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State audit of Hamburg IDA calls for better monitoring

Some companies didn’t get enough of a tax break in Hamburg, and others got too much, according to a state audit.

The audit looked at project approval and monitoring of the Hamburg Industrial Development Agency, which grants tax incentives to promote business growth. It found that 21 businesses were overbilled by $17,870 for payments in lieu of taxes, or PILOTs. An additional 25 were underbilled by a total of $38,850.

Another key finding of the audit, by the office of State Comptroller Thomas P. DiNapoli, is that the IDA should develop a policy to recapture financial assistance given to companies that fall short of job-creation goals.

State law gives IDAs a clawback ability on tax breaks that were granted to projects that fail to come within 80 percent of their job and investment projections. But the Hamburg IDA board has decided that it will not try to recapture benefits that companies have already received.

“We have a clawback policy we feel is good. What they’re asking us to do, we’re not comfortable with,” said IDA Executive Director Michael J. Bartlett.

Some IDAs that do have recapture policies also have provisions that let them take individual circumstances into account, Bartlett said, and because of that, it is rare for benefits to be returned. The economic situation is not always certain, he said, and the provision can hurt companies.

“The very existence of the recapture provisions makes it very difficult for a lender to approve applicants for loans in connection with projects,” Bartlett wrote in the IDA’s response to the audit.

Bartlett said the Hamburg IDA expects that businesses will “undertake to do what they say they will do.”

If the project becomes vacant for a “considerable “ period of time, or the project is changed without approval, the agency will cut off future benefits, he said in the letter.

The audit found that five companies anticipated they would create and retain 101 full-time equivalent jobs but reported just 46.5 full-time equivalent employees.

Ten other projects met or exceeded employment goals by 121 full-time equivalent jobs, according to the audit.

The audit also says the IDA should implement clear requirements for tax incentives, monitor sales tax benefits and PILOTs to make sure they are accurate and to verify employment data.

It also said the IDA should evaluate companies’ capital investments to make sure they are consistent with their applications.

The State Comptroller’s Office has made some of the same recommendations, such as the recapture policy and increased monitoring, in audits of other IDAs in the state.

The audit covers the period from Jan. 1, 2013, through Dec. 23, 2014, and does not mention the IDA’s current $54 million project with FedEx Ground Transport, which will be getting about $8 million in tax breaks over the next 10 years.

email: bobrien@buffnews.com