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February 23, 2009

DiNapoli Audit: Yonkers IDA Could Not Document that Development Project Benefits Exceeded Costs

YIDA Also Didn’t Adequately Monitor Whether Businesses Met Their Obligations

Due to a lack of documentation, Yonkers Industrial Development Agency (YIDA) officials could not assure taxpayers that projects they approved provided a net benefit to the community, according to an audit released by State Comptroller Thomas P. DiNapoli. The audit also found that the YIDA failed to hold businesses accountable for failing to hold up their end of the bargain when receiving benefits. The audit covers the period January 2005 to December 2007.

“The primary reasons IDAs exist are to grow a local economy and facilitate the creation of jobs to the benefit of the community they serve,” said DiNapoli. “If an IDA cannot prove that projects are worth taxpayer investment, and if an IDA does not hold businesses responsible for not meeting their obligations, what is the point in having an IDA in the first place? This audit demonstrates that YIDA officials need to do a better job of ensuring that YIDA-sponsored projects can benefit the community by creating jobs or increasing the tax base.”

Among the findings in DiNapoli’s audit:

  • YIDA officials did not establish criteria or adequately document why they approved or denied project proposals. For example, they approved the Yonkers Pier and Central Avenue Nissan applications even though the applications for these projects were incomplete and officials did not document the specific reasons for approval; and
  • There was no cost-benefit analysis for one project, and the analysis for six other projects were incomplete and could not provide the board with a sound basis to make its final determination of whether or not the projects were viable. Neither YIDA officials nor project applicants performed the type of detailed analyses necessary to determine if the benefits to the City would exceed the cost that it would incur by the YIDA providing these projects with tax abatements and exemptions.

For example, had the Central Avenue Nissan application been subject to a cost-benefit analysis that included more comprehensive information, it would have shown that total benefits accruing to the company were $274,215, not the original application amount of $12,600. Similarly, the Whitney Young and Sacred Heart project applications did not show all the exemptions claimed, and the Whitney Young applicant invested less than originally planned.

DiNapoli’s audit also included the following findings:

  • YIDA officials did not adequately monitor IDA-sponsored projects to ensure that the projects met or made reasonable progress toward their employment projections or other goals stated in the project applications. As a result, there is limited assurance that YIDA projects have met their performance goals. Of seven projects audited, five promised to create or retain 1,161.5 jobs. However, they only reported 971, a shortfall of 190.5 jobs or 16.4 percent. Moreover, YIDA officials did not compare the business owners’ actual investment in the projects with the amounts estimated in the project applications.
  • Yonkers Racing Corporation, which operates the Yonkers Raceway, was required to remit $2.5 million in payments in lieu of taxes (PILOT) to the City of Yonkers and Westchester County by December 2007. However, as of April 2008, it had not done so. The city’s portion of the unpaid amount was about $2.1 million and the county’s, $397,000. YIDA officials later provided auditors with documentation showing they agreed on a payment plan with the Raceway operators that resulted in payment of the PILOT and penalties by June 2008;
  • In addition, although YIDA officials informed auditors that the nValley (sic) project had substantially fulfilled application promises, auditors found that the project’s rental income fell substantially short of its operating costs causing YIDA to spend an additional $4 million to complete the renovation of the building in order to sell it; and
  • Although YIDA officials have the authority to include provisions in project documents requiring recapture of prior tax benefits in the event that a project does not fulfill its purposes, YIDA officials did not take advantage of this authority. Instead, the project documents for three projects with job creation shortfalls authorized the YIDA to stop future tax benefits, but the YIDA has allowed the projects’ tax benefits to continue.

DiNapoli recommended that YIDA officials:

  • develop formal or specific evaluation criteria for prospective IDA projects, and ensure that reasons for approving or disapproving a project are documented;
  • ensure that all applications include precise descriptions of each project;
  • ensure that project cost-benefit analysis accurately reflect all costs and benefits to help ensure they have necessary information to make appropriate project sponsorship decisions;
  • verify the information that applicants provide in their cost-benefit analysis;
  • determine if project benefits are likely to exceed project costs to the YIDA and taxpayers before recommending projects for approval;
  • and establish procedures to monitor all completed projects to ensure verification of project costs, investments, and jobs created.

For the most part, YIDA officials generally agreed with DiNapoli’s recommendations and indicated they would take corrective action.

Click here for a copy of the report.



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