Can a New York industrial development agency (IDA) create a subsidiary corporation (often a § 1411 local development corporation) or hand out grants or loans from its own revenue to other public or private interests?

Plain-English summary

The Authorities Budget Office, which oversees state and local public authorities, asked AG Schneiderman two questions about industrial development agencies (IDAs):

1. Some IDAs were creating subsidiary corporations, often as § 1411 local development corporations, that the ABO suspected were being used to do things the IDA itself wasn't authorized to do. Could an IDA legally do that?
2. Some IDAs were taking the revenue they earned (typically lease and PILOT payments on financed projects) and handing it out as grants for civic, charitable, or educational causes, or seeding loan programs run by other public bodies. Could an IDA do that?

The AG said no on both counts. The reasoning rests on a single principle, applied twice: an IDA is a creature of statute and has only the powers the Legislature granted, plus those necessarily implied from those grants. Matter of Flynn v. State Ethics Com'n, 87 N.Y.2d 199 (1995).

For subsidiaries: General Municipal Law Article 18-A, the IDA enabling statute, contains a long list of express IDA powers (acquiring property, leasing, contracting, issuing bonds, accepting gifts, doing all things necessary or convenient). It does not list a subsidiary-creation power. The Legislature has expressly granted that power to other public benefit corporations (LIPA, Battery Park City Authority) when it wanted to. The silence in Article 18-A is meaningful. The catch-all "necessary or convenient" clause is read narrowly: it covers activities incidental to expressly-granted powers, not entirely new categories of action. Since IDAs can fulfill their statutory function without subsidiaries, subsidiary creation is not implicit in the granted powers.

For grants and loans of IDA money: Section 858(11) lets an IDA accept gifts, grants, loans, and contributions from others and use that money for IDA purposes. The flow is one-way. The statute does not authorize an IDA to make grants or loans of its own money. Both the State Comptroller's earlier opinions (1999 Op. St. Comptr. No. 99-4; 1982 Op. St. Comptr. No. 82-360) and the AG's own statutory-construction principles foreclose reading the silence as authorization.

This is a significant opinion for IDA governance. Many IDAs across New York had been operating subsidiaries and donor programs. The opinion functioned as a corrective.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Legislature has periodically amended General Municipal Law Article 18-A and the Public Authorities Law since 2014. Anyone evaluating an IDA's powers in 2026 should consult the current text of those statutes and the most recent ABO and Comptroller guidance, not rely on this opinion as a current statement of law.

Historical context

What the opinion meant for IDAs at the time

IDAs holding subsidiaries needed to wind them down or have the parent municipality replace them with a different statutory vehicle (often a § 1411 local development corporation chartered by the municipality directly, not as an IDA subsidiary, with its own statutory authority to carry out the activity at issue). IDAs running grant or seed-money programs from their revenue had to stop, return funds for IDA purposes, or restructure the activity through a different legal vehicle.

Why the parallel statutes for LIPA and Battery Park matter

The AG cites Public Authorities Law § 1020-f(o), § 1020-i (LIPA), and § 1974(12) (Battery Park City Authority) to make a textual point: when the Legislature wants to give a public benefit corporation subsidiary-creation power, it knows how to say so. The absence of such language in Article 18-A is a deliberate omission, not a drafting oversight.

How the AG read the catch-all clause

General Municipal Law § 858(11)'s power "to do all things necessary or convenient to carry out [its] purposes and to exercise the powers expressly given by Article 18-A" is read narrowly under Abiele Contracting and the AG's earlier opinions (Op. Att'y Gen. No. 2007-F4; No. 99-F1; No. 84-F21). The clause expands incidental activities supporting a granted power, not new categories of activity. Allowing it to authorize subsidiary creation or grant-making would, the AG noted, render the Legislature's careful enumeration of express powers meaningless.

Common questions

Q: What's an industrial development agency?
A: A statutorily-created public benefit corporation (one per municipality, more or less) that promotes economic development by financing the acquisition, construction, and equipping of projects. The IDA typically takes title to a project, leases it to a developer, and issues bonds to finance the construction. The IDA's project structure usually carries tax benefits (sales tax exemption on construction materials, mortgage-recording-tax savings, payment-in-lieu-of-taxes agreements) that flow to the developer.

Q: Why would an IDA want a subsidiary?
A: To do something the IDA itself can't do directly. For example, taking on real-estate development risk, holding non-IDA assets, doing land banking, or running programs that don't qualify as IDA "projects." The opinion's rationale is precisely that this end-run is the problem: if the activity isn't authorized for the IDA, the IDA cannot create a subsidiary to do it instead.

Q: Can a municipality just create a § 1411 LDC directly?
A: A municipality may sponsor or charter a § 1411 not-for-profit local development corporation under separate Not-for-Profit Corporation Law authority. That LDC has its own purposes and powers under § 1411, distinct from an IDA's. The opinion does not bar municipalities from chartering LDCs; it bars IDAs from doing so as their subsidiaries.

Q: Can an IDA transfer money to anyone?
A: It can pay its own legitimate operating expenses, repay bondholders, and use revenues for its corporate purposes (which includes financing additional projects). What it cannot do is hand out grants or loans for civic, charitable, educational, or other non-IDA purposes, even if the recipient is itself a public body.

Q: What is the Flynn rule the opinion relies on?
A: An administrative or public-benefit body has only the powers the Legislature granted plus those necessarily implied from those grants. Matter of Flynn v. State Ethics Com'n, 87 N.Y.2d 199, 202 (1995). This rule is the spine of the opinion.

Background and statutory framework

General Municipal Law Article 18-A (§§ 850 et seq.) authorizes IDAs and sets out their corporate form, purposes, and powers. Section 852 declares the policy: economic growth through local development. Section 854(4) defines the IDA's "projects" (industrial, manufacturing, commercial, recreation facilities). Section 858 enumerates the IDA's powers, ending with the catch-all "to do all things necessary or convenient to carry out its purposes and to exercise the powers expressly given by Article 18-A."

Section 858(11) describes the gift-acceptance power: the IDA can accept gifts, grants, loans, and contributions from others and use them for IDA purposes. The operative verb is "accept," not "make."

The Public Authorities Law contrasts: §§ 1020-f(o) and 1020-i (LIPA) and § 1974(12) (Battery Park City Authority) explicitly authorize their respective entities to create subsidiaries. The Article 18-A drafters did not include such language for IDAs.

Citations and references

Statutes:
- N.Y. Not-for-Profit Corporation Law § 1411 (local development corporations)
- N.Y. General Municipal Law Article 18-A; § 852, § 854(4), (7), (14), (15), § 856(2), § 858, § 858(4), (9), (10), (11)
- N.Y. Public Authorities Law § 1020-f(o), § 1020-i (LIPA); § 1974(12) (Battery Park City Authority)

Cases and opinions:
- Postler & Jaeckle Corp. v. County of Monroe Indus. Dev. Corp., 153 Misc. 2d 392 (Sup. Ct. Monroe Co.), aff'd, 188 A.D.2d 1039 (4th Dep't 1992)
- Matter of AG-II Acquisition Corp. v. Bd. of Assessors of Co. of Nassau, 21 Misc. 3d 543 (Sup. Ct. Nassau Co. 2008), IDA is a creature of statute
- Matter of Flynn v. State Ethics Com'n, 87 N.Y.2d 199, 202 (1995), administrative bodies have only granted plus necessarily-implied powers
- Community Bd. 7 v. Schaffer, 84 N.Y.2d 148, 159 (1994), necessarily-implied power test
- Abiele Contracting, Inc. v. New York City Sch. Const. Auth., 91 N.Y.2d 1, 11 (1997), catch-all "necessary or convenient" clause read narrowly
- Op. Att'y Gen. No. 2007-F4; No. 99-F1; No. 84-F21
- Op. St. Comptr. No. 2011-1; 1999 Op. St. Comptr. No. 99-4; 1982 Op. St. Comptr. No. 82-360

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/2014-f1_pw_0.pdf

Original opinion text

Not-For-Profit Corporation Law § 1411; General Municipal Law Article 18-A, §§ 852, 854(4), 854(7), 854(14), 854(15), 856(2), 858, 858(4), 858(9), 858(10), 858(11); Public Authorities Law §§ 1020-f(o), 1020-I, 1974(12)

An industrial development agency (IDA) is not authorized to create a subsidiary in order to fulfill its designated function or to provide grants or loans from its own moneys to public or private interests.

September 9, 2014

David Kidera
Director
Authority Budget Office
P.O. Box 2076
Albany, New York 12220-0076

Formal Opinion
No. 2014-F1

Dear Mr. Kidera:

You have requested an opinion relating to the powers of an industrial development agency (IDA). You have explained that the Authorities Budget Office (ABO) is authorized to review and assess the operations and practices of state and local public authorities for compliance with state law. In the course of exercising this authority, the ABO has discovered that several IDAs have formed subsidiaries, often as local development corporations organized pursuant to Not-for-Profit Corporation Law § 1411. You believe that this is being done to circumvent statutory limitations placed on IDAs. Also, the ABO has found IDAs using their revenues to support civic, charitable, or educational causes unrelated to the IDA's purpose or to provide money for loan programs managed by other public entities. You ask whether an IDA is authorized to form a subsidiary or to use its revenues in the above manner. As explained below, we are of the opinion that both of these activities are unauthorized.

Article 18-A of the General Municipal Law authorizes the creation of and governs municipal IDAs. IDAs are a vehicle by which the State encourages and supports economic growth through the local development of commerce and industry. General Municipal Law § 852. An IDA is created for the benefit of a particular municipality. See General Municipal Law Art. 18-A, tit. 2. An IDA's fundamental purpose is to promote, develop, encourage, and assist in the acquiring, constructing, maintaining, and furnishing of industrial, manufacturing, commercial, and recreation facilities ("projects"). General Municipal Law §§ 854(4), 858. It performs this function by providing financial assistance, typically through a lease of property, to an entity occupying a project. General Municipal Law §§ 854(14),(15), 858(10); Postler & Jaeckle Corp. v. County of Monroe Indus. Dev. Corp., 153 Misc. 2d 392, 393-94 (Sup. Ct. Monroe Co.); aff'd, 188 A.D.2d 1039 (4th Dep't 1992). By fulfilling its primary purpose, an IDA advances the job opportunities, health, general prosperity and economic welfare of the people of the state of New York and improves their recreation opportunities, prosperity and standard of living. General Municipal Law § 858.

To accomplish its functions, an IDA is granted numerous powers by statute. The powers of an IDA include the following:

• To acquire, hold, and dispose of personal property for its corporate purposes;
• To acquire and to use real property necessary for its corporate purposes;
• To dispose of its real property;
• To make bylaws for the regulation of the use of a project or projects;
• To make contracts and leases, and to execute instruments necessary or convenient with any person, firm, partnership, or corporation, either public or private;
• To acquire, construct, reconstruct, lease, improve, maintain, equip, or furnish one or more projects;
• To accept gifts, grants, loans, or contributions from, and enter into contracts or other transactions with, federal or state agencies, municipalities, public or private corporations, or other legal entities, and to use such gifts, grants, loans, or contributions for its corporate purposes;
• To borrow money, to issue bonds, and to provide for the rights of bondholders;
• To grant options to renew a lease with respect to a project and to grant options to buy a project at a price the IDA deems desirable;
• To enter into agreements requiring payments in lieu of taxes; and
• To do all things necessary or convenient to carry out its purposes and to exercise the powers expressly given by Article 18-A. General Municipal Law § 858.

An IDA is a corporate governmental agency constituted as a public benefit corporation. General Municipal Law § 856(2). It is a creature of statute. Matter of AG-II Acquisition Corp. v. Bd. of Assessors of Co. of Nassau, 21 Misc. 3d 543, 545 (Sup. Ct. Nassau Co. 2008). As such, an IDA has only the powers granted by express or necessarily implied legislative delegation. See Matter of Flynn v. State Ethics Com'n, 87 N.Y.2d 199, 202 (1995).

With respect to your first question, nothing in the enabling statutes governing IDAs expressly authorizes the creation of a subsidiary, a power explicitly granted other public benefit corporations, see, e.g., Public Authorities Law §§ 1020-f(o), 1020-i (LIPA); id. § 1974 (12) (Battery City Park Authority). Moreover, an IDA is fully able to fulfill its purpose without creating a subsidiary and thus the power to create a subsidiary is not necessarily implied from the powers expressly granted. See Community Bd. 7 v. Schaffer, 84 N.Y.2d 148, 159 (1994).

Likewise, in our opinion, the creation of a subsidiary is not permitted by the authority to "do all things necessary or convenient" to carry out its purposes and exercise its powers. Courts and agencies have interpreted this clause in the context of the purposes and powers granted by statute, as authorizing those activities incidental to an expressly-granted power rather than a broad grant of power itself. See, e.g., Abiele Contracting, Inc. v. New York City Sch. Const. Auth., 91 N.Y.2d 1, 11 (1997); Op. Att'y Gen. No. 2007-F4; Op. Att'y Gen. No. 99-F1; Op. Att'y Gen. No. 84-F21; Op. St. Comptr. No. 2011-1. A more expansive interpretation would render meaningless the Legislature's careful delineation of express powers. An IDA does not need to create a subsidiary in order to fulfill its designated function and we therefore conclude that creation of a subsidiary is not authorized.

Second, you ask whether an IDA can provide grants or loans from its own moneys to public or private interests. An IDA collects revenues by leasing, selling, or otherwise disposing of its projects. General Municipal Law §§ 854(7), 858(4),(9),(10). You have explained that the ABO often has found IDAs using revenues to support civic, charitable, or educational causes unrelated to their public mission or to provide seed money for loan programs managed by other public entities. We are of the opinion that these activities are not authorized. While an IDA is expressly permitted to accept gifts, grants, loans and contributions from various entities and to use such moneys for its corporate purposes, General Municipal Law § 858(11), the enabling statutes do not explicitly authorize an IDA to make grants or loans of its money to any type of entity. Nor do we believe that these activities are necessary for an IDA to completely exercise the powers granted by the Legislature. We therefore conclude that an IDA may not provide grants or loans from its own moneys to public or private interests. This conclusion is consistent with the view previously taken by the Office of the State Comptroller. See 1999 Op. St. Comptr. No. 99-4 (no express authority for IDA to make grant of moneys to municipality); 1982 Op. St. Comptr. No. 82-360 (no express authority for IDA to loan its moneys).

Very truly yours,

ERIC T. SCHNEIDERMAN
Attorney General