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June 20, 2012

 

DiNapoli Urges Senate to Pass Legislation to Give Comptroller Audit Authority Over LDCs

Citing millions of dollars in unnecessary costs to taxpayers, State Comptroller Thomas P. DiNapoli called on the state Senate to vote on his proposal to give the Comptroller’s office direct audit authority over local development corporations (LDCs) and other similar entities that are controlled by local governments. The bill has passed the Assembly (A.9689) and is awaiting Senate (S.7540) action.

“My office has repeatedly found that local governments have used LDCs to cover fiscal improprieties that have cost taxpayers millions of dollars,” DiNapoli said. “Proper oversight will help restore these entities to their original purpose of promoting economic development.”

Currently, the Comptroller’s office lacks the authority to audit the state’s approximately 270 LDCs directly. By auditing local governments that have relationships with LDCs, the Comptroller’s office has uncovered the circumvention of state finance laws by localities through their use of LDCs.

In many cases, LDCs are used correctly, as tax-exempt entities, for economic developments such as rehabilitating industrial plants or encouraging businesses to locate or stay in a particular region. DiNapoli’s reform proposal would expand the Comptroller's audit authority to cover LDCs, as well as limited liability companies (LLCs) and other comparable entities under the control of one or more local governments.

Last year, a report by DiNapoli examining LDC operations statewide found that officials used LDCs to skirt the law. Recent audits found:

  • Monroe County officials used an LDC to issue bonds to cover operating expenses;
  • Ramapo town officials left taxpayers potentially liable for up to $60 million related to the construction of a minor league stadium financed through an LDC; and
  •  The village of Cornwall-on-Hudson used an LDC to avoid state procurement laws, spending $929,000 on an unusable building.

Other instances in which LDCs and LLCs unnecessarily drove up taxpayer costs include the city of Rochester’s use of an LLC to purchase a ferry that ultimately cost nearly $20 million, and a potential $10 million cost hike due to the use of two LDCs to avoid competitive bidding for the Nyack Fire District’s new firehouse.

A copy of the Comptroller’s 2011 report, “Municipal Use of Local Development Corporations and Other Private Entities” can be seen at: http://www.osc.state.ny.us/localgov/pubs/research/ldcreport.pdf

To review the proposed legislation, visit:  http://assembly.state.ny.us/leg/?default_fld=%0D%0A&bn=A09689&term=&Memo=Y



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