Wednesday, August 19, 2009

Brodsky, Perkins fire back at objections to public authority reform raised by Paterson aide; are authorities really checked by elected officials?

In a scorching letter issued yesterday, Assemblyman Richard Brodsky and state Senator Bill Perkins slammed an attempt to gut public authorities reform legislation and charged that objections raised in a memo by Peter Kiernan, Counsel to Governor David Paterson, would gut authority reform.

Kiernan’s memo was dated August 14 but released yesterday by the legislators, who, protesting that no objections were raised while the bill was pending in the legislature, promised a detailed reply.

Notably Kiernan suggests, unreliably, that the elected officials serve as a sufficient check on authorities, and proposes that, in lieu of a requirement that property be sold at market rates, there be greater disclosure, including the appraised value.

While this would fall short of the provisions in the bill, recommended by a bipartisan commission appointed by former Gov. George Pataki, it nonetheless would represent somewhat more disclosure than emerged in June when the Metropolitan Transportation Authority approved a revised deal with Forest City Ratner for the Vanderbilt Yard.

Fiduciary duty

The legislation would among other things, establish an independent Authorities Budget Office, require board members to acknowledge their fiduciary duty to the authority and not the elected official who appointed them; and require all property to be sold at fair market value--all issues that have drawn objections from the governor’s office and Mayor Mike Bloomberg.

The issue of fiduciary duty is perhaps most explosive, and both Bloomberg and Paterson--the beneficiaries of, respectively, a huge campaign war chest and a position gained by appointment, suggest, that the role of elected serves as a sufficient check.

Kiernan objected that “the legislation would effectively silence elected officials’ voices on board decisions, ...[requiring them] to subordinate the concerns of the jurisdictions that appointed them relative to the particular interests of the board on which they serve... Public authorities are linked to the broader public interest through the elected officials who appoint their board members. Thus, requiring board members to be ‘truly independent’ of appointing authorities could impede the development of important state-wide and cross-authority initiatives, such as comprehensive energy, transportation and economic policy and planning initiatives.”

Elected officials a check?

Bloomberg, according to the AP, said a stronger safeguard is the fact that the executives who appointed board members are directly accountable to voters and taxpayers for the actions of authorities.

Oh, sure. If taxpayers object to a questionable deal for the Vanderbilt Yard, they should then vote Bloomberg out of office?

Kiernan did raise a reasonable objection, noting that the bill “does not make it clear who would enforce the proposed fiduciary duty, and it thus increases the likelihood of vexatious litigation against board members by persons who simply disagree with board decisions.”

One alternative he suggested was to replace this language with a provision analogous to the fiduciary provisions… in the recent MTA legislation, which recognizes the fiduciary duty of board members, but provides that the remedy for violation of such duty would be discharge.”

But that leaves enforcement to the very elected officials who might want their appointees to violate their fiduciary duty. Surely a middle ground is possible.

Selling property at below-market rates

Kiernan objected to a requirement that property sold by public authorities be sold only by publicly advertising for bids and for no less than estimated fair market value, except where fair market value is very small, or disposition is being made to the state or a political subdivision. “This provision would prevent the state from engaging in numerous economic development projects, where below-cost authority land is used as an incentive,” he wrote.

A Bloomberg aide told the Times that this would “sharply curtail the city’s ability to build affordable housing, create jobs and develop additional community space.”

That sounds a lot like the Atlantic Yards deal.

The Times yesterday editorialized:
The mayor’s most valid criticism is that the legislation would make it harder to create affordable housing or small-business projects.

However, as I wrote, the deal for Atlantic Yards is a deal mainly to build an arena, not affordable housing.

Disclosure the answer?

Kiernan recommended, “We suggest addressing this issue with greatly enhanced disclosure. Transfer for less than fair market value would be permissible only if the authority at issue made a written and public disclosure stating 1) that it was engaging in such a transfer; 2) the appraised value of the property being transferred and the consideration received; and 3) the statutorily permissible purposes for such transfer.”

While that would be more than what emerged in June--does the 2005 appraised value still hold? what were the statutorily permissible purposes?--it would have much less of an impact.

Other objections

Among other objections, Kiernan also raised concerns about the general powers and duties of the Independent Authorities Budget Office, saying it would cost at least $2.7 million more a year and that there were insufficient limits on the use of subpoenas and the information gained from it.

From the Brodsky/Perkins letter

“For years, we have conducted investigations of authority activity around the state,” write the legislators. (Actually, Brodsky’s done most of it, because the Democrats have been the minority party in the Senate.) “Many times they have acted in the public interest. But very often they have been the cause of mistake, error, corruption, and failure…. We concluded that only fundamental institutional reform would cure a system that was rife with exploding debt, favoritism, interference from outside public and private forces, inefficiency and failure.”

Among the examples they cite: “The failure of the MTA’s forced asset disposition on the West Side and at the Javits Convention Center [and] secret negotiations and deals to use billions of taxpayer dollars to finance sports facilities....”

They note that Paterson, “as a distinguished Senator and Minority leader, and as Lieutenant Governor issued statements, voted and proposed legislation that included most of the specific provisions of A. 2209.”

“In the face of that history and principled consensus, we were troubled by the sweeping and fundamental attack on the bill in Mr. Kiernan’s letter,” they wrote. “We recognize the opposition of Mayor Bloomberg, whose hostility to authority reform is a matter of public record. We noted the similarity between the mayor’s critique and Mr. Kiernan’s letter. This would be less disturbing if the Administration had raised these concerns over the years the Legislature took to carefully consider the evidence and the remedies. But, despite our individual and joint efforts to engage the Administration, we were never informed of the kind of fundamental, philosophical opposition to authority reform contained in Mr. Kiernan’s letter.

Thompson piles on

As noted in the Gotham Gazette, City Comptroller William Thompson, who's seeking the Democratic nomination to run against Bloomberg, supports the bill, stating, “Some critics, such as the Mayor of New York City, have complained that by requiring the appointment of independent board members, the proposed law reduces accountability when the reverse is clearly the case. Such disingenuous criticism should be rejected.”

And the Daily News’s Liz Benjamin points to the legislators’ long-time difficulties with Bloomberg over issues like congestion pricing and mayoral control of schools, though this time editorial opinion and good-government groups generally favor reform.

The example of GIPEC

On Monday emerged some news that bolsters the case for more oversight.

According to Senator Craig M. Johnson (D-Nassau):
The Governor's Island Preservation and Education Corporation showed “flawed judgment” and ignored available information when it purchased an unusable ferry-- resulting “in a significant waste of taxpayer dollars,” according to a report released today by the Senate Committee on Investigations and Government Operations.
The report also stated that GIPEC relied on a marine consultant with a potential conflict of interest and that its Board “maintained a troublingly detached role” during the purchase of the vessel in the Summer of 2007.
The boat, the M/V Islander, cost the state a total of $922,645. Less than 18 months later it was sold on eBay for $23,600 after it was determined that the 59-year-old ferry would be too expensive to make sea worthy.


The Daily News followed up with an article and an editorial. But it loves the Atlantic Yards deal, which arguably will cost the state a lot more than six figures.

1 comment:

  1. What we really need is legislation that requires the mayor and the governor to act on behalf of the people, not their real estate and finance cronies. Now, one group elects; the other governs. Mayor Bloomingdales, of course, likes it that way. He's such a good businessman, but he doesn't know how to build affordable housing without permitting private developers to steal public resources. In 1933, in the depths of the depression, Mayor LaGuardia figured out how to build affordable housing, and lots of it. Mayor Bloomingdales should READ the history of those times before he whines another lame excuse for his ineptitude.

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