New York’s public authorities are proliferating and in some cases duplicating the work of others, the chairman of a task force on the implementation of an authority reform law said yesterday.
“There are many authorities that seem to overlap the authority of other authorities,” task force chairman Ira Millstein said at the Dormitory Authority of the State of New York’s board meeting yesterday.
One of the goals of the newly created independent Authorities Budget Office someday will be to study “whether or not some of the authorities ought to be merged with other authorities — so there’s one instead of five doing similar jobs,” he said.
Gov. David Paterson appointed Millstein, a senior partner at Weil, Gotshal & Manges LLP, to chair the seven-member task force, which he created by executive order following the passage late last year of the Public Authorities Reform Act.
The task force is looking at roughly 10 of the state’s 500 to 700 public authorities — no one is sure exactly how many the state has — to make recommendations on how the new ABO should oversee these entities.
“There has not been diligent oversight of the authorities, ever,” he said. “For the bulk of the public authorities, nobody’s really paid much attention to them and there is simply a lack of understanding on the public’s part of what these authorities do and basically who’s watching and what debt’s being issued and for what.”
One area the task force is looking at is the proliferation of local development corporations.
“Many of the authorities have local development corporations — which have been granted authority by the authority,” Millstein said. “IDAs and LDCs are one of the biggest problems we have. They’re not controlled by anyone.”
The expiration of the state law allowing industrial development authorities to sell tax-exempt bonds to finance civic facilities on behalf of nonprofits has led municipalities to create local development corporations to sell bonds instead.
DASNY executive director Paul Williams Jr. said he was concerned that this situation has given rise to more debt-issuing authorities that lack transparency. The expiration of the IDA law brought more business to DASNY, which is seeking greater authority to issue bonds on behalf of nonprofits such as charter schools.
Brian McMahon, executive director of the New York State Economic Development Council, a trade group representing economic development professionals and organizations, said in an interview that lawmakers are the problem.
“Municipalities are trying to find solutions to a problem caused by the state, and the problem is that they don’t have the ability to finance their nonprofit projects,” he said. “LDCs are a legal way to issue tax-exempt bonds on behalf of nonprofit borrowers.”
McMahon said the solution was for the Legislature to enact a permanent IDA civic facilities law.
Millstein also spoke about the reform act’s requirement that board members have a fiduciary duty to the authority, rather than to the individual who appointed them. Under the new law, this applies to ex-officio members and their designees.
“The minute you become ex-officio on the board, you are a member of the board with the same fiduciary responsibilities as everybody else on the board,” Millstein said.
When an ex-officio board member designates someone to attend a meeting in his or her place, that person becomes a member of the board with fiduciary duties to the authority. Millstein cautioned ex-officio board members against using multiple designees.
“That’s a big mistake because you’re appointing people to the board who don’t know what’s going on and I would say that if you’re going to designate somebody, you better leave them there for a year or two so they can find out what’s really happening,” Millstein said.
Board members can listen to the person who appointed them, “but when you act, you have to act in the best interest of the authority,” he said. Board members who are uncomfortable with that responsibility can recuse themselves, he said.
One problem facing the ABO, as created under the reform act, is the small staff of seven people and lack of an attorney, Millstein said.
Assemblyman Richard Brodsky, D-Westchester, who chairs the Assembly’s Committee on Corporations, Authorities, and Commissions and was the prime force behind the authority reform act, said that the state’s budget includes funding for an additional three staff members.
The task force’s report must be competed by Aug. 15.