Opinion 2000 - 9


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 The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.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 -- Officers and Employees (compensation for executive director); (performance evaluation program)

PUBLIC OFFICERS AND EMPLOYEES -- Compensation (authority to make payment pursuant to performance evaluation program)

WORDS AND PHRASES -- Compensation (as including salary and certain other payments)

GENERAL MUNICIPAL LAW 858(7): An industrial development agency may not determine at the end of a year to provide additional compensation as an "after-the-fact" bonus to the executive director of the agency for services already rendered and for which a fixed salary was already paid. The governing board of the industrial development agency, in fixing the executive director's total compensation, however, may establish a performance evaluation program under which specific performance criteria are set forth and disclosed to the executive director prior to the performance of services, with corresponding dollar amounts of additional compensation established for meeting the criteria. The board then may determine at the end of each year that the executive director has met the specified criteria and is eligible for the specified additional compensation.

You ask whether an industrial development agency may compensate its executive director by an annual salary plus an additional lump sum amount determined at the end of the year by the agency's governing board, upon recommendation of the chair after the conduct of a performance review.

General Municipal Law 858(7) authorizes an industrial development agency to appoint officers, agents and employees, prescribe their qualifications, and fix and pay their "compensation." We have previously expressed the view that the word "compensation" in similar contexts generally connotes the total consideration paid to an officer or employee for his or her services, including salary or wages and authorized fringe benefits (see, e.g. 1988 Opns St Comp No. 88-64, p 126; 1985 Opns St Comp No. 85-13, p 15; cf. 1989 Opns St Comp No. 89-27, p 63; 1987 Opns St Comp No. 87-8; p 13). It is well-established, however, that additional compensation fixed as a reward for services already rendered and fully compensated, such as a bonus or a retroactive pay increase, generally constitutes a mere gratuity and an improper gift of public moneys (see, e.g., 1988 Opns St Comp No. 88-59, p 118; cf. BOCES v State, 236 AD2d 84, 664 NYS2d 149, app dsmd 91 NY2d 921, 669 NYS2d 262, 1v den 92 NYS2d 802, 677 NYS2d 72). Although industrial development agencies are not constitutionally proscribed from making gifts of their moneys (see 1991 Opns St Comp No. 91-32, p 91; Schulz v Pataki, _____ AD2d _____, 708 NYS2d 177), they nonetheless have no affirmative statutory authority to make gifts to their officers and employees (see 1999 Opns St Comp No. 99-4, p 6).

It is not a gift, however, if compensation is presently earned but withheld until the completion of a period of service, as an inducement to continued competent and faithful service (see, e.g., Lecci v Nickerson, 63 Misc 2d 756, 313 NYS2d 474; Teachers Association v Board of Education, 34 AD2d 351, 312 NYS2d 252; 1986 Opns St Comp No. 86-11, p 18; 1985 Opns St Comp No. 85-44, p 59). We have, for example, expressed the opinion that, pursuant to a local government's authority to adopt local laws relating to the compensation and welfare of its officers and employees (see Municipal Home Rule Law 10 [1][ii][a][1]), a local government may establish an employee performance evaluation plan under which identifiable criteria are fixed and made known to employees prior to the performance of services and are applied by supervisors in evaluating employees, with specified amounts paid as a result of a given performance rating (Opn No. 85-44, supra). We have noted that such payments are distinguishable from an outright bonus payment gratuitously made as additional compensation for past services already rendered (id.).

Based on the foregoing, it is our opinion that an industrial development agency may not determine at the end of a year to provide additional compensation as an "after-the-fact" bonus to the executive director for services already rendered and for which a fixed salary was already paid. On the other hand, we believe the governing board of the industrial development agency, in fixing the executive director's total compensation, may establish a performance evaluation program under which specific performance criteria are set forth and disclosed to the executive director prior to the performance of services, with corresponding dollar amounts of additional compensation established for meeting the criteria. The board then may determine at the end of each year that the executive director has met the specified criteria and is eligible for the specified additional compensation. Under such a program, although the payment is not made until the board's determination at the end of the year, it is our opinion that the payment would not constitute a gift because the executive director would be earning the additional compensation on a current basis during the year by meeting the performance criteria as he or she is performing services.

August 4, 2000
James E. Downey, Esq., Attorney at Law
County of Chenango Industrial Development Agency