STATE OF NEW YORK MARK P. PATTISON
ALAN G. HEVESI
COMPTROLLER OFFICE OF THE STATE COMPTROLLER DEPUTY COMPTROLLER
110 STATE STREET DIVISION OF LOCAL GOVERNMENT SERVICES
ALBANY, NEW YORK 12236 AND ECONOMIC DEVELOPMENT
Tel: (518) 474-4037 Fax: (518) 486-6479
March 3, 2006
Honorable Norman Stocker
And Members of the Town Board
Town of Ellicottville
P.O. Box 600
Ellicottville, New York 14731
Report Number: P1-6-5
Dear Supervisor Stocker and Members of the Town Board:
One of the Office of the State Comptroller’s primary objectives is to identify areas where local
governments can improve their operations and provide guidance and services that will assist local
officials in making those improvements. Our goals are to develop and promote short-term and long-term
strategies to enable and encourage local government officials to reduce costs, improve service delivery
and to account for and protect their government’s assets.
In accordance with these goals, we conducted a regional audit to determine if bills prepared by Affected
Tax Jurisdictions (ATJ) were in compliance with the terms of Payment In Lieu Of Tax (PILOT)
agreements. An ATJ is any municipality (county, city, town, village) or school district, in which an
Industrial Development Agency (IDA) project is located, which will not receive tax payments which
would otherwise be due, except for the tax exempt status of the IDA involved in the project. The
PILOTs are generally equal to a portion of the real property taxes that would have been levied if the
project did not involve the IDA. PILOT agreements must contain, among other things, the amount due
annually to each ATJ or a formula by which the amount can be calculated. Each IDA must establish a
Uniform Tax Exemption Policy (UTEP) which addresses the exemption periods and percentages, types
of projects allowed and procedures for granting exemptions. However, the IDA may deviate from this
policy and arrange for different exemption periods and percentages for a particular project. Regardless,
the UTEP does give the ATJs an idea of the types of PILOT terms that can be expected, which can aid
the ATJ in preparing PILOT billings.
The process utilized to bill and collect the annual PILOTs generally is performed by staff at each ATJ.
Although the IDA is not responsible for calculating the PILOT bills, it is responsible for granting the
PILOT. As such it has an inherent responsibility to ensure that the ATJs adequately understand the terms
of the agreement so that PILOT bills are accurate. Our audit focused primarily on 2003 and 2004 billing
The Town of Ellicottville (Town) was one of the 15 ATJs included in this regional audit. We also
audited related activities for the five IDAs associated with the ATJs. This report letter provides findings
and recommendations specific to your Town. In addition, we will be issuing a regional report that
summarizes our findings at the five IDAs and the 15 ATJs included in the audit. This summary report
will more fully develop the causes of the deficiencies identified. Consequently, the summary report
should be used in conjunction with this report letter to obtain a comprehensive understanding of our IDA
We provided a draft copy of this report letter to Town officials prior to our exit discussion, conducted on
August 11, 2005. We considered information conveyed to us at the discussion and contained in the
Town’s written response in preparing the final version of this letter. Town officials generally agreed
with our recommendations and indicated they planned to initiate corrective action. The Town’s response
is included in its entirety as an appendix.
During 2003, the Cattaraugus County IDA reported 19 projects with PILOTs aggregating to $258,934
for all ATJs. We selected two PILOT agreements related to these projects and reviewed the respective
Town billings for 2004. Our audit disclosed that neither of the bills (100 percent) were prepared
correctly. This resulted in both project owners being under-billed by a total of $839. If these errors are
not corrected, they could result in under-billing of the project owners by approximately $5,200 over the
life of the PILOT agreements. Our computation assumes no increase in tax rate for future billings, so the
impact of these errors would be greater as tax rates increase over time. Although we did not audit
billings for years prior to 2003, we projected back errors using available information and applicable tax
rates and values to illustrate possible past impact. Because prior years’ information was not available to
indicate otherwise, we made the assumption that these errors have been occurring since the inception of
These billing errors 1 occurred because one used an incorrect abatement percentage, one data entry error
was made, and the Town failed to bill a project owner during 2004. The Town Clerk explained that she
was waiting for information from the Town Assessor to calculate the bill. Since the Assessor did not
provide the needed information, she thought the PILOT agreement was completed. However, the new
Assessor did not realize she needed to notify the Town Clerk about the PILOT properties. Contradictory
language or unclear terms in the agreement, a lack of communication between staff preparing the bills
and the Town Assessor, and a lack of monitoring contributed to these billing errors.
1. The Town Clerk should seek assistance from IDA officials and/or the Town Assessor to determine
the assessed values of PILOT parcels that are essential for the accurate billing.
2. Town officials should develop procedures for the review of PILOT billings by someone other than
the person preparing the bills. This independent monitoring could be done by other Town staff, or
ideally by IDA staff familiar with the PILOT agreements.
More than one type of error occurred on one of the bills.
3. Town officials should prepare amended bills for the projects owners for which we identified billing
errors. This would also include making corrections for future billings and adjusting past billings.
4. For billings related to PILOT agreements that we did not review as part of this audit, Town officials
should determine whether the appropriate amount was billed and take corrective action to adjust past
billings and ensure that future billings are correct.
It is your responsibility, as Town officials, to formulate a plan of action by assessing risks, designing
control procedures that address the identified risks in a cost-effective manner and determining how to
best remedy deficiencies. This plan of action should be available for public review in the office of the
Town Clerk and the Office of the State Comptroller. Our Office is available to assist you upon request.
If you have any further questions, please contact the Buffalo Regional Office at (716) 847-3647.
Steven J. Hancox