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February 17, 2005

 

Hevesi, Spitzer, Silver, Brodsky Issue Sweeping Public Authority Reform Proposal
Omnibus Bill with Best Ideas from Comptroller, Attorney General, Governor and Legislature Sets Stage for Unprecedented Accountability, Transparency

State Comptroller Alan Hevesi, Attorney General Eliot Spitzer, Assembly Speaker Sheldon Silver and Assemblyman Richard Brodsky today unveiled sweeping comprehensive public authority reform legislation that includes the best provisions identified in debates over the last year. The bill, which is expected to be approved by the Assembly, would fundamentally alter the way public authorities operate in New York State to provide unprecedented transparency and accountability to the public.

The bill, sponsored by Silver and Brodsky, includes provisions from the Comptroller’s legislation proposed last year, the bill sponsored by Assemblyman Brodsky passed last year by the Assembly and a bill sponsored by Senator Vincent Leibell that was considered in the Senate. It also contains provisions from Attorney General Eliot Spitzer, Governor George Pataki, and the Milstein Committee, which was appointed by the Governor last year to examine issues of public authority governance.

The bill:

  • Creates a Public Authorities Inspector General. Based on the proposal that passed the Assembly last year, the Public Authorities Inspector General would be appointed by the Attorney General and authorized to investigate any public authority, among other duties.
  • Creates a Public Authorities Independent Budget Office. An Independent Budget Officer appointed by the Comptroller would be authorized to review the budgets of the statewide and larger public authorities.
  • Improves corporate governance of public authorities. Requires a majority of independent members, separation of chairman and CEO roles, Board approval of financial statements, among other provisions.
  • Defines and names 733 public authorities. Defines four classes of public authorities and identifies 733 public authorities and their subsidiaries by name.
  • Controls public authority debt. Places controls on public authority debt, including requiring authorities to comply with debt caps set by the Legislature and to secure approval for initiatives that may exceed any cap imposed on them.
  • Controls the proliferation of public authority subsidiaries. The list of 733 public authorities includes 155 subsidiary corporations established by public authorities, most of which were created without approval by the Legislature. Creation of any new subsidiary corporation will require approval by the Legislature.
  • Reviews public authorities’ missions. Creates a Temporary Commission on Public Authority Reform similar to the Commission proposed by the Governor but with express responsibility for recommending to the Legislature elimination or consolidation of public authorities and a specific deadline for reporting.
  • Provides rules for public authorities in selecting auditing firms. The bill also prohibits authorities from engaging the same audit firm for non-audit services.
  • Strengthens procurement rules. Requires public authorities to have rules at least as stringent as State agencies, and provides for review of contracts by the Comptroller as is now required of all State agencies.
  • Restricts procurement lobbying. Restricts contact between a firm seeking to do business with a public authority except for specific purposes and only with the person designated by the agency to handle the procurement.
  • Regulates property disposal. Requires the larger and statewide public authorities to adopt comprehensive guidelines for disposing of property.
  • Strengthens ethics rules. Applies State ethics law to members of the governing boards of the larger and statewide authorities.

“There is a unique and overwhelming consensus that the public demand for accountability from its public authorities can no longer be ignored,” Hevesi said. “All statewide elected officials and both houses of the Legislature have worked on their own approaches to improving public authorities. Now, is the time to come together to develop a new milestone in creating transparency and accountability in New York State government. Reform can and must be achieved.”

Attorney General Spitzer said, “The lack of oversight in public authorities has produced scandal and inefficiency. The reforms we are proposing today will raise ethical standards, increase accountability and enhance the performance of the authorities. I urge the Executive and the Legislature to work together to implement them as soon as possible.”

Assembly Speaker Sheldon Silver said, “By adding greater transparency and accountability to the more than 700 public authorities and their subsidiaries we are providing all New Yorkers a more complete view of their State government, improving their overall efficiency and instituting safeguards for taxpayer dollars. This joint effort by state leaders with differing responsibilities and scopes of authority is a true indication of how serious a problem the State’s ‘shadow government’
has become and I urge the Senate and Governor to recognize the urgency of this legislation and join in our effort.”

Assemblyman Brodsky, who chairs the Assembly Committee on Corporations, Authorities and Commissions, said, “Our comprehensive legislation is the culmination of three years of work. It now falls squarely on the governor and Senate whether there is serious reform or continued scandal and inefficiency.”

The bill issued today is the culmination of an 18-month effort during which the State witnessed new efforts to reform public authorities. In 2004, three significant pieces of legislation were advanced in the Legislature regarding public authorities and both Assemblyman Brodsky and Senator Leibell have held extensive hearings on authority reform. Also, the Governor proposed corporate governance principles and appointed a panel to study related issues and compel adoption of corporate governance reforms. For the first time in recent history, the Office of the State Comptroller identified the number of public authorities and published information about their finances. In 2003 and 2004, the Office of the State Comptroller increased oversight of public authorities, completing 46 audits of public authorities and uncovering financial malfeasance and mismanagement at a number of authorities including the Metropolitan Transportation Authority, the Long Island Power Authority, the New York Power Authority and the New York Racing Association, among many others.

“Many of New York’s public authorities do important work and do it well, but their good work is eclipsed by the irresponsible actions and mismanagement by others,” Hevesi said. “Public consciousness has been raised about the need to control public authority debt, which now totals more than $70 billion, in addition to the $43 billion authorities have borrowed on behalf of the State government. This is an enormous sum and is a clear danger to New York’s finances.”

Hevesi noted a number of troubling characteristics of public authorities:

  • Public authorities have issued more than $43 billion in State-funded debt. State debt service costs on authority debt will increase approximately 55 percent from $3.3 billion in 2004-05 to $5.1 billion in 2009-10. Although debt service on this borrowing is paid by taxpayers, none of this debt is approved by the voters.
  • Only 11 of the 733 public authorities in New York have their borrowing reviewed by the Public Authorities Control Board.
  • Efforts by the State Comptroller and Legislature to audit authority finances or question authority officials have met with resistance, even requiring Assemblyman Brodsky to pursue in court access to documents withheld by the Canal Corporation in response to an earlier subpoena.

The 44 public authorities that do report procurement activity to the Comptroller’s Office awarded 11,270 contracts valued at more than $10.5 billion in 2002 alone. With minor exceptions, none of those contracts were subject to review by the Comptroller, as is the case with State agencies.

In the meantime, Hevesi is implementing other improvements administratively, including increased reporting requirements for public authorities, focusing on personnel and compensation. He also has issued new Debt Issuance Approval guidelines, which describe the process and criteria by which the Office of the State Comptroller reviews and approves the terms and conditions of mainly negotiated or private sales of bonds issued by many public authorities, municipalities and school districts.

In a report released concurrently with the legislation, Hevesi outlined ten instances where increased attention to public authorities resulted in improved actions at specific authorities, but said comprehensive changes are needed to avoid a piecemeal approach.

“The days when people running public authorities thought no one was watching are over,” Hevesi said. “This bill is the start of a new era, and there is both consensus of what the goal is and how to get there.”

Click here for a copy of the Comptroller's report
Click here for a copy of the Bill Memo
Click here for a copy of the Bill
Click here for more background on public authorities.

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