NORWICH – A new policy passed last week by the county agency responsible for encouraging industrial development will add another layer of accountability to companies looking to relocate or establish themselves in the Chenango County area, according to economic development officials.
At a meeting on Wednesday, the Chenango County Industrial Development Agency approved a recapture policy which will enable them to “claw back” tax and other financial incentives given to companies that do not deliver on the promised economic benefits they claimed they would bring to the area.
“This is what we should be doing,” said CCIDA Chairman Hugh Kearney, who stated during the meeting that he believed having the policy in place would placate some community members who have been opposed to the incentives offered by the agency in the past.
According to CCIDA Executive Director Maureen Carpenter, the policy is the result of a recommendation by the organization’s Governance Committee, which was tasked two years ago with evaluating internals controls, policies and procedures. The policy will apply to all IDA projects and benefits going forward, she said, but will not apply to existing projects already receiving benefits.
While Carpenter said that IDAs are not currently required to have recapture policies in place, it is a recognized best practice in the industry and one which is strongly recommended through the Public Authority Accountability Act.
According to the recapture policy itself, its purpose is “to identify a set of criteria for evaluation of project performance and to assist the board of the agency in determining whether it is appropriate under certain circumstances to recapture, limit or to terminate a contract with the recipient of IDA benefits.”
In order to gauge how a company has adhered to their promises, the agency will use the information provided on the annual report they are required to fill out each year.
Some of the things which the agency will be looking for would be significant shortfalls on job creation and retention projections, lack of promised capital investment or a shift of production out of the area.
“If the economic benefits promised have not been achieved as described in the application, the company will be asked to provide justification for said shortfalls,” states the policy.
If the agency determines that the company in question has failed to meet its obligations, they reserve the right to take action including early termination of the agreement, reducing the values of incentives or require repayment of benefits already received with interest.
Based on the policy, the CCIDA also has the right to refrain from taking any of the above action if it deems fit.
One of the incentives to which the new policy will apply are Payment in Lieu of Taxes (PILOT) agreements.
“This is a particularly powerful benefit that an IDA can offer to a new or expanding company,” Carpenter said.
Under the arrangement, the IDA takes title to the property in order to extend its tax exempt status to the company. An agreement is then established between the company, the IDA and local taxing jurisdictions in accordance with the IDA’s Uniform Tax Exempt Policy. The agreement provides the company with the equivalent of a 50 percent tax exemption over a 10-year period, Carpenter explained, beginning with a 95 percent tax abatement in the first year, which decreases by 10 percent each year over the next 9 years. The property returns to the tax rolls and is fully taxable in the eleventh year.
Eight Chenango County companies currently have PILOT agreements in place with the CCIDA, she reported, including New York Susquehanna & Western Railroad, Wagner Ninevah and Norwich Pharmaceuticals.
Carpenter reported that there are no PILOT agreements currently being considered by the CCIDA, but did state that there were projects in the pipeline which could potentially seek such an agreement or other incentives through the agency. She was unwilling to discuss the details of any of those potential projects.
While the CCIDA’s legal counsel, Jim Downey, has expressed reservations that having the recapture policy will be a deterrent to businesses looking to relocate to Chenango County, Carpenter said she does not share his concern.
“I think that businesses understand that they are going to be held more and more accountable for the promises that they make when being given incentives, whether they are through a state program or local Industrial Development Agency,” she explained.
“I think our role is to disclose upfront that we do have this policy, and the terms and conditions that they must be accountable for, but also to express that we understand that sometimes there are things that are out of the companies control that impact their results, and that these things will be taken into consideration upon annual review.”