The expiration of a seven-month extension of a sunset law that gave industrial development agencies the authority to finance civic projects has put on hold at least two projects in Dutchess County.
A proposal to construct a nursing home, representing $30 million in IDA financing, is in limbo, according to Dutchess County Economic Development Corp. President and CEO Anne Conway. She said at least one other project in the pipeline was also affected.
The failure of the state Legislature to further extend the provision ”“ or to pass legislation that would make the IDAs”™ authority to finance civic projects permanent ”“ is “very serious,” said Conway.
“It”™s a big concern.” Conway said the Dutchess County IDA financed $249 million worth of civic facilities in 2007, which included construction projects associated with schools, nursing homes and Saint Francis Hospital. Noncivic types of IDA funded projects, such as those related to tourism and manufacturing, are not affected.
Brian McMahon, executive director at The New York State Economic Development Council (NYSECD), an organization based in Albany that represents local economic development officials, said his group had identified $1.5 billion worth of civic projects held up statewide as a result of the IDAs”™ lapse of authority.
Some civic projects could instead qualify for financing from the state Dormitory Authority. However, the interest rates on bonds issued by the authority are higher than those offered on bonds issued by regional IDAs. Furthermore, the Dormitory Authority can”™t finance certain types of not-for-profit projects, such as YMCAs, group homes for the mentally and physically disabled and libraries.
“Without the IDAs, these projects would have no option but to go to a commercial bank and borrow money. The financing would be 25 to 40 percent higher than financing through the IDA,” McMahon said.
Lance Matteson, president of the Ulster County Development Corp., said there”™s another disadvantage to having the Dormitory Authority rather than the regional IDAs finance projects: It takes control away from local economic development programs. “Not only does it cripple our ability to fund those projects, it prevents projects from generating IDA fees, which are plowed back into economic development,” he said. “We give small grants with the funds we earn from those transactions.”
And, said Matteson, “It takes away a tool used by the local economic community to create incentives for the type of development they want.” The Ulster County IDA, for example, “strongly rewards LEED (Leadership in Energy and Environmental Design)-certified building projects. It awards high wages. We have a more generous pilot if (project developers) do these things. The state is ripping that tool away from us.”
In Ulster County, no projects are directly affected as of yet. But the nonprofit sector has been a significant beneficiary of IDA financing. Last year, the Ulster County IDA issued bonds for several civic projects, including Woodland Pond, a $100 million continuing-care retirement community under construction in New Paltz.
Matteson also said the state is not playing fair: The Dormitory Authority is “not included in the targeted reforms” the state is proposing for the IDAs, he said.
The state Legislature”™s failure to extend the IDAs”™ authority is related to an ongoing philosophical debate among legislators about whether projects financed by the IDA should be subject to more restrictions and wage requirements. A bill introduced in the Senate would make the IDAs”™ authority to bond civic projects permanent and pretty much maintain the status quo. In contrast, a bill that passed the Assembly, sponsored by Assemblyman Sam Hoyt, a Buffalo Democrat, would require IDA-financed projects to pay prevailing wages to construction workers and living wages for the long-term jobs created, as well as require IDAs to adhere to standards for more accountability and transparency.
“Hoyt”™s bill had all the wage requirements as well as a lot of regulatory requirements,” said McMahon. “It probably will not pass the Senate, but it becomes a focal point for negotiations, which could result in some new laws” putting more restrictions on the IDAs.
Conway said the prevailing wage provision in the Assembly bill would raise the cost of IDA-financed projects by roughly 35 percent. Matteson said while “a lot of people feel it”™s not a bad thing to improve transparency, the (state Legislature”™s) Public Accountability Act took care of the lion”™s share of the problems. The reporting we have to do is way more than for most public entities and the nonprofits.”
In response to a report issued last year by a nonprofit group based in New York City called Jobs with Justice that claimed IDA-financed projects in 2005 created approximately only a third of the 217,000 jobs promised, the NYSEDC commissioned a study by the Center for Governmental Research (CGR), a nonprofit organization based in Rochester. The CGR based its findings upon data obtained from the state Office of the State Comptroller and the IDAS themselves, according to the NYSECD.
The CRG reported that in 2005, IDA-financed projects actually created approximately 310,000 jobs, in stark contrast to the 79,000 jobs reported by Jobs with Justice. Half of the projects that fell short of job projections still created 60,000 jobs in their communities, according to the CRG report.
In addition, the CGR report found that only a single IDA reported an overall job loss in 2005, in contrast to the 13 reported by Jobs with Justice. Sixteen percent of projects posted job losses, according to the CGR, in contrast to the 25 percent reported by Jobs with Justice. Of those projects with losses, a third involved fewer than 10 jobs, according to the CGR report.
The NYSEDC noted in a statement that the proposed IDA reforms reflect “the real agenda of the unions.” It cited another CGR-commissioned report that found “such a requirement would increase labor costs by 57 percent and overall project costs by 28 percent in upstate.”
