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Report: ESD fails to fully evaluate most of its economic development programs

Empire State Development spends nearly $2 billion annually in taxpayer money for loans, grants, tax credits and other incentives to companies and projects, but fails to properly evaluate most of its programs to determine if they actually are boosting the state’s economy, a new audit from the state’s comptroller found.

In a report released Monday, New York state Comptroller Thomas DiNapoli noted that ESD administers some 57 programs with more than 5,000 associated projects that state laws and regulations require the public authority to evaluate every two to four years. Almost without exception, the audit found that ESD does not monitor or evaluate its economic assistance programs to determine whether goals are met, identify program successes and failures or apply successful strategies to other programs.

That creates uncertainty about program effectiveness, according to the audit.

“Empire State Development has an important role in helping New York’s economy grow and create jobs, especially now as we work to recover from the COVID-19 pandemic. However, the authority has not fully evaluated which programs work and which don’t,” DiNapoli said in a statement. “ESD does not use the data it collects to assess the effectiveness of its programs and see if the billions of dollars spent are creating opportunities across the state. The agency must do a better job of analyzing whether these programs are achieving their goals and share this information with the public.”

ESD officials said they have reviewed data for their Excelsior Jobs Program and START-UP NY Program that showed positive results and led to some changes in those programs. However, when auditors asked for supporting documentation showing how data was analyzed, ESD was unable to provide it.

Auditors also found that while ESD has migrated, or plans to migrate, many of its programs to a central database (Dynamics), others remain tracked elsewhere, and only 37 of its 57 programs were fully tracked in the Dynamics system. Having its programs and all associated projects in a centralized project tracking system would allow for greater efficiencies in compiling and reporting on relevant data, auditors said.

The audit did find that ESD does evaluate the economic impact of the film industry and that its evaluation found that the industry spends significant dollars throughout the state that generated nearly $1 billion in tax collections. As a result, ESD recommended that the state Legislature reduce the film tax credit from 30 percent to 25 percent of eligible expenses to ensure the long-term viability of the program.

ESD also evaluates its business and tourism marketing efforts to measure the effectiveness of its marketing programs, the audit found. ESD used the results to optimize marketing plans on an ongoing basis.

But the audit, which covered the period from Jan. 1, 2016, through April 16, 2021, also found that “despite the fact that ESD collects relevant data, beyond these specific program evaluations, ESD management does not see the value of conducting similar types of analyses or evaluations of any other of its economic assistance programs.”

ESD officials said analyses and evaluations were performed but were unable to provide documentation of such evaluations, according to the audit. ESD officials said they use a multi-level process to evaluate programs and individual projects are evaluated and audited to determine if the project’s goals are met, including employment and private investment goals. Officials said ESD issues more than 50 quarterly and annual reports each year, which are posted on the organization’s website.

“However, while providing valuable program information, most of these reports do not clearly evaluate program effectiveness,” according to the audit.

In ESD’s response to the audit, the agency noted that it has since launched a Database of Economic Incentives, which provides three years’ worth of active projects that will continue to be added to and updated quarterly. The database tracks project status, compliance status, job creation commitments and actual jobs created, among other things.

ESD officials also responded to the audit’s assertion that the agency does not conduct enough evaluations of its economic assistance programs by stating that the assertion is incorrect.

“ESD regularly engages in both project-level and program performance evaluations and routinely reports the results to the public,” ESD officials responded, to which DiNapoli reiterated that ESD was unable to provide evidence of any other evaluations or assessments beyond those referenced in the audit.

DiNapoli went on to say that ESD’s contention that it conducts and documents program assessments does not align with comments from legislators during annual budget hearings.

“Specifically, during the 2021 Executive Budget joint legislative hearing on economic development, the Senate Finance Committee questioned ESD on whether or not it evaluates the use of taxpayer dollars that go into programs and the new economic activity and new job opportunities created for the state,” DiNapoli wrote in his response. “Furthermore, the Senate Finance Committee states, ‘I’m just not sure that if we take a hard look, we’re going to be so happy with the results. But the fact is if we don’t take a hard look, we’re not going to learn from the mistakes we’ve made either.’”

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Upstate United suggests using federal funds to provide unemployment insurance relief to businesses

Upstate United, a nonpartisan pro-taxpayer organization, has published a fact sheet detailing what it says is a potential $9 billion tax increase for employers statewide.

Troubling Trends — New York’s $9 Billion Unemployment Insurance Crisis makes the case for the state government to use untapped federal funds to provide unemployment insurance relief to struggling businesses.

“The impending unemployment crisis will be a big problem for small businesses across the state. Hitting employers with $9 billion in UI-related costs right now would derail our economic recovery at a critical time,” said Justin Wilcox, executive director of Upstate United. “Providing UI relief with unused federal dollars will help employers keep their doors open and workers employed.”

At the height of the pandemic, nearly 2 million New Yorkers were unemployed. As a result, the state’s UI fund ran out of money and New York ultimately had to borrow $11.9 billion from the federal government to cover its UI payments, the organization noted. While some of that money has been repaid, New York still owes Washington $9 billion. The state’s UI fund — which currently is insolvent — must be replenished.

Upstate United points to a recent analysis from the Tax Foundation that found that New York has more than $11 billion in federal aid available through the American Rescue Plan Act. That analysis also found that, unlike the majority of states nationwide, New York has not spent any federal aid to address its UI shortfall.

“Over the last 20 months, elected officials encouraged their constituents to support local businesses. Now, we’re asking those same officials to give a lifeline to employers before they go under,” Wilcox said.

In a report issued last month, New York State Comptroller Thomas DiNapoli voiced concerns about the state’s UI issues. According to the report, from the fourth quarter of 2019 until the second quarter of 2020, regular UI benefits paid increased from $530 million to $6.5 billion — an increase of 1,124 percent. Total benefit payments, including federally funded enhanced benefit programs, were nearly $100 billion in New York from March 1, 2020, through Aug. 6, 2021.

“The surge in UI claims rapidly depleted the balance of the New York State Unemployment Insurance Trust Fund, requiring the State to borrow from the federal government to pay claims, with $9 billion in outstanding UI loans as of Sept. 2, 2021,” DiNapoli wrote in the report. “Over the coming years, the obligation to repay these federal advances and rebuild the Trust Fund balance to appropriate levels will present a daunting challenge that could potentially impede the State’s overall economic recovery and prevent New York businesses from growing to the full extent of their capacity.”

DiNapoli called for a collaborative approach to address the crisis, stating “Working together, New York State, participating employers and the federal government can develop solutions that restore the Trust Fund while allowing the ongoing economic recovery to continue.”

Upstate United’s fact sheet noted that unless New York takes swift action, the state’s borrowing will result in many employers paying a 254 percent UI tax increase in 2025.

“There is a solution to this crisis. New York can pay down its debt and fully fund its UI trust fund using unspent federal dollars from COVID-19 relief programs,” the group stated. “Failing to do so will stick overburdened businesses across New York with a $9 billion tax hike and stall our economic recovery.”

[email protected] / 585-653-4021
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Report: Monroe County remains in fiscal stress

Monroe County is one of four counties statewide to remain in fiscal stress for two or more consecutive years, New York state Comptroller Thomas DiNapoli revealed this week.

DiNapoli’s office releases fiscal stress scores on municipalities, excluding New York City, twice annually. The latest round of scores identified 19 local governments designated in fiscal stress, including six counties, four cities and nine towns, based on the financial information of local governments operating Jan. 1 through Dec. 31, 2020.

“New York’s local governments have overcome some major fiscal hurdles during the COVID-19 pandemic,” DiNapoli said in a statement Wednesday. “Federal assistance, the restoration of state aid and resurging revenue have provided them much-needed relief. However, those designated as stressed are less likely to have the flexibility to adapt to fiscal challenges long term. Local officials must budget and plan carefully to avoid fiscal stress and manage their communities through the uncertainties created by the pandemic.”

Some 30 entities ended 2020 in some sort of fiscal stress, the report shows. In this latest round, the city of Poughkeepsie (fiscal stress score of 78.3), the city of Niagara Falls (72.1) and the town of Caneadea (65.4) are in the highest-ranking designation of “significant stress.” The counties of Suffolk and Westchester, the city of Glen Cove and the town of Yates were in “moderate stress.”

Those designated as being “susceptible to fiscal stress” are the counties of Broome, Monroe, Nassau and Oneida, the towns of Centerville, Clarkstown, Colonie, Fort Covington, Pulteney, Sherman and Southport, as well as the city of Albany.

The Office of the New York State Comptroller (OSC) noted that the pandemic that began in March 2020 had a significant impact on local government operations. In the spring and summer of 2020, “revenue projections for many local governments were dire as sales tax collections plummeted, local revenue sources such as parking, recreation and courts were severely diminished, portions of state aid were withheld without guarantee of restoration and concern about the availability of even the most stable revenues — such as the property tax — was high.”

DiNapoli’s Fiscal Stress Monitoring System was implemented in 2013 to keep the public informed about the factors impacting local governments’ financial health. The system evaluates local governments on financial indicators including year-end fund balance, cash-on-hand, short-term borrowing, fixed costs and patterns of operating deficits and creates fiscal stress scores.

FSMS also evaluates information such as population trends, poverty and unemployment in order to establish a separate “environmental” score for each municipality.

In fiscal terms, 2021 looks brighter for many local governments, according to the report. Some state aid that had been withheld was repaid early in the calendar year 2021, and the American Rescue Plan Act of 2021 supplemented revenues lost due to COVID-19 with direct payments to most local governments, to be distributed in two payments over the current and next federal fiscal years.

[email protected] / 585-653-4021
Follow Velvet Spicer on Twitter: @Velvet_Spicer

State comptroller’s audit follow-up finds issues with Pittsford budget process

The village of Pittsford has demonstrated limited progress implementing corrective actions with regard to its budget, a follow-up audit from the state comptroller’s office shows.

In a previous report issued in July 2017, auditors identified problems with the board’s oversight over the village’s financial operations. When auditors revisited the village in August 2020 to review progress, they found limited corrective actions had occurred. Of the seven audit recommendations, one recommendation was fully implemented, four recommendations were partially implemented and two recommendations were not implemented.

The village’s annual budget for the 2016-17 fiscal year was roughly $1.3 million and was funded primarily through real property taxes, sales tax, state aid and user charges.

In a letter to Pittsford Mayor Robert Corby and the village’s board of trustees this month, state Comptroller Thomas DiNapoli’s office noted that the budgeting recommendation — that the board adopt budgets that realistically reflect the village’s operating needs based on historical or other known trends — was only partially implemented. DiNapoli noted that the board’s ability to adopt realistic budgets continues to be limited due to ongoing litigation.

“Despite efforts to approximate litigation expenditures using historical data and estimates provided by legal firms, legal expenditures exceeded the budget by approximately $266,000 (38 percent) from fiscal year 2018 through 2020,” according to the audit follow-up.

The board has since improved that facet of the budget, and DiNapoli noted that for fiscal 2020-2021, “with the exception of legal fees, the board generally budgeted reasonably and managed operations within budget.”

But the board, according to the audit review, “continued to adopt sewer fund budgets with overestimated expenditures.” From 2017-2018 through 2019-2020, expenditures were overestimated by $176,200, or 29 percent.

The original audit also recommended that the board monitor the level of fund balance and ensure that budgets are structurally balanced. Corrective action has been partially implemented in that regard, the comptroller’s letter states.

In the general fund, the board instituted a monthly review of fund balance, but despite that practice, the village was unable to maintain a level of 15 percent of the current year’s appropriations, and, in fact, the fund balance was less than 7 percent during 2018-2019. That had recovered to 12 percent for 2019-2020. The fund balance policy states that if the balance falls below the optimal level, the board will develop and adopt a fiscal plan to restore the balance within a five-year period. That wasn’t done, according to the letter from DiNapoli’s office.

The original audit found several problems within the village’s sewer fund.

“The board continued to adopt unbalanced budgets, resulting in net operating surpluses of approximately $213,000 from 2017-2018 through 2019-2020 and a net increase in unrestricted sewer fund balance of approximately $53,000,” according to the audit review. “However, unrestricted fund balance for the sewer fund ranged from 279 to 312 percent of appropriations. This level of unrestricted fund balance does not align with the village’s adopted policy nor is supported by long-term financial and capital plans.”

It was recommended in 2017 that the board adjust sewer rent rates to correspond with the actual annual cost of sewer services provided. That has not been implanted and the village continues to overcharge customers for sewer rent, according to the letter.

“Village officials have not adjusted sewer rent rates to correspond with the actual annual cost of sewer services provided. Sewer rent charges continued to significantly exceed annual sewer expenditures, resulting in operating surpluses,” the follow-up letter stated. “The board has not established appropriate reserves for future expenditures and to provide transparency to taxpayers regarding the use of surplus funds. As stated within the village’s corrective action plan, the village hired a dedicated sewer department employee following the prior audit. However, the employee left the position shortly after being hired and was not replaced.”

In addition, it was recommended in 2017 that the board discontinue making sewer fund transfers to its general fund and recover the money previously transferred. That has been partially implemented, with the village’s last transfer from the sewer fund to the general fund in 2018 for roughly $18,000. But village officials have not transferred back funds identified in the original audit or from the 2018 transfer.

It also was recommended the board develop a long-term financial plan to identify revenue, expenditure and fund balance trends for its sewer fund. That also has not been implemented, according to the comptroller’s letter. The board stated that it was in the process of developing a long-term financial plan for the sewer fund, but that it has been delayed due to various factors including personnel turnover and other priorities such as litigation.

The board has updated its procurement policy to provide clear guidance for procuring professional services as indicated in the original audit. It has partially implemented a recommendation that it enter into written agreements or approved detailed board resolutions for all individuals and firms who provide services.

The audit follow-up found that the village of Pittsford made improvements in maintaining written contracts with sufficient detail. The review included payments totaling $1.2 million made to 11 professional service providers between 2017 and 2020.

“We obtained and analyzed the written service agreements for sufficient detail. The village had sufficiently detailed written agreements on file for six of the professional service providers (55 percent), who received payments totaling $249,562,” according to the follow-up.

“During our review, we discussed the basis for our recommendations and the operational considerations relating to these issues,” the follow-up letter states. “We encourage village officials to continue their efforts to fully implement our recommended improvements.”

[email protected] / 585-653-4021
Follow Velvet Spicer on Twitter: @Velvet_Spicer

New York No. 1 producer of cottage cheese, yogurt

Almost a quarter of all land in New York state is farmland, which may come as a surprise to those who think of the state as one Big Apple.

A report issued by state Comptroller Thomas P. DiNapoli Thursday says $4.8 billion in revenue came from New York’s farms in 2017, with more than half of that — 56 percent — from milk alone.

“Agriculture is a crucial piece of the state’s economy, with farms contributing nearly $2.4 billion to the state’s gross domestic product,” DiNapoli said in a statement that accompanied the report. “Our farmers continue to provide jobs and fresh, locally sourced food, while also preserving open spaces. However, farmers face a number of challenges, from declining milk prices, which can threaten family businesses, to tariffs and restrictions on immigrant workers.”

New York was among the top five producers in the nation for 15 different farm products, and held the No. 1 spots for cottage cheese, sour cream and yogurt. It’s No. 2 for maple syrup, cabbage, apples and snap beans. And it’s No. 3 for milk, milk cows, grapes and Italian cheese.

Agriculture generates $4.8 million in revenue in New York.
Agriculture generates $4.8 billion in revenue in New York.

In descending order, the top five crops by dollar value in New York are: milk, corn, hay, apples, and cattle and calves.

DiNapoli’s report describes some trends of growth, particularly in the number of organic farms and in crops such as Concord grapes and maple syrup. Production of Concord grapes – used primarily for juice and jams – nearly doubled from 2012 to 2017. Some things remained stable though. Wyoming County, which has the largest number of cows in the state, at 47,500 head of cattle, still has more cows than people.

But DiNapoli warned of some clouds on the agriculture horizon in terms of trade and labor force.

“Declining milk prices have cut revenues sharply, in some cases threatening family businesses. Tariffs, including those imposed recently on agricultural products by the nation’s trading partners in response to those imposed by the federal government, have increased financial uncertainty for many farmers in New York and nationwide,” the report said. “Federal policies relating to visas for migrant workers and other immigration programs have increased restrictions on such workers, who play an important role in the state’s agricultural workforce; such steps may add to the challenge of planting and harvesting on a timely basis.”

[email protected]/(585) 363-7275

Report: Bridges need $27.4 billion in repairs

A new report from released today by New York State Comptroller Thomas P. DiNapoli estimates that bridges in New York need $27.4 billion in repairs.


Although the cost estimate is very large, the report found the number of “structurally deficient” locally-owned bridges has declined in recent years.

Local governments, mostly counties, own 8,834 out of 17,462 bridges in the state. The report found local bridges are more likely to be structurally deficient than state-owned bridges (12.8 percent compared to 9 percent).

“Structurally deficient” bridges that remain open are considered safe to drive on, but may have load-bearing elements in poor condition or are prone to repeated flooding.

The overall percentage of structurally deficient local bridges declined from 16.7 percent to 12.8 percent from 2002 to 2016, while the state’s percentage was relatively flat at around 9 percent.

Town-owned bridges are more likely to be structurally deficient (18.4 percent) than other local bridges. The highest number of structurally deficient local bridges are located in New York City (86), followed by the counties of Erie (52), Ulster (46) and Steuben (40). The counties with the highest percentage of structurally deficient local bridges are Seneca (34.6 percent), Cayuga (27.6 percent) and Hamilton (23.8 percent).

The total cost of repairs to all 17,462 highway bridges in the state was estimated at $75.4 billion in 2016 by a federal agency. For local bridges, those in New York City have the highest estimated repair costs at $20.4 billion.

Municipalities are generally responsible for the costs of their locally owned bridges, however, they generally receive assistance from the state and federal governments.