Relates to the accountability and efficiency of industrial development agencies and authorities; requires each industrial development agency to develop a standard application form to be used by the agency to accept requests for financial assistance from all individuals, firms, companies and developers; further requires industrial development agencies to develop policies for the suspension or discontinuance of financial assistance of PILOT.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7915 Revised 06/18/15
SPONSOR: Magnarelli TITLE OF BILL:
An act to amend the general municipal law, in relation to the account-
ability and efficiency of industrial development agencies and authori-
ties
PURPOSE:
To increase the accountability and improve the efficiency and transpar-
ency of the operations of industrial development agencies and authori-
ties (IDAs) by requiring standard application forms for requests for
financial assistance, uniform criteria for the evaluation and selection
for each category of projects for which financial assistance is
provided, and uniform project agreements.
SUMMARY OF PROVISIONS:
Section one of the bill would add three new subdivisions to General
Municipal Law § 859-a:
Standard application form - A new subdivision four would added to Gener-
al Municipal Law § 859-a to require each IDA to develop a standard
application form for requests for financial assistance from IDAs. The
form would be submitted by or on behalf of the applicant, and subscribed
and affirmed under penalties of perjury as true, accurate and complete.
The form would be required to contain certain information including,
among other things: the name and address of the applicant; a description
of the proposed project; the amount and type of financial assistance
requested; an estimate of capital costs of the project; the projected
number of full time equivalent jobs that would be retained or created if
the request for financial assistance is granted as well as certain other
information relating to those jobs; and a statement acknowledging that
the submission of any knowingly false or misleading information may lead
to immediate termination of any financial assistance and reimbursement
of an amount equal to all or part of any tax exemptions claimed as a
result of the project. The IDA could require supplemental information as
it determines to be necessary and appropriate, including supporting
documents and information provided by or on be half of the applicant.
Uniform evaluation criteria - A new subdivision five would be to General
Municipal Law § 859-a to require each IDA to develop, and adopt by
resolution, uniform criteria for the evaluation and selection of each
category of projects for which financial assistance would be provided.
At minimum, the criteria would require, among other things, that, prior
to the approval of the provision of any financial assistance, the IDA:
assess all material information included in connection with the applica-
tion, as necessary to afford a reasonable basis for its decision to
provide financial assistance; and undertake a written cost-benefit anal-
ysis that identifies the extent to which a project will create or retain
permanent, private sector jobs, the estimated value of any tax
exemptions to be provided, the amount of private sector investment
generated or likely to be generated by the proposed project, the likeli-
hood of accomplishing the proposed project in a timely fashion, and the
extent to which the proposed project will provide additional sources of
revenue for municipalities and school districts.
Uniform project agreement - A new subdivision six would be added to
General Municipal Law § 859-a to require each IDA to develop a uniform
IDA project agreement, that would set forth the terms and conditions
under which financial assistance would be provided. The uniform agree-
ment 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 owner, occupant or operator of
full time equivalent jobs created and retained as a result of the finan-
cial assistance; the dates when payments in lieu of tax (PILOT) payments
are to be made and an estimate of the amounts or formula(s) by which
those amounts are calculated made (or a copy of an executed PILOT agree-
ment); a provision for the suspension or discontinuance of financial
assistance, or for the modification of any payment in lieu of tax agree-
ment to require increased payments, in accordance with policies devel-
oped by the IDA; a provision for the return of all or a part of the
financial assistance provided for the project, as provided for in poli-
cies developed by the IDA; and a provision that the business certify,
under penalty of perjury, that it is in substantial compliance with all
local, state and federal tax, worker protection and environmental laws,
rules and regulations.
Section two of the bill would add three new subdivisions to section 874
of the General Municipal Law to require each IDA to: (1) develop poli-
cies for the suspension or discontinuance of financial assistance, or
for the modification of any payment in lieu of tax agreement to require
increased payments under specified circumstances: (2) develop policies
for the return of all or a part of the financial assistance provided for
a project, including all or part of the amount of any tax exemptions, as
specified in the policy. All such returned amounts of tax exemptions
would be required to be redistributed to the appropriate affected tax
jurisdiction, unless agreed to otherwise by any local taxing jurisdic-
tion: and (3) at least annually assess the progress of each project
toward achieving the investment, job retention or creation, or other
objectives of the project indicated in the project application. These
assessments would be required to be provided to board members.
Section three of the bill would provide that the act take effect 180
days after it shall have become law. It would further provide that that
the bill would apply in full force and effect to the Cities of Troy and
Auburn Industrial Development Authorities established pursuant to the
Public Authorities law. New subdivision 12 that would be added to Gener-
al Municipal Law § 874 would apply to projects approved on or after the
effective date of the bill.
JUSTIFICATION:
IDAs are public benefit corporations, created by special act of the
State Legislature for the benefit of one or more municipalities and the
inhabitants thereof. Article 18-A of the General Municipal Law provides
that the purposes of IDAs are to promote, develop, encourage and assist
in the acquiring, constructing, reconstructing, improving, maintaining,
equipping and furnishing industrial, manufacturing, warehousing, commer-
cial, research and recreation and certain other listed facilities, and
thereby advance job opportunities health, general prosperity and econom-
ic welfare of the people of the State of New York and to improve their
recreation opportunities, prosperity and standard of living.
To fulfill their statutory purposes, IDAs are authorized to provide
"financial assistance" for certain types of "projects" (see e.g. Gener-
al Municipal Law §§ 854 (4), (14), 859 (1) (b), 864, 874). "Financial
assistance" includes the issuance of bonds by the IDA to finance
construction of a project and "straight-lease transactions." Since the
property and activities of IDAs are tax exempt (General Municipal Law §
874; Real Property Tax Law § 412-a), the IDA may "pass through" the
benefits of certain tax exemptions (real property, sales, mortgage
recording taxes) to private entities which undertake projects. The "pass
through" can be in addition to bond financing, or done separately,
generally through what is known as a "straight- lease transaction." The
loss of revenue associated with the tax exemption pass-through 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. In
addition, after the project is completed, and the IDA relinquishes
title, jurisdiction, control or supervision of the property, the proper-
ty usually becomes taxable and its assessed value is often increased to
account for improvements made during the period of IDA involvement.
Because of reform legislation enacted in 1993 (Chapter 356), IDAs are
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 (General Municipal Law §
859). Also, the Public Authorities Accountability Act of 2005 (Chapter
766) and the Public Authorities Reform Act of 2009 (Chapter 506) added
requirements for governance, reporting, auditing and property disposi-
tion 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 improvements 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 individ-
ual or entity may request financial assistance from an IDA, or by which
an IDA grants such assistance or monitors projects after assistance if
provided. Instead, audits conducted by OSC have shown that the process
is too often ad hoc and inconsistent from IDA to IDA, and even from
project to project within an individual IDA. By the same token, several
audits found that some IDAs were performing effectively and noted
certain best practices. Some of the provisions of this bill were drawn
from those best practices.
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 evaluate each application
should be 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 munici-
pality for whose benefit the IDA was created.
Also, each IDA project would be undertaken pursuant to a uniform project
agreement that would set forth the terms and conditions under which
financial assistance would be provided. It would provide a 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. It is intended that the requirement in the new
subdivision six of Section § 859-a of the General Municipal Law for each
IDA to develop "a uniform agency project agreement" containing certain
provisions will be met by an IDA using a form of agreement that contains
the required provisions. To help ensure that the affected tax jurisdic-
tions do not suffer a loss of tax revenues for projects that do not meet
job creation and retention goals or in other specified circumstance, the
agreement would provide for the suspension or discontinuance of finan-
cial assistance, or for the modification of PILOT agreements, in accord-
ance with polices developed by the IDA. In addition, the agreement would
provide for the return of all or part of financial assistance as
provided for IDA policies. Correspondingly, IDAs would be required to
develop such policies, setting forth circumstances when there would be a
suspension or discontinuance of financial assistance, or the return of
such assistance.
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 monitorship once IDA benefits
are conferred.
The Comptroller urges passage of this legislation.
PRIOR LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
This act shall take effect 180 days after it shall have become a law
and, shall apply to industrial development agencies created pursuant to
article 18-A of the general municipal law and shall also apply with full
force and effect to the cities of Troy and Auburn industrial development
authorities established pursuant to the public authorities law;
provided, however, the provisions of subdivision 12 of section 874 of
the general municipal law as added by section 2 of this act shall apply
only to projects approved on or after the effective date of this act.
