continued “There is this expectation I believe that IDAs where not necessarily viewed as permanent governmental entities,” he said.
Since the requirement is decades old, he said the functions of IDAs have changed, but the law hasn’t changed to support it.
“I think over time the IDAs have evolved and have been providing all other forms of financial assistance and this section of law was never changed to reflect this changing nature of IDAs,” he said.
Mallozzi said he wasn’t aware of the legal provision prior to the letter, but he said the Schenectady Metroplex Development Authority was. The IDA voted for administrative duties to be run by Metroplex last year.
Since the state largely ignored the law, Mallozzi said there was never a concern of enforcement and thought it was “shocking” the state was coming after the IDA for not holding debt.
“It did come as a surprise that they would be applying that statute now,” said Mallozzi. “Given that the state has made clear it wants to consolidate all agencies in the state … I’m not surprised it is happening.”
The IDA sent a response letter at the end of November claiming the agency has legal authority to continue to operate. Mallozzi cited the section of law being enacted in 1969 when nearly all IDA transactions involved issuing bonds.
He said the state legislature later realized issuing bonds was costly and holding property titles subjected the agency to liability. Then it added another section to the law allowing for IDAs to provide benefits to a project by entering leasing agreements, which resulted in IDAs primarily entering a straight lease. He claimed this leasing agreement simplified and reduced costs of such transactions.
“The Rotterdam IDA believes that its use of simplified lease structures vs. bonding should not result in the termination of the Agency,” Mallozzi said in the response letter. “It seems both counterintuitive and counterproductive to punish an IDA for not issuing debt at a time when New York State is trying to reduce borrowing.”