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July 12, 2011

 

DiNapoli: Effectiveness of IDAs Still Questionable

Comprehensive Review of State and Local Economic Development Efforts Needed

Industrial Development Agencies (IDAs) reported they supported 4,577 projects and provided nearly half a billion dollars in net tax exemptions in 2009, for a cumulative gain of 204,000 jobs over the life of the projects assisted, according to a report examining the performance of IDAs released today by State Comptroller Thomas P. DiNapoli.

"For four years, I've called on IDAs to improve the accuracy of the jobs data," DiNapoli said. "Taxpayers should know if the projects they're paying for are creating the jobs that were promised. Year after year, we've had serious questions about the effectiveness of IDAs. We need to make sure that the tax breaks given for these projects are promoting job retention and growth.

"New York has a lot of local economic development entities; developing a regional, coordinated approach is very difficult. We have to fix that."

This is the fourth annual DiNapoli report examining the performance of the state's IDAs.The report analyzes the aggregate net tax exemptions provided by IDAs in each county compared to the aggregate property tax levy for each county and the total job gains or losses by county. The report found no apparent connection between higher tax exemptions and job growth.

DiNapoli noted that while there has been some improvement in the quality of the reports submitted by IDAs, shortfalls on the job data continue to impede the ability to evaluate the effectiveness of these economic development agencies. DiNapoli's report includes four recommendations for making IDAs more effective:

  1. Improve transparency of IDA operations. Publish an annual report card, with detailed information on individual projects, such as job performance data and tax exemptions;
  2. Improve accuracy of jobs data. IDAs should require that project developers sign a uniform project agreement that contains provisions that compel the accurate disclosure of employment information;
  3. Ensure projects are likely to meet economic goals. Utilize uniform applications for projects and adopt objective project evaluation and selection criteria; and
  4. Require repayment of benefits if economic goals are not met. Include a "clawback" provision in project agreements that allow IDAs to recapture benefits if employment or other project goals are not met.

In addition to the 115 IDAs operating in the state in 2009, there are also 279 local economic development corporations, many of which were also created for economic development purposes. Some areas in the state have multiple IDAs and LDCs, including 40 such entities in New York City, 21 in Erie County, 19 each in Monroe and Westchester counties, and 14 each in Albany and Orange counties.

DiNapoli also announced the release of comprehensive financial and debt data for IDAs for 2009 and, for the first time, comprehensive financial and debt data for LDCs. The availability of LDC data is the result of reporting requirements under the 2005 Public Authority Accountability Act, as amended by the 2009 Public Authorities Reform Act.

Other findings of the IDA report include:

  • In 2009, the 115 IDAs in New York State reported they supported 4,577 projects, an increase of 106 projects with an additional worth of almost $8 billion from the year before.
  • Nearly $5 billion of the increase in the total value of projects assisted by IDAs in 2009 is attributable to one new project the Global Foundries U.S. microchip plant in Saratoga County.
  • Other large new projects are being assisted by the Rensselaer County IDA (a power plant and a health imaging manufacturing facility), the Monroe County IDA (a shopping center), and the Town of Lockport IDA (an internet data center).
  • IDAs provided total gross tax exemptions of $1.2 billion in 2009. These exemptions were partially offset by the receipt of payments-in-lieu-of-taxes (PILOTs) totaling nearly $700 million), resulting in net tax exemptions of almost $500 million.
  • Net exemptions declined due largely to on-going adjustments in reporting methods by New York City IDA. These adjustments also affect the average cost per job gained. That cost fell to $2,429 from $3,300 in 2008.
  • Projects receiving IDA assistance employed 724,390 full-time equivalent workers in 2009. This represents a net gain of 204,172 jobs from IDA projects over the life of the projects.
  • IDAs are independent public authorities that offer real property tax, sales and mortgage recording tax exemptions, and low interest rate bonds to attract, retain and expand businesses. In 2009, there were 115 active IDAs.

For a copy of the report, visit: http://www.osc.state.ny.us/localgov/pubs/research/idaperformance2011.pdf

Comprehensive 2009 financial and debt information reported by IDAs and LDCs is now available on the Comptroller's Web site at: http://www.osc.state.ny.us/localgov/datanstat/findata/index_choice.htm

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