Opinion 94

Opinion 94 - 14

This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

INDUSTRIAL DEVELOPMENT AGENCIES -- Powers and Duties (authority to finance projects located outside the municipality for whose benefit the agency was created); (development related to earlier projects as constituting modifications)

GENERAL MUNICIPAL LAW, з854(4): General Municipal Law, з854(4), as amended by the Laws of 1993, chapter 356, prohibits industrial development agencies (IDAs) from providing financial assistance in respect of any project located wholly outside the municipality for whose benefit the IDA was created. This prohibition does not apply, however, to projects for which an agency has authorized any assistance prior to October 19, 1993, the date on which chapter 356 became effective, even if such projects are thereafter modified. Whether continued development "related to" an earlier project developed outside the municipality for whose benefit the IDA was created constitutes a mere modification of the earlier project and, therefore, is not prohibited by the amended General Municipal Law, з854(4), is a question of fact.

You inform us that the city's industrial development agency (IDA), since its formation in 1974, has provided financial assistance in the development of various projects located outside the city in a neighboring town. You ask whether, in light of recent amendments to the General Municipal Law (GML), the IDA may provide further financial assistance for the "continued development of projects related to" the earlier projects.

Article 18-A of the GML (зз850 et seq.) contains provisions governing the establishment and operation of IDAs. Numerous amendments to article 18-A were made by chapters 356-7 of the Laws of 1993. Among other things, the definition of "project" was amended to mean:

any land, any building or other improvement, and all real and personal properties located within the state of New York and within or partially within and partially outside the municipality for whose benefit the agency was created ... , provided, however, no agency shall provide financial assistance in respect of any project partially outside the municipality for whose benefit the agency was created without the prior consent thereto by the governing body or bodies of all the other municipalities in which any part of the project is, or is to be, located. Where a project is located partially within and partially outside the municipality for whose benefit the agency was created, the portion of the project outside the municipality must be contiguous with the portion of the project inside the municipality (emphasis added; GML, з854[4]).

Prior to this amendment, a project could also be located wholly outside the municipality for whose benefit the agency was created, subject to the consent of the other involved municipality and except to the extent the enabling act establishing the IDA restricted the IDA's activities to within the corporate limits of the municipality for whose benefit it was created (see 33 Opns St Comp, 1977, p 29; 1977 Opns St Comp No. 77-759, unreported; see, e.g., GML, з902-a). Since the projects in question are located wholly outside the city, the continued provision of financial assistance by the IDA for further development at the site of these projects would be prohibited under article 18-A if the 1993 amendment applies.

The amendment generally became effective October 19, 1993. It does not apply, however, to "projects for which an agency, through the issuance of its bonds, execution of leases, or the passage of an inducement resolution or bond resolution, has authorized any assistance prior to the date on which this act shall have become a law [October 19, 1993] whether or not such projects are thereafter modified ... " (L 1993, ch 356, з38). Thus, if the proposed financings are for the completion of one or more projects located outside the city, which projects are the subject of bonds, leases, or inducement or bond resolutions predating the amendment, then the amendment to article 18-A would not apply, even if the projects have been "modified". If, however, the projects located outside the city have been developed and completed, then further financial assistance for new projects, even if related to the original projects, in our opinion, would be prohibited by the amendments.

Whether the proposed financial assistance for the "continued development of projects related to" the earlier projects is for the completion of the earlier authorized projects, as modified, or is for new projects, is a question of fact. If the proposed transactions constitute mere modifications to the projects undertaken prior to the enactment of the amendments, then further IDA financial assistance may not be prohibited by GML, з854(4) as amended. On the other hand, if the projects located outside the city have been developed and completed, we question whether further development related thereto could be characterized as mere modifications of the original projects or rather, would be new projects (cf. Albert Elia Building v New York State Urban Development, 54 AD2d 337, 388 NYS2d 462). Nevertheless, this question of fact should be resolved, in the first instance, by the governing board of the IDA, on advice of counsel, as appropriate.

October 25, 1994
James W. Griffin, Executive Director
City of Hornell Industrial Development Agency