Quoted Text

Labor’s Commitment to IDA Reform

Last week the New York State AFL-CIO was pleased to co-host an event with several of our affiliates and the New York Initiative for Development Accountability, calling for IDA Reform.

Many of our affiliates have long been advocating reform of the IDA program statewide, and the State Federation has been supporting their efforts for the past 15 years.  At this time, we recognize an opportunity not only to reform the program, which is rife with abuse, but also to correct an inequity within the so-called civic facilities program, wherein IDA’s fund projects that supposedly have some civic or public value.

Our Building Trades affiliates have long opposed such government funded construction projects occurring outside prevailing rate, guaranteed by Article VIII of the labor law. The bill we seek would correct this glaring wage inequity.

As such, the New York State AFL-CIO will utilize all of the resources at its disposal throughout this campaign.  Both our legislative and field services departments will be mobilizing members statewide, marking this effort as a top priority.  Our customary legislative strategy will be supplemented with a statewide, grassroots initiative urging all members in the field to alert their legislators of labor’s position on this vital issue.

It should be noted that our opponents have a high powered campaign geared up, so winning on the merits of the issue is not assured.  

The New York State AFL-CIO is committed to this battle, and will not relent until IDA Reform is passed and signed into law.

Denis Hughes, President

Quoted Text

Unfortunately, a number of studies have shown that inconsistent and inaccurate reporting has limited
the utility of the data available through these annual reports. For example, nearly 3,500 projects receive
IDA-related benefi ts, but unfortunately, many are not providing IDAs with the data they need to complete
their State reporting requirements. To address this problem, OSC initiated several measures designed to
improve the quality of the reports submitted by IDAs. Specifi cally, OSC sent out a description of common
reporting errors, as well as a report to each IDA of where problems had been found in its previous year’s
submission. Additionally, OSC enhanced its review procedures, improved its audit presence and increased
the amount of training it provided to IDAs.
As a result of these oversight and training efforts, the completeness and consistency of IDA reporting for
2004 showed a marked improvement over previous years. For example, for 2002, IDAs reported current
job data for only 58 percent of their projects; this has been increased to 88 percent in reports for 2004.
Nonetheless, of the 3,474 projects reported in 2004, 521 (15 percent) did not provide complete job data.
Thus, there is still a need for more complete and accurate reporting.
The overall effectiveness of IDA programs has been the subject of a number of studies, reports and audits.
Despite the enactment of reforms in the late 1980s and early 1990s, issues regarding IDA operations,
accountability and transparency persist. In addition, a number of policy concerns have been raised. Following

Quoted from Shadow

Very true Boomer, but some of the cities [like Schenectady] are experiencing deteriorating streets, crime, high taxes, fees, and a school system that graduates only 50% of their students.

Quoted Text

FOREWORD
Founded in 1932, the Citizens Budget Commission (CBC) is a nonprofit,
nonpartisan civic organization devoted to influencing constructive change in the finances
and services of New York State and New York City. During 2003 the role of public
authorities in providing state and local services became a controversial issue, in part due
to studies and investigations completed by the State and City Comptrollers and by
legislative oversight committees. While these studies were useful CBC was concerned
that the attention was focused too narrowly on what might be atypical abuses rather than
the more significant long-run issues and broader perspectives, including a recognition
that public authorities with appropriate controls have and continue to serve important
public objectives. The leadership of the CBC therefore decided early in 2004 to initiate a
study of this important topic. At the invitation of the Commission’s chairman, H. Dale
Hemmerdinger, we agreed to lead the ad hoc Trustee committee that would oversee this
effort. The following Trustees volunteered to join this research committee: Paul Alter,
Paul Bader, Paul Balser, Stephen Berger, Kenneth Bond, Lawrence Buttenwieser,
Herman Charbonneau, Stephen DeGroat, Douglas Durst, Roger Einiger, Bud Gibbs,
Kenneth Gibbs, James Haddon, John Hallacy, Walter Harris, Fred Hochberg, Deborah
Jackson, David Jones, Jerome Katz, Eugene Keilin, Walter Kicinski, Peter Kiernan, Bill
Lambert, Andrew Lynn, Robinson Markel, Steven Polan (Co-chair), Hector
Prud’homme, Alfredo Quintero, John Rhodes, Edward Sadowsky, Deborah Sale, Richard
Sigal, Emanuel Stern (Co-chair), Kevin Willens, and Nancy Winkler.
The Committee met eight times. The sessions were devoted primarily to
reviewing materials developed by the CBC staff, but also included a meeting with State
Comptroller Alan Hevesi and his staff and an informal conversation with several chairs
of authority boards who agreed to share their perspectives with us. It is important to note
that many of the Trustees involved in this effort have considerable expertise in the topic
developed through extensive experience with public authorities including serving in
leadership roles and working with them on financial transactions. This report was
approved by the Committee at its final meeting.
Shortly after the CBC created our committee, Governor George Pataki appointed
the New York State Commission on Public Authority Reform with Ira Millstein as its
chairman. Mr. Millstein, who also is a Trustee of the CBC, had already been active in
helping the Governor with governance issues related to public authorities. He did not
participate in this Committee’s deliberations; however, the CBC President, Diana
Fortuna, serves as a member of the Millstein Commission, and the CBC Committee
benefited greatly from shared information and analysis. On behalf of the CBC, we thank
Mr. Millstein for his cooperation and congratulate his Commission for its work, which is
expected to result in a report later this year that is likely to provide additional valuable
recommendations for making better use of public authorities in New York.
This report was prepared by Charles Brecher and Jo Brill. Brecher is the Research
Director and

Quoted Text

Public authorities play a major role in delivering public services. They supplement direct
government agencies in three ways:
· Provide a business-like organizational structure for public services that are
financed primarily by user fees and whose capital investments are self-financed
through bonds supported by user fees.
· Provide a stewardship for major capital assets and make long-run investment
decisions with some isolation from pressures of the electoral cycle.
· Provide a mechanism for taking advantage of federal tax benefits for economic
developme nt and other purposes that otherwise would be treated as private
activities.
Authorities are intended to strike a balance between political accountability and political
independence. Unlike heads of direct government agencies, governing boards of
authorities are expected to be more independent of those who appoint them, to make
difficult and unpopular decisions outside the arena of elected politics, and to be
accountable to the public indirectly through reporting, transparency in decision-making
and long-run performance.
New York State makes extensive use of public authorities. It has created 583 authorities,
and they have created subsidiaries that bring the total number of entities to 740. They
assist in a variety of important public services including, providing electric power,
creating and maintaining bridges and highways, running mass transit systems, building
and operating housing, financing higher education, and providing medical care. State
officials, typically the Governor, appoint the majority of board members to 104
authorities. Local government officials appoint the boards of 474 authorities, including
17 accountable to the City of New York. Five authorities have boards whose members
are appointed by officials of more than one government.
The Problems Associated with New York’s Authorities
New York State’s extensive reliance on authorities has given rise to four significant
problems:
· Misuse of the power to incur debt
· Insufficient oversight and coordination of project revenue backed and private
conduit borrowing
· Insufficient reporting to support accountability
· Insufficient independence in governance
Each problem

Quoted Text

The Problems Associated with New York’s Authorities
New York State’s extensive reliance on authorities has given rise to four significant
problems:
· Misuse of the power to incur debt
· Insufficient oversight and coordination of project revenue backed and private
conduit borrowing
· Insufficient reporting to support accountability
· Insufficient independence in governance
Each problem is explained more fully in the report, but can be summarized as follows.

Quoted Text

The combination of creative financing mechanisms and multiple authorities available to
use them means that there is no effective legal limit on State-funded debt. As a result,
New York has too much State-funded debt. This determination is based on a method
originally suggested by the Citizens Budget Commission in 2000. It defines “affordable”
debt as debt which can be issued without requiring tax increases or service cuts that place
the jurisdiction far out-of-line with its competitors. Based on this assessment, New York
State was one of eight states having debt levels in the danger zone, with its debt ratio the
third highest in the nation. State-supported debt in 2003 exceeded the State’s danger-zone
threshold by nearly $10 billion.

Quoted Text

The 1938 Constitution "expressly empowered public authorities to contract debt independently independently of the State". [7] Because of this, the Court of Appeals has repeatedly affirmed that public authorities are distinct from the state and that the state carries no moral obligation to repay their debts. Although the Constitution prohibits the state from lending its credit to public authorities, it does allow the state to make gifts of money to authorities. As a practical result, this has resulted in some authorities receiving annual funding from the state on a consistent basis. Despite the fairly obvious moral obligation that the state carries to continue funding these authorities, which provide incredibly important public services such as road maintenance and transit operations, the Court of Appeals has continued to approve the fiction created by the Constitution's ban on moral obligation debt. As the Court of Appeals stated in Schulz v. State, 84 N.Y.2d 231 (1994), if "modern ingenuity, even gimmickry, have in fact stretched the words of the Constitution beyond the point of prudence, that plea for reform in State borrowing practices and policy is appropriately directed to the public arena".[1] See also Wein v. State, 39 N.Y.2d 136 (1976); Wein v. Levitt, 42 N.Y.2d 300 (1977).

Financing public projects through public authorities is also attractive because their independent corporate structure theoretically makes them more flexible and efficient than state agencies. Many restrictions placed on state agencies do not apply to public authorities, including, for example, general public bidding requirements (some public bidding requirements do apply under the Public Authorities Law). See Plumbing, Heating, Piping & Air Conditioning Contr. a**'n v. N.Y.S. Thruway Auth., 5 N.Y.2d 420 (1959). Most public authorities may also make contracts, and because of public authorities' corporate status, there is generally, no remedy against the state for the breach of such contracts. John Grace & Co. v. State University Constr. Fund, 44 N.Y.2d 84 (197. Many public authorities, such as Industrial Development Agencies and the Empire State Development Corporation, can also condemn property.

The New York State Public Authorities Control Board was created in 1976 to provide oversight for some of the state's most powerful authorities.[2] Sections 50 and 51 of the Public Authorities Law currently require 11 authorities to receive approval from the PACB prior to entering into contracts for project-related financing. There are five members on the PACB board, all of whom are appointed by the governor and serve year-long terms.[3]

Public authorities are currently responsible for more than 90% of the state's debt and 80% of the state's infrastructure, leading some to refer to them as the "shadow government."[8]