Editorial: Keep developers honest
Sep 30, 2018
A state audit found that an Albany agency could do a better job of holding developers who receive tax incentives accountable.
Publicly funded projects must be reviewed regularly to make sure goals are met.
Two years after a new state law was enacted to rein in and standardize operations of hundreds of local economic development funding entities, a new audit of the city of Albany's agency shows more still needs to be done to ensure developers receiving tax breaks keep their promises.
The recent audit by the office of state Comptroller Thomas DiNapoli analyzed 14 of 47 projects in the city of Albany that are still actively benefiting from tax incentives granted through the city's Industrial Development Agency. Auditors found that with 10 of the projects, the property tax reductions lasted longer than the IDA's standard five years. Some last much longer.
Under the law regulating IDAs and similar local and regional entities that grant tax and other incentives intended to spur economic development, all agencies must annually certify that recipients are meeting job creation benchmarks or achieving other measurable benefits to the community. The law also requires that the agreements — which dole out what can amount to millions of taxpayers dollars for larger developments — include "clawback" language, under which projects may lose the breaks or even have to refund grant money if they fail to meet the agreed-to goals in qualifying for the breaks.
In response to its audit, the Albany IDA noted that it does have a mechanism to spread the incentives over longer periods, if developers demonstrate the need and define the long-term benefits to the greater community. For example, for the redevelopment of the Park South neighborhood, the developers received a $24.4 million tax relief package that included a 22-year payment-in-lieu-of-taxes arrangement. The renovations to the Albany Hilton will benefit from tax breaks spread over 30 years.
Most of the Albany projects that were audited met or exceeded their job creation targets, but the state regulators found the city agency had not always incorporated project goals into its agreements. For six projects, auditors found no evidence the IDA independently verified the information developers provided.
Still, the Albany IDA did better than others in the region, where Times Union stories have documented cases in which little if any follow-up was done to see if the tax breaks really did result in the promised economic boosts.
Politicians insist that without taxpayer-financed incentives, developers will simply walk away. But unless there is a demonstrable and significant public benefit from the project, why make taxpayers pay for these subsidies? Local development agencies have an obligation to review and report back to those very taxpayers about whether projects they help underwrite are delivering the jobs, lower rents or other promised public benefits.
And when developments fall short, the agreements should always include language that rescinds property tax reductions or, when appropriate, requires grant money be returned.
Otherwise, for all taxpayers know, they're simply subsidizing profit margins that line developers' pockets.