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Audit criticizes 2 area development agencies Erie County and Amherst industrial development agencies faulted for not monitoring job creation

A draft state audit of the Amherst and Erie County industrial development agencies says that before giving tax breaks, the agencies should evaluate not only how many jobs would be created by a project, but how much those jobs pay and what will be the local impact of the project.

The audit by State Comptroller Alan G. Hevesi's office criticized the Amherst IDA for not having or applying consistent, specific criteria to decide which businesses should receive economic development incentives. It also said the agency doesn't have the systems to verify information companies provide in their applications or the job results they report later.

Auditors criticized the agency for not attempting to evaluate a company's performance to see if it is producing the promised benefits.

The state also said the AIDA should impose sanctions on companies that don't meet promised goals, such as increasing payments they make instead of taxes or even seeking to recover tax benefits that have already been granted.

"The AIDA Board has the responsibility to initiate corrective action," the letter from Hevesi's office said. "The board should prepare a plan of action that addresses the recommendations in this report."

A draft of Amherst's audit letter and response were obtained by The Buffalo News. The Erie County Industrial Development Agency declined to provide its draft letter or response, but ECIDA executive director Charles Webb said the contents were similar, although not identical.
Hevesi's office declined to comment until the audit is final, as changes can still be made and the responses from the agencies will be included in the final version.

But both Webb and Amherst IDA executive director James Allen said they disagreed with Hevesi's critique and recommendations, saying the comptroller was going beyond the scope of the laws that have governed the operation of IDAs statewide for more than 30 years. They noted that current law doesn't specify how to measure success, and the audits did not find any violations by either IDA. And they said certain recommendations are just not necessary.

"What we and the ECIDA have been doing is very much in compliance with the law," Allen said.

Instead, they speculated that the state's top accounting official wants to change the law to force more accountability on both IDAs and companies. Legislation could be introduced within a month or so, Webb suggested. "They've recommended changes that are not in the law and we question where they came from," Webb said. "We think the comptroller is probably gearing up to recommend some changes in legislation."

The reports, when finalized, will cap a months-long examination of six IDAs statewide as part of a broader examination of economic development efforts. Besides ECIDA and AIDA, the state is also looking at regional IDAs in Onondaga, Ontario, Suffolk and Tompkins counties. The audit examined the IDA's policies and procedures, and looked at selected projects from 2000 to 2004.

The audits come amid continuing criticism from various circles that IDAs are too generous with tax breaks for companies that don't need them and that aren't creating good jobs. Opponents say that there needs to be more stringent standards and accountability.

But Webb said auditors don't understand how the Western New York economy works, and are trying to apply a "cookie-cutter" approach to all agencies statewide.

He and Allen were particularly critical of so-called "clawback" provisions that auditors wanted included in agreements with companies so the IDAs could stop future benefits and recover past incentives if companies don't live up to their pledges. Auditors said many other IDAs have such agreements, but Webb and Allen said they're not enforceable and would hurt future economic development efforts.

They also said the priority should be on adding investment locally to create jobs later, not on job creation itself.

"To have something to scare somebody doesn't make sense. If you're not going to enforce it, don't put it in there," Allen said. "New York State can't afford it. We're not competitive now. At some point in time, nobody's going to look at New York state."

Auditors said IDAs should also determine if they really have to be involved, whether a project would occur anyway, or whether there's a risk it might go out of state. The Amherst IDA does not have such a procedure, including one for verifying threats to leave the area, the audit said.

Finally, a review of eight "single-unit" projects in Amherst in 2000 and 2001 found that only one met or exceeded job creation goals. Three more increased jobs by less than promised, while four cut jobs. In all, the companies had a shortfall of 1,529 jobs, but still got benefits.
e-mail: jepstein@buffnews.com1

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