Audit Objective
Did the Essex County Industrial Development Agency (ECIDA) Board of Directors (Board) properly approve and monitor projects that were provided financial assistance?
Audit Period
January 1, 2017 – August 31, 2024
Understanding the Program
Industrial development agencies (IDAs) are established by special act of the State Legislature to advance the job opportunities, economic welfare, health and general prosperity of the people of New York State. IDAs provide financial assistance, including tax exemptions (e.g., real property, mortgage recording and sales and use taxes), to businesses to encourage various types of economic development projects (e.g., industrial, manufacturing, warehousing, commercial, research, renewable energy and recreational facilities).In return for financial assistance, many project owner occupants, or project owners who receive IDA financial assistance, promise to create new jobs or retain existing jobs in the community and invest in constructing new buildings or renovating existing buildings.
The seven-member Board is responsible for managing ECIDA’s financial and operational affairs, including project approval and monitoring. A Board-appointed Co-Executive Director serves as the chief financial officer (CFO) and is responsible for reviewing submitted project applications and annually reporting information for approved projects.
During the audit period, the Board approved 12 projects with projected investments in their applications totaling more than $360 million. Seven of the approved projects were granted sales and use tax exemptions and three were granted mortgage recording tax exemptions.
Audit Summary
The Board did not properly approve and monitor projects that were provided financial assistance. For example, the Board did not develop and adopt, by resolution, uniform criteria for the evaluation and selection for each category of projects to be provided financial assistance, including the preparation of a written cost-benefit analysis (CBA), as required by New York State General Municipal Law (GML). Of the nine approved projects we reviewed, a written CBA was not prepared for four of the projects, and the CBAs prepared for the other five projects did not include all the information required by GML. As a result, the Board could not properly assess these projects, before their approval, to ensure the benefit to the community would be a sufficient return for the financial assistance to be provided.
In addition, the project agreements for eight of the nine projects did not include all the information required by GML. For example, the project agreements for seven of these eight projects did not include the amounts of financial assistance to be provided, as required. As a result, the extent of financial assistance that the Board granted to these projects was not clear.
Furthermore, officials did not annually assess the progress of each project toward achieving the investment goals indicated in the project applications or provide the assessments to the Board, as required by GML. In addition, because jobs information was not recorded based on the number of full-time equivalent (FTE)1 jobs on the application or annual questionnaire, the Board’s ability to assess the progress of each project toward achieving the job goals indicated in the project applications was limited.
The Board was also not provided with, and did not request, adequate information to monitor projects to determine whether they claimed sales and use tax exemptions within the authorized amounts. Three of the seven projects that were approved and granted sales and use tax exemptions between 2017 and 2023 reported exceeding the authorized amounts by a combined total of $129,218, and officials were unaware that another project reported inaccurate amounts of exemptions claimed. The Board did not take any steps to recapture the reported excess amounts, as required by GML.
The report includes 13 recommendations that, if implemented, will improve ECIDA’s project approval and monitoring. Board officials generally agreed with our recommendations and have initiated, or indicated they planned to initiate corrective action.
We conducted this audit pursuant to Article X, Section 5 of the State Constitution and the State Comptroller’s authority as set forth in Article 3 of GML. Our methodology and standards are included in Appendix C.
The Board has the responsibility to initiate corrective action. A written corrective action plan (CAP) that addresses the findings and recommendations in this report should be prepared and provided to our office within 90 days, pursuant to GML Section 35. For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. We encourage the Board to make the CAP available for public review in ECIDA’s office.