Aug 3
2023
No more free golf for Chautauqua IDA
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The Chautauqua County Industrial Development Agency has agreed to make changes to the way it operates after a scathing state review in May found “inappropriate and questionable” spending at the economic development outfit.
Those changes, however, come with some consternation from the IDA. While it told state officials it would curtail some of its spending and review some of its policies, it vigorously defended other practices the state Authorities Budget Office critiqued, arguing the agency can’t force it to change.
The IDA, for example, will no longer reimburse an executive for a country club membership where he played golf with prospective clients. But it will continue to reimburse that executive for vehicle expenses.
The IDA, in its response, asserted that the faults the state found with its operations “rests on ABO best practices and guidelines, and ultimately lacks legal foundation and relies on the ABO’s subjective opinion and administrative measuring sticks.”
The ABO, in its own response, called that statement “incorrect.” The agency has the power to refer its findings to prosecutors but Acting Director Jeff Pearlman said his office would not do that in this case.
“To say that no crime was found here is 100 percent true,” he said. “But, you know, not the best line to be giving in defense of the IDA.”
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The IDA said it “engaged special legal counsel” to review several of its policies in response to the ABO’s review, which Investigative Post first reported in May.
The ABO’s critique of the Chautauqua County IDA comes as lawmakers are turning a critical eye on IDAs and contemplating reforms. State Sen. James Skoufis, for example, issued a report last week criticizing a handful of IDAs, including those in Chautauqua County and Amherst, for not pressing companies harder on whether or not they need the financial assistance they ask the IDA for. And in the spring, state Sen. Sean Ryan and Assemblymember Jonathan Rivera, both of Buffalo, introduced bills that would curtail IDAs ability to offer property tax breaks.
In its review, the ABO found that the Chautauqua County IDA had reimbursed executives more than $75,000 for restaurant meals, driving expenses and a golf membership at a country club. The ABO described those expenditures as “unauthorized and inappropriate payments.” The ABO also found the IDA made more than $100,000 in donations and sponsorships, which the agency also described as “inappropriate.”
The ABO’s review of the IDA found numerous operational and procedural issues, too. Those included the IDA mixing funds between its various operations in one bank account and allowing a special committee to “fast track” applications for tax subsidies. In 2022, 44 companies benefited from nearly $15 million in subsidies thanks to the IDA.
The IDA, in response, said it will no longer reimburse its chief financial officer, Richard Dixon, for a golf membership at a country club. The IDA said it will not, however, stop reimbursing Dixon for vehicle expenses, which total more than $10,000 per year. The IDA also said it will continue to reimburse employees for meals that serve a business function.
“We’re not going to do a golf membership anymore. I don’t want to argue the point if it’s allowable or not; we’re not going to do it anymore,” Mark Geise, CEO of the IDA, told the Jamestown Post-Journal last month.
Geise and other IDA officials declined to answer questions from Investigative Post about their response to the ABO. Instead, Harris Beach attorney Ben Rand provided a statement from the IDA saying it takes its “fiduciary responsibilities very seriously.”
“We value a culture of excellence and continuous growth, and are already implementing many of the recommendations in the report,” the statement said.
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The IDA, in its response to the ABO, said its “special legal counsel” is reviewing its policies for travel, credit card usage, discretionary spending, ethics and conflicts of interest, among other matters. Those reviews, though, may not result in changes. The IDA sent the ABO a letter from Phillips Lytle attorney Milan Tyler which asserted its policy for “fast tracking” applications for subsidies was legal and didn’t need to be changed.
“The IDA board, and only the IDA board, always adopts the statutorily required project approvals, and no such abdication of this role to the Transaction Committee has ever been made,” the IDA wrote to the ABO. “Any conclusion to the contrary is false, misleading, and harmful to the IDA and the residents of the County for which it serves.”
The IDA defended other practices, too. While it said it would better document credit card purchases and ensure purchases were handled appropriately, the IDA said it wouldn’t stop allowing their use, particularly for meals.
“Just because the ABO believes that food and beverage expenditures are inappropriate does not make such expenditures unlawful provided the IDA and its Affiliates made such expenditures consistent with their mission and purposes,” the IDA wrote to the ABO.
The IDA will also let Dixon keep his vehicle benefits, at $850 per month. The IDA argued that since its board approved Dixon’s employment contract, which includes the monthly reimbursements, the spending is legal.
“Merely because the IDA lacks a specific ABO recommended ‘best practice’ discretionary funds policy, that is not otherwise required by law, and that even if such a policy were in place it would have resulted in the same discretionary fund expenditures, is not a reasonable basis upon which to conclude that such expenditures were inappropriate,” the IDA asserted to the ABO.
Pearlman, to an extent, agreed with some of the IDA’s pushback. He said that so long as IDA spending is included in an employment contract or is approved by the board of directors, it’s legal.
“The ABO, we don’t care about how they decide to move forward, as long as it’s within, you know, their enabling statute, the mission and in service to the public,” he said.
Despite the pushback from the IDA, Pearlman said he was happy with the outcome of the review.
“They’ve agreed to make the changes to almost if not all of the recommendations we make in the review, even the ones that they say they disagree with,” Pearlman said. “I think it’s a good thing. I think it’ll make the operations of the IDA better and more transparent.”
