Holiday shoppers might be worried about how much they’re borrowing for presents, but state officials are chiding the Rotterdam Industrial Development Agency for carrying no debt.
The New York State Authorities Budget Office is seeking to terminate the Rotterdam IDA because it fails to comply with a provision of the General Municipal Law requiring any IDA to hold outstanding bonds or notes. Local officials aren’t disagreeing the IDA doesn’t hold any debt, but contend the requirement is an arcane provision. IDA Chairman Robert Mallozzi questioned why the state is now choosing to aggressively enforce the statute.
David Kidera, director of the state ABO, sent a letter to Mallozzi mid-October, in which Kidera requested an explanation of why the law wouldn’t immediately apply to the local agency. The law states once debt is cleared, the agency is required to terminate all obligations and liability is passed on to the town.
“Please provide us with any compelling justification why this language would not apply automatically and under what legal authority the Rotterdam Industrial Development Agency continues to act,” Kidera wrote in his letter.
Kidera contests it’s simply a “matter of law” for the agency to stop operations. Also, he said there were several IDAs reporting no outstanding debt to the state, which is leading to similar pushes for dissolution statewide.
“What is apparent to us and I think others that we have spoken with, is that this section of law is pretty clear and pretty explicit,” Kidera said. “I think they are placing themselves and the Town of Rotterdam and any company that does any business with them in some type of risk.”
According to Kidera, the requirement of holding debt was the original purpose of IDAs and the agencies weren’t meant to be permanent bodies, but rather tied to specific projects. Requiring debt allowed the agencies to avoid a sense of permanency.
“There is this expectation I believe that IDAs where not necessarily viewed as permanent governmental entities,” he said.
Since the requirement is decades old, he said the functions of IDAs have changed, but the law hasn’t changed to support it.
“I think over time the IDAs have evolved and have been providing all other forms of financial assistance and this section of law was never changed to reflect this changing nature of IDAs,” he said.
Mallozzi said he wasn’t aware of the legal provision prior to the letter, but he said the Schenectady Metroplex Development Authority was. The IDA voted for administrative duties to be run by Metroplex last year.
Since the state largely ignored the law, Mallozzi said there was never a concern of enforcement and thought it was “shocking” the state was coming after the IDA for not holding debt.
“It did come as a surprise that they would be applying that statute now,” said Mallozzi. “Given that the state has made clear it wants to consolidate all agencies in the state … I’m not surprised it is happening.”
The IDA sent a response letter at the end of November claiming the agency has legal authority to continue to operate. Mallozzi cited the section of law being enacted in 1969 when nearly all IDA transactions involved issuing bonds.
He said the state legislature later realized issuing bonds was costly and holding property titles subjected the agency to liability. Then it added another section to the law allowing for IDAs to provide benefits to a project by entering leasing agreements, which resulted in IDAs primarily entering a straight lease. He claimed this leasing agreement simplified and reduced costs of such transactions.
“The Rotterdam IDA believes that its use of simplified lease structures vs. bonding should not result in the termination of the Agency,” Mallozzi said in the response letter. “It seems both counterintuitive and counterproductive to punish an IDA for not issuing debt at a time when New York State is trying to reduce borrowing.”
The response letter touted the IDA’s accomplishments in economic development and blamed the state for stalling ongoing talks.
The agency has brought more than $65 million in new investment to the town and helped create over 530 new jobs and keep 160 jobs, according to officials. Several projects were cited including the Price Chopper Frozen Foods Distribution Center, Long Pond Village, FedEx Freight, Recovery Room restaurant and Berkshire Bank at the vacant Capitol Plaza and a new office building at the Rotterdam Corporate Park
Repairs to storm damage caused by Tropical Storms Irene and Lee at Long Pond’s 192-unit apartment complex have stalled following the state’s notice. Storm damage wasn’t covered by insurance and since the IDA holds has a leasehold interest the lender is requiring the IDA to approve the transaction.
Uncertainty over the agency is also stalling progress on the former Curry Road Plaza, which is a blighted 12-acre site in the center of Rotterdam. In December 2009, the town IDA acquired the site and has worked to complete environmental preparations to spur investment. Agency members have been working with a private developer to purchase the entire property, according to the letter.
If the town’s IDA were dissolved, Mallozzi said the Schenectady County IDA could take over its functions, but wouldn’t have a focus only on the town. He said he didn’t think long-term development for the town would be affected if the agency ended.
“I’ve always felt that having a Rotterdam IDA run by residents of Rotterdam, whose main priority would be Rotterdam … was always beneficial.”
Mallozzi said the agency would respect whatever decision is made by the state.
A reversal doesn’t appear forthcoming from the state. Kidera said the state is looking into “taking some additional steps” in the process.
“What is clear is that they have not provided us with any documentation that they have a bond or a note outstanding that would override that provision of law,” Kidera said. “It would be our position they are already terminated as a matter of law.”
