Provides for accountability and efficiency of industrial development agencies

Summary of provisions

Preparation and Publication of Annual Summary: Section 1 of this bill would amend Section 859 of the General Municipal Law by adding new Subdivisions 4 and 5 that require IDAs to prepare an annual summary containing an assessment of financial activities and operations for the prior fiscal year. The IDA would be required to prepare the summary within ninety days following the close of each fiscal year and to include information for each pending and completed project For every completed project, the summary 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 and job retention goals were met.

Also, the IDA would be required to make the summary publicly available by posting it on the websites, if any, of the IDA and the municipality for whose benefit the IDA was created.

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 a minimum of two 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 30 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 applicable taxing 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 affirmed under the penalty of perjury, 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 standardized, written cost-benefit analysis would be required, as well as a determination that employment projections are reasonable, along with the development 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 Comptroller, 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 the proposed 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 entities auditing the IDA; a provision for the discontinuance of financial assistance or a modification of PILOT agreements in the

event of a material violation of the terms and conditions of the agreement; a provision for the return of financial assistance in the event of material shortfalls 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: A new Subdivision 7 to Section 859-a of the General Municipal Law, also added by Section 2 of this bill, requires the Department of Economic Development to conduct investigations of material complaints concerning possible violations of a project agreement.

Restriction on funds of IDAs: Section 3 of this bill adds back into Section 862 of the General Municipal Law a provision of law that had sunset. The new Subdivision 2 of this Section provides that no funds of an IDA shall 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 requirements to give notice to affected tax jurisdictions for deviation from the Uniform PILOT Agreement Policy.

Dissolution and Merger: Section 5 of this bill would add a new Section 885 to the General Municipal Law 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 effective date of the dissolution and merger, the town, village or city IDA would cease to exist and all rights, titles, interests, obligations and liabilities of those IDAs would be vested in the county IDA. The Commissioner 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 undertaken by July

1, 2013, 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, 2013.

Troy and Auburn IDAs: Sections 6 through 9 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 10 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, maintaining, equipping and furnishing of industrial, manufacturing, warehousing, commercial, research and recreation and certain other listed facilities, and thereby advance the job opportunities, health, general prosperity and economic welfare of the people of the State of New York and to improve their recreational 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 moneys 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 taxes" 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 have been 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 Authorities Accountability Act of 2005 (Chapter 766) added requirements for governance, reporting, auditing and property disposition that 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 improvements are necessary, especially in light of the critical role IDAs often play in the economic wellbeing of a community and their 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 financial assistance from an IDA, or by which an IDA grants such assistance or monitors projects after assistance is provided. Instead, audits conducted by staff from the Office of the State Comptroller 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 would be more consistent and thorough. This should lead to a more uniform and transparent 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 minimum of two of the IDA board members be present at the hearing and that no final determination on the project or the financial assistance being contemplated by the agency be made until at least thirty days after the public hearing.

Also, each IDA project would be undertaken in accordance w~th a standard project agreement that would set forth the tem1S and conditions of the assistance and provide mechanisms to help ensure that the IDA can monitor 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 summary containing a summary of its financial activities for the prior fiscal year. Much of the information to be included in the summary 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 summary. Moreover, by compiling this information 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, which 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 complying with the summary 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, and they are 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 operation 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 had not been tax-exempt by reason of agency involvement, rather than the current requirement for "percentage of exemption." 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. This change should help clarify the distinction between taxes themselves and PILOTs, and serve to enhance more accurate reporting and lessen confusion.

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.

Prior legislative history

Similar to A.11107 of 2010.

Fiscal implications

None to the State.

Effective date

This act shall take effect immediately.