TOMPKINS COUNTY, N.Y.—In a report published late last year, the New York State Comptroller’s Office called for the Tompkins County Industrial Development Agency to scrutinize more closely the outcomes of local projects that receive tax abatements.
The audit, which can be read in full here, examined 39 TCIDA projects that were active during the audit period. It found that the majority of projects had properly followed guidelines set forth in their tax abatement agreements, including job creation goals and Payment in Lieu of Taxes (PILOT) deals (which is normally a mutually agreed financial payment that a development project’s owners will pay in place of property taxes on the ascending value of their project’s parcel for a certain number of years, meant to encourage development).
However, according to the audit, several projects ran slightly afoul of their agreements on those two points specifically—with the state asking for a full corrective action plan from the county to hopefully prevent such issues in the future. Tax abatements are often controversial in Tompkins County, especially during the development boom of the last few years, though that furor has softened a bit recently with certain encouragements or requirements that tax abated projects provide some extra benefit to the community — like a certain portion of a residential project’s units being set aside for affordable housing, for instance.
According to Ithaca Area Economic Development President Heather McDaniel, TCIDA was randomly selected by the comptroller’s office for audit. McDaniel is also the Administrative Director for the TCIDA, which handles tax abatements.
“We really appreciate the oversight from the Office of the State Comptroller,” McDaniel said. “There’s always room for improvement […] We did have a check-and-balance in place, but it turned out that we weren’t using it in an efficient and timely manner to catch mistakes. So we were able to go in and make some improvements to our process with the taxing jurisdictions.”
McDaniel said the issues arose with tax abatements for the 210 Hancock project, owned by Ithaca Neighborhood Housing Services, the Tompkins Financial building on Seneca Street and a project in Lansing. The issues with the latter project stemmed from confusion between the Town and Village of Lansing, which were using a previous year’s tax rate to produce their abatement bills for that project.
Of the 22 projects approved between mid-2016 and the end of 2019, seven were selected for full audit review by the comptroller’s office. Three of those had “job retention or creation goals.” Two had met their goals, but the other had actually lost two jobs (going from 55 to 53 since its approval in 2019).
Further, on a larger scale, the full 2020 annual project report was reviewed, presumably showing all of TCIDA’s active projects, finding 27 projects with job retention or creation goals as part of their abatement agreements. Eleven of those 27 were not meeting their job goals.
“These 11 projects had 1,377 employees when applying for financial assistance and projected the creation of 146 jobs,” the audit states. “However, at the end of 2020, the projects reported employing 1,009 employees, which was a loss of 368 jobs. Due to the COVID-19 pandemic, the Administrative Director [Heather McDaniel] recommended that the Board not recapture or terminate any of the financial assistance to these projects. She informed us that the Board would be looking at this more closely in the following years if the trends continue.”
Additionally, the audit found that three tax bills had been improperly administered, resulting in one project being underbilled by $78,600, one project not being billed at all for its tax payment of $18,900, and one project being overbilled by $873. That totals just under $100,000 in discrepancies—though, as pointed out in the TCIDA board’s response to the audit, that’s out of $3.7 million that was owed in PILOT taxes across all 39 active projects.
“Because the board is not monitoring and tracking the PILOTs, billing errors occurred and may continue to occur, and taxing jurisdictions did not receive all amounts to which they were entitled,” the audit states, saying that the IDA needs to more closely follow up with taxing jurisdictions regarding whether or not tax bills on active projects are being properly and fully administered and collected. “Furthermore, the board is not able to make informed decisions as to whether it should recapture financial benefits provided to those businesses delinquent with their payments.”
To address these issues, the audit’s recommendations include requiring businesses to submit NYS-45 forms with project reports to track employment promises, monitor PILOT agreements and set up new policies to monitor amounts billed and received, and work with taxing jurisdictions to address billing errors already committed.
In a letter acknowledging the audit’s findings, Tompkins County Legislator Rich John, who also serves as the TCIDA Board chair, laid out two corrective action plans hoping to address the problems the comptroller’s office showed, in the inaccurate billing incidents and the job reports. They are that the TCIDA is now requiring NYS-45 forms from projects to track job goals, and staff is monitoring compliance as well, plus a meeting between the County Assessment department, County Finance department and IAED staff to clarify the process between projects with tax abatements and taxing jurisdictions, hopefully preventing future billing errors.
McDaniel said she believes the discrepancies will be corrected through the corrective action laid out by John in his response letter.
“This was a really clean audit. All of our procedures and policies, for the most part, are being followed,” McDaniel said, also attributing some of the difficulty in tracking projects to the sheer number of active projects that have active tax abatements currently, a sign of the wave of development locally. “We’re crossing our T’s and dotting our I’s. […] It’s continuous improvement, it’s labor-intensive and administratively intensive on our end, but the results are worth it.”