Suffolk County Executive Steve Levy addresses a meeting of Long...

Suffolk County Executive Steve Levy addresses a meeting of Long Islanders for Education Reform at the Huntington Hilton. (March 31, 2010) Credit: Photo by Dave Sanders

A bill signed by Suffolk County Executive Steve Levy creates an agency that could spur as much as $70 million in new construction by nonprofit agencies that had lost their access to tax-free borrowing.

The measure authorizes a new local development corporation to issue tax-exempt bonds for nonprofit projects like schools and hospitals.

The bill, signed Monday, became necessary because the State Legislature in 2008 let lapse local industrial development agencies' power to issue such bonds for nonprofit groups. The nonprofit provision was a collateral casualty of a larger fight in Albany to make IDAs' financing of private business more accountable, although overhaul plans have stalled.

Legis. Wayne Horsley (D-Babylon), chairman of the Suffolk Legislature's economic development committee, said the state "has failed miserably here and we need this arrow in our quiver because we need all the economic development we can get."

Legis. Thomas Cilmi (R-Bay Shore) called the new agency "a good way for these organizations to get low-cost funding to do their job in tough times."

Bruce Ferguson of the Suffolk Industrial Development Agency said eight nonprofits, including the Parrish Art Museum in Southampton and Huntington Hospital, have expressed interest in projects that would total $50 million to $70 million.

The new local development agency will act as a funding conduit, issuing tax-exempt bonds that a bank or another institution would buy. While the county does not guarantee the bonds, buyers do not have to pay income tax on the interest. Ferguson estimated rates on tax-free bonds at 3.25 percent, about half that of conventional financing.

Hempstead Town already has reactivated a dormant local development corporation and last year approved financing for projects for Molloy College and Adelphi University totaling nearly $90 million, said Fred Parola, chairman of both the town IDA and local development corporation. He said the agency also is processing an application for Kulanu Torah School in the Five Towns for $6 million.

Suffolk's new local development agency is scheduled to meet for the first time April 22; board members are the same as on the county IDA, which provides financial assistance and incentives for businesses that relocate or expand.

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