BILL NUMBER:  S5867

 TITLE OF BILL :  An act to amend the general municipal law, in
relation to the accountability and efficiency of industrial
development agencies and authorities

 PURPOSE :

To increase the accountability and improve the efficiency and
transparency of the operations of industrial development agencies and
authorities (IDAs) by requiring standard application forms for
requests for financial assistance, uniform criteria for the evaluation
and selection for each category of projects for which financial
assistance is provided, and uniform project agreements.

 SUMMARY OF PROVISIONS :

Section one of the bill would add three new subdivisions to General
Municipal Law § 859-a:

Standard application form - A new subdivision four would added to
General Municipal Law § 859-a to require each IDA to develop a
standard application form for requests for financial assistance from
IDAs. The form would be submitted by or on behalf of the applicant,
and subscribed and affirmed under penalties of perjury as true,
accurate and complete. The form would be required to contain certain
              

information including, among other things: the name and address of the
applicant; a description of the proposed project; the amount and type
of financial assistance requested; an estimate of capital costs of the
project; the projected number of full time equivalent jobs that would
be retained or created if the request for financial assistance is
granted as well as certain other information relating to those jobs;
and a statement acknowledging that the submission of any knowingly
false or misleading information may lead to immediate termination of
any financial assistance and reimbursement of an amount equal to all
or part of any tax exemptions claimed as a result of the project. The
IDA could require supplemental information as it determines to be
necessary and appropriate, including supporting documents and
information provided by or on be half of the applicant.

Uniform evaluation criteria - A new subdivision five would be to
General Municipal Law § 859-a to require each IDA to develop, and
adopt by resolution, uniform criteria for the evaluation and selection
of each category of projects for which financial assistance would be
provided. At minimum, the criteria would require, among other things,
that, prior to the approval of the provision of any financial
assistance, the IDA:  assess all material information included in
connection with the application, as necessary to afford a reasonable
basis for its decision to provide financial assistance; and undertake
a written cost-benefit analysis that identifies the extent to which a
project will create or retain permanent, private sector jobs, the
estimated value of any tax exemptions to be provided, the amount of
private sector investment generated or likely to be generated by the
proposed project, the likelihood of accomplishing the proposed project
in a timely fashion, and the extent to which the proposed project will
provide additional sources of revenue for municipalities and school
districts.

Uniform project agreement - A new subdivision six would be added to
General Municipal Law § 859-a to require each IDA to develop a uniform
IDA project agreement, that would set forth the terms and conditions
under which financial assistance would be provided. The uniform
agreement would be required to contain certain provisions, including:
a description of the project and financial assistance; a requirement
for an annual certification by the project owner, occupant or operator
of full time equivalent jobs created and retained as a result of the
financial assistance; the dates when payments in lieu of tax (PILOT)
payments are to be made and an estimate of the amounts or formula(s)
by which those amounts are calculated made (or a copy of an executed
PILOT agreement); a provision for the suspension or discontinuance of
financial assistance, or for the modification of any payment in lieu
of tax agreement to require increased payments, in accordance with
policies developed by the IDA; a provision for the return of all or a
part of the financial assistance provided for the project, as provided
for in policies developed by the IDA; and a provision that the
business certify, under penalty of perjury, that it is in substantial
compliance with all local, state and federal tax, worker protection
and environmental laws, rules and regulations.

Section two of the bill would add three new subdivisions to section
874 of the General Municipal Law to require each IDA to: (1) develop
policies for the suspension or discontinuance of financial assistance,
or for the modification of any payment in lieu of tax agreement to
require increased payments under specified circumstances: (2) develop
policies for the return of all or a part of the financial assistance
provided for a project, including all or part of the amount of any tax
exemptions, as specified in the policy.  All such returned amounts of
tax exemptions would be required to be redistributed to the
appropriate affected tax jurisdiction, unless agreed to otherwise by
any local taxing jurisdiction: and (3) at least annually assess the
progress of each project toward achieving the investment, job
retention or creation, or other objectives of the project indicated in
the project application. These assessments would be required to be
provided to board members.

Section three of the bill would provide that the act take effect 180
days after it shall have become law. It would further provide that
that the bill would apply in full force and effect to the Cities of
Troy and Auburn Industrial Development Authorities established
pursuant to the Public Authorities law. New subdivision 12 that would
be added to General Municipal Law § 874 would apply to projects
approved on or after the effective date of the bill.

 JUSTIFICATION :

IDAs are public benefit corporations, created by special act of the
State Legislature for the benefit of one or more municipalities and
the inhabitants thereof. Article 18-A of the General Municipal Law
provides that the purposes of IDAs are to promote, develop, encourage
and assist in the acquiring, constructing, reconstructing, improving,
maintaining, equipping and furnishing industrial, manufacturing,
warehousing, commercial, research and recreation and certain other
listed facilities, and thereby advance job opportunities health,
general prosperity and economic welfare of the people of the State of
New York and to improve their recreation opportunities, prosperity and
standard of living.

To fulfill their statutory purposes, IDAs are authorized to provide
"financial assistance" for certain types of "projects" (see e.g.
General Municipal Law §§ 854 (4), (14), 859 (1) (b), 864, 874).
"Financial assistance" includes the issuance of bonds by the IDA to
finance construction of a project and "straight-lease transactions."
Since the property and activities of IDAs are tax exempt (General
Municipal Law § 874; Real Property Tax Law § 412-a), the IDA may "pass
through" the benefits of certain tax exemptions (real property, sales,
mortgage recording taxes) to private entities which undertake
projects. The "pass through" can be in addition to bond financing, or
done separately, generally through what is known as a "straight- lease
transaction." The loss of revenue associated with the tax exemption
pass-through can be mitigated if the IDA enters into what is known as
a "payment in lieu of tax" or "PILOT" agreement with the private
entity, under which the private entity agrees to pay all or a portion
of the amounts that would otherwise be due as taxes had the project
not been an IDA project. In addition, after the project is completed,
and the IDA relinquishes title, jurisdiction, control or supervision
of the property, the property usually becomes taxable and its assessed
value is often increased to account for improvements made during the
period of IDA involvement.

Because of reform legislation enacted in 1993 (Chapter 356), IDAs are
required to have budgets, conduct public hearings before providing
financial assistance for most projects and have "uniform tax exemption
policies." In addition, IDAs can lose their authority to offer
financial assistance in the form of State tax exemptions if they fail
to file the required annual audited financial statement (General
Municipal Law § 859). Also, the Public Authorities Accountability Act
of 2005 (Chapter 766) and the Public Authorities Reform Act of 2009
(Chapter 506) added requirements for governance, reporting, auditing
and property disposition that will enhance IDA accountability. While
these changes have, been positive steps toward making IDAs more
accountable to the municipalities and taxpayers for whose benefit they
are created, there remain areas where improvements are necessary,
especially in light of the critical role IDAs often play in the
economic well-being of a community and the potential costs in lost tax
revenues.

This bill would provide for additional safeguards to help ensure that
the process used by IDAs in determining to provide financial
assistance is transparent, uniform and deliberative, and furthers the
underlying purposes of the statutes governing IDAs.

Current law does not spell out an orderly procedure by which an
individual or entity may request financial assistance from an IDA, or
by which an IDA grants such assistance or monitors projects after
assistance if provided. Instead, audits conducted by OSC have shown
that the process is too often ad hoc and inconsistent from IDA to IDA,
and even from project to project within an individual IDA. By the same
token, several audits found that some IDAs were performing effectively
and noted certain best practices. Some of the provisions of this bill
were drawn from those best practices.

This bill would require standard application forms for those
requesting IDA financial assistance and would require IDAs to develop
uniform criteria for assessing applications. Pursuant to these new
requirements, the types of information IDAs would receive for each
project would be more standardized and the process used to evaluate
each application should be consistent and thorough. This should lead
to a more uniform and transparent process, more informed
decision-making by IDAs and increased confidence by taxpayers that
decisions to provide financial assistance are reasoned and in
furtherance of the underlying purposes of IDAs, including the creation
and retention of jobs within the municipality for whose benefit the
IDA was created.

Also, each IDA project would be undertaken pursuant to a uniform
project agreement that would set forth the terms and conditions under
which financial assistance would be provided. It would provide a
mechanisms to help ensure that the IDA can monitor the progress of the
projects, including whether jobs created or retained as a result of
the project meet initial projections. To help ensure that the affected
tax jurisdictions do not suffer a loss of tax revenues for projects
that do not meet job creation and retention goals or in other
specified circumstance, the agreement would provide for the suspension
or discontinuance of financial assistance, or for the modification of
PILOT agreements, in accordance with polices developed by the IDA. In
addition, the agreement would provide for the return of all or part of
financial assistance as provided for IDA policies. Correspondingly,
IDAs would be required to develop such policies, setting forth
circumstances when there would be a suspension or discontinuance of
financial assistance, or the return of such assistance.

We believe this bill will greatly increase the accountability of IDAs
to the taxpayers and municipalities for whose benefit they are
created. It will serve to ensure a greater degree of uniformity in the
application process for IDA assistance, more careful analysis and
deliberation in the decision-making process and enhanced monitorship
once IDA benefits are conferred.  The Comptroller urges passage of
this legislation.

 PRIOR LEGISLATIVE HISTORY :

New bill.

 FISCAL IMPLICATIONS :

None.

 EFFECTIVE DATE :
This act shall take effect 180 days after it shall have become a law
and, shall apply to industrial development agencies created pursuant
to article 18-A of the general municipal law and shall also apply with
full force and effect to the cities of Troy and Auburn industrial
development authorities established pursuant to the public authorities
law; provided, however, the provisions of subdivision 12 of section
874 of the general municipal law as added by section 2 of this act
shall apply only to projects approved on or after the effective date
of this act.