County Supervisors Take Charge of Wayward Loan Program

At our monthly meetings, Council receives updates on Ontario County business from our County Supervisors. This month, Supervisor Charles Evangelista reported that a recent audit of the county’s Revolving Loan Fund raised questions about the administration of the program and the lack of jobs created by some firms receiving loans. The purpose of the program is to loan money to companies interested in locating in the county, or expanding their existing operations, all with an eye toward the creation of new jobs.

We obtained a copy of the Summary Sheet for the County’s loan program (click here to view it). It lists all loan recipients and the history of their loans. In critiquing the program, the Canandaigua Messenger reports, “of the 39 current loans, 36 are listed as having ‘problems.’”

In addition to issues of repayment, there is the question of job creation. Companies receiving funds are required to report progress on their employment goals. The Messenger continued, “Only 31 companies out of the 39 reported job-creation statistics, and many of them only after prompting by the OED. Of those that created jobs, only four met their job-creation target; six are not on track to meet their target; and five did not meet their target. Sixteen other businesses reported job loss.”

Responding to the crisis, the County’s Planning and Research Committee, chaired by Geneva Supervisor Rocky LaRocca, brought forward a series of resolutions designed to correct perceived problems. The reforms are intended “to provide greater accountability and transparency” by giving the Board of Supervisors more information about and control over the loans.

They have created a Loan Review Committee which will “make recommendations to the Board of Supervisors regarding the granting of loans, including the terms and conditions of such loans.” (View the bylaws of the County Revolving Loan Review Committee here.) Committee meetings will be open to the general public under provisions of New York State’s open meetings law. The bylaws also include a “Conflicts of Interest and Ethics Policies” section, covering such areas as “pecuniary interest, gifts, and confidential information.”

In legislation covering “Amendment to Loan Authorizations,” the Board gave itself direct oversight of changes in the terms and conditions of any loan after the original loan agreement was in place. (Click here to view the resolution.) Apparently, it was common practice for county loan administrators to decrease interest rates, extend the term of the loan, or otherwise offer concessions to firms. It appears some loans were never repaid.
New procedures for loan application processing and monitoring were also put into effect. These reforms seem sensible to get the wayward loan program back on track.

The audit findings and recommendations are reminiscent of last year’s inquiries into IDA’s in communities across New York State, including the Ontario County IDA (OCIDA). In April, 2006, Ontario County Economic Director Michael Manikowski and OCIDA Chair Christopher Iversen responded to an unflattering state audit. (Their response can be accessed here, or visit the State Comptroller's site to see the complete set of responses). OCIDA has claimed that increased reporting and independent monitoring is not a good idea because “it would not bode well for the county's economic landscape to take such a hard line with risk-liable companies”.

But we think that the reforms make sense. The intention is not to discourage business investment, but instead to provide accountability to taxpayers for the use of their funds to subsidize the start-up or expansion costs of private industry. We applaud the efforts of our elected County representatives to keep a check on their administrative colleagues.