The Cortland County IDA: Q & A’s
What is an IDA?
The Cortland County Industrial Development Agency is a public benefit corporation of the State of New York, created by the Cortland County Legislature pursuant to Chapter 77 of the 1974 Laws of New York, effective March 19, 1974. As a public authority, the Cortland County IDA has the powers and duties conferred by Article 18-A of the New York General Municipal Law.
What does an IDA do?
An IDA provides incentives for private sector business investment and job creation resulting in economic growth and improved quality of life. The Cortland County IDA coordinates financial incentives for projects that produce investment and job creation in Cortland County. These incentives are typically delivered in the form of real property tax exemption, offset by payments in lieu of taxes (PILOTS) by the project sponsor, sales tax exemptions on project related construction materials and equipment, exemptions form New York State mortgage recording tax, or other negotiated local incentives. In general, these projects are manufacturing related, although the activities that produce positive economic impact, including those encompassing PILOT agreements, are set forth in General Municipal Law Article 18-A.
How is the IDA funded?
The IDA receives no county funding. There is an extremely modest annual operating budget, supported entirely by project fees. Any fees generated by projects are redirected back into the development projects, such as infrastructure for road, water, or sewer improvements to serve new sites. IDA fees may also be used as matching funds for state grant programs.
How is the IDA governed and managed?
The Cortland County IDA is governed by a seven-member board that is appointed by the Cortland County Legislature. The IDA serves at the pleasure of the Legislature.
The Cortland County BDC staff serves as uncompensated volunteer staff to the Cortland County IDA. The IDA also retains legal counsel to coordinate and deliver legal services, including, but not limited to, all aspects of straight lease transactions and tax-exempt bond projects. Legal counsel also annually monitors the performance of IDA projects through employment affidavits. Additionally, the IDA retains an independent auditor who conducts annual audits in accordance with generally accepted government auditing requirements, and who is responsible for compiling and filing required reports with the Office of the State Comptroller.
The Cortland County Industrial Development Agency seeks informal input regarding projects from the staff and board of directors of the Cortland County Business Development Corporation, a separate not-for-profit corporation. This assures a coordination of economic development efforts. The Cortland County Business Development Corporation (BDC) is comprised of the seven IDA members, along with six at large members elected to three-year terms by the IDA.
The Cortland County BDC also administers the Cortland County Empire Zone. The BDC provides technical assistance to businesses, particularly financing, in partnership with agencies like the SBDC, SBA, SCORE, ESD and NYBDC, as well as community development providers. The BDC administers a $500,000 Revolving Loan Program, which directly funds small business expansions.
The Cortland County BDC staff consists of an Executive Director who also serves as Empire Zone Certifying Officer, an Empire Zone Coordinator who also serves as Financial Administrator and an Office Manager.
What laws apply to IDA’s?
Because the Cortland County IDA is a public authority, it is bound by state laws affecting agency operations. These include:
- Open Meetings Law: The IDA must give notice to the public and news media of all meetings. All meetings are open to the public. The agency votes in open meetings and can only go into executive session to discuss certain limited items
- State Environmental Quality Review: The IDA must comply with Article 8 of the New York Environmental Conservation Law and the implementing regulations (the “SEQR Act”)
- Freedom of Information Law: The IDA must comply with Article 6 of the New York Public Officers Law (the “Freedom of Information Law” or “FOIL”) which requires that with certain limited exceptions, the IDA must provide public access to records of the agency.
- Personal Privacy Law: The IDA must comply with Article 6-A of the New York Public Officers Law (the “Personal Privacy Protection Law”).
- Conflict of Interest Law: The IDA must comply with Article 18 of the New York General Municipal Law that defines conflicts of interest.
- Ethics Law: The IDA is bound by Section 810 (3) of the New York General Municipal Law, in that members, officers are deemed officers and employees of Cortland County for the purposes of the “State Ethics Law”, and they may be subject to annual financial disclosure.
What geographic areas may be considered for IDA benefits?
The Cortland County IDA serves all communities within Cortland County.
Specifically, what benefits can the IDA provide, and to whom?
Criteria for IDA projects are outlined through Article 18-A of New York General Municipal Law. Under the General Act, the IDA can undertake the following types of projects: manufacturing, warehousing, research, commercial, industrial, industrial pollution control facility, recreation facility, horseracing facility, educational or cultural facility, continuing care retirement community, railroad facility, and civic facility, or other projects that create public benefit. Projects may be either “bond” projects (involving the issuance of debt) or “straight lease” projects (not involving debt) that result in economic gain and public benefit. The IDA evaluates projects on a case-by-case basis to assure that projects result in direct new investment, may stimulate additional investment beyond the initial project, and increase employment.
Potential IDA benefits may include:
- Federal and state interest exemption on certain debt, providing the project meets the requirements of the Internal Revenue Code. These exemptions of interest allow borrowing at lower interest rates.
- Other state tax benefits, such as exemption from the New York State Mortgage Recording Tax, and the exemption from New York State and local sales tax for purchases of equipment and building supplies during the project period.
- Real property tax exemption, offset through a PILOT (payment in lieu of tax agreement). The IDA can abate real property taxes on new construction or purchase of a facility via a sale-leaseback or lease-leaseback arrangement. For new construction or renovations warranting an increase in existing assessments, the IDA’s uniform tax exemption policy applies to the increase in assessed value, provided the IDA approves the project as suitable. The real property tax reductions under the PILOT schedule are effective as the first (1st) assessment roll prepared by the taxing authorities after the IDA has acquired an interest in the real property.
What is the IDA’s standard PILOT?
The standard Cortland County IDA PILOT schedule is as follows:
|Year of Exemption||Amount of Reduction|
|1 – 3||100%|
|4 – 5||75%|
|6 – 8||50%|
|9 – 10||25%|
|11 and thereafter||0%|
The foregoing schedule provides for an approximately 65% reduction in real property taxes over a ten year period. Terms and conditions of the PILOT are outlined in an agreement between the company and the IDA and subject to the tax guidelines of Cortland County.
What factors does the IDA consider in granting PILOTs?
Determination of eligibility for benefits is made clear through Article 18-A of General Municipal Law; however, the IDA also considers other factors when evaluating applications from businesses. These factors are primarily: capital investment and jobs.
- The number of jobs to be created, with priority given to businesses creating full-time permanent jobs that pay starting hourly wages at 135% of the current New York State minimum wage or higher
- The timeline for projected investment and job creation, with priority given to projects expected to create investment and job growth within the first two years of application
- The extent to which the applicant will increase the skill base of the local workforce through training, opportunities for professional development and career track advancement
- The extent to which goods are services will be procured regionally, thereby increasing regional buyer-supply chains and producing a greater multiplier effect in the Upstate economy
- The level and type of investment to be made by the applicant business, with a total minimum new investment of $500,000
- The extent to which the business enhances strategic economic development goals adopted by the Cortland County BDC and the Cortland County Zone Administrative Board
- Businesses in arrears on local taxes will not be granted benefits.
All projects are considered on a case-by-case basis, if the applicant can demonstrate that the project in consistent with the provisions of Article 18-A of General Municipal Law.
Retail projects will not be granted IDA benefits without a special exception ratified by the entire Cortland County Legislature. The IDA will apply statutory definitions for retail as outlined in Article 18-A of General Municipal Law governing Industrial Development Agencies, which does not permit special exceptions retail enterprises.
What is the actual process of getting IDA benefits, and how does the IDA seek public input?
The company seeking benefits completes an Application Form and Long Environmental Assessment Form (EAF). If deemed an eligible project under Article 18-A of General Municipal Law, the Application Form, and EAF are sent to IDA members for deliberation and consideration at an open meeting. Deliberation typically includes consideration of factors such as:
- The magnitude of capital investment to be made and the importance of permanent, private sector job creation, along with the achievement of wage standards and the extent to which the project will provide needed services or jobs
- Whether the project will provide employment for Cortland County workers, particularly displaced workers, or bring new workers to the area
- Whether the benefit is necessary for the company to retain its competitive position and/or productivity
- Whether the benefit is necessary to attract an out-of-state company or enable a project in Cortland County that might otherwise have gone out-of-state
- Whether the project is supported through another public source (i.e., the Empire Zone, GOSC funding, ESD funding, HUD funding, etc.), and whether IDA benefits are necessary or duplicative
- Whether the project will help redevelop an abandoned facility, revitalize a key industrial site or stimulate a downtown central business district development, or redevelop a gateway corridor
- Whether the project is necessary to meet critical community needs such as quality housing, health or safety, environmental issues, infrastructure, transportation (particularly multi-modal)
- The company’s overall financial status, its competitive position in its industry, and its long-term prospect for viability
- Means of financing and whether commitments are in place from lenders
- Whether the project would be undertaken without IDA support
- The impact of the project on the county and overall regional economy
- How the project benefits the taxpayer and local tax base over the long term
- Demonstrated public support for the project
Upon approving opinion by IDA counsel and approval by IDA members at an open meeting, the IDA passes a “Preliminary Inducement Resolution” and signs a “Preliminary Agreement” with the company. IDA members review the EAF, consider opinion of counsel, and review the entire project impact as part of the IDA’s compliance with the State Environmental Quality Act (“SEQR”). The IDA selects the appropriate Action category for the project under SEQR, determines whether it should serve as lead agency and proceeds with the SEQR process appropriate for that Action. At the appropriate time during the SEQR process, the IDA will adopt a “Resolution” or other appropriate SEQR document setting forth the IDA’s SEQR determination for the project. For some projects, the IDA is not lead agency under SEQR and agrees to abide by the SEQR determination issued by whichever agency is acting as lead agency.
The IDA passes a “Public Hearing Resolution” authorizing a public hearing regarding the proposed project. IDA counsel prepares and distributes the required public notices to the media and all taxing authorities. The IDA conducts a public hearing on the project to solicit public input. Based on consideration of public comment, the IDA passes a “Final Inducement Resolution.”
Certificates regarding no conflict of interest are signed and filed with the IDA. Other documents (such as general certificate of company, certificate of insurance, etc.) as required by law are submitted by the company to IDA counsel. IDA counsel prepares the required closing documents and conducts a closing. IDA counsel notifies Cortland County Office of Real Property Services and local taxing authorities as to the start and end dates of the PILOT.
Does the IDA ever deviate from its standard PILOT, and if so, why?
The decision to deviate from a standard PILOT is at the discretion of IDA members. Deviations by the Cortland County IDA are rare, and it is the practice of the IDA to consult with one or more of the local taxing authorities before granting a deviation. Usually, a deviation occurs only as a condition of project financing, or in association with some other state program (i.e., NYSDHCR tax credit period), or if a project is unusual in nature and requires special considerations related to its successful operations. More typically, a deviation might occur because the IDA chooses not to extend full benefits, but to shorten the length of a PILOT. The Cortland County IDA discourages deviations from the standard uniform tax exemption policy approved by the agency on April 2, 1998. If the IDA adopts a deviation, it must be set forth in a resolution adopted by the agency, with proper written notice and a public hearing. The IDA encourages local taxing authorities to participate in the public hearing and public comment period.
How does the IDA track performance of PILOTs?
An independent auditor is retained by the Cortland County IDA to complete the required annual reports to the Office of the State Comptroller. IDA counsel also sends annual employment affidavits to all companies receiving IDA benefits. Each company must file an annual legal affidavit with the IDA, attesting to their current employment levels. Affidavits are required by November 1 of each year. Affidavits measure number of jobs and types of jobs. The IDA, in consultation with counsel, reviews these annually to determine if a company is in compliance or default. The IDA acts on those findings at its December annual meeting.
Throughout the year, IDA staff may also make site visits, request additional financial information if required, or monitors SEC filings of public companies, to determine if there are potential problems. If there are apparent inconsistencies with employment affidavits filed with the IDA by the company receiving benefits, these are reported to IDA members.
IDA members, in consultation with staff and counsel, regularly review and discuss the criteria for IDA incentives to assure that they are consistently applied. IDA members, in consultation with staff and counsel, monitor project performance based on both annual employment affidavits and staff site visits to ensure that projects have fulfilled proposed benefits and objectives.
The IDA confers frequently with the Office of Real Property Tax, the County Treasurer’s Office, and local taxing authorities to monitor that PILOT payments are being made under the terms of the PILOT agreements. PILOTs are billed by the taxing authorities.
What happens if a company does not meet its obligations as part of the PILOT agreement?
If the IDA determines that a company is in default, counsel notifies the company and local taxing authorities. The company is given an opportunity to take corrective action to comply, or to respond. The IDA then takes appropriate action as outlined in the terms of the PILOT agreement and/or the IDA’s uniform tax exemption policy. The IDA may choose to continue the PILOT based on factors cited by the company such as industry cycles, a general downtown in the economy, or other special circumstances. The IDA may modify the PILOT based on guidelines within the agreement. The IDA may terminate the PILOT. IDA counsel notifies all local taxing authorities of its decision. Typically, the IDA uses this formula:
|Year of Exemption||80% or more compliance||60% to 80% compliance||40% to 60% compliance||20% to 40% compliance||Less than 20% compliance|
|1 – 3||0%||25%||50%||75%||100%|
|4 – 5||25%||43.75%||62.5%||81.25%||100%|
|6 – 8||50%||62.5%||75%||82.5%||100%|
|9 – 10||75%||81.25%||87.5%||93.75%||100%|
|11 and after||100%||100%||100%||100%||100%|
Any additions to a project during the term of the PILOT are assessed normally, unless the addition is approved as a separate project, following notice and public hearing. A PILOT does not exempt a project from special assessments, special district taxes, or other special levies by a local taxing authority. All PILOT payments are billed and received by the local taxing authorities. The IDA does not receive or administer PILOT payments. If a local taxing authority has not received a PILOT payment, it must notify the IDA, and it can also petition the IDA to enact a remedy to enforce the PILOT.
What happens at the end of a PILOT?
At the conclusion of a PILOT project, IDA counsel notifies local taxing authorities and places the project back on the tax rolls.
How and why can benefits be terminated?
Termination of IDA benefits include failure to comply with statutes that govern the program, failure to invest or meet job goals within three years of application, and/or default on any other provision of the final agreement between the IDA and the company. IDA counsel and staff are jointly responsible for monitoring the performance of the project and providing a recommendation to IDA Board regarding termination or restructuring of an agreement due to non-performance or default.