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August 15, 2009

Reaction to Governor Paterson's Refusal to Reign In Public Authorities

Here's reaction to today's story in the New York Times regarding how Governor Paterson is about to veto legislation to reign in public authorities.

Develop Don't Destroy Brooklyn, Paterson & Bloomberg Team Up to Veto Reform Impacting Sweetheart Deals Like Atlantic Yards

Paterson and Bloomberg are uniting to veto major reform of the cess pool of unaccountability and non-transparency otherwise known as the New York State Public Authorities. And why? Because it might block or upset thier friends' developments such as Atlantic Yards and diminish their control over the authorities which laughably claim to be independent.

We're looking at you Empire State Development Corporation, and you Metropolitan Transportation Authority.

Atlantic Yards Report, Paterson stalls public authority reform that would establish new budget office, require fiduciary duty of board members (including ESDC)

A lot of people think that a bill to reform state authorities, passed by the state legislature but awaiting Governor David Paterson's increasingly unlikely signature, is a good idea.

The New York Times, in an editorial July 23 headlined New York’s Phantom Government, praised the idea of an independent authorities budget office with subpoena power, and an automatic review by the state Comptroller's office of authority contracts valued at more than $1 million.

"Perhaps even more important, board members at these entities would have a new fiduciary duty to protect the authority’s bottom line, just like board members in most private corporations," the Times opined. (That duty, as I will explain on Monday, already applies to the board members of the Metropolitan Transportation Authority, according to a clause in the MTA bailout bill passed this spring.)

The Buffalo News praised the legislation. So did Newsday.

State Comptroller Thomas DiNapoli said, "Assemblyman Brodsky and Senator Perkins’ bill is the first major step toward public authority reform we’ve seen in years. It’s long overdue."

...

While no one has used the Empire State Development Corporation (ESDC) as an example, I wonder if the ESDC board would be following a fiduciary duty if it voted to approve Atlantic Yards without a current fiscal impact analysis or a (never-conducted) cost-benefit analysis.

Could the board have approved AY in 2006 without considering the availability of housing bonds and can it do so going forward?

(The law would go into effect 60 days after signature, so if Paterson signs it, which seems unlikely, it wouldn't affect the planned ESDC vote in September. But I wonder if the governor and mayor had Atlantic Yards in mind as a project they'd like to see passed before it got mucked up by reform legislation.)

This blog entry concludes by listing aspects of the legislation that would force authorities to act responsibly.

Fiduciary Duty of Authority Board Members

Members of authority boards will no longer be beholden to those who appoint them. They will have an explicit fiduciary duty to the authority and their mission. Board members’ primary responsibility will be to ensure that the authority runs in the best manner possible.

Debt Reform

The legislation empowers the ABO [Authorities Budget Office] to issue debt reform plans for pub lic authorities. Also, public authorities must submit debt reform measures to the ABO. The legislation will also limit the amount of debt Subsidiaries of Public Authorities may issue.

Comptroller Approval of Contracts

This legislation will require each authority to submit to the comptroller contracts over $1 million. Having this oversight of contracts will prevent fraud and mismanagement while keeping the authority focused on its mission.

Subsidiaries

Public Authorities will no longer be able to create subsidiaries whenever they feel the need to. Unless formed for a very specific purpose, subsidiaries will now only be formed with the approval of the legislature. Authorities will no longer be able to use subsidiaries to create more debt without a clear purpose and proper oversight.

Disposition of Property

All authority property must now be sold at fair market value.

Posted by steve at August 15, 2009 8:40 AM