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By Jorge Fitz-Gibbon and Mareesa Nicosi

March 24, 2012

Local governments are creating private development corporations at a rapid rate, allowing them to spend tens of millions in tax dollars outside the public view and with minimal state oversight, a Journal News investigation shows.

It’s a loophole that lets governments award contracts without public bidding, sell tax-exempt bonds and take public property for resale or development. Local development corporations, or LDCs, are booming because they sidestep state restrictions on tax breaks for nonprofit groups...

“We’ve identified problems of things that are going on at LDCs, how some of them are staffed, some of the contracts that they enter into,” Kidera said. “And I think the comptroller has some concerns as to how far they can penetrate LDCs in terms of audit and oversight. We know we can, but then we don’t necessarily have the staff and the resources to be a presence in all these LDCs.”...

Collectively, a dozen... local LDCs have failed to file at least one of the required state reports on nearly two dozen occasions.

None have faced disciplinary action beyond a letter of censure. Loose regulatory oversight and the rate at which LDCs are forming have some worried.

“They are created basically to skirt either reforms that have been made or just oversight in general that other public bodies are accountable for,” said Nathalie Alegre, an organizer for ALIGN, or the Alliance for Greater New York, a Manhattan-based watchdog group that has written extensively on the state’s quasi-private economic development entities...

And Alegre said there are more effective ways to boost economic development.

“Taxpayers already spend, at the state level, $8.2 billion each year on economic development and job-creation tax breaks,” she said. “That’s a lot of money that could be put to use to other things, like the public services we all depend on or to other job-creation initiatives that actually create good jobs for local people.”

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