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ABO releases report on Schenectady County’s economic development entities

December 22, 2011

Schenectady County has more economic development authorities than it needs, according to a report released today by the Authorities Budget Office.

So how many economic development authorities are there? In addition to the city and county economic development departments, there are seven local authorities: Schenectady County Metroplex Development Authority, Schenectady County IDA, City of Schenectady IDA, Town of Rotterdam IDA, Schenectady Local Development Corporation, Schenectady County Community Business Center, and Schenectady County Capital Resource Corporation. All of these entities were created to boost economic development and job creation and to expand the local tax base, and they do so by providing various types of financial assistance (e.g., issuing tax exempt bonds, providing mortgage recording and sales tax exemptions, granting property tax abatements, and issuing grants and loans).

It should also be pointed out that Schenectady County isn’t unique in having a proliferation of economic development authorities with overlapping jurisdictions. Schenectady County is also one of the smallest counties in New York by area and it has fewer municipalities than any other county, so the problems created by redundant economic development services could be even more severe in other areas of the state.

The ABO report made a number of findings:

  • There are too many economic development authorities: “Based on a review of unemployment, sales tax, and property value data for the County, it appears that the authorities are relatively successful in accomplishing their missions, although employment results are not as positive. We conclude that these accomplishments are not a result of the structure in place. Instead, we believe that the residents of Schenectady County could be equally and more cost-effectively served by fewer authorities, since multiple authorities currently provide similar financial assistance to projects.”
  • The Rotterdam IDA shouldn’t even exist anymore: “the Rotterdam IDA no longer has outstanding bonds, and therefore has ceased to exist under Section 882 of General Municipal Law. We are concerned that board members, Town of Rotterdam officials, and any businesses receiving financial assistance from Rotterdam IDA are at risk for actions taken subsequent to 2009.”
  • The authorities don’t provide a streamlined process: “Although authority officials described the existing seven authority structure as a unified economic development team, we found such a claim to be overstated. The seven authorities do not share a common application for financial assistance, and relevant information is not shared among all of the authorities involved in a project…. We also found that there is no comprehensive economic development plan in place that is annually reviewed and updated, and that Metroplex has not developed a five-year capital projects plan, as required by its enabling legislation.”
  • Having too many economic development authorities is a waste of money: “We identified instances where the involvement of multiple authorities has led to the inefficient allocation of resources. For example, over $600,000 of economic development funds have been provided to the CBC since 2003 for the CBC to meet its operating costs although the CBC no longer fulfills its original purpose. In another instance, over $25,000 is paid annually to municipal and authority staff, in addition to their full time salaries, to provide administrative and operational services to the various economic development authorities.
  • The IDAs are providing inappropriate direct grants: “We also are concerned that IDAs may be providing inappropriate types of financial assistance, since it appears that the IDAs have awarded economic development grants. The types of financial assistance that IDAs are authorized to provide are enumerated in General Municipal Law, and the provision of grants is not included.”
  • Poor record-keeping: “Lastly, we noted that records and information maintained by the various authorities are incomplete and poorly managed. As a result, we were unable to accurately determine the number and amount of loans provided by the SLDC, and identified other instances where records contained inaccurate data. In addition, reports required to be filed pursuant to Public Authorities Law are not submitted timely and often contain inaccurate information.”

The report also included a list of 15 recommendations:

  1. Reduce the number of authorities involved in economic development in the County to eliminate the authorities providing redundant and duplicative types of financial assistance.
  2. Counsels to the Rotterdam IDA and the Town of Rotterdam should determine how to effect the [termination] provisions of Section 882 of General Municipal Law and advise the entities on the appropriate actions to take in complying with the provisions in this section of law.
  3. All participating authorities should agree on and implement a truly unified approach to economic development that utilizes a streamlined application process, ensures that all relevant information is shared among all authorities, fully identifies all financial assistance being provided, and relies on fewer and less redundant authorities to execute.
  4. The existing authorities should develop a comprehensive multi-year plan that coordinates economic development throughout the county, fosters a full understanding of the role and purpose of all involved authorities, and is updated annually.
  5. Consistent with this plan, Metroplex should develop and update annually its five-year capital plan, as required by Section 2655-c of Public Authorities Law.
  6. Discontinue the practice of using economic development funds to pay for administrative and operating costs of the economic development authorities.
  7. Metroplex, as the central administrative support agency, should provide such services directly to the other authorities, without charging fees.
  8. Reconsider the practice of providing economic development funds to other organizations to allocate, since the use of these funds for administrative and support activities reduces the funds spent on economic development.
  9. Metroplex should discontinue the practice of subsidizing Business Improvement Districts with proceeds from the County sales tax to offset special assessments charged to businesses located within the District.
  10. Neither the County nor the City should not assign municipal employees to work for public authorities during the municipal work day or provide additional compensation for this work without a determination from the Office of the State Comptroller.
  11. The Rotterdam IDA or Town of Rotterdam should recover the stipends paid to past board members, since they were to serve without compensation as stipulated in Article 18-A of General Municipal Law.
  12. Each authority should restrict the financial assistance it provides to projects to those enumerated in its enabling legislation.
  13. Each authority should establish and adhere to appropriate procedures and controls to ensure that all economic development records are accurate, complete, and maintained appropriately.
  14. Authorities should only make payments for contractual services that are in accordance with the terms of a contract. No payments should exceed those amounts unless the contract has been properly amended and adopted.
  15. Authority boards should ensure that all financial and operating information is correctly and accurately reported in PARIS by Metroplex, since it is the authority that is legally obligated to be in compliance with all reporting requirements. This includes ensuring that all projects and contracts are properly reported, and that property reports accurately describe the property owned.
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