Authorizes recoupment of financial incentives awarded businesses upon failure to fulfill the terms of such incentive

2 Co-sponsors

• David Carlucci
• Liz Krueger

BILL NUMBER:S3727

Title of bill

An act to amend the executive law, in relation to the recoupment of economic incentives to businesses

Purpose

To require that companies which receive economic incentives for the purpose of job creation or expansion of operations fulfill their promise, unless unforeseen circumstances arise.

Summary of provisions

Provides that where the State, a public benefit corporation including an industrial development authority, or a municipality provides an economic incentive to a company for the purpose of job training, job creation or retention, or expansion of operations, such agreement shall be in writing and state the terms and conditions of the incentive. Where the company's promise is not fulfilled, the agency shall be authorized to recoup the incentive in an amount proportionate to the unfulfilled part of the agreement. The recipient shall be entitled to a hearing with an opportunity to explain any non-compliance. Recoupment may be waived where the failure was not attributable to bad faith or fraud, and was due to unforeseen circumstances beyond the recipient's control. Unforeseen circumstances are defined to include market conditions which are of such magnitude that a waiver of payment is necessary to ensure continued operations or employment of the company at its locations. State agencies are required to establish rules regarding the conduct of the hearing and conditions of repayment. Requires a report to the Governor and Legislature concerning incentives provided and agency action regarding noncompliance.

Existing law

Currently there are no state laws requiring recoupment of an economic incentive from a company that defaults on the agreement for which the incentive was provided.

Justification

Providing incentives to attract or convince companies to remain in New York state has become a common practice. Competition by surrounding states which provide similar incentives has made this practice a regularly used economic development tool. It is necessary, however, that public money is invested wisely with companies which try in good faith to deliver on their promise to create jobs or expand operations. This bill requires nothing more than that which is already required of companies in the private business world - to enter into a contract and perform as promised in consideration of payment. Yet, because a company acting in good faith may be unable to carry out its agreement, the bill authorizes a waiver of repayment upon a showing that market conditions prevented compliance. A company's failure to create or retain jobs, moreover, affects the lives of the workers at the affected facility. Job security is shaken and subsequent employment

may be difficult to come by. This bill attempts to provide some assurance that employment disruption will only occur if due to market conditions, beyond the control of the company.

Legislative history

2001-02: S.1587 No action 2003-04: S.1291 No action 2005-06: S.1994 Referred to Finance 2007-08: S.2805 Referred to Finance

Fiscal implications

An increase in tax revenues from employed workers and expanded operations.

Effective date

Immediately applicable to all contracts entered into on and after the date of enactment.