Independent Budget Office Faults New York City's
Oversight of Corporate Welfare Deals
Below is a newspaper article from the Daily News about the report, followed by a summary of the report along with recommendations by Good Jobs NY.
Thursday, May 31, 2001
EDC Hit on Hiding Info
Benefits concealed, group contends
By ERIC HERMAN
Daily News Business Writer
The city's Economic Development Corporation, which gives tax breaks and other financial benefits
to private sector companies, conceals many of its concessions from the public, a new report
charged.
According to a report by the watchdog Independent Budget Office, the EDC skirts a central law
governing its operation that requires it to disclose the details of deals, and provides only "unreliable"
and "inconsistent" information.
"We need to know how much the deals are costing the city, and what benefits we're getting from
them," said Independent Budget Office director Ronnie Lowenstein. By handing out benefits like
reduced property and sales taxes, cheap energy and low-cost financing, the EDC seeks to keep
companies from moving to places like New Jersey where office space is cheaper, its supporters
say.
Yesterday, for example, Mayor Giuliani announced a deal to keep 962 MetLife jobs in the city.
MetLife will move some of its operations from Manhattan to Long Island City. In return, the
company will get tax breaks that the EDC says will be worth $26.2 million.
"We're gaining jobs ahead of the rest of the state, ahead of the country, and the economic retention
deals that we made - over the sometimes bitter criticism of some people - is part of the reason of
why that's happening," Giuliani said.
Critics of the EDC say it fails to disclose how it arrives at the value of the concessions and that they
are often worth far more than the announced figure. Supporters say the EDC fosters new
construction by offering reduced property taxes to developers.
"Without the cooperation of the EDC, there is no new commercial construction happening in this
city," said Mary Ann Tighe, vice chairman of Insignia/ESG, a real estate firm.
Yet the EDC operates in what amounts to secrecy, according to the report from the watchdog
agency. In 1993, the city council imposed reporting requirements on the EDC. Since then, the EDC
has given out more than $200 million in tax breaks and more than $5.1 billion in financing through
tax-exempt bonds.
EDC president Michael Carey, said that although he hadn't seen the report, "I would dispute the
notion that we're not in compliance" with the law.
Citing 11 requirements in the law, the Independent Budget Office asserts the EDC complies with
just one of them. In each other case, it provides distorted or incomplete information, or doesn't
provide it at all. For example, the report says that the EDC underestimates the value of sales tax
breaks, while overestimating the tax benefits of keeping companies in the city.
"They take the law, do as little as possible to comply with it ———— and the result is less
accountability," said Stephen DiBrienza, a councilman (D-Brooklyn) running for public advocate
who co-sponsored the report.
The budget watchdog group has clashed for years with the Giuliani administration.
However, independent budget officials said their criticisms of the EDC are aimed at its failure to
report the details of deals, not at the deals themselves.
"There are times when deals like this are entirely appropriate," said Lowenstein.
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Summary from Good Jobs NY on IBO Report
Today, the New York City Independent Budget Office released "Full Disclosure? Assessing City
Reporting on Business Retention Deals." The IBO's report confirms what many of us have known -
the New York City Economic Development Corporation fails to disclose important details of its
subsidy deals, doesn't keep adequate records to facilitate monitoring of the economic incentive
packages it's authorized, and blatantly disregards Local Law 69. Local Law 69, introduced by
Council Members DiBrienza and Eldridge and passed in 1993, requires the EDC to prepare an
annual report for all retention deals that involve over 25 jobs or are worth over $250,000.
This report reinforces how critical it is for the public to be informed of and have a clearer
understanding of economic retention packages. As you can see from the highlights below, the
report questions EDC's ability to effectively monitor the billions of dollars in public subsidies it has
doled out. You can access the report in its entirety at www.ibo.nyc.ny.us or follow the link from
our web site www.goodjobsny.org.
Highlights:
* Local Law 69 only requires reporting for the first eight years a corporation receives a subsidy,
ignoring the costs associated with the remaining years of deals that generally last at least 15 years.
This exclusion makes it impossible to understand the true cost of these deals to the city.
* The EDC overstates a corporation's economic impact by assuming a mass exodus of all the
company's employees, its suppliers and any tax revenue on the corporations property in the
absence of the retention package.
* The EDC has been lax in insisting companies report to the EDC on a timely basis and/or with
provable information.
* The EDC does not report information required by Local Law 69 in a timely manner and they
severely restrict access to the law by providing only two copies of the Local Law 69 report, one to
the mayor and one for the entire city council. Since Local Law 69 mandates the report be sent only
to these two parties, the EDC currently requires all others, including elected officials, to file a
Freedom of Information Law request.
The IBO report suggests how EDC reporting and Local Law 69 can be improved:
* Provide the actual date the agreement was made between the EDC and the corporation along
with the total amount of subsidies provided in the initial agreement and all of the subsides received
to date.
* Considering many of these subsidy deals are made in the name of job retention and growth,
corporations that received subsidies must be held accountable by requiring them to create and
maintain the jobs they promised when they received the deal. The EDC must be consistent in
penalizing companies that fail to keep their end of the bargain.
* Currently, corporations are only expected to submit a report for the first eight years. Considering
that virtually all deals start with a minimum of 15 years, reporting should be required every year a
corporation receives subsidies.
* Copies of the EDC's report must be made accessible to the public and sent to each member of
the City Council.
* All tax revenue expenditures and employment must be consistent and be derived from an official
source, i.e. the Department of Finance or the Department of Labor.
Taking it a step further - suggestions from Good Jobs New York:
* Mandate that a living wage of $10 an hour ($11.50 an hour if health benefits are not provided) be
required for employees and contractors of the corporation receiving the subsidy.
* Every subsidy deal exceeding $1 million dollars should, at the request of a member of the City
Council, be the subject of a public hearing. There should also be an annual City Council hearing on
the City's retention program.
* The creation of a Borough Equity Development Fund to assist with for example, job training
programs, infrastructure and other areas often neglected in areas outside Midtown Manhattan.
Bettina Damiani, Project Director
Good Jobs New York
275 7th Ave, 6th Fl., New York, NY 10001
tel. 212.414.9394 / fax 212.414.9002
e-mail: GJNY@ctj.org / www.goodjobsny.org
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