DiNapoli to Curb LDC Use

New York State Comptroller Thomas DiNapoli last week announced his initiative to restrict cities and towns from using local development agencies for non-economic development purposes.

DiNapoli is also seeking to expand his oversight of the state’s 279 local development corporations and limited-liability companies by auditing all such entities. The comptroller currently audits local governments that have a relationship with LDCs.

“Local governments are supposed to use LDCs for economic development purposes,” DiNapoli said in a statement. “But we found that isn’t always the case. Time after time, our auditors uncovered LDCs being used to skirt the laws governing local government operations. And that’s costing taxpayers money.”

In addition to increasing the comptroller’s auditing capacity, DiNapoli recommended that no local government or school district should guarantee debt sold by an LDC or LLC.

He said such bonding entities should also be prohibited from borrowing for local government operations, capital assets, or projects not related to economic development, among other reforms.

DiNapoli’s report includes one example, in which Monroe County sold its power plant to a local development corporation for $7 million, money the county then used for its operating budget. The LDC converted the power plant to natural gas from coal and issued $32 million of bonds to upgrade the plant. The county now purchases power from the facility through a 32-year contract.

“This arrangement appears to be inconsistent with provisions in the county law and the not-for-profit corporation law conditioning the transfer of real property to an LDC on a determination that the property is no longer required for county purposes,” according to the report.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER