United States: IDA Legislative Update – New Laws Affecting Industrial Development Agencies And Authorities Adopted

New York Governor Kathy Hochul recently signed three bills into law that impact administration and operation of New York's industrial development agencies and authorities ("IDAs"). The new laws are intended to, and will, increase transparency and communications between IDAs and the local taxing jurisdictions within which they operate. The new laws generally apply to all IDAs governed by Article 18-A of the General Municipal Law ("GML"), along with industrial development authorities established for the cities of Auburn and Troy pursuant to the Public Authorities Law ("PAL").

Chapter 766 of the Laws of 2022 – Effective January 1, 2023 — Sending Initial Resolutions and Deviation Notices to ATJs

This new law requires IDAs to send copies of certain resolutions by certified mail, return receipt requested, to the chief executive officers of each affected taxing jurisdiction ("ATJ"), including (i) initial resolutions describing proposed IDA projects, and (ii) resolutions describing any proposed deviation from an IDAs Uniform Tax Exemption policy, or UTEP.

Existing law requires each IDA to adopt a detailed resolution describing a proposed project and the kinds of financial assistance being considered by the IDA for the project (required under GML 859-a(1), PAL 1953-a(1) and 2307(1), and sometimes referred to as an "Initial Project Resolution" or "Inducement Resolution"). In addition, existing law requires IDAs to adopt specific resolutions in connection with a proposed deviation from an adopted UTEP and notify each ATJ in writing that the proposed deviation is being considered, and the reasons therefore (required under GML 874(4)(b), PAL 1963-a(2) and 2315(2), and sometimes referred to as "Deviation Notices").

For practical purposes, most, if not all, IDAs already send detailed public hearing notices to ATJs pursuant to the GML and PAL by certified mail, return receipt requested to the chief executive officers of each ATJ. In addition, when an IDA is considering a UTEP deviation, Deviation Notices are most often issued as a component of public hearing notice letters sent to each ATJ.

This new law requires IDAs to send its "Initial Project Resolution" or "Inducement Resolution" by certified mail, return receipt requested to the chief executive officers of each ATJ, and where a school district is involved, the certified mailing should be sent to both the School Board and School Superintendent. Likewise, any Deviation Notices must now be sent in the same fashion.

With this new law effective January 1, 2023, we recommend all IDAs update their public hearing and deviation notice procedures to include issuance of notices by certified mail, return receipt requested, to the chief executive officers of each ATJ, including a certified copy of the IDAs "Initial Project Resolution" or "Inducement Resolution," and written details on any contemplated deviation from the IDAs UTEP. Mailings should always include both the School Board and superintendent, along with the chief executive officers of all other ATJs. To the extent an IDA adopts a single resolution approving proposed projects following the conduct of a public hearing, then the final authorizing resolution should be issued per this new law following adoption.

Chapter 708 of the Laws of 2022 – Effective February 14, 2023 — Sending Notices for PILOT Agreement Expirations and Terminations

This new law will require IDAs to send notices of expiration for all PILOT Agreements at least two (2) years prior to the contract end date, or immediately if a PILOT Agreement is otherwise terminated for any reason.

Existing law requires IDAs to deliver a copy of any newly executed PILOT Agreement to each ATJ within fifteen (15) days (GML 858(15), PAL 1953(14) and PAL 2306(14)). For practical purposes, most, if not all, IDAs send copies of new PILOT Agreements to ATJs within 15 days and concurrently with the filing of the required 412-a Application for Exemption with the applicable assessor prior to the applicable taxable status date (the "Exemption Application"). The Exemption Application includes details on the expiration date of a PILOT Agreement, however, this information may not be readily available to ATJs for many older PILOT Agreements.

This new law requires IDAs to send notices of expiration for PILOT Agreements to ATJs at least two years prior to the contact expiration date, and immediately if terminated sooner. This notice mechanism will help IDAs and ATJs better manage the process for transitioning exempt parcels from Roll Section 8 (exempt) to Roll Section 1 (taxable) when PILOT Agreement expire or are terminated. This transition process is generally governed by Section 520 of the Real Property Tax Law ("RPTL") and can be a somewhat tricky process depending on the terms and language contained within each PILOT Agreement. The expiration and termination notices will allow IDAs and ATJs to work cooperatively to both anticipate and budget for PILOT expirations, and to also work with local assessors to confirm the process and timing for issuance of regular tax bills.

With this new law effective February 14, 2023, we recommend all IDAs assemble a PILOT "aging report" for all active PILOT Agreements that includes (i) date of expiration, (ii) date of final PILOT payment(s) and the applicable tax years for which it applies (if known), and (iii) any other relevant provisions of the PILOT Agreement pertaining to expiration, including any full tax "restoration payments," credits afforded for PILOT Payments made against omitted tax bills to be issued under RPTL 520, etc.

This PILOT aging report should be completed by February 14, 2023, and to the extent that any IDA PILOTs are expiring in less than two years, then IDAs should develop a standard form of expiration notice to send to each ATJ that includes the relevant details noted above. We encourage IDA staff to work with counsel, local assessors and each ATJ as early as possible to confirm PILOT expiration and termination details so the process of returning projects to the taxable rolls can be planned and managed on a collaborative basis.

Chapter 799 of the Laws of 2022 – Effective December 28, 2022 — Notice of Assessment Challenges

This new law requires any person or entity making payments under a PILOT Agreement to provide written notification to any agency (IDA) and/or any ATJs receiving PILOT payments at least 45 days before filing for a change of assessment.

Existing law for filing changes in assessment before a Board of Assessment Review (BAR), or thereafter for filing a formal tax certiorari proceeding, largely involve just notices and filings with the applicable assessor, BAR and the assessing unit itself (most often a Town or City). For formal tax certiorari proceedings, RPTL 708 does require petitions be filed with applicable counties and school districts. However, prior law largely left IDAs out of the chain of communication if a project owner or operator commenced a tax case.

While an IDA wouldn't in the normal course become directly involved in a certiorari case, the process and outcome can have a significant impact on PILOT Agreements that include abatement formulas sensitive to the assessed value of a project. In addition, PILOT Agreements often include provisions regarding project owner rights to file such proceedings, which could be relevant to how an ATJ and/or assessor responds to and/or handles a particular claim. This new law will provide advance notices to IDAs and ATJs for BAR and tax certiorari proceedings, which in turn should create additional transparency and opportunities for IDAs and ATJs to work collaboratively.

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