Memo of Analysis Regarding Intro No. 1322

BILL: 1322

SUBJECT: A Local Law to amend the New York City Charter, in relation to the recovery of financial assistance for economic development in cases of noncompliance with the terms of such assistance

SPONSORS: Corey D. Johnson, Daniel R. Garodnick, and Helen K. Rosenthal

DATE: December 8, 2016

REBNY represents over 17,000 owners, developers, managers and brokers of real property in New York City.  We support the overall goals of this bill to ensure lawful compliance with the requirements for receiving economic assistance, with exceptions as noted below.  

Our members recognize that these economic development programs are vital components in spurring economic activity in geographic areas or in industries that are important in a five borough economic development agenda. The beneficiaries must comply with all its applicable requirements if the purpose of these programs is to be achieved.  Applicants who willfully ignore their obligations must be held accountable for non-compliance.

However, we must acknowledge that there can be varied reasons for an applicant’s non-compliance, which may be completely beyond the control of the applicant.  Taking the same approach for all these varied situations, namely immediately recapturing the benefits, may not be the best course of action and may be counterproductive.

For instance, job creation is often the primary goal of the Industrial Development Agency (IDA); however the creation of jobs depends on a number of factors not expressly in the control of the business, such as the overall state of the economy and the particular market conditions of the business’s industry.  Changes in the economy or the market for the business’ product may eliminate the need and capability of the company to satisfy its primary objective like the employment growth it committed to at the time the benefit was approved.  In this circumstance, the business is not complying willfully because economic and market conditions make it untenable.    This is an important distinction. 

In these situations, we understand that New York City Economic Development Corporation (EDC) tries to work with businesses to retain the business’s current job count and the investment or economic assistance the EDC has made.  The time restraints established by this bill could jeopardize the existing jobs and potentially result in the City’s inability to reclaim these benefits.  Such hasty action in these circumstances is both imprudent and counter-productive, particularly for smaller companies where economic conditions could disproportionately have an adverse impact on their operations. 

Another area of economic assistance may be capital for substantial renovation of new development.  The compliance here could be a commitment to a completion date.  Likewise, the economy or the market could thwart the timing of completion.  In this situation, we think it is better to work with the beneficiary to complete the project than rescind the benefits in the timelines proposed.

To be clear, we are not suggesting that businesses that have the financial capability to comply should be excused from compliance because the economy is not as ideal as they would like.  In these situations, EDC should take all prudent actions to ensure compliance to the best of its ability, including the revocation of benefits.

A certain degree of discretion must be afforded in the decision to re-claim benefits extended to a business.  This proposed legislation, while well-intentioned, could deprive the dispensing agency from exercising that discretion to the detriment of smaller businesses and the city’s econom