Report: New York schools losing revenue to IDA subsidies

ALBANY, N.Y. (NEXSTAR) — A report released Tuesday raised questions about the increase in housing projects subsidized by New York State’s 107 local Industrial Development Agencies. It analyzes the fiscal and democratic implications of IDAs moving into housing development, which could be considered outside the scope of their original mission.

The report—”Policy Crossroads: Reconsidering IDA Housing Tax Breaks in New York” by Reinvent Albany and the State Policy Advocacy Clinic at Cornell University’s Jeb E. Brooks School of Public Policy—is available to read at the bottom of this story.

Created by a 1969 New York state law, IDAs are local public authorities meant to help pay for local business and real estate projects. IDAs have to:

1. Help local economies grow
2. Create long-term jobs
3. Be necessary for the project to be completed

The report tallied 39,625 new housing units from IDA-approved projects between 2018 and 2022. However, only about 25% (10,080 units) were affordable or below-market. Meanwhile, over 50% of New Yorkers spend more than 30% of their income on housing. That statistic comes courtesy of Peter Cook, executive director of the New York State Council of Churches. Watch him tie the housing crisis to IDAs in the video below:

For the fiscal year ending in 2023, according to the Comptroller’s Office, 106 IDAs reported 4,282 active projects, with a record high combined value of almost $136 billion. That year, the total value of IDA projects grew by 3.1% from fiscal year 2022, reaching a total of $2 billion in tax exemptions in 2023. Property tax exemptions alone totaled $1.7 billion, representing over 87% of that $2 billion in 2023. That was partially offset by $883 million in payments in lieu of taxes, resulting in $1.1 billion in net tax abatement subsidies.

In 2023, they estimated 202,706 new jobs would come from active projects, the lowest estimate in a decade and a 5.2% decline from 2022, per the Comptroller. Median salaries for estimated new jobs were $43,000, and project operators also estimated that 208,061 old jobs would be retained. Temporary construction jobs increased by about 19.3% from 2022 to 2023, reaching 43,686 jobs.

To track net job gains, a project operator must report the total number of employees at the beginning of the project—how many jobs were there before the project fell under IDA purview—every year until the end of the project. So, IDAs reported 226,827 net jobs gained for 2023, the highest total since 2014. But the baseline total number of jobs reported before IDA status dropped by 47.5% from 2013 to 2023, and the total reported at the end of the fiscal year also decreased by 29.6% in that period.

Across New York, 62.4% of the 4,282 active projects in 2023 were through county IDAs. The New York City IDA accounted for 29.5% of all tax exemptions granted statewide in 2023, with almost $1.6 billion of their outstanding debt tied to Yankee Stadium and Citi Field.

Ron Deutsch, Senior Policy Fellow at Reinvent Albany, led a press conference at the State Capitol in Albany on Tuesday to release the report and announce a coalition that’s pushing back on the way IDAs work. That coalition—including faith, education, community, and good government organizations—is laser-focused on IDAs in housing.

He said IDA housing subsidies are out of scale with the actual benefits to local public ledgers since IDAs essentially pay private corporations to build unaffordable housing. “Enough is enough,” said Deutsch, a co-author of the report. “We are fed up with how our industrial development agencies are doling out our school tax revenue to businesses that, quite frankly, don’t need it.”

Traditionally focused on commercial and industrial projects, IDA subsidies usually come as property tax reductions. That property tax revenue could pay for local schools, parks, police, and fire services instead, the report said. In fiscal year 2021, for example, state public schools lost about $1.8 billion in revenue because of IDA tax abatements, according to research by Good Jobs First cited in the report, with taxpayers making up the difference.

“Do we really think that Amazon needs our public subsidies and our school tax revenue?” Deutsch asked.

Deutsch further argued that housing subsidies conflict with the law that created them and the economic development section of the New York State Constitution. That’s because Article VII, Section 8, Paragraph 3—addressing public corporations like IDAs—prohibits loans for facilities “used primarily as a hotel, apartment house or other place of business which furnishes dwelling space or accommodations to either residents or transients.”

According to the report, “A plain reading of the state constitution seems to prohibit IDAs from subsidizing housing, whether affordable or market rate.” And because housing projects usually provide temporary employment rather than permanent, the report said, subsidizing housing doesn’t quite align with the IDA’s mission of long-term job creation.

The report alleged that, historically, IDAs are full of “conflicts of interest and corruption, with little oversight to prevent further abuses of power.” It also determined that the State Authorities Budget Office and the Office of the State Comptroller “are too heavily reliant on self-reported data that is often insufficiently sourced and unreliable” when auditing IDAs, lacking the teeth necessary to address conflicts of interest or misuse of funds.

“This report shines a light on the complex way that taxpayers subsidize housing development in New York,” said Joshua Norkin, Director of the Authorities Budget Office. “With federal spending cuts threatening New York’s economy, public authorities must be careful to exercise fiscal discipline as stewards of taxpayer money.”

The report also found that IDA boards don’t have good representation from their communities, which can cause or worsen uneven oversight. Without requirements to include those affected, boards don’t often consider the lowered local revenue in the future caused by tax abatements today. And the report alleged that IDA boards too frequently operate with only minimal support staff, using external consultants for financial analysis because board members lack training in accounting or economics.

Rashida Tyler, Deputy Director of the New York State Council of Churches, shared her firsthand experience as a former Ulster County IDA board member working on the Kingstonian project, which was received payment in lieu of taxes of about $26 million:

At the press conference, Deutsch explained that the coalition wants new, simple legislation to “prohibit IDAs from using school tax revenue to provide incentives to local businesses or to developers in any given area.” They want accountability and transparency from IDAS, more oversight and audits, and including affected parties in decisions. Deutsch also suggested giving school boards “the ability to veto an IDA project” if they need the tax dollars that would be given away or don’t perceive any public benefit.

The report spotlights several bills that could change the way the system works by improving representation, transparency, and accountability:

• S4039A/A5090A would require all elected officials, state employees, and political party chairs to volunteer without compensation for any services performed for IDAs.
• S3368 would require a public hearing at least 30 days before granting any financial assistance over $100,000.
• S132/A4927 would block IDAs from abating the portion of property taxes that would otherwise go to school districts.
• S5543/A6625 would require sending IDA audits and final reports to local school board presidents and superintendents.
• A5793 would extend audit authority to county comptrollers, letting them review IDAs before renewing agreements for payment in lieu of taxes.
• S4464/A838 would require IDA boards to have a member who is either a labor or school district personnel representative.

Governor Kathy Hochul’s administration appears to back IDAs working in housing development. In July 2023, the governor issued Executive Order No. 30 authorizing state agencies and authorities like IDAs to increase tax breaks for housing developers to encourage construction. Hochul’s 2025 State of the State address and FY 2025 Executive Budget also proposed initiatives—like new tax incentives and capital funds—that encourage the IDA shift toward housing.

The coalition trying to take on IDA reform includes Reinvent Albany, the New York State Council of Churches, New York State United Teachers, the New York State School Boards Association, the Rural Schools Association of New York State, Citizen Action of New York, the New York State Council of School Superintendents, AQE Legislative Affairs and Community Engagement Specialist, and the Guilderland Coalition for Responsible Growth.

Take a look at the report below: