Like unexpectedly stumbling across a section of the zoo populated solely with exotic animals, let the reader ponder public authorities.
If they resemble zebras with their familiar black tapered stripes, the stripes of public authorities would not be the only thing uncanny. Some would have antlers, others would breathe fire. But they all would be recognized as relatives of the horse.
To paint as accurate a picture as possible to describe public authorities, one cannot rely on fantastic metaphor or allegory alone. The taxonomic rank implied here is important. Family. Genus. Species.
Public authorities do belong to the family of incorporation, where there is very little poetry. Also referred to as public-benefit corporations, they are corporations created to further public interests, according to the state comptroller’s office.
In New York State, furthering the public interest is legally recognized as creating “a material positive impact on society and the environment, taken as a whole, assessed against a third-party standard, from the business and operations of a benefit corporation.”
Due to their ability to issue their own debt without voter approval, these entities are used most often to fund or to support local government infrastructure while circumventing a constitutional provision to the contrary. Municipal and state governments have limits on how much debt they can take on. Public authorities do not.
This is known as backdoor borrowing. Debt issued by public authorities on behalf of the state accounted in 2021 for $51.1 billion, or just over 97 percent of all state-funded debt.
The debt service for these bonds is usually supported by revenues from the project created, such as tolls levied if a toll bridge is built or fees paid by a third party to run the toll bridge. But if the state has assigned specific revenue streams to an authority as a way for the authority to pay debt service, taxpayer money pays for a debt the taxpayers never voted to approve.
Excelsior!
The IDAs
Currently 594 public authorities operate in New York State. 47 of which are state authorities and 547 are local authorities. They are further broken down into finer categories: resource recovery authorities, land banks, IDAs, urban renewal or community benefit agencies, not-for-profit corporations affiliated with, sponsored, or created by local governments. and other vaguely described “miscellaneous authorities”.
The first public authority in history, the now-immense Port Authority of New York and New Jersey, celebrated its centennial last year. Embracing an inspired variety of missions in the name of the public good, authorities have proliferated in ever-greater numbers ever since.
One of the most common species of public-benefit corporations is the Industrial Development Agency (IDA). First dreamed into being in 1969 “to facilitate economic development in specific localities,” some 108 IDAs operate in New York State. All 62 counties have at least one.
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IDAs can be thought of as the most pro-business of all the authorities for their interpretation of what constitutes the public good — though which public is specified can vary.
Imbued with the ability to dole out tax breaks in the interest of attracting jobs and projects, IDAs in different municipalities have been known to compete against each other in wooing and poaching prospective developers. One municipality’s meat may be another’s poison.
For an IDA engaged in its most typical function, one need look no further than the Ulster County Industrial Development Agency’s (UCIDA) $25-million tax break over 25 years granted to The Kingstonian, the 143-unit mixed-use housing, hotel, parking and retail development approved for Uptown Kingston.
Granting a property-tax exemption and negotiating a scaled payment in its place is known as a payment in lieu of taxes (Pilot).
As county comptroller March Gallagher notes, the granting of a Pilot to developers isn’t just naked favoritism. “There can be great reasons for [granting a Pilot],” says Gallagher. “You don’t want to strap the project from a cash-flow perspective and put it underwater in year one. I think Pilots can be useful to get what you need in terms of development. But I do think it has to be handled carefully. And it should be analyzed.”
School districts shut out
School districts, which derive their revenues from property taxes. are often less keen on Pilots for housing developments. A student body in a given school district may be expected to grow, while fewer tax dollars than have been agreed upon by the voters need to be paid to the schools. More students, less money.
Herb Lamb, vice-president of the Kingston school board, spoke on the subject at an October 19 meeting. “There are a thousand new housing units going into the Kingston School District under these things,” said Lamb. “We need to get the public to understand if it continues, eventually it’s going to choke us. There is no way around us getting to the point that we will have to go over the tax caps if they continue.”
Another developer, Pennrose, presently contracted with Kingston to build a 164-unit housing project at Golden Hill. Pennrose currently seeks a 40-year Pilot. The UCIDA is happy to give the developer what it wants provided the Kingston Common Council approves. The school district may disapprove, but the bylaws of UCIDA allow it to ignore the school district board’s opinion.
Unlike the elected board of the school district, the board of the UCIDA can’t get voted out of office. Its members are appointed by the county legislature.
IDAs are required to hold a public hearing before approving any project for which financial assistance of more than $100,000 is proposed, but there is no requirement that IDA board members attend such a hearing, much less respond to questions or objections.
Pennrose’s development presents a further opportunity to observe a Land Development Corporation (LDC), another interesting species of public-benefit corporation. A non-profit land development corporation, the Ulster County Housing Development Corporation (UCHDC), describes itself as “a public instrumentality of, but separate and apart from, Ulster County.” Which is interesting, because in its bylaws it explains in its composition of membership that the sole member of the corporation shall be the county. Quite a balancing act.
All but one member of the board do double duty with paid employment at the administrative or legislative level of the county.
The UCHDC
There is no language in the charter specifically granting the Ulster County comptroller the power to audit public authorities. This raises issues of transparency. Like an IDA, the UCHDC can apply for loans and borrow money without limit, make and accept, execute and issue negotiable bonds and provide loans and grants, creating debt measured in the millions.
At the end of 2021, the UCIDA reported that it carried $7.8 million in conduit debt issued in the name of a state or local government for the benefit of a third party which will be on the hook for repayment of the debt.
Ulster County comptroller March Gallagher has submitted a recommendation to the county Charter Revision Commission (CRC) that language be inserted into the charter granting her office specific authority to audit all public-benefit corporations operating within the county.
If the CRC agrees, the recommendation will make it to a ballot next year. The voters will get their chance to weigh in.
The idea seemed popular among the commissioners, but member Shannon Harris cooled the brakes, suggesting that the commission should hear from the affected parties.
The UCRRA
While Gallagher is not at odds with the suggestion, only two years ago the Ulster County Resource Recovery Agency attempted to stonewall the local comptroller’s efforts to audit the agency, going so far as to go to court to prevent her audit. Though the agency lost, it succeeded in delaying the audit by nearly a year.
“While we were able to prevail in this challenge to authority,” wrote Gallagher in a report to the county, “it unfortunately came at additional and unnecessary cost to Ulster County taxpayers and Ulster County Resource Recovery Agency customers.”
Even if the change in language ends up on the ballot, language in the state law does not specifically mention the rights of county comptrollers to audit public authorities, referring instead to city comptrollers. That’s the sort of detail lawyers sharpen their knives with.
This could be about to change. A bill first introduced in 2020 by state senator Shelley B Mayer allowed for the examination of industrial development agencies and not-for-profit corporations by county comptrollers. The measure is picking up steam. The bill unanimously passed the State Senate on February 8.
Two Republicans state senators, Mike Martucci and Mario Materra, joined the bill as co-sponsors. At the close of last session, the bill was still in the Assembly. Mayer, who won her re-election bid, will most certainly keep the bill moving when next year’s session begins.
The New York State Authorities Budget Office (ABO) has markedly increased its reporting requirements for public authorities in recent years. Public authorities law requires authorities to submit annual reports to it, which are available for the general public to download, sort, search and analyze.
Transparency, scrutiny, accountability. All these things are for the public benefit.
“We just want to protect taxpayer dollars,” says Gallagher. “I mean, that’s the whole point. Shine a light, and follow the money.”
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