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State watchdog renews criticism of economic developers

State watchdog renews criticism of economic developers

Metroplex chairman defends Schenectady project, says criticism off-base
State watchdog renews criticism of economic developers
Ortho NY at 530 Liberty St., Schenectady.
Photographer: Google Maps

SCHENECTADY — A watchdog agency renewed its criticism of industrial development agencies Monday with a report citing inaccuracies, missed job creation goals and questionable practices in a variety of projects statewide.

The state Authorities Budget Office randomly chose 25 of the 403 projects reported as completed statewide in 2011 for review, including one each handled by the Saratoga County IDA and the City of Schenectady IDA. 

The ABO pointed out no specific fault with the project assisted by the Saratoga County IDA, construction of a 58,000-square-foot structure in Halfmoon for Creatacor. The property received $446,158 in total net tax exemptions and the company increased its workforce from 28 to 44 full-time employees from 2002 to 2011.

But the ABO reported multiple discrepancies in the project assisted by the City of Schenectady IDA, the purchase and overhaul of a building on Liberty Street in downtown Schenectady for a medical practice:

  • The applicant was to add four full-time and five part-time jobs to the 46 full-time jobs it already had in the year 2000. For 2011, when the project was reported as completed, the project owner reported there was only one full-time equivalent position added through the project, but the IDA at that time reported zero jobs gained. In 2017, the IDA told the ABO that both numbers were incorrect, there were 84 full-time equivalent jobs for the project as of 2010.
  • The IDA originally reported that the project received property tax exemptions totaling $432,465 and made payments in lieu of taxes of $442,559. Upon review in 2017 by the ABO, IDA officials indicated that the total real property tax exemptions were $759,015 and the total PILOTs made were $741,623.
  • The IDA originally said no sales or mortgage recording tax exemptions were provided; in 2017, it said sales and mortgage recording tax exemptions were also provided to the company, but it could not determine the amount.
  • Corporate merger and dissolution complete the picture. The original applicant was SROA Realty LLC, which apparently was connected to Schenectady Regional Orthopedic Associates, which ceased to exist upon merger with OrthoNY in 2014. OrthoNY continues to operate at 530 Liberty St. and the property is listed on the tax rolls with a taxable value of $1,859,200.​

The City of Schenectady IDA is administered by the Schenectady County Metroplex Development Authority. Metroplex Chairman Ray Gillen noted that the project predates the tenure of both him and all current board members of the city IDA. He defended the project, however, and issued a rebuttal of the ABO report:

  • Downtown Schenectady was in a crisis situation with many retail and office operations shrinking or closing in the 1970s, 1980s and 1990s. Filling the vacant space was a priority.
  • The project in question occupies a former auto parts store that was closed down and converted to a medical office building that also closed. The former Two Guys department store next door also had closed down, totaling more than 100,000 square feet of vacant space in the year 2000.
  • The project has since brought more than 75 jobs downtown for a net tax break of $17,392.
  • The IDA did not originally report sales tax and mortgage tax exemptions because such reports were not required in 2001; it is unable to compile the data 16 years later.
  • Metroplex corrected earlier IDA tax payment/tax exemption numbers for the project when it took over operation of the IDA from the Schenectady Economic Development Corporation.
  • With the expiration of IDA benefits in 2011, the IDA cannot require that workforce totals be submitted to it, and therefore cannot now provide accurate or current numbers.

The ABO has for years criticized the accuracy of data provided by public authorities. It offered an opinion on the matter in the report:

“The role of IDAs in the state’s economic development program should be reviewed and re-evaluated. While there are many projects where the IDA appears to have helped encourage new business development and attract businesses to the area, it also appears that long-term financial assistance is being provided to many businesses simply to help support the operations of the business.”

The ABO listed specific details it found problematic in its review of the 25 projects statewide:

  • State General Municipal Law prohibits IDAs from providing assistance to retail projects in most circumstances; IDA staff could not say if two retail projects that received aid met those circumstances.
  • The financial assistance appears to have been effective, as 20 of the businesess continue to operate, but three have closed and two are being used in ways not originally intended.
  • Some projects began receiving assistance in the late 1990s and will continue to receive assistance until 2031.
  • Some IDAs appear to treat businesses like clients and strive to serve them whenever they request additional tax exemptions.
  • It was rare for an IDA to deny additional financial assistance to a returning business.
  • Of the 25 businesses, 15 failed to reach targets for full-time job creation.
  • The 25 businesses in total narrowly missed their combined full-time job creation target, also missed their seasonal/contract job creation target, but far exceeded their part-time job creation target.
  • Only 23 percent of the value of property owned by businesses receiving assistance has returned to the tax rolls as fully taxable.
  • 35 percent of projects had incorrect reporting by IDA staff of financial assistance.
  • 58 percent of projects had inaccuracies in job reporting.
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