The main purpose of an Industrial Development Agency (IDA) is to stimulate the local economy through the creation of permanent local jobs. This can be achieved by providing tax incentives including PILOTs (payments in lieu of taxes) to local businesses. Historically, according to the annual report on IDAs from the Office of the State Comptroller (OSC), Glen Cove’s IDA (GCIDA) has ranked toward the bottom of all IDAs in NY state for the cost per job created indicating that taxpayers are being asked to subsidize residential developments which do not meaningfully create jobs. Absent permanent job creation, this is tantamount to appropriating a tax subsidy from taxpayers for the benefit of high-density residential developers. Of greater concern, is the lack of accountability and transparency in how these subsidies are appropriated and facilitated. Recently, the OSC issued an audit of the GCIDA operations from January 1, 2017 through September 30, 2019 and the report was alarming and disturbing. According to the report, the key finding states, “The Board and officials did not properly approve and monitor projects or take action when goals were not met.”
Specifically, some of the most concerning findings were:
• Payments in Lieu of Taxes (PILOTs) billing and collections were not monitored by officials
• Of the ten projects reviewed, default events occurred in seven of them which could lead to recapture for Glen Cove. However, no recourse was pursued for any of the seven projects.
• Almost half of 115 payments reviewed were received 1-9 months late
• Several invoices were sent out after the due dates
• PILOTs were not allocated correctly among affected taxing jurisdictions (ATJ)
• “The GCIDA has no procedures in place to ensure PILOTs collected are being accurately paid to each ATJ.”
• Due to the lack of controls, the city and school district were short-changed $75,039 and $300,875, respectively.
If the GCIDA had accurately allocated PILOT payments and collected late fees, adding a few hundred thousand dollars in revenue, it would have equated to approximately one to two percent in taxes and thus would have lessened the extent of the large tax increase last year.
A misconception about PILOTs is that it is assumed that a project will not happen if a PILOT is not granted thus the benefit to the city is the difference between collecting no or little taxes for vacant land versus collecting the amount of the PILOT payment. This is not the correct analysis. The appropriate cost-benefit analysis needs to accurately assess the true costs to service developed properties with water, schools, police, sanitation, fire etc., which are much more extensive for developed land versus vacant land, which is why vacant land has a lower assessed value. Once a property does not pay the standard tax rate which covers the expense of standard municipal services, then the rest of the taxpayers are subsidizing that property’s services, the cost of which is extensive.
Based on the critical issues raised by the New York State Comptroller concerning how the IDA is currently operated, I strongly propose a moratorium on further granting of any tax breaks until such time that the appropriate metrics, policies and protections are established which correspond to and address those issues cited by the OSC audit and are put into operation. Because taxpayer money is being appropriated with no accountability to the taxpayers, I strongly believe a specific metric must be introduced into the process to create that accountability.
Glen Cove City Councilmember