Requires the return of all or a part of the financial assistance provided for a project where the project has material shortfalls or material violations; prevents the use of funds, financial incentives, subsidies or tax exemptions for projects already in development.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A22B
SPONSOR: Magnarelli TITLE OF BILL:
An act to amend the general municipal law, in relation to requiring the
return of all or a part of the financial assistance provided for a
project where the project has material shortfalls or material violations
and preventing the use of funds, financial incentives, subsidies or tax
exemptions for projects already in development
PURPOSE:
This bill will require that industrial development agencies (IDAs)
implement policies for the return of financial assistance or tax incen-
tives provided to a project that is determined to show material short-
falls in job creation and retention or material violations of the
project agreement. It also prohibits IDAs from offering financial
assistance to projects that are already in development at the time of an
application.
SUMMARY OF PROVISIONS:
Section 1: Amends subdivision 11 of section 874 of the general municipal
law to require that local industrial development agencies implement
their policies for return of financial assistance or tax incentives
provided to a project whenever the agency's annual assessment shows
material shortfalls in job creation and retention projections or materi-
al violations of the terms and conditions of the project agreement. Adds
new subdivision 13, stating that IDAs may not grant tax exemptions to a
project already in development unless there is a significant increase in
project costs has been discovered during the development of a project.
Section 2: Amends section 854 of the general municipal law by adding a
new subdivision 21 defining the term "in development."
Section 3: Amends section 862 of the general municipal law to add a new
subdivision 3, stating that IDAs may not give financial incentives or
subsidies to a project already in development unless there is a signif-
icant increase in project costs has been, discovered during the develop-
ment of a project.
Section 4: Effective date.
JUSTIFICATION:
Governor Nelson Rockefeller enacted IDAs in 1969 for the purpose of
incentivizing economic activities in New York State by issuing financial
assistance to private companies, primarily in, the form of tax breaks.
While reasonable incentives are occasionally necessary to attract or
retain business, the extent to which IDAs have been providing question-
able benefits brings into question whose interests are being served by
the system. Projects requesting financial assistance are frequently
approved with minimal scrutiny and little community input. This system
appears to often favor the interests of business without sufficiently
examining if the public interest is being met. IDAs often grant private
companies financial assistance in return for economic benefit, typically
a promise to create or retain jobs in the community. IDAs are required
to annually evaluate the success of each project at meeting the job and
economic metrics agreed to as a condition of financial assistance. Addi-
tionally, they must develop policies for the return of all or . part of
the financial assistance provided for a project in the event that a
project has material shortfalls in job creation and retention or materi-
al violations of the conditions of the agreement. However, IDA boards
have the discretion to implement such policies and compel the return of
taxpayer funds. Too often, projects fall significantly short of their
benefit promises, distressing the economic welfare of local communities.
This bill proposes to address this abuse by requiring IDA boards to
compel the return of taxpayer-funded incentives issued to underperform-
ing projects.
The purpose of IDAs is to incentivize companies to relocate or remain in
its community through the offer of financial assistance. However, it is
important to prevent IDAs from placing the interests of companies ahead
of the public trust, which they are designed to serve. The mission of an
IDA should be to not simply incentivize for the sake of incentivizing,
but to maximize a community's benefit,.particularly when it comes to the
project's ratable. While determining the seriousness of a threat to
locate or relocate elsewhere can be a difficult and often subjective
process, such scrutiny will benefit the taxpayers that IDAs are formed
to represent. This bill would prevent companies that threaten relocation
despite already being under-construction from receiving any unjustified
financial incentives.
LEGISLATIVE HISTORY:
2020: A.11003; 2021-22: A.473
FISCAL IMPLICATIONS:
None to the state. The return of financial assistance granted by indus-
trial development agencies to underperforming projects will benefit
local taxpayers.
EFFECTIVE DATE:
This act shall take effect immediately.
