New York’s Industrial Development Agency helps companies get things like tax breaks, tax-exempt bonds, and other perks that are meant to keep business in the city and encourage them to thrive.
The agency, managed by the Economic Development Corporation, is supposed to make sure that these corporations stay in New York and create a certain number of jobs in return for these goodies.
But this isn’t always the case, according to Comptroller John C. Liu’s recent audit of the agency.
Liu said that the group doled out millions in taxpayer dollars “on companies that did not live up to their agreements to create and retain jobs in the City.”
The “EDC not only failed to properly evaluate the companies selected to receive public assistance, but also neglected to monitor them and terminate their benefits after they clearly couldn’t deliver the promised local economic boost,” Liu says.
This program controls some $497 million, which gets distributed to a total of 576 companies.
But $318 million got distributed to 334 companies that didn’t create or retain the required number of jobs.
The analysis, released today, began in July 2010, and examines info from fiscal year 2009.
The big theme for Liu: shortcomings in project selection and monitoring:
“The EDC selected projects for IDA benefits based on shaky promises of job creation. The EDC not only failed to examine applicants’ financial plans to see if they were realistic, but also neglected to determine whether the promised jobs were, in fact, ultimately created. A close look at three projects, which received $250 million subsidies and tax-free bond issuances over the years, illustrated the flaws in the IDA’s project selection and oversight.”
Some of these projects included a parking developer in the Bronx, which had bad financial plans but still “qualified” for IDA benefits. And a Brooklyn nursing home got 19 million in tax-exempt bonuses, even though it had operating losses to the tune of $4.4 million.
The EDC approved $19 million in IDA tax-exempt bonds to finance this nursing home’s renovation in 2006 despite the fact that it had operating losses of $4.4 million. A metalworks factory in Brooklyn got 300 grand, to create 10 jobs over three years. After 10 years, the biz had only hired two people and cut ties with the IDA program. So, “taxpayers subsidized the company for $148,000 per job.”
The EDC, which administers the IDA tax breaks, has disagreed with Liu’s assessment in its official response, but has nevertheless started a new self-audit plan.
To read more about how your tax money might be misspent, visit the comptroller’s website and check out the audit in full.
UPDATE: The EDC has issued a statement responding to Liu’s claims, and says that the audit did not provide an accurate accounting of how the corporation distributes money. Patrick Muncie, agency spokesman, said:
“We appreciate the Comptroller’s well-intentioned effort to assess NYCIDA, including his finding that the program has complied with all accountability and reporting requirements. However, we find a number of the audit’s other findings to be erroneous and drawn from a tiny fraction representing a mere 2% of over 500 NYCIDA active projects. We remain confident in the integrity and impact of the agency — one that has been praised by independent watchdog groups as a model for other IDAs in its transparency and robust efforts to protect taxpayer dollars.”