By GREGORY ZELLER //
It’s that time of the year again: Gov. Andrew Cuomo is gunning for centralized control of local economic development, and Brian McMahon is firing back.
McMahon, executive director of the New York State Economic Development Council, is actually a fan of many of the governor’s economic-development efforts. He’s been involved with economic development for 30 years, McMahon noted, “and I’ve never seen more momentum and positive activity on economic-development issues.”
But Cuomo’s proposal to require that all local IDA projects financed by tax-exempt Private Activity Bonds be approved by the state’s Public Authorities Control Board – a five-member anti-debt cabal handpicked by the governor – isn’t one of them.
The proposal, included in Cuomo’s wide-ranging 2016 budget package, is the administration’s latest attempt to centralize local economic development, according to McMahon. This time last year, it was a budget proposal that any local IDA incentive package involving state sales tax money be approved by Empire State Development, the state’s main economic-development agency.
Due primarily to opposition led by McMahon and his group, that proposal was shot down. Now McMahon is rallying the troops again, this time to keep the decision-making in the hands of local industrial-development experts.
“Those local agencies exist to respond to local needs,” McMahon told Innovate LI. “They’re close to the governments and taxpayers they serve.”
This year’s turf war scuffles over state and federal protocols dating back three decades.
Private Activity Bonds are issued by government entities to finance private business deals. Interest paid on the bonds is exempt from taxes, making them one of the most-affordable ways to finance a project.
In 1986, amid growing complaints that the bonds were a “stealth subsidy” for business, Congress capped the tax benefits with a population-based formula that allows New York State to issue about $2 billion of the bonds annually.
At the time, Albany divvied the annual allowance into three pots: One-third reserved for state public-authority issuers, one-third for local issuers – IDAs, for instance – and one-third for a reserve to supplement the issuer accounts, in case they run low but still have projects worth supporting.
Cuomo’s new proposal would require that any Private Activity Bond allocations made through the IDAs and other local development corporations be approved by the Public Authorities Control Board, essentially removing the decision-making from local leaders.
Three decades since the three-way split was introduced, and with “no problem that’s been identified as to why the governor wants to take over this activity,” McMahon is at a loss to explain Albany’s thinking.
“I think the governor wants to take over because he wants more control of economic development at the local level,” McMahon said. “I don’t think he trusts local government to make good decisions in their own best interests.”
So, as he did in 2015, the NYSEDC exec is mobilizing local forces. This week, he put out the call to IDA boards across the state, requesting they contact their local Senate and Assembly members to get their opposition on the record.
McMahon’s communique even included a form letter local IDAs could forward to elected officials, including town-level officeholders who could also contact state representatives and otherwise support the cause.
The well-organized resistance is essential, according to McMahon, who cites several potential dangers in Cuomo’s centralization plan. Chief among them: slower approval processes and “changing the nature of projects that are approved.”
Although local IDAs make frequent use of economic-development initiatives created on Cuomo’s watch, McMahon believes they “understand the importance of this issue” and predicts another strong response.
Bill Mannix, executive director of the Town of Islip Industrial Development Agency and NYSEDC chairman, said Tuesday he’d already contacted Islip’s state delegation and, “as in years past,” expected representatives to be “very supportive of our efforts to maintain local control.”
The issue here, Mannix noted, is not only the importance of keeping local decisions with local decision-makers, but in keeping them away from a board whose scope is completely unrelated to Private Activity Bond approval.
The Public Authorities Control Board was established in 1976 in direct response to fiscal crises in New York City and New York State, specifically to prevent the state from falling into another deep debt – and Private Activity Bonds are “nothing like what the board was established to review or control,” according to Mannix
“This debt in no way obligates the state or any of its agencies,” he said. “It’s private debt that’s entered into by a private company for a particular project.”
So putting local Private Activity Bond deals before the state’s debt-buster board “makes no sense,” he added, “unless you’re simply attempting to remove local control.”
Mannix didn’t accuse Cuomo of a straight-up power grab; McMahon also said he “wouldn’t want to characterize the governor’s motives.” And McMahon repeatedly referenced “an awful lot of good things going on in economic development, largely due to the governor’s leadership,” including programs centralized in the state capital.
“The regional Economic Development Councils, for example, have led to many long-lasting positive developments,” McMahon said. “And Start-Up NY continues to grow, and is becoming a very important program for the way startups become commercialized.”
But in seeking to wrest Public Activity Bond control from local IDAs, he added, Cuomo has missed the mark.
“We don’t paint with a broad brush, and this is only one issue,” McMahon said. “But he’s made a proposal we think is imprudent and would harm local economic development.”