Policy Brief October 2017

Opaque and Duplicative

Local Economic Development in New York State

By Riley Edwards

M unicipal governments across New York State are concerned with

boosting their local economies, as only 5 of 62 counties have had job
growth higher than the national average since 2010, according to the U.S.
Bureau of Labor Statistics. Local governments outside of New York City spent
$58.8 million on economic development in 2015, according to data from the
Office of the New York State Comptroller. However, a much larger amount of
locally-controlled money for economic development efforts flows through a
system of public benefit corporations and not-for-profit corporations created
by local governments to award financial assistance to businesses.
These two types of entities, Industrial Development Agencies (IDAs) and Local
Development Corporations (LDCs), are responsible for making $16.2 billion in
investments from 2011 through 2015. These entities have proliferated across
the state, numbering nearly 350 in 2015. The Citizens Budget Commission
(CBC) has three concerns with the current system of IDAs and LDCs:

Fragmentation of decision-making authority;

Lack of sufficient accountability; and

Record of poorly justified investment

choices.

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This report begins with an overview of IDAs and LDCs and the financial resources they control
and then examines these three concerns. It concludes with recommendations for improving the
transparency and effectiveness of IDAs and LDCs.1

Overview
IDAs are public benefit corporations created by state law at the request of a municipality. They can
buy and sell property, and property owned by an IDA is exempt from property tax and mortgage
recording tax. An IDA can pass these exemptions on to a business occupying the property, which
then generally makes Payments in Lieu of Taxes (PILOTs) to some or all of the impacted taxing
jurisdictions. Exemptions from state and local sales taxes may also be granted for purchases related
to IDA projects. IDA operating costs are typically funded by fees paid by the businesses that receive
their assistance.1 As of December 2015, there were 107 IDAs statewide.2

LDCs are private not-for-profit corporations. They can be established by anyone, but this report
focuses only on those that are under the oversight of the New York State Authorities Budget
Office (ABO) because they meet the definition of a local authority in accordance with Section 2 of
Public Authorities Law, meaning they are affiliated with, sponsored by, or created by a municipal

Table 1: Comparison of Key Features of IDAs and LDCs

IDAs LDCs

Can buy and sell property Yes Yes

Can borrow money Yes Yes

Can issue debt, including

Yes Yes
conduit debt

Can issue conduit debt to

No Yes
nonprot projects

Subject to oversight by New York

Yes Yes
State Authorities Budget Oce

Subject to oversight by
Yes No
New York State Comptroller

Can oer tax exemptions Yes No

Can give grants or loans No Yes

2
government.3 LDCs have the power to construct, purchase, rehabilitate or improve industrial or
manufacturing plants, or assist financially in such construction, rehabilitation or improvement.
They can either maintain such plants for others, or sell, lease, or mortgage them.4 Municipalities
can sell or lease property they no longer need to LDCs without appraisal, public notice, or bidding.
Property owned by an LDC is tax-exempt but LDCs cannot pass this benefit on to others.5 LDCs
can also award loans and grants to businesses, nonprofits, or public entities. As of December 2015,
there were 241 LDCs statewide, of which 189 had purposes related to economic development.6

Both IDAs and LDCs can buy and sell property, borrow money, and issue debt. (See Table 1.) Both
types of entities are subject to oversight by the ABO, but only IDAs are subject to oversight by the
Office of the State Comptroller (OSC). Their key differences lie in the types of economic development
support they can give; IDAs can offer tax exemptions, while LDCs cannot. LDCs can give grants
or loans to businesses or other nonprofits, while IDAs cannot make grants or loans of their own
funds.7 LDCs can issue conduit debt for civic facility projects, or those owned or operated by
not-for-profit corporations; IDAs cannot issue conduit debt for these projects, following the 2008
expiration of a provision of the General Municipal Law.8 Conduit debt is issued in the IDAs or LDCs
name for the benefit of a recipient company or nonprofit, and is the obligation of the recipient, not
the issuing IDA or LDC.

Finances
Total Costs
In 2015 spending and tax expenditures by IDAs and LDCs totaled $1.9 billion. Sixty percent of that
total was concentrated in New York City. Statewide, tax expenditures totaled $676 million and
spending totaled $1.2 billion. (See Table 2).

The total costs of IDAs and LDCs in New York City decreased by one-fifth over the period from
2011 to 2015, with decreases in spending by New York City Industrial Development Agency

Figure 1: 2015 LDC and IDA Costs

By Entity By Type By Location

IDAs Tax Breaks Outside

New York City
$750.3 $676.3 $745.9
40% 36%
LDCs Spending 40% New York City
$1,106.9 $1,180.9 $1,111.3
60% 64% 60%

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 Table 2: Annual Tax Break Value, Operating Spending,
and Non-Operating Spending of LDCs and IDAs

NEW YORK CITY

Change since 2011
Tax Breaks 2011 2012 2013 2014 2015 ($) (%)
NYC Industrial
$51.0 $80.1 $68.5 $75.6 $85.6 $34.5 68%
Development Agency
Subtotal Tax Breaks $51 $80 $68 $76 $86 $35 68%
Spending
NYC Economic
$854.9 $864.8 $1,001.3 $1,022.9 $746.0 ($108.9) (13%)
Development Corporation
Other NYC LDCs 459.3 423.3 515.2 450.9 273.4 (185.9) (40%)
NYC Industrial
10.5 8.6 13.6 9.1 6.3 (4.2) (40%)
Development Agency
Subtotal Spending $1,325 $1,297 $1,530 $1,483 $1,026 ($299) (23%)
Subtotal New York City $1,376 $1,377 $1,599 $1,558 $1,111 ($265) (19%)

OUTSIDE NEW YORK CITY

Change since 2011
Tax Breaks 2011 2012 2013 2014 2015 ($) (%)
Industrial Development
$495.0 $467.0 $574.9 $538.9 $590.7 $95.7 19%
Agencies
Subtotal Tax Breaks $495 $467 $575 $539 $591 $96 19%
Spending
Industrial Development
$144.8 $94.6 $74.0 $93.4 $67.7 ($77.1) (53%)
Agencies
Local Development
52.3 70.2 87.8 83.3 79.0 26.7 51%
Corporations
Land Banks 0.0 0.0 0.3 4.5 8.6 8.6 NA
Subtotal Spending $197 $165 $162 $181 $155 ($42) (21%)
Subtotal Outside New York City $692 $632 $737 $720 $746 $54 8%

TOTAL IDA AND LDC COSTS $2,068 $2,009 $2,336 $2,279 $1,857 ($211) (10%)

NA = Not Available.
Notes: Tax break gures exclude projects in "civic facility" or "continuing care retirement facilities" categories. Figures for New York City Economic Development Corporation
(NYCEDC) also include Apple Industrial Development Corporation, which merged into NYCEDC in 2014. Other NYC LDCs category includes Governors Island Corporation,
Brooklyn Bridge Park Corporation, Build NYC Resource Corporation, Hudson Yards Development Corporation, Hudson Yards Infrastructure Corporation, West Brighton Com-
munity Local Development Corporation, New York City Capital Resource Corporation, Theater Subdistrict Council Local Development Corporation, New York City Business
Assistance Corporation, Community Fund for Manhattan, and Coney Island Development Corporation. It does not include Brooklyn Navy Yard Development Corporation, Bronx
Overall Economic Development Corporation, NYC Energy Eciency Corporation, or NYC Land Development Corporation, due to unavailability of nancial statements for some
years. Spending and tax breaks for IDAs exclude IDAs for which nancial statements were unavailable in some years: City of Rensselaer IDA, Colonie IDA, Corinth IDA, Fairport
IDA, Hamilton IDA, Hudson IDA, Mechanicville-Stillwater IDA, Montgomery County IDA, Port Jervis IDA, and Town of Waterford IDA. Spending by LDCs excludes LDCs for
which nancial statements were unavailable in some years: Chadwick Bay Regional Development Corporation, Cheektowaga Economic Development Corporation, Lakefront
Development Corporation, Sullivan County Economic Development Corporation, Tioga County Local Development Corporation, and Village of Lancaster Community Develop-
ment Corporation. Land Banks category includes Broome County Land Bank, Bualo Erie Niagara Land Improvement Corporation, Chautauqua County Land Bank Corporation,
Greater Syracuse Property Development Corporation, Land Reutilization Corporation of the Capital Region, Newburgh Community Land Bank, Suolk County Land Bank Corpo-
ration, and Troy Community Land Bank Corporation. It excludes Rochester Land Bank Corporation due to unavailable nancial statements in some years.
Sources: Oce of the New York State Comptroller, Financial Data for Local Governments, "Other Local Government Data: Industrial Development Agencies" (accessed July
2017), and Financial Data for Local Governments, "Other Local Government Data: Local Development Corporations" (accessed July 2017).

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(NYCIDA), New York City Economic Development Corporation (NYCEDC), and other LDCs, and an
increase in NYCIDA tax breaks. Outside New York City, the total costs of IDAs and LDCs increased
slightly, led by growth in LDC spending and IDA tax breaks. Over the same period, IDA spending
decreased by half.

Expenses and Revenues

In 2015, the most recent year for which data is available, the allocation of operating expenses
was similar between IDAs and LDCs, but differed for those located in New York City compared
to the rest of the state. (See Table 3). In New York City, professional services contracts dominated
expenditures, largely due to a contract between the NYCIDA and NYCEDC in which NYCEDC
manages all of the projects of NYCIDA. Outside the City, both IDAs and LDCs spent most of
their money on salaries and benefits; professional services contracts, which can include auditors,
bond counsel, etc.; and other operating expenses, which can include rent, dues and subscriptions,
consultant costs, etc.

Revenues for both IDAs and LDCs came largely from charges for services, or fees paid by the
projects receiving assistance.9 (See Table 4). LDCs both within and outside of New York City
received a significant share of their revenue from other sources, which can include land sales, grant
revenues, and contracts with related entities.

Table 3: LDC and IDA Operating Expenses, 2015

Outside New York City IDAs LDCs

Salaries and benets 27% 16%
Professional services contracts 23% 17%
Supplies and materials 2% 7%
Depreciation & amortization 6% 10%
Other operating expenses 41% 50%
Total operating expenses (millions) $54.5 $81.3
New York City NYCIDA LDCs
Salaries and benets 0% 8%
Professional services contracts* 96% 82%
Supplies and materials 0% 0%
Depreciation & amortization 0% 4%
Other operating expenses 4% 5%
Total operating expenses (millions) $4.8 $837.2
NA = Not Available.
Sources: Oce of the New York State Comptroller, "Other Local Government Data: Industrial
Development Agencies" (accessed July 2017), and Financial Data for Local Governments,
"Other Local Government Data: Local Development Corporations" (accessed July 2017).

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 Table 4: LDC and IDA Revenue Sources, 2015

Outside New York City IDAs LDCs

Charges for services 72% 35%
Rental and nancing 12% 12%
Other 16% 53%
Total revenue (millions) $66.6 $77.3

New York City NYCIDA LDCs

Charges for services 94% 48%
Rental and nancing 0% 20%
Other 6% 32%
Total revenue (millions) $6.8 $1,085.9

Sources: Oce of the New York State Comptroller, "Other Local Government Data: Industrial
Development Agencies" (accessed July 2017), and Financial Data for Local Governments,
"Other Local Government Data: Local Development Corporations" (accessed July 2017).

Debt Held
IDAs and LDCs have nearly $24 billion of debt outstanding. The vast majority (86 percent) of
this debt is conduit debt, and approximately $10 billion of this debt is held by IDAs. Since 2008,
IDAs have been prohibited from issuing conduit debt on behalf of nonprofit projects, sometimes
referred to as civic facilities.10 Since then,IDAs have decreased in number, while LDCs, which face
no such restriction, have proliferated.

In addition to conduit debt, IDAs and LDCs hold some authority debt, mainly revenue debt, but
also some general obligation and other debt. Two upstate LDCs have debt in the form of PILOT
Increment Financing (PIF).11 Authority debt in New York City is dominated by $3 billion in revenue
bonds issued by the Hudson Yards Infrastructure Corporation.

In total, IDAs and LDCs provide a larger commitment of economic development resources than

Table 5: Industrial Development Agency and

Local Development Authority Debt Outstanding, 2015
(dollars in millions)

Outside New York City New York City Total

IDAs LDCs Total IDAs LDCs Total All

Conduit Debt $5,759 $7,458 $13,217 $5,549 $1,815 $7,364 $20,581

Authority Debt $22 $86 $108 $0 $3,141 $3,141 $3,249
PILOT Increment Financing $53 $1 $55 $0 $0 $0 $55
Total $5,834 $7,545 $13,380 $5,549 $4,956 $10,505 $23,885

Sources: Oce of the New York State Comptroller, "Other Local Government Data: Industrial Development Agencies" (accessed July 2017), Oce of
the New York State Comptroller, Financial Data for Local Governments, "Other Local Government Data: Local Development Corporations" (accessed
July 2017).

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more prominent economic development grantors, such as the Regional Economic Development
Councils (REDCs). Since REDCs were established in 2011, $4.7 billion has been awarded through
the annual award process, including up to $1.7 billion in industrial development bonds.12 Over
the same period, IDAs and LDCs have granted at least $3.1 billion in tax breaks, made at least
$254 million in grants, and issued at least $578 million in conduit debt for economic development
purposes.13 Despite the significant financial resources controlled by IDAs and LDCs, their operations
and organization rarely receive the same level of scrutiny as similarly costly programs run by the
state.

A review of financial and other reports points to three major concerns with IDAs and LDCs.

Concern 1: Fragmentation and Overlap

As of December 2015 there were 107 IDAs and 189 LDCs dedicated to economic development
in New York State.14 In the nine REDC regions outside New York City, the number of IDAs ranged
from 7 to 21 and the number of LDCs ranged from 8 to 31. (See Figure 2.) New York City was home

Figure 2: Number of IDAs and LDCs per REDC Region, 2015

9 IDAs NORTH 7 IDAs

8 LDCs COUNTRY 18 LDCs

11 IDAs 7 IDAs
30 LDCs 13 LDCs

MOHAWK
VALLEY
FINGER CENTRAL
21 IDAs
LAKES NEW YORK
CAPITAL 27 LDCs
REGION
WESTERN
NEW YORK SOUTHERN TIER

18 IDAs
14 IDAs 11 IDAs MID-HUDSON 31 LDCs
20 LDCs 15 LDCs

LONG
Multiple regions ISLAND
2 LDCs 1 IDAs NEW YORK 8 IDAs
15 LDCs CITY 15 LDCs

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 Figure 3: Number of IDAs and LDCs

LDCs IDAs
199 196
189
175

144

115 114

112 113 112 109 108 107

99

2009 2010 2011 2012 2013 2014 2015

Sources: Oce of the New York State Comptroller, "Other Local Government Data: Industrial Development Agencies" (accessed July 2017), and
Financial Data for Local Governments, "Other Local Government Data: Local Development Corporations" (accessed July 2017).

to only one IDA, NYCIDA, along with 15 LDCs, including NYCEDC. Of the states 62 counties, six
contained more than 10 LDCs and IDAs combined. This preponderance results in a fragmentation
of decision-making authority and impedes the coordination of economic development investments
according to a consistent strategy.

Of the state's 62 counties, six contained

more than 10 LDCs and IDAs combined.

Although the numbers of both IDAs and LDCs have fallen slightly in recent years and there is
informal cooperation between entities in the same geographic area, there is still unnecessary
duplication of effort. IDAs and LDCs spent $100 million on wages, salaries, and benefits in 2015,
with neighboring entities performing overlapping work. At its worst, competition between entities
creates a lose-lose situation at the regional level, as businesses lured from one community to
another are rewarded with tax incentives. A recent study by a Stanford economist found that
spatial concentration of New Yorks IDAs increased the tax breaks awarded, but was unlikely to
have a significant effect on where firms located.15 In contrast, coordination between individual
IDAs and LDCs could take local strengths and weaknesses into account to allocate assistance more
efficiently, and consolidation could decrease administrative costs.

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 Data Limitations
In the course of this analysis, several concerns arose with the quality and
accuracy of data that IDAs and LDCs report to the ABO.

The information that IDAs and LDCs are asked for in their PARIS filings
has not changed since PARIS was created in 2009, even though their
activities have evolved over time.

LDCs are asked for slightly different information about their projects
than IDAs are in their annual reports to PARIS, so data is not comparable.

The project information entered into PARIS is based on the information

provided to IDAs and LDCs on project applications, which are specific
to each IDA/LDC, so data definitions are not standardized.

Through board trainings, ABO has found that some IDA/LDC boards do
not understand how to correctly enter the data from project applications
into PARIS.

ABO receives correction requests from authorities that note that

information entered in previous years was incorrect, but ABO often does
not make these corrections. This is generally because the authorities
cannot provide documentation showing the correct data.

Concern 2: Lack of Accountability

IDAs are subject to oversight by both OSC and the ABO, which was established by the Public
Authorities Reform Act of 2009 (PARA) to oversee state and local authorities. OSC does not have
oversight over LDCs, which are formed as not-for-profit corporations, not authorities, and ABO
only has oversight over those that meet the definition of a local authority.16 Reforms in PARA and
the Public Authorities Accountability Act of 2005 require all entities overseen by ABO to submit
five annual reports in the Public Authority Reporting Information System (PARIS), which is jointly
overseen by the ABO and OSC.

The five required reports are an annual report, a budget report, an audit report, an investment report,
and a procurement report. The annual report contains information on the entitys governance; board
of directors; staff members and their pay; subsidiaries; financial information; debt schedule; property
acquired or disposed of by the authority; and details on projects. For LDCs, project information
covers grants, loans, or bonds awarded, and for IDAs, project information covers tax exemptions
and bonds. The budget report contains a revenue and expenditure four-year plan, and the audit

9
report is a copy of the authoritys independently audited financial statements. The investment
report includes all investments owned by the authority, an audit of the authoritys investments, and
confirmation that the authoritys investment guidelines are reviewed and approved annually. The
procurement report contains a list of all procurement transactions for the fiscal year.

Despite these seemingly extensive filing requirements, the quality of information provided is
questionable and often needs to be corrected. (See sidebar.)17 In addition, about a quarter of
authorities fail to submit their required reports each year.18 Between January 2010 and July 2017,
65 IDAs and 240 LDCs missed at least one reporting deadline, and 8 IDAs and 71 LDCs failed
to file a report in at least five years since 2010.19 Furthermore, ABOs three most recent annual
reports have all noted that the information submitted in PARIS is frequently inaccurate.20 However,
ABO does not confirm the accuracy of all the data submitted and instead does reviews in response
to complaints about particular entities.21

ABO has the power to investigate IDAs and LDCs, but its only enforcement powers are warnings
and letters of censure, and it has not issued a letter of censure since 2013.22 ABO has consistently
proposed that it be granted additional enforcement powers, such as levying fines, but no changes
have been made to its powers since it was established in 2009.23 Additionally, while OSC can audit
IDAs, it does not have the power to audit LDCs directly. It can only audit LDCs indirectly through
their relationships with municipalities.24 Like ABO, OSC has limited sanction power.25

IDAs and LDCs are not subject to the same procurement requirements as municipalities. ABO
reports that 55.7% of IDA procurements costs and 16.4% of LDC procurement costs were for non-
competitively bid contracts during the 2016 reporting year.26 The lack of scrutiny has resulted in
misconduct. Two Monroe County LDCs were involved in a bid-rigging case that ended in four guilty
verdicts. One of the men convicted had helped the county to establish its LDCs and then, with
help from the three other men, including the countys former information technology director, won
major bids for LDC procurements with companies he controlled.27

Legislation to reform IDAs, requested by OSC, was signed into law in 2015 and took effect in
June 2016. The legislation requires IDAs to develop standard application forms for projects
seeking financial assistance, including projections of job creation and retention; uniform criteria
for evaluating these applications, including a written cost-benefit analysis; a uniform project
agreement, including annual certification by the project owner of the number of full-time-equivalent
jobs created or retained; and a policy defining the circumstances under which financial assistance
must be suspended, terminated, or repaid by the project. These are all strong steps forward for
accountability, and data for fiscal year 2015, used in this analysis, do not reflect any impact these
policy changes may have had on IDA operations, reporting, and investment decisions.

10
 Concern 3: Record of Poorly Justified Choices in Making Economic
Development Investments
The available data is limited, and ABO has noted inaccuracy in IDA and LDC reporting, but the
information that is available suggests IDAs and LDCs do not have a strong record of making sound
economic development investments. In order to evaluate the decision-making of the IDAs and
LDCs, the following analysis is based on IDAs and LDCs reports of how many jobs their projects
planned to create or retain at the time the incentive was awarded, rather than on how many jobs
were actually created. Some projects did not report planned job creation or retention and may
have had other economic development goals, such as capital investment. However, no data are
available on those goals or their outcomes, so this analysis focuses on jobs. A perfect success rate
is not achievable in economic development, but those giving financial assistance should target
it to projects they expect to have a high return on investment and a low cost-per-job created or
retained.

This analysis computes the average cost in 2015, in either foregone tax revenue or in grant funds,
per job that each IDA and LDC project was projected to create or retain. This is an imperfect
measure: data is not available on the expected timeline for job creation in each project, so the
2015 cost may be divided among more jobs than should be expected to exist at this point. Also,
while grant costs are one-time and tax exemption costs are annual over a period of typically 5 to
30 years, new jobs may persist for longer, although there is no requirement that they exist past the
point when IDA or LDC incentives cease.

Some projects did not report planned job creation

or retention and may have had other economic
development goals, such as capital investment.
However, no data is available on those goals or
their outcomes, so this analysis focuses on jobs.

Of 3,033 IDA projects outside of New York City receiving tax exemptions in 2015, 2,716 had net
tax savings; that is, the actual tax that would have been owed is greater than the PILOT paid. (See
Table 6.) Of these, 2,350 projects reported planned job creation, with an average tax exemption
per planned job of $24,747. Another 161 projects reported planned job retention only, without
job creation, with an average tax savings of $23,706 per planned job retained. Lastly, 205 projects

11
 Table 6: Cost Per Job for IDA and LDC Projects Outside New York City, 2015

Number of Average $ Per

Projects Total Cost Planned Job
Total IDA Projects Outside NYC Receiving Tax Exemptions 3,033 $595,256,502 NA
Projects with Net Tax Savings 2,716 $601,814,477 NA
Projects Reporting:
Planned Job Creation/Retention 2,350 $497,312,993 $24,747
Planned Job Retention Only 161 $55,152,100 $23,706
Projects Not Reporting Planned Job Creation or Retention 205 $49,349,384 NA
Total LDC Projects Outside NYC Awarded Grants 76 $3,599,310 NA
Projects Reporting:
Planned Job Creation 23 $2,343,840 $12,031
Projects Not Reporting Planned Job Creation 53 $1,255,470 NA
NA = Not available.

Notes: IDA projects in "civic facility" or "continuing care retirement facilities" categories are excluded. Projects with Net Tax Savings includes only proj-
ects with PILOT payments less than taxes that would be due. Average cost for Projects Reporting Planned Job Creation/Retention is per estimated job
created; estimated jobs retained are not included in this per-job cost. LDC grants in "residential property" and "land preservation" categories are ex-
cluded, as are grants to other LDCs, IDAs, local governments, or nonprots, except those focused on economic development.

Sources: CBC sta analysis of data from Oce of the New York State Comptroller, "Other Local Government Data: Industrial Development Agencies"
(accessed July 2017), and Financial Data for Local Governments, "Other Local Government Data: Local Development Corporations" (accessed July
2017).

reported no planned job creation or retention but received average tax exemptions of more than
$240,000, despite no reported commitment to job creation or retention.

Of 1,705 LDC projects outside of New York City, 1,211 projects were loan projects, 343 were bond
projects, and 151 were grant projects. Excluding grants to local governments, other LDCs/IDAs,
other nonprofits, or for residential property or land preservation purposes, there were 76 grant
projects by LDCs outside New York City in 2015. Twenty-three grant projects reported planned job
creation, with an average grant of $12,031 per planned job. Planned job retention is not reported
for LDC projects. The remaining 53 grant projects reported no planned job creation, but received
average grants of $23,688. Per-job figures for loan and bond projects were higher than for grant
projects, but not comparable because the funds are repaid.

Out of 272 IDA projects in New York City receiving tax exemptions, 269 had positive net tax
exemptions. (See Table 7.) Of these, 255 projects reported planned job creation, with an average
tax exemption per planned job of $17,056. Another seven projects reported planned job retention
only, with an average exemption per planned job retained of $2,379. Lastly, seven projects reported
no planned job creation or retention. These projects received average tax exemptions of more than
$420,000 despite no apparent commitment to job creation or retention.

Of 255 LDC projects in New York City, 110 were loan projects, 70 were bond projects, and 75
were grant projects. Excluding grants to local governments, other LDCs/IDAs, other nonprofits, or

12
 Table 7: Cost Per Job for IDA and LDC Projects In New York City, 2015

Number of Average $ Per

Projects Total Cost Planned Job
Total IDA Projects in NYC Receiving Tax Exemptions 272 $85,419,928 NA
Projects with Net Tax Savings 269 $85,420,182 NA
Projects Reporting:
Planned Job Creation/Retention 255 $63,981,428 $17,056
Planned Job Retention Only 7 $18,484,426 $2,379
Projects Not Reporting Planned Job Creation or Retention 7 $49,349,384 NA
Total LDC Projects in NYC Awarded Grants 45 $2,954,328 NA
Projects Reporting:
Planned Job Creation 0 $0 NA
Projects Not Reporting Planned Job Creation 45 $7,049,435 NA
NA = Not available.

Notes: IDA projects in "civic facility" or "continuing care retirement facilities" categories are excluded. Projects with Net Tax Savings includes only proj-
ects with PILOT payments less than taxes that would be due. Average cost for Projects Reporting Planned Job Creation/Retention is per estimated job
created; estimated jobs retained are not included in this per-job cost. LDC grants in "residential property" and "land preservation" categories are ex-
cluded, as are grants to other LDCs, IDAs, local governments, or nonprots, except those focused on economic development.

Sources: CBC sta analysis of data from Oce of the New York State Comptroller, "Other Local Government Data: Industrial Development Agencies"
(accessed July 2017), and Financial Data for Local Governments, "Other Local Government Data: Local Development Corporations" (accessed July
2017).

for residential property or land preservation purposes, there were 45 grant projects by LDCs
in NYC in 2015. None of the grant projects reported planned job creation, so per-job cost is not
calculated for these projects.

Together, these lackluster numbers suggest that IDAs and LDCs are awarding assistance to many
projects that make no commitment to job creation or retention, and to some projects with high
costs relative to the number of jobs affected. If jobs are not the primary goal of these investments,
additional data should be collected so their performance can be better evaluated. Although some
projects will fail no matter how carefully they are chosen, IDAs and LDCs should not invest public
resources in projects where success still means a bad deal for taxpayers.

Although some projects will fail no matter how

carefully they are chosen, IDAs and LDCs should
not invest public resources in projects where
success still means a bad deal for taxpayers.

13
Recommendations
CBC advocates for coordination, performance measurement, and transparency in economic
development. The current system of IDAs and LDCs falls short of each of these principles, and
CBC has two recommendations to improve the transparency and effectiveness of these entities.

1. Consolidate IDAs at the regional level to coordinate with REDCs

REDCs bring together regional leaders in business, academia, government, and labor to
establish strategic plans for investment in each region based on local strengths and challenges.
This model helps to coordinate awards from numerous state agencies around a single set of
priorities. IDAs in each of the states 10 REDC regions should be consolidated into a single
multicounty IDA per region, which will work to support the REDCs strategic plans.28 Existing
LDCs should not be allowed to engage in economic development activities and should be limited
to specific purposes. The formation of new LDCs within each region should be subject to a veto
by the local REDC so that economic development within the region remains coordinated, while
retaining flexibility for LDCs created for specific purposes. Additionally, consideration should
be given to streamlining the process for dissolving inactive LDCs.

2. Improve reporting and accountability

a. Strengthen ABOs enforcement powers

Since 2011, ABOs annual reports have contained similar requests that ABO be granted
the ability to assess fines, suspend directors, or to curtail certain activities of an authority
and its board which have been censured but remain out of compliance with state law or
deficient in performing their fiduciary duty.29 These powers should be granted so that
ABO can more effectively address the persistent lack of reporting and the other problems
uncovered in its reviews of IDAs and LDCs.

b. Expand oversight over PARIS reporting

Many IDA and LDC projects are worth millions of dollars, yet ABO reports that the data
it receives from authorities has been repeatedly inaccurate and unreliable.30 Oversight
of the data being input into PARIS should be increased. Data for large projects should
be verified individually for each project, and data for smaller projects should be subject
to spot-checking. If this is not possible at the ABOs current capacity, the ABOs budget
should be increased to a level that allows it to accomplish its mission.

c. Authorize the State Comptroller to audit LDCs

Recent instances of fraud illustrate the risks of insufficient oversight of financial resources
for economic development. To prevent future abuse of public resources, OSCs audit
authority should be extended to apply to LDCs directly, not only through their relationships
with local governments.

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 d. Improve and standardize IDA and LDC reporting

Standardized metrics for measuring economic development outcomes, such as job

creation, are essential to evaluating economic development programs and directing public
resources effectively. These metrics should include the number of jobs before assistance,
planned job creation and retention, actual jobs, planned capital investment, and actual
qualified investments reported annually after assistance begins.31 IDAs and LDCs should
collect the same information for each of their projects, all of which should be available
on the states open data website, as it is today. Data on IDA and LDC projects should be
part of a comprehensive database of deals containing information on all state and local
economic development projects.

These five changes can help to address the current fragmentation, unaccountability, and lack of
transparency that characterize the current state of IDAs and LDCs. Generating consistently positive
results from economic development projects is never guaranteed, but a coordinated approach
combined with the data necessary to make informed decisions will go a long way toward achieving
this goal.

15
ENDNOTES

1 Office of the New York State Comptroller, Industrial Development Agencies in New York State: Back-
ground, Issues and Recommendations (May 2006), p. 7, www.osc.state.ny.us/localgov/pubs/research/
idabackground.pdf.

2 Office of the New York State Comptroller, Financial Data for Local Governments, Other Local Gov-
ernment Data: Local Government Finances (accessed July 31, 2017), http://www.osc.state.ny.us/
localgov/datanstat/findata/index_choice.htm.

3 Sec. 2(2) of Public Authorities Law (2005); and New York State Authorities Budget Office, Annual Re-
port on Public Authorities in New York State (July 1, 2017), p. 8, www.abo.ny.gov/reports/annualreports/
ABO2017AnnualReport.pdf.

4 Office of the New York State Comptroller, Local Authorities in New York State: An Overview (April
2015), p. 4, www.osc.state.ny.us/localgov/pubs/research/localauthorities0415.pdf.

5 New York State Authorities Budget Office, email to Citizens Budget Commission staff (August 9,
2017); and Office of the New York State Comptroller, Municipal Use of Local Development Corpora-
tions and Other Private Entities: Background, Issues and Recommendations (April 2011), p. 4, www.osc.
state.ny.us/localgov/pubs/research/ldcreport.pdf.

6 Thirty-six LDCs were created to convert ongoing revenue from a 1998 settlement with four to-
bacco companies into lump sum payments. These LDCs, along with 16 other non-economic-devel-
opment-related LDCs, are excluded from the analysis in this report. Other LDCs excluded: Fiscal
Year 2005 Securitization Corporation, Golden Hill Local Development Corporation, Maplewood
Manor Local Development Corporation, Monroe Newpower Corporation, Monroe Security & Safety
System Local Development Corporation, Municipal Electric and Gas Alliance Inc., NYC Technology
Development Corporation, Orange Valley View Development Corporation, Orleans County Health
Facilities Corporation, Otsego County Health Facilities Corporation, Philipstown Depot Theatre
Development Corporation, Rensselaer Municipal Leasing Corporation, Rockland County Health
Facilities Corporation, Sales Tax Asset Receivable Corporation, Schuyler County Human Services
Development Corporation, and Upstate Telecommunications Corporation. See: Office of the New
York State Comptroller, Financial Data for Local Governments, Other Local Government Data: Lo-
cal Government Finances (accessed July 31, 2017), http://www.osc.state.ny.us/localgov/datanstat/
findata/index_choice.htm, and Local Authorities in New York State: An Overview (April 2015), p. 11, www.
osc.state.ny.us/localgov/pubs/research/localauthorities0415.pdf.

7 New York State Authorities Budget Office, Policy Guidance No.15-01 (January 13, 2015), www.abo.
ny.gov/policyguidance/15-01%20Restrictions%20on%20Grants%20and%20Loans.pdf.

8 The expiration of this provision was met with opposition by IDA leaders, business groups, and

16
 nonprofit groups. See: New York City Economic Development Corporation, Statewide Coalition
Calls for Permanent Restoration of Industrial Development Agency Authority to Aid Civic Facilities
(press release, March 4, 2009), www.nycedc.com/press-release/statewide-coalition-calls-permanent-res-
toration-industrial-development-agency; Office of the New York State Comptroller, Municipal Use of Lo-
cal Development Corporations and Other Private Entities: Background, Issues and Recommendations (April
2011), p. 3, www.osc.state.ny.us/localgov/pubs/research/ldcreport.pdf; The Business Council of New
York State, State Economy and Social Services Suffer From IDA Impasse (press release, June 16,
2009), www.bcnys.org/whatsnew/2009/0616IDAcivicfacility.htm; and Testimony of Thomas Reinagel,
Executive Director, United Church Home Society, before the New York State Assembly Standing
Committee on Local Governments (May 17, 2007), www.leadingageny.org/linkservid/8556182D-D9BE-
355F-06EF82B4292E0222/showMeta/0/.

9 For example, the Nassau County Industrial Development Agency charges a fee of 0.6 percent of to-
tal project costs or bond issues (taxable and tax-exempt) and for straight-lease transactions. It also
charges a one-time legal fee, a closing fee, an annual administrative fee, and an application fee. See:
Nassau County Industrial Development Agency, Audited Financial Statements and Supplementary Infor-
mation, Years Ended December 31, 2015 and 2014 (April 1, 2016), pp. 16-17, https://www.abo.ny.gov/
annualreports/PARISAuditReports/FYE2015/IDA/NassauCountyIDA2015.pdf. In addition to project-
related fees, some LDCs receive fee income related to their specific focuses, such as ferry fares for
Governors Island Corporation and electricity distribution income for Griffiss Utility Services Corpo-
ration.

10 Section 854, subdivision 13 of the General Municipal Law, which authorized IDAs to issue conduit
debt for civic facilities projects, including most projects owned or operated by nonprofits, expired in
2008. See: Office of the New York State Comptroller, Municipal Use of Local Development Corporations
and Other Private Entities: Background, Issues and Recommendations (April 2011), p. 3, www.osc.state.
ny.us/localgov/pubs/research/ldcreport.pdf.

11 In a PIF project, a projects developer makes increment payments equal to the difference between
the value of taxes on the improved property and the original property taxes before improvements.
These increment payments are used to pay debt service on bonds issued to cover the improve-
ments. The original tax amount continues to go to the affected tax jurisdictions. Griffiss Local
Development Corporation holds $1.5 million, while the Saratoga County Industrial Development
Agency holds $53 million of a $70 million PIF bond issued in 2013 to upgrade the infrastructure
surrounding the GlobalFoundries plant in Malta. See: Saratoga County Industrial Development
Agency, Financial Statements and Supplemental Information (December 31, 2014), www.abo.ny.gov/an-
nualreports/PARISAuditReports/FYE2014/IDA/SaratogaCountyIDA2014.pdf.

12 Not all of the funds awarded have necessarily been spent, and some are directed toward non-eco-
nomic development purposes, such as waterfront redevelopment.

13 These totals exclude: IDA tax exemption projects in the civic facility or continuing care retire-
ment facilities categories; LDC grant projects in the residential property or land preservation

17
 categories, or LDC grants made to other LDCs, IDAs, local governments, or nonprofits, except those
focused on economic development; and LDC and IDA conduit debt issued to nonprofits. Including
all projects, IDAs and LDCs have granted $3.1 billion in tax breaks, made $644 million in grants, and
issued $8.8 billion in conduit debt from 2011 to 2015.

14 Thirty-six LDCs were created to convert ongoing revenue from a 1998 settlement with four to-
bacco companies into lump sum payments. These LDCs, along with 16 other non-economic-devel-
opment-related LDCs, are excluded from the analysis in this report. Other LDCs excluded: Fiscal
Year 2005 Securitization Corporation, Golden Hill Local Development Corporation, Maplewood
Manor Local Development Corporation, Monroe Newpower Corporation, Monroe Security & Safety
System Local Development Corporation, Municipal Electric and Gas Alliance Inc., NYC Technology
Development Corporation, Orange Valley View Development Corporation, Orleans County Health
Facilities Corporation, Otsego County Health Facilities Corporation, Philipstown Depot Theatre
Development Corporation, Rensselaer Municipal Leasing Corporation, Rockland County Health
Facilities Corporation, Sales Tax Asset Receivable Corporation, Schuyler County Human Services
Development Corporation, and Upstate Telecommunications Corporation. See: Office of the New
York State Comptroller, Financial Data for Local Governments, Other Local Government Data: Lo-
cal Government Finances (accessed July 31, 2017), http://www.osc.state.ny.us/localgov/datanstat/
findata/index_choice.htm, and Office of the New York State Comptroller, Local Authorities in New
York State: An Overview (April 2015), p. 11, www.osc.state.ny.us/localgov/pubs/research/localau-
thorities0415.pdf.

15 Evan Mast, Race to the bottom? Local tax break competition and business location (draft, Stan-
ford University, April 13, 2017), https://sites.google.com/site/evanemast/.

16 ABOs oversight of LDCs is limited to those that meet the definition of a local authority as defined
in Section 2 of Public Authorities Law. That is the same subset of LDCs on which this report fo-
cuses. See: New York State Authorities Budget Office, Annual Report on Public Authorities in New York
State (July 1, 2017), p. 8, www.abo.ny.gov/reports/annualreports/ABO2017AnnualReport.pdf.

17 Sources for sidebar: Staff of New York State Authorities Budget Office, personal communication
(July 27, 2017); New York State Authorities Budget Office, Annual Report on Public Authorities in New
York State (July 1, 2017), p. 58, www.abo.ny.gov/reports/annualreports/ABO2017AnnualReport.pdf, and
PARIS Handbook: A Reference Guide for PARIS Users (2011), www.abo.ny.gov/paris/PARISHandbook2011.
pdf.

18 New York State Authorities Budget Office, Annual Report on Public Authorities in New York State (July
1, 2017), p. 58, www.abo.ny.gov/reports/annualreports/ABO2017AnnualReport.pdf.

19 LDC total does not include those unrelated to economic development, such as Tobacco Asset Se-
curitization Corporations, but may include LDCs that no longer exist. See: New York State Authori-
ties Budget Office, Public Authorities That Have Failed to File Required Reports in the Public Authorities
Reporting Information System as of June 29, 2017 (June 29, 2017), www.abo.ny.gov/reports/delinquen-

18
 treports/July2017DelinquentList.pdf, January 2017 edition, www.abo.ny.gov/reports/delinquentre-
ports/January2017DelinquentList.pdf, June 2016 edition, www.abo.ny.gov/reports/delinquentreports/
July2016DelinquentList.pdf, January 2016 edition, www.abo.ny.gov/reports/delinquentreports/Janu-
ary2016DelinquentList.pdf, June 2015 edition, www.abo.ny.gov/reports/delinquentreports/June2015D-
elinquentList.pdf, January 2015 edition, www.abo.ny.gov/reports/delinquentreports/January2015FI-
NALDelinquentList1.pdf, June 2014 edition, www.abo.ny.gov/reports/delinquentreports/July2014Delin-
quentList.pdf, January 2014 edition, www.abo.ny.gov/reports/delinquentreports/January2014Delin-
quentList.pdf, June 2013 edition, www.abo.ny.gov/reports/delinquentreports/July2013DelinquentList.
pdf, January 2013 edition, www.abo.ny.gov/reports/delinquentreports/January2013DelinquentList.pdf,
June 2012 edition, www.abo.ny.gov/reports/delinquentreports/July2012DelinquentList.pdf, January
2012 edition, www.abo.ny.gov/reports/delinquentreports/January2012DelinquentList.pdf, January 2011
edition, www.abo.ny.gov/reports/delinquentreports/January2011DelinquentList.pdf, and January 2010
edition, www.abo.ny.gov/reports/delinquentreports/January2010DelinquentList.pdf.

20 New York State Authorities Budget Office, Annual Report on Public Authorities in New York State (July
1, 2017), p. 58, www.abo.ny.gov/reports/annualreports/ABO2017AnnualReport.pdf July 2016 edition,
pp. 4-5, www.abo.ny.gov/reports/annualreports/ABO2016AnnualReport.pdf, and July 2015 edition, pp.
iii, 6-8, www.abo.ny.gov/reports/annualreports/ABO2015AnnualReport.pdf.

21 New York State Authorities Budget Office, Annual Report on Public Authorities in New York State (July
1, 2017), p. 7, www.abo.ny.gov/reports/annualreports/ABO2017AnnualReport.pdf.

22 The ABO was led by acting directors from 2014 to 2017, which may have contributed to the lack
of censures issued. New York State Authorities Budget Office, Annual Report on Public Authorities
in New York State (July 1, 2017), p. 1, www.abo.ny.gov/reports/annualreports/ABO2017AnnualRe-
port.pdf, and ABO Enforcement Actions (accessed July 26, 2017), www.abo.ny.gov/enforcement/
enforcement.html.

23 New York State Authorities Budget Office, Annual Report on Public Authorities in New York State (July
1, 2017), p. 57, www.abo.ny.gov/reports/annualreports/ABO2017AnnualReport.pdf, July 2016 edition,
p. 60, www.abo.ny.gov/reports/annualreports/ABO2016AnnualReport.pdf, July 2015 edition, p. 48, www.
abo.ny.gov/reports/annualreports/ABO2015AnnualReport.pdf, July 2014 edition, p. 51, www.abo.ny.gov/
reports/annualreports/ABO2014AnnualReport.pdf, July 2013 edition, p. 30, www.abo.ny.gov/reports/an-
nualreports/ABO2013AnnualReport.pdf, July 2012 edition, p. 20, www.abo.ny.gov/reports/annualreports/
ABO2012AnnualReport.pdf, and July 2011 edition, p. 19, www.abo.ny.gov/reports/annualreports/ABO-
2011AnnualReport.pdf.

24 Office of the New York State Comptroller, Municipal Use of Local Development Corporations and Other
Private Entities: Background, Issues and Recommendations (April 2011), p. 1, www.osc.state.ny.us/local-
gov/pubs/research/ldcreport.pdf.

25 Office of the New York State Comptroller, Local Authorities in New York State: An Overview (April
2015), p. 8, www.osc.state.ny.us/localgov/pubs/research/localauthorities0415.pdf.

19
26 New York State Authorities Budget Office, Annual Report on Public Authorities in New York State (July
1, 2017), p. 28, www.abo.ny.gov/reports/annualreports/ABO2017AnnualReport.pdf.

27 Gary Craig, Sentencings close Monroe County bid-rigging case, Democrat and Chronicle (May 6,
2016), www.democratandchronicle.com/story/news/2016/05/06/ldc-bid-riggers-sentenced-corruption-
case/84011344/.

28 The state will have to determine how the relevant local governments come together to appoint the
governing body, in recognition of the loss of local control from consolidating IDAs. A possible model
is the Counties of Warren and Washington IDA, with board members appointed by each county.

29 New York State Authorities Budget Office, Annual Report on Public Authorities in New York State (July
1, 2017), p. 57, www.abo.ny.gov/reports/annualreports/ABO2017AnnualReport.pdf.

30 New York State Authorities Budget Office, Annual Report on Public Authorities in New York State (July
1, 2017), p. 58, www.abo.ny.gov/reports/annualreports/ABO2017AnnualReport.pdf.

31 For additional detail and a complete list of recommended metrics, see: Riley Edwards, A Blueprint
for Economic Development Reform (Citizens Budget Commission, March 13, 2017), https://cbcny.org/
research/blueprint-economic-development-reform.

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Opaque and Duplicative: www.cbcny.org
Local Economic Development in New York State
@cbcny

540 Broadway Two Penn Plaza

Policy Brief October 2017 Fifth Floor Fifth Floor
Albany, NY 12207 New York, NY 10121
State Budget, Economic Development 518-429-2959 212-279-2605

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