Can an IDA be automatically terminated if it retires all of its bonds, as the ABO concluded in its recent report on Schenectady County’s economic development authorities?
To answer this question, you have to look at the text of the IDA Act, which contains two termination provisions.
First, section 856(1)(b) of the N.Y. Gen. Mun. Law states that every IDA:
shall be perpetual in duration, except that if … at the expiration of ten years subsequent to the effective date of the special act [establishing such agency], there shall be outstanding no bonds or other obligations theretofore issued by such agency or by the municipality for or in behalf of the agency, then the corporate existence of such agency shall thereupon terminate….
The second termination provision is in section 882, which provides that:
Whenever all of the bonds or notes issued by the agency shall have been redeemed or cancelled, the agency shall cease to exist and all rights, titles, and interest and all obligations and liabilities thereof vested in or possessed by the agency shall thereupon vest in and be possessed by the municipality.
So how should these provisions be interpreted? There’s no case law on the issue, and although both provisions were included in the original legislation creating IDAs, there’s nothing in the bill jacket to suggest how they were intended to apply.
Here’s my take on the issue:
Section 856 could be interpreted to allow an IDA to exist for an absolute minimum of ten years—in other words, it’s perpetual except and until it reaches ten years of age and has no outstanding bonds or obligations. The ten year time period would give each fledgling IDA a sort of grace period for commencing operations, which, in the first ten years, need not include the issuance of industrial development bonds, but may include “other obligations.” Section 882, in this interpretation, would only apply to IDAs that are at least ten years old and that have no outstanding bonds or notes, but which may still have “other obligations.” This could have been intended as a way to ensure that mature IDAs would issue industrial development bonds—or else be terminated—and so be less likely to morph into entities more like urban renewal agencies. The termination provision in section 882 also ensures that essentially defunct IDAs will be disbanded and removed from the clutter of various economic development entities.