New jobs needed to keep economy afloat — IDAs must be accountable

Americans this week are well aware of the size of our national debt, as the debate on raising the debt ceiling has raged, and are equally aware that, in the resolution, many worthwhile programs for poor and middle-class citizens will be sacrificed.

 Government at all levels needs to spend sensibly if it is to provide useful services to citizens. Last month, the New York State comptroller released an audit that detailed problems with Industrial Development Agencies.

The idea behind IDAs sounds noble. They are meant to advance the job opportunities, health, general prosperity, and economic welfare of New Yorkers. They do this most often by offering financing for projects through the issuance of bonds and by providing tax exemptions to attract and expand businesses.

The town of Guilderland created an IDA in 1973. The town board appoints its members but the IDA functions independently of the board.

Comptroller Thomas DiNapoli audited the 115 IDAs operating in the state in 2009 and, as we reported in a front-page story last week, he found that Guilderland’s IDA financed three projects in 2009 for a total cost of nearly $21 million to be paid back. The goal was to retain 209 jobs with the projects and create 40 more jobs. Actually, eight jobs were lost.

The three Guilderland projects were all for nonprofit organizations — construction of a facility for the Western Turnpike Rescue Squad; an update and expansion for the YMCA, which runs a recreational facility in Guilderland; and an update and expansion of a building for the Wildwood Program, which serves people with handicaps.

The projects were financed through the IDA to receive tax exemptions.

“That falloff in the number of jobs isn’t that significant,” Donald Csaposs, chief executive officer for the Guilderland IDA, told our reporter Anne Hayden. Csaposs surmised the loss of jobs — 48 fewer than had been planned for — could be because of the poor economy in which not-for-profit groups are struggling.

We have no problem with those organizations using a system that is set up to allow them a tax break. But something is wrong if taxpayers are footing the bill for a program that is meant to sustain and create jobs and, in this case, jobs are lost.

The amount of money at stake statewide is large. In 2009, the total amount for 4,577 IDA projects topped $73.5 billion, with tax exemptions close to $500,000. This was almost $8 billion more than the year before with half of that hike due to one project, the Global Foundries U.S. microchip fabrication plant assisted by the Saratoga County IDA.

Over the last decade, IDA debt has increased dramatically. At the end of 2009, IDAs reported close to $23 billion in outstanding debt, up from about $17 billion in 2003. The project with the single largest bond issue, $943 million for the new Yankee Stadium, was from the New York City IDA.

In 2009, IDA-assisted projects employed close to 725,000 workers, a net gain of over 200,000 jobs at an average cost of $2,429 per job gained. The median range of salaries was from about $28,000 to $40,000.

But DiNapoli’s analysis by county of net tax exemptions by IDAs and of job growth did not show a positive correlation between the two. If the tax cuts aren’t leading to job growth, they should not be granted.

DiNapoli’s report calls for better application and approval procedures for the IDA projects, and better clawback provisions for projects that do not meet goals. A clawback provision in project agreements would allow an IDA to recapture benefits if employment or other goals of the project are not met.

“If a for-profit company were to come before us and apply for financing, certainly we’d consider a clawback provision, where basically, if you don’t perform, you have to pay back some of the money granted in the tax breaks,” said Csaposs.

Such a provision should be part of every contract.  Otherwise, taxpayers lose out.

Forty-eight jobs fewer than expected should not be shrugged off. Csaposs said, if there were a sharper decline, “…it might behoove us to sit down with the project managers and see if we could provide some sort of counsel.”

Csaposs also said he didn’t know the exact reason for the loss of jobs. Keeping tabs to make sure goals are met should be part of the process.

While the Guilderland IDA meets the letter of the law in publishing its mission and annual reports on the town’s website, we urge it to go further and follow the comptroller’s recommendation to publish an annual report card, with detailed information on individual projects, such as job performance data and tax exemptions granted.

Such transparency would not only inform citizens but also make project managers more accountable.

The comptroller’s report highlights other statewide problems, too. Some areas have overlapping IDAs as well as Local Development Corporations that compete with each other. This makes it hard to establish a regional, coordinated approach.

Funding does not necessarily reflect the size, density, or development needs of the state’s communities, the comptroller found. While two of New York’s biggest cities, Rochester and Buffalo, don’t have their own IDAs, some small villages and towns do.

Some LDCs, DiNapoli found, have been used to circumvent state laws that direct local government finances. To stem this, he has advanced legislation to limit and regulate the use of LDCs.

One example in DiNapoli’s report of conflicting strategies hurting taxpayers is fairly close to home. The Montgomery county IDA provided tax exemptions to help the Beech-Nut baby food plant relocate from the village of Canajoharie to the town of Florida. While Montgomery County as a whole may have benefited by keeping Beech-Nut, the move had “a significant and detrimental effect,” the report states, on Canajoharie, which had built water and sewer systems to support the needs of the plant. Village taxpayers now have to pay for that infrastructure without tax revenue from the Beech-Nut plant.

Clearly, a more coordinated and regional approach is called for.

This year’s state budget allocates $130 million for projects to be selected by 10 newly created regional Economic Development Councils. Local private and public stakeholders are to serve on the councils. They will have their work cut out for them. It is imperative that projects be thoroughly and carefully reviewed to see that limited resources go to the projects that will reap the biggest benefits.