DiNapoli wants more oversight of LDCs

State Comptroller Thomas DiNapoli says he wants more oversight over the state's multiplying local development corporations.

DiNapoli Thursday introduced legislation in Albany that would authorize his office to audit the state's 279 known LDCs to ensure that municipalities do not use them for "backdoor borrowing" that is guaranteed or paid for by taxpayers.

"LDCs are a good idea that, in too many cases, has been put to bad use," DiNapoli said in a news release Thursday. "There must be more oversight and more control over LDCs. Taxpayers shouldn't be forced to support another layer of shadow government."

Municipalities create local development corporations and limited liability corporations to foster economic development. However, DiNapoli said that, in some cases, they've been used to skirt state law. In one case auditors found that Watertown improperly transferred $60,000 to its LDC, which in turn paid a private ambulance service $50,000 without a contract, according to a comptroller's office report.

The bill would stop local governments from creating LDCs for activities not related to economic development and impose new reporting standards regarding property transfers.

The head of a business trade group called DiNapoli's proposal unnecessary.

"He implies that there's no oversight of local development corporations at the state level, that simply is not true," said Brian McMahon, executive director of the New York State Economic Development Council. "To now impose additional requirements [and] additional oversight by other people who want to control what local governments do is overkill."

The Authority Budget Office oversees roughly two thirds of the known LDCs in the state. Of those, 86 reported required financial information in fiscal 2009 and they had $7.4 billion of outstanding debt, according to the comptroller's office report.

LDCs boomed after the expiration of a 2008 law authorizing industrial development agencies to issue tax-exempt bonds on behalf of nonprofits to finance new college dormitories, private schools and medical facilities. In the two years after the law expired, municipalities created 20 LDCs.

Hempstead revived a dormant LDC to issue bonds on behalf of Adelphi University and other institutions that could no longer go to the industrial development agency.

Hempstead LDC chief executive officer Fred Parola said he had no problem with the comptroller's office auditing their books.

"It's a public authority so it's appropriate that the state comptroller's office be entitled to ensure that the money is being spent properly in the public interest," he said.