The number of New York’s public authorities continues to grow, as does the amount of debt they have racked up and the tax exemptions they receive,
The Authorities Budget Office said the number of state and local authorities increased by 63 in the past year to 553, and the amount of debt that state authorities alone have has reached $142 billion.
“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 the system,” said David Kidera, director of the ABO.
Often referred to as “shadow governments,” public authorities have been criticized for their ability to issue bonds without voter approval and with little public oversight.
The ABO, established in 2005, was created to increase the accountability and transparency of public authorities.
The office recently proposed legislation, which has been passed by lawmakers, to dissolve 123 defunct and inactive authorities.
In its sixth annual report, the ABO recommends a consolidation or reform of public authorities and proposes a new form of local authority that could eliminate the need for both industrial development agencies and local development corporations.
IDAs, which are formed with the aim of increasing employment and encouraging business, can adversely affect jurisdictions outside their sponsoring municipality, the report said. For example, granting various tax exemptions in a village might deny revenue to a county. The ABO cited a potential net loss of $773 million in revenue to state and local governments over the past two years.
Brian McMahon, executive director of the New York State Economic Development Council, said this loss exists only if the taxing jurisdictions would otherwise have received the tax revenues.
“The erroneous and misleading assumption in the ABO report is that the projects that benefit from IDA assistance would have happened anyway,” he said, even though the vast majority of them would not have.
The Economic Development Council is the state’s principal organization representing professionals from IDAs and LDCs.
McMahon also said that tax abatements are tools used to encourage private-sector investment and that they have multipliers that generate revenues for taxing jurisdictions.
“Investments made by project owners increase the value of property,” he said. “New jobs that are created by businesses result in homes being purchased, cars being bought, restaurants being patronized and local vendors being retained, to name a few of these multipliers.”
IDAs lost the authority to issue tax-exempt bonds in 2008, when the statutory power expired. The sunset of the provision contributed to a growth in the number of local development corporations, which aim to promote employment and attract new industries to a community and can issue tax-exempt bonds.
Of the 63 new public authorities created in the past year, 61 were LDCs. They now account for 270 of New York’s public authorities, with at least one in every county, except Montgomery.
New York City has the greatest amount, with 23.
“This growing dependence on local development corporations should be a public policy concern,” the ABO report said.
LDCs can make loans capitalized with public dollars, award grants, and work with IDAs to issue debt for projects that cannot be undertaken by IDAs.
“If these entities were structured in a way intended to avoid ABO oversight, these transactions would occur without public scrutiny, public hearings or financial disclosure,” the report said.
McMahon said that since IDAs can no longer sell tax-exempt bonds, LDCs have been an important alternative.
“These nonprofit institutions play critical roles in meeting charitable and societal needs of the communities they serve,” he said. “They provide cost-effective tax-exempt bond financing to the customer to allow capital projects to move forward.”
Of the ABO’s suggestion to create a new authority to eliminate IDAs and LDCs, McMahon said the Economic Development Council would be interested in discussing those ideas to gauge their impact on economic development.
