Subject: Status of IDA Completed Projects
Purpose: To determine the status of the projects after financial assistance ended and whether the projects achieved the expected results for the assistance granted by IDAs include low interest tax-exempt or taxable bonds, mortgage recording tax exemptions, sales tax exemptions, and real property tax exemptions.
Scope: 403 projects were reported as completed in 2011 with 25 primarily manufacturing and warehousing selected for review. Two of the projects reviewed were for residential housing and a private school. These projects do not appear to fit with the legislative purpose of IDAs, since they appear to have little or no impact on job creation.
Financial: The IDAs reported that the 25 projects received a total of $27.7 million in tax exemptions and paid $7 million in payments in lieu of taxes (PILOTs), resulting in over $20.6 million in net exemptions. The majority of the exemptions (54 percent) were for real property taxes, but almost half of this was recovered by the taxing jurisdiction in the form of PILOTs. IDAs issued bonds for six of the projects totaling $31.4 million.
Summary: This review shows that IDA financial assistance does not always assist businesses in creating jobs or help to return properties to the tax rolls. The audit found 15 of the 25 businesses failed to meet the job creations targets. Further, only 23 percent of the value of property owned by the businesses has been returned to the tax rolls as fully taxable.
The audit also found inaccuracies in the project information reported and a continued lack of transparency over the millions of dollars in tax exemptions. Of the 57 projects reviewed, 20 projects (35 percent) were indicated by IDA staff to be reported inaccurately in regard to financial assistance provided. Also, 33 projects (58 percent) where the jobs were not reported accurately in comparison to the project owner’s application or the actual jobs reported by the businesses annually to the IDA.
Conclusions: Industrial Development Agencies (IDAs) often provide financial assistance to projects that are not directly related to the mission and purpose of the IDA and that are not providing the job creation results that are promised by businesses in exchange for financial assistance. As a result, it is difficult to measure the benefits obtained as a result of providing financial assistance. IDA staff and board members have a fiduciary duty to ensure that projects they approve are in line with the mission and purpose of IDA’s.
The role of IDAs in the State’s economic development program should be reviewed and re-evaluated. While there are many projects where the IDA appears to have helped encourage new business development and attract businesses to the area, it also appears hat long-term financial assistance is being provided too many businesses simply to help support the operations of the business. Is anyone listening?