Getting Past the Prisoners' Dilemma: Transparency and Accountability Reforms to Improve New York's Industrial Development Agencies

Abstract

This paper discusses the pros and cons of New York's Industrial Development Agencies (IDAs), which offer economic development subsidies to attract and retain businesses. IDA reform has become an important public policy issue, and the paper explores some of the reforms that have been proposed, including measures that would: increase monitoring and reporting requirements; make the subsidy award process more objective; increase public participation; heighten ethics requirements for IDA boards; impose penalties for subsidy abuse; make IDAs more accountable to school districts and local governments; and that would improve the environmental and social qualities of IDA projects. The paper concludes that many reforms are warranted, and it suggests that reform supporters should prioritize these accountability and transparency measures. Controversial reforms, such as increased wage requirements and clawbacks, should be modified so as to make them more acceptable to business interests. Compromise proposals might rely on incentives rather than mandates, or include sufficient exceptions.

Keywords: economic development, subsidies, tax exemption, accountability, transparency, public finance