An Albany, N.Y., area resident who wanted to learn to play the bagpipes, learn traditional Irish or Scottish dance, or just get in touch with his or her Celtic heritage could pop on over to the Capital District Celtic Cultural Association for classes. Up until six months ago, that is.
The association lost its lease and is looking for a new home — and, more importantly, is looking for financing through the Dormitory Authority of the State of New York.
In the past, a 501(c)(3) nonprofit organization like the association looking to borrow $2 million to build a new 20,000-square-foot cultural community center would go to its local industrial development agency for tax-exempt bond financing. But when executive director Kevin Roe did that, he found out that it was not an option. The state law that allowed IDAs to sell bonds to finance civic facilities on behalf of nonprofits expired in January 2008, leaving by one estimate $2.5 billion in projects without access to financing.
“We were told that if we wanted to do it we could possibly do it through the Dormitory Authority,” Roe said. The association got its local assemblyman on board and he introduced the necessary legislation to authorize DASNY to sell the bonds.
DASNY’s authorization to sell bonds for nonprofit facilities is limited to health care and higher education projects, but lawmakers frequently introduce bills so that the authority can sell bonds for other nonprofits like the cultural center, or prep schools.
This year, because the IDA law expired, groups including the YMCA of Greater Syracuse and the Alliance of Long Island Agencies Inc., an group of nonprofits that provide services to people with mental retardation and developmental disabilities, have sought bills to enable them to get financing through DASNY.
The alliance had borrowed about $250 million through Suffolk County and Nassau County IDAs, but to borrow the $30 million it is seeking this year, Seth Stein, executive director and general counsel for the alliance, said they will have to go through DASNY.
“We have an urgent need for long-term capital,” Stein said. The organization doesn’t have a preference between IDAs or DASNY for its borrowing, he said.
Under a bill introduced last week by Sen. Bill Perkins, D-Manhattan, nonprofits like the Alliance, YMCA and the Celtic association would no longer need special legislation.
“Any entity that’s a 501(c)(3) would be able to come to us,” DASNY spokesman Marc Violette said of the bill, S. 3695.
Perkins introduced the bill at the request of DASNY, whose current executive director, Paul Williams Jr., has followed up on his predecessor’s goal of expanding the authority’s financing into what has traditionally been IDA territory. The reason for the proposal was to give the authority greater flexibility to meet the capital needs of more organizations.
The legislation already faces a hurdle in the state Assembly. Richard Brodsky, D-Westchester, who chairs the Assembly committee on corporations and authorities, is concerned that the bill would take away the role of the Legislature in being able to approve and review individual projects that now require special legislation, said his deputy chief of staff, Emma Furman.
“Our concern was maintaining the role of the Legislature in this approval process to give it better oversight,” Furman said of a meeting this week with DASNY staff about the bill, which has not been introduced in the Assembly.
Brodsky has long sought to rein in public authorities and IDAs, criticizing them as lacking transparency and accountability.
Even if the DASNY bill, or some form of it, does become law, it won’t be an automatic green light for nonprofits that can’t currently borrow due to the expiration of the IDA law. DASNY requires borrowers to have at least an A1 or A-plus credit rating, or a board-approved exception.
In the past, some borrowers could get to this level using bond insurance, but with the downgrade of many bond insurers in the past year and a half, this is no longer an option. Dorm Authority staff has long weighed the possibility of creating a subsidiary that could take on lower credits without sullying the DASNY brand, but the proposed legislation does not do that.
One the most vocal advocates for restoring the IDA civic facilities law has been Brian McMahon, executive director of the New York State Economic Development Council, which represents development professionals. McMahon said allowing DASNY to move into IDA territory could give borrowers more options.
“We don’t mind them having that authority as long as [IDAs] have the same authority,” McMahon said. “If [IDAs and DASNY] had the same authority to finance a wide rang of nonprofits, it would make [DASNY] better, it would make them more competitive, it would probably make IDAs more competitive, and most important of all it would lower borrowing costs for nonprofit entities.”
McMahon said that when IDAs were given limited authority to sell bonds on behalf of colleges, hospitals, and senior-living facilities, it forced DASNY to lower its fees. McMahon said his organization is aware of $2.5 billion of nonprofit projects that are stalled due to the lack of IDA authority to sell bonds for them.
A resolution to the legislative deadlock that is preventing IDAs from selling civic facility debt is not likely anytime soon. Assemblyman Sam Hoyt, D-Buffalo, has reintroduced a bill this session intended to increase accountability and transparency at IDAs, but a provision to allow the restoration of the civic facilities bonding authority was stripped out to separate it from the accountability issue.
With the new Democratic majority in the Senate still getting settled, it is not clear when the issue will come to the forefront again.
