Nassau County Comptroller Jack Schnirman announced this week that his office would audit the county’s Industrial Development Agency to determine whether tax and other financial incentives the agency has granted to businesses in recent years have helped spur economic growth and benefitted taxpayers.
Schnirman, a Democrat and former Long Beach city manager who took office in January, had pledged to launch an audit of the IDA — his first of a county agency — during his campaign last year. The move follows his recent announcement to audit the Town of Hempstead’s animal shelter.
According to the state, IDAs are intended to spur economic development and create jobs, mainly through tax exemptions such as payment in lieu of taxes, or PILOT, programs, and sales tax breaks.
Local IDAs, however, have come under fire in recent years for approving projects that many say create relatively few jobs — such as car dealerships and storage facilities — and tend to favor developers and businesses. In a report issued in October, the Citizens Budget Commission said that IDAs “do not have a strong record of making sound economic development investments,” and called for consolidating 109 statewide IDAs into one for each of the state’s 10 regions.
“When you give a tax abatement, you’re making an investment on behalf of taxpayers,” he said. “The question is, are we seeing the return on investment that we want to? I, along with others, have questions as to whether things like public storage and car dealerships are going to generate that kind of return on investments.”
In 2011, former County Comptroller George Maragos conducted an audit that found the county’s IDA lacked many proper controls, guidelines and procedures. The new audit, which will cover 2015 through 2017, will follow up on the previous findings to determine whether issues have been correctly remedied, Schnirman said.
On Tuesday, Schnirman told reporters that he would review the IDA’s finances and revenues; examine internal financial controls and governance; verify compliance; and review the project assessment process, future projects and new business concepts.
“We’re supposed to, with our IDA, be supporting start-up businesses that grow and thrive here in Nassau, and help companies relocate here and expand their business,” Schnirman said. “Our audit is going to be asking, very simply, ‘How are we doing with all that?’ I’ve heard the criticism of our county IDA, and we believe that the public deserves answers.”
In 2016, the Nassau IDA — one of eight on Long Island and among the most active — said in an annual report that it approved 12 projects that would retain 571 full-time jobs, create 359 full-time jobs and 564 temporary construction jobs, as well as 210 housing units. The projects would generate roughly $2.7 billion in economic activity and generate approximately $20 million in new tax revenue.
According to Newsday, under former Republican County Executive Ed Mangano, the IDA aided 88 building projects that are expected to generate nearly $94 million in investment, tax payments and other economic activity over the life incentive packages spread over 10, 20 and 40 years. The projects would also create 11,127 jobs.
IDA Executive Director Joseph Kearney did not return a request for comment.
“Everybody pays more taxes when someone else pays less taxes, so we need to be sure we’re getting a solid return on the investments that we as taxpayers are making and getting the economic development that we’re looking for,” Schnirman said. “We will ask the tough questions to drive reform and ensure for taxpayers that the IDA works as that job-creating economic engine to ultimately lower our residential taxes, not drive them up.”
As city manager, Schnirman and other Long Beach officials came under fire after the city entered into a settlement agreement in 2014 with a developer looking to build two luxury apartment towers on the vacant Superblock property. The agreement included the city’s support for a PILOT for an unspecified term.
The developer, iStar, had initially told members of the Zoning Board of Appeals that it had the financial wherewithal to move forward with the project, which it said would generate $4.8 million in property taxes.
Residents were outraged in 2015 when iStar claimed it needed tax breaks to move forward with the project. The IDA rejected two requests by the developer for tax abatements, including a 20-year, $109 million proposal in 2016, amid an outcry by former U.S. Sen. Al D’Amato, who is a Herald columnist, and residents who maintained that the project would not create the level of jobs and other economic activity to justify such an “excessive” tax break, and the city would lose out on the full tax benefits of the development.
In 2016, Schnirman called on the IDA to conduct an economic analysis of iStar’s plan, and said that the public had expressed frustration “over the fact that they have been left with no way to gauge the possible economic advantages of this project — in terms of local job creation and growth — in comparison with the tax abatements sought by iStar.”
“I made no secret about my feelings and concerns about the critical importance of the cost-benefit analysis in driving how the IDA makes determinations about projects, and about where in the process that cost-benefit analysis should be,” Schnirman said.
Asked whether he felt the IDA based its decision on political pressure, he added, “I was very vocal … about my concerns that a cost-benefit analysis did not lead the process, and that the political process seemed to drive it.”
County Legislator Denise Ford, a Republican from Long Beach who opposed iStar’s requests for tax breaks, said that the IDA made the right call in rejecting iStar’s PILOT applications, which she said the city had supported.
“It wasn’t political pressure,” Ford said. The IDA “took a look and held extensive hearings. I’m actually grateful that the IDA sided with the residents and voted against the PILOT.”
Ford added that she welcomed an audit of the agency. “I think for all of us, we welcome any oversight in any of our departments, and I’m sure the IDA has nothing to hide,” Ford said. “I do believe that for any type of benefits that anybody gets, I want to make sure that they follow up on what they promise, and I’d like the IDA to be a little more aggressive in going after those who didn’t follow the regulations they were supposed to follow.”