The New York State Assembly unanimously passed on Tuesday a bill that would significantly alter the types of projects financed by industrial development agencies and give local governments more power to monitor the activities of these entities.
The bill, introduced by Assemblyman Francis J. Pordum, D-Hamburg, would provide sweeping changes in the general municipal law and public authorities law by restricting the use of industrial development agency financing of retail and commercial development. There are 125 such agencies in New York State.
An assembly staffer said that over the past 10 years, almost 40% of industrial development agency projects financed retail development. Charles Carrier, a spokesman for the Assembly, said many of these agency projects merely shift employment from one town to another, rather than create new employment.
"The original concept of providing new jobs has not been adhered to," Mr. Carrier said. "From what we have found, one supermarket would close, to open up in another area. IDAs are not expanding the base of jobs, they're just slicing the same pie in a number of ways."
The bill would also give local governments more of a role in the development of these projects, which are exempt from local taxes, and address potential conflicts of interest by prohibiting municipal attorneys from servindg as counsel of an industrial development agency.
The measure will face resistance from the state Senate, a spokesman for Republican Majority Leader Ralph Marino said yesterday. The spokesman said the Senate is concerned that the bill will discourage retail projects. "Not all retail projects are bad," the spokesman said. "To simply declare you can't do retail doesn't give you any leeway."
Mr. Pordum, chairman of the Assembly's Local Government Committee, said he had no specific community in mind in crafting the legislation, which he introduced in June 1991. The bill's development was more a result of a series of meetings he held throughout the state to determine the scope of potential industrial development agency abuses, he added.
"When we did those hearings across the state, we found out about a whole list of abuses," Mr. Pordum said yesterday. "so instead of doing bills piecemeal to address each concern, we put all our" remedies in one bill.
Through these meetings, Mr. Pordum said he was able to identify flaws in the use of industrial development agencies. They are:
* A failure to enhance lon-term economic development. Mr. Pordum said many of the agencies create retail and commercial jobs, which do not promote long-term economic growth in the state, but shift existing jobs. Under the bill "IDA financing of retail trade projects except those located in highly distressed areas" would be prohibited.
* Conflicts of interest that develop because members of industrial development agencies often serve in the local government of the town where the development is taking place. Specifically, the bill would make "board members, officers, and employees of the development agencies subject to the conflict of interest provisions of the state's General Municipal Law." In addition, the bill would prohibit the counsel of the municipality from serving as a counsel to the industrial development agency.
* Failure of many industrial development agencies to submit complete financial information. The bill, for example, would prohibit an agency from funding any project if it fails to file an annual financial statement with the state comptroller's office.
A spokeswoman for the state comptroller's office said 29 of the 125 industrial development agencies in the state did not file financial statements as required by law. The spokeswoman said "about half" of the development agencies file incomplete information. The comptroller, however, has no legal authority to take action against these agencies, and in general, supports the proposals in the bill beefing up enforcement of disclosure, the spokeswoman said.
State lawmakers established industrial development agencies in the late 1960s to issue tax-exempt bonds for job creation and economic development. However, several agencies have drawn substantial criticism from some state lawmakers, civic groups, the state comptroller's office, and local government officials for a range of abuses.
Last year, for example, the Assembly had prepared a bill that would tighten the regulations covering the use of proceeds from industrial development bond sales.
The bill, which was never introduced, came largely in response to the use of tax-exempt bonds by the Hempstead industrial development agency for the purchase of Roosevelt Raceway, a racetrack in the Village of Westbury on Long Island. The raceway was acquired by a group of investors through the Hempstead Industrial Development Agency, which in 1984 issued $54 million in tax-exempt bonds.
Then in March of this year, the Troy Industrial Development Authority issued $35.6 million in lease revenue bonds partly to cover the city of Troy's projected deficit of almost $4 million in its 1992 budget.
The issue prompted an inquiry from the state comptroller's office. Among other issues, the comptroller's office is attempting to determine if the industrial development agencies, like Troy, can legally issue securities for deficit-reduction purposes.