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June 1, 2012

 

DiNapoli: Monroe County Used LDC to Issue Bonds to Cover Operating Expenses

Legislation Needed To Improve LDC Oversight

Monroe County officials used the Monroe Newpower Corp., a local development corporation (LDC), to issue bonds to cover county operating expenses, saddling taxpayers with $33 million in debt, according to an audit released today by New York State Comptroller Thomas P. DiNapoli.

“Monroe County used a shadow entity it created to cover daily operating expenses. This backdoor borrowing loaded taxpayers with debt for three decades,” DiNapoli said. “This marks the second time we’ve seen Monroe County misuse LDCs to fund county operations. This is clearly not what LDCs are intended for and it needs reform.”

The Comptroller's office has found an ongoing pattern of LDC abuse, with local governments improperly using LDCs to circumvent state laws or bypass oversight, driving up taxpayer costs. LDCs are private, not-for-profit corporations often created by a local government for economic development or other public purposes. They are generally not subject to the same requirements and laws as local governments.

The Comptroller and State Attorney General Eric Schneiderman currently are investigating the use of two other Monroe County LDCs with regard to management fees and a $224 million upgrade of the county's emergency communications system.

In late 2002, Monroe County created the Monroe Newpower Corporation (Newpower), an LDC, and used it to purchase the county’s 75-year-old coal-burning plant for $7 million, without an appraisal. It then used the $7 million to cover operating expenses and, ultimately, secured $33 million in Newpower bond anticipation notes which county taxpayers must repay over the 32-year life of the bond.

DiNapoli's auditors recommended that Monroe County:

  • Stop using LDCs to issue debt to finance operating expenses.
  • Allow vendors adequate time to respond to requests for proposals (RFP) and document their recommendation prior to awarding contracts.
  • Authorize a new prior RFP process if material changes are made to the county’s original request.

Last year, a Comptroller’s audit found that Monroe County officials wasted millions in taxpayer dollars when they created Upstate Telecommunications Corp., an LDC, to support the county's information system needs.

DiNapoli has proposed a series of oversight reforms which would expand the Comptroller’s audit authority to cover LDCs and other comparable entities and prevent the use of LDCs to finance
local government operations.  

Assemblyman Bill Magnarelli said: "It is clear that LDC reforms are needed.  LDCs claiming they are 'private entities' while being supported by taxpayers' dollars and being able to avoid public transparency and accountability is unacceptable.  I will work with Comptroller DiNapoli on legislation required to support his recommendations for IDA/LDC reforms and oversight."


To read the Comptroller’s proposed LDC reforms, go to: http://www.osc.state.ny.us/legislation/index.htm

For a copy of the full Newpower report go to: http://www.osc.state.ny.us/localgov/audits/counties/2012/monroe.pdf

For a copy of the full Upstate Telecommunications report go to: http://www.osc.state.ny.us/localgov/audits/counties/2011/monroe_co.pdf



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