipal Law, also added by Section 2 of this bill, which requires the Department of Economic Development to conduct investigations of material complaints concerning possible violations of a project agreement.

Restrictions on funds of IDAs - Section 3 of this bill adds back into Section 862 of the General Municipal Law provisions of law that had sunset. The new Subdivision 2 of this Section provides that except as otherwise provided, no financial assistance of the IDA shall be provided in respect of any project where facilities or property that are primari- ly used in making retail sales to customers who personally visit such facilities constitutes more than one-third of the total project cost.

The new Subdivision 3 of Section 862 of the General Municipal Law, as also added by Section 3 of this bill, establishes no funds of an IDA shall be used for the purpose of preventing the establishment of an industrial or manufacturing plant, nor shall any funds of the IDA be given to any group or organization which is attempting to prevent the establishment of an industrial or manufacturing plant nor shall such funds be used for advertising or promotional materials which depict elected or appointed government officials in either print or electronic media.

Uniform PILOT Agreement Policy - Section 4 of this bill would amend Subdivision 4 of Section 874 of the General Municipal Law to rename the Uniform Tax Exemption Policy as the Uniform PILOT Agreement Policy, and would require the policy to include payments in lieu of taxes, as a percentage of taxes that would have been levied by or on behalf of

affected tax jurisdictions if the project was not tax exempt by reason of agency involvement, rather than the percentage of exemption. This Section also adds back into the law language that had sunset. Such language relates to notice to affected tax jurisdiction for deviation from the Uniform PILOT Agreement Policy.

Designation of agents - Section 5 of this bill adds a new Subdivision 9 to Section 874 of the General Municipal Law. This Subdivision was previ- ously in law and sunset. Such Subdivision relates to the designation of a project operator or other person to act as an agent of an IDA.

Dissolution and merger - Section 6 of this bill would add a new Section 885 to the General Municipal to authorize and set forth procedures for the dissolution of a town, village or city IDA and the merger of such dissolved IDA into the IDA of the county in which the town, village or city is located. The dissolution and merger would be pursuant to a plan that states, among other things, the underlying purpose and the terms and conditions of the proposed dissolution and merger. Upon the effec- tive date of the dissolution and merger, the town, village or city IDA would cease to exist and all rights, titles, interests; obligations arid liabilities of those IDAs would be vested in the county IDA. The Commis- sioner of the Department of Economic Development would be required to undertake a study to identify those IDAs that have not undertaken significant activity within the prior five years and recommend that they be dissolved and merged into the county IDA. The study would be under- taken by July 1, 2011, and the Commissioner's findings reported to the Speaker of the Assembly, the Temporary President of the Senate, the Governor, and the State Comptroller and to each IDA identified in the report, by December 31, 2011.

Troy and Auburn IDAs- Sections 7 through 10 of this bill would make conforming amendments to Sections 1953-a, 1963-a, 2307 and 2315 of the Public Authorities Law, relating to the Cities of Troy and Auburn IDAs.

Effective date - Section 11 would make the act effective immediately.

Justification

IDAs are public benefit corporations, created by special act of the State Legislature for the benefit of municipalities, to provide "financial assistance" to private entities, as an inducement to the private entity to relocate, expand or remain in the municipality. IDAs are governed by Article 18-A of the General Municipal Law, which states that the purposes of IDAs are to promote, develop, encourage and assist in the acquiring, constructing, reconstructing, improving, main- taining, equipping and furnishing industrial, manufacturing, warehous- ing, commercial, research and recreation and certain other listed facil- ities, and thereby advance job opportunities health, general prosperity and economic welfare of the people of the State of New York and to improve their recreation opportunities, prosperity and standard of living.

The "financial assistance" provided by an IDA generally takes the form of favorable interest rate financing through the use of the proceeds of

IDA bonds or notes to fund construction or acquisition costs, and/or, since the property and activities of IDAs are tax exempt, the "pass through" of the benefits of certain tax exemptions (real property, sales, mortgage recording taxes) to the private entity. The "pass through" can be in addition to bond financing, or done separately through what is known as a "straight lease" transaction. Because of the tax exemption pass-through, the local governments that would usually receive tax revenues as a result of the project (known as the "affected tax jurisdictions") will not receive such monies due to the IDA status of the project. This loss of revenue can be mitigated if the IDA enters into what is known as a "payment in lieu of tax" or "PILOT" agreement with the private entity, under which the private entity agrees to pay all or a portion of the amounts that would otherwise be due as taxes had the project not been an IDA project.

Because of reform legislation enacted in 1993 (Chapter 356), IDAs are now required to have budgets, conduct public hearings before providing financial assistance for' most projects and have "uniform tax exemption policies". In addition, IDAs can lose their authority to offer financial assistance in the form of State tax exemptions if they fail to file the required annual audited financial statement. Also, the Public Authori- ties Accountability Act of 2005 (Chapter 766) added requirements for governance, reporting, auditing and property disposition that will enhance IDA accountability. While these changes have been positive steps toward making IDAs more accountable to the municipalities and taxpayers for whose benefit they are created, there remain areas where improve- ments are necessary, especially in light of the critical role IDAs often play in the economic well-being of a community and the potential costs in lost tax revenues.

This bill would provide for additional safeguards to help ensure that the process used by IDAs in determining to provide financial assistance is transparent, uniform, and deliberative and furthers the underlying purposes of the statutes governing IDAs. Current law does not spell out an orderly procedure by which an individual or entity may request finan- cial assistance from an IDA, or by which an IDA grants such assistance or monitors projects after assistance if provided. Instead, audits conducted by OSC staff indicate that the process is too often ad hoc and inconsistent from IDA to IDA, and even from project to project within an individual IDA.

This bill would require standard application forms for those requesting IDA financial assistance and would require IDAs to develop uniform criteria for assessing applications. Pursuant to these new requirements, the types of information IDAs would receive for each project would be more standardized and the process used to assess each application should be consistent and thorough. This should lead to a more uniform and tran- sparent process, more informed decision-making by IDAs and increased confidence by taxpayers that decisions to provide financial assistance are reasoned and in furtherance of the underlying purposes of IDAs, including the creation and retention of jobs within the municipality for whose benefit the IDA was created. Further, to assure that decisions by

the IDA are made with the full benefit of public input, the current public hearing requirement would be amended to require that at least a quorum of the IDA board be present at the hearing and that no final determination on the project or the financial assistance being contem- plated by the agency be made until at least thirty days after the public hearing.

Also, each IDA project would be undertaken in accordance with a standard project agreement that would set forth the terms and conditions of the assistance and provide mechanisms to help ensure that the IDA can moni- tor the progress of the projects, including whether jobs created or retained as a result of the project meet initial projections. Further, the bill would require each IDA to prepare, file and publicize an annual "report card" containing a summary of financial activities for the prior fiscal year. Much of the information to be included in the report card is already developed by IDAs in order to comply with the reporting requirements of General Municipal Law § 859 and/or Public Authorities Law § 2800 and, therefore, it should not be unduly burdensome for IDAs to prepare this annual "report card." Moreover, by compiling this infor- mation in a single, comprehensive annual document, local taxpayers will be able to access this material concerning their IDA's performance at a single location. IDAs will be more accountable to the public and their sponsoring municipalities, who will be able to better monitor and assess the activities of their IDAs. To ensure compliance with this new requirement, the bill would prohibit IDAs that are delinquent in comply- ing with the report card requirement from offering financial assistance which provides exemptions from State taxes until the requirement is met.

There are currently 114 active IDAs throughout the State. In many cases, IDAs for towns, villages or cities have served only limited purposes, sometimes created for the purpose of financing only a single project. Often, these IDAs are effectively dormant; yet do not meet the statutory requirements for dissolution. This bill would provide the necessary authority for a voluntary, administrative process whereby such an IDA could be dissolved and merged into the IDA for the county in which the town, village or city is located. The bill would make provision for the orderly transition from the town, village or city IDA into the county IDA, including ensuring that bonds and other obligations and liabilities of the dissolved IDA will be properly addressed.

Finally, the bill would change the name of the policy required by Section 874 of the General Municipal Law from the "Uniform Tax Exemption Policy", to the more descriptive "Uniform Payment in Lieu of Tax (PILOT) Policy". The current name has caused some confusion by implying that the primary purpose of the policy is to address the granting of tax exemptions. In fact, tax exemptions largely are made applicable by oper- ation of law (see General Municipal Law §874). The policy, instead, is focused on PILOTs. The bill would make the title more closely aligned with the purpose, and would correspondingly clarify that the guidelines in the policy must include a statement of the payments in lieu of taxes, as a percentage of taxes that would have been levied by or on behalf of affected tax jurisdictions if the project was not tax exempt by reason

of agency involvement, rather than the current requirement for "percent- age of exemption". We have found that in many financial statements submitted to the Comptroller by IDAs, which call for the amount of tax exemptions for IDA projects, IDAs report the exemptions, less the amount of PILOTs, incorrectly characterizing PILOTs as if they were actual tax payments, rather than "in lieu of " payments. T his change should help clarify the distinction between taxes themselves and PILOTs, and serve to enhance more accurate reporting and lessen confusion.

We believe this bill will greatly increase the accountability of IDAs to the taxpayers and municipalities for whose benefit they are created. It will serve to ensure a greater degree of uniformity in the application process for IDA assistance, more careful analysis and deliberation in the decision-making process and enhanced monitoring once IDA benefits are conferred.

The Comptroller urges the passage of this legislation.