State shuts off IDA financial support for nonprofits

A state office has ordered industrial development agencies to end their practice of assisting nonprofit organizations with agency money, leading Westchester County officials to explore legal options while affected nonprofits in the region search for alternate funding sources for their work with small businesses and entrepreneurs.

The Westchester County Industrial Development Agency in 2014 provided a total of $409,000 to five nonprofits for their job creation and business support services. The largest share, $200,000, went to the Westchester Putnam Workforce Investment Board, a board of government and private-sector appointees that oversees one-stop employment centers with the state Department of Labor and workforce development programs in the two counties.

To support nonprofits that assist small businesses, the county IDA last year awarded $70,000 to the Women”™s Enterprise Development Center in White Plains; $64,000 to the Procurement Technical Assistance Center program of the Rockland Economic Development Corp; $50,000 to SCORE Westchester, the county chapter of the Service Corps of Retired Executives; and $25,000 to Community Capital New York, an alternative lender based in Hawthorne.

But when leaders from those nonprofits appeared before the county IDA board in January to make their cases for renewed or increased funding from the agency in 2015, they learned that those funds might no longer be available.

County and IDA officials had recently received a policy directive from the state Authorities Budget Office stating that an IDA “may not, under any circumstances, award grants or make loans of its own monies.” The authority to make such grants or loans is not an implied power of a public benefit corporation, and the statutory restrictions on that practice are “clear and unambiguous,” the ABO noted.

IDAs and other public authorities were directed to immediately end their financial support to public or private entities unless that power is specifically permitted in the legislation that created them.

The January directive from Albany followed a legal opinion on the powers of an industrial development agency issued in September by state Attorney General Eric T. Schneiderman at the request of the Authorities Budget Office director. Schneiderman was responding to the ABO”™s concern that IDAs often use revenues to support civic, charitable or educational causes unrelated to their public mission or to provide seed money for loan programs managed by other public entities. The attorney general concluded that an IDA may not provide grants or loans from its revenues to public or private interests.

“In terms of the nonprofit world, there are very few agencies being impacted” by the loss of IDA funding, said Anne Janiak, executive director of the Women”™s Enterprise Development Center. At WEDC, the IDA”™s $70,000 in annual funding supported entrepreneurship training sessions conducted in both English and Spanish, seminars and one-on-one counseling sessions for women owning or starting businesses, according to the IDA annual report.

Operating on a $900,000 budget in 2014, which included an approximately $244,000 federal grant, WEDC stood to be less affected by the change in practice than other IDA-funded agencies.

“IDAs have been under scrutiny for a while” by the state, Janiak said. “You can understand why this opinion came down. It”™s more in line with transparency, good government, the way things should operate ”” even though it”™s disappointing. I understand the rationale behind it even if it affects us directly.”

Janiak said WEDC officials will be “knocking on a lot of doors” to replace the IDA funds. “Where there”™s a will, there”™s a way,” she said.

At the regional Procurement Technical Assistance Center in Pearl River, program manager Liz Kallen in February said the center”™s program in Westchester to assist and train business clients in obtaining government contracts for their companies could end for 2015 without the $64,000 contribution from the county IDA. PTAC clients in Westchester County reported contract awards that totaled approximately $41.5 million in federal fiscal year 2014, she said.

Kallen said the absence of the PTAC program in Westchester would be “a tremendous loss” to the county”™s economic development efforts and could have a long-term effect on small businesses in the county.

At SCORE Westchester, the annual financial contribution from the county IDA has largely comprised the all-volunteer nonprofit”™s entire operating budget. “It definitely would have a huge impact on us,” said Natasha Roukos, a retired IBM Corp. executive who serves as chairman of the approximately 40-member SCORE chapter.

Roukos said the annual award is used to maintain the SCORE website and publish printed materials to attract people to its free workshops for small businesses. After sending out its online newsletter, “We have anywhere from 10 to 30 registrations for our workshops,” he said. Roukos said those attendance numbers likely will drop if SCORE can no longer afford to promote its sessions.

The chairman said contributions to SCORE from other organizations have ranged from $1,000 to $3,000. “It will take a lot more of those to make up for the IDA,” she said.

“We”™re pursuing other funding sources but we have no commitments,” Roukos said.

Westchester Deputy County Executive Kevin J. Plunkett, who also serves as vice chairman of the county IDA board, said the IDA”™s attorney found that the Authorities Budget Office directive “is pretty clear” in prohibiting the IDA from continuing its support of nonprofits. County Executive Robert P. Astorino has asked that the IDA attorney explore whether its authorizing state legislation can be amended to expressly allow the suspended donations, Plunkett said.

Plunkett said Astorino also has asked the attorney for the county Local Development Corp. to explore changing the county statute that established the agency so as to shift financial support of nonprofits from the IDA to the LDC, “to the extent that it has the funding to do that.” The 2-year-old LDC currently does not have sufficient revenue for that, he said.

“We hope that our lawyers from the LDC and the IDA can come up with a way to get this thing done,” Plunkett said.