New York State Authorities Budget Office Calls for Comprehensive Debate on the Future of Public Authorities; New Rochelle IDA, LDC Cited in ABO Annual Report

Written By: Robert Cox

DavidKidera(screenshot from webcast symposium held April 27, 2010, hosted by Government Law Center at Albany Law School image courtesy of Norman Oder/” class=”caption” border=”0″ width=”200″ height=”153″ style=”float:right;” />The New York State Authorities Budget Office (ABO) has issued its annual report on the financial operations, practices, and structure of state and local public authorities.

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New Rochelle Development Commissioner Responds to New York State Authority Budget Office Report

ABO Director David Kidera is calling for a comprehensive debate on the proliferation of public authorities and amending state laws, creating better enforcement tools to instill trust that decisions of authority executives are being made in the best interests of the public and to increase compliance with statutory and ethical standards.

I urge everyone to read the entire report carefully. It is time for a comprehensive debate on the future of our public authorities and whether New York State, its local governments, and its taxpayers can continue to support the growing size and cost of this system. We need to reach consensus on practical ways to manage the proliferation of local authorities, assure that their financial decisions promote sustained economic growth across the State and the creation of career oriented jobs, and examine opportunities to consolidate, eliminate, or restructure authorities, at the state and local level, with similar missions or common public purposes. We need to amend our laws to establish the legal framework within which we expect authorities to operate into the future. We also must consider better enforcement tools that will heighten compliance with statutory and ethical standards and instill trust that the decisions of public authority directors and executives are being made in the best interests of the public. This report offers a number of observations and recommendations for consideration to advance this discussion.

The number of public authorities subject to ABO oversight has grown to included 550 public benefit and not-for-profit corporations, in addition to their 300 subsidiaries. This is a net increase of 63 covered authorities from just one year ago. This net increase is almost exclusively attributable to the addition of 61 local development corporations to the inventory.

At the December 15th, 2011 meeting of the New Rochelle IDA, Development Commissioner Michael Freimuth told the IDA Board that LDCs are a vehicle to do what IDAs are no longer able to do. Freimuth cautions the NRIDA Board that he expects there will be new state regulations and audits by the state comptroller soon after. In 2011, local development corporations (LDCs) awarded $182 million in grants, and had $114 million in outstanding loans, initially capitalized with public funds. Only 17 percent of the value of these grants and loans were programmed for the purpose of creating new jobs.

In 2010, the New York State Comptroller issued a highly critical report which validated the concerns of long-time critics of the New Rochelle IDA — the report found the NRIDA had no defined process for approving projects, no effort to monitor ongoing projects and a generally sloppy, make-it-up-as-you-go approach while doling out tens of millions of dollars in bonds, tax incentives and other goodies to politically-connected developers with no particular concern over whether the projects deliver upon promised results

RELATED: New York State Comptroller Rips New Rochelle IDA in Audit Due Out Next Month

Under the direction of Development Commissioner Michael Freimuth, steps have been taken since to address the OSC criticism by creating a more clearly defined and standardized process. The NRIDA created a Uniform Tax Exemption Policy (UTEP) Sub-Committee in January, 2011. The UTEP Sub-Committee consisted of David Lacher, Gordon Bell and Meredith Adler Hilton with Development Commissioner Michael Freimuth serving ex-officio. The NRIDA has since adopted the resulting UTEP document.

In a statement issued with the report, ABO Director David Kidera said:

The information presented in this report vividly demonstrates the scope and influence of public authorities at both the state and local level. Virtually every New York State resident and taxpayer is impacted by the financial decisions and activities of these authorities. Last year, the 44 state authorities reported generating $21.8 billion in revenue from fees, rents, tolls and other service charges. State authorities ended 2011 with $141.9 billion in outstanding debt, of which 36.7 percent was issued on behalf of state government. In 2011 alone, state authorities issued $14 billion in new debt. Concurrently, local authorities issued $14.5 billion in debt last year, and ended 2011 with $91.4 billion in outstanding debt. Together, state and local authority spending exceeded $53 billion — $9 billion of which was spent on professional services and other procurement contracts.

Kidera was especially critical of IDAs, noting that IDA projects resulted in $135 million in local property tax abatements, the potential loss of $377 million in local school tax revenue, and more than $100 million in foregone state sales taxes. He noted that most of these exemptions adversely affect taxing jurisdictions outside the IDA’s sponsoring municipality.

The New Rochelle Industrial Development Agency was cited in the ABO Annual Report for failing file file required reports in the Public Authorities Reporting Information System (PARIS). The NRIDA Budget Report and Audit Report were due on March 31, 2012. As of July 1, 2012 they had still not been filed.

The New Rochelle Local Development Corporation was also cited in the ABO Annual Report for failing to file their Budget Report, due last year, and their Annual Report and Audit Report which were due on March 31, 2012.

The ABO Annual Report also reports on Authorities dissolved by S5198-D/A10288-A and S5227-B/A8823-A. For New Rochelle the New Rochelle Urban Renewal Agency and City of New Rochelle Parking Authority was dissolved. The parking Authority was dissolved as part of the creation of an LDC for the New Roc City garage for financing purposes.

Kidera was highly critical of the way Authorities in New York State are run.

  • 26 state authorities reported operating deficits – their revenue streams were insufficient to cover the cost of operations.
  • There were significant data inaccuracies in more than 18 percent of all annual reports filed by state and local authorities, reports that were certified as accurate and complete by authority directors or management, or by the authority’s independent auditor.
  • Last year the ABO formally censured the boards of directors of 19 authorities for repeated and chronic non-compliance with reporting requirements.
  • Despite extensive training, it is apparent that some directors and executive staff do not fully comprehend their fiduciary duty and responsibility under the law.

About The New York State Authorities Budget Office

The ABO is the only office of its kind in the country. No other state has established one office to centralize the collection and analysis of public authority data, to review the finances and operations of all authorities – regardless of mission or purpose – enforce compliance with the law, and report its findings to the public. In the past six years, despite resource constraints and limited enforcement tools, the ABO has evolved from an office initially focused on data collection and reporting, to an analytical and enforcement agency that has improved the operating practices of state and local authorities, shed light on the performance of executive management and emphasized the fiduciary role of boards of directors. Recently the ABO received national recognition as a model office for other states. Through the work of the ABO, extensive information on the operations of more than 400 authorities is currently accessible to the public on one web site.

h/t JB