Tuesday, December 28, 2010

Brodsky, in final report, warns of importance of further public authorities reform, "failure to receive value for investments," doesn't mention AY

Departing Westchester Assemblyman Richard Brodsky, the crusader for public authority reform who focused on the new Yankee Stadium rather than the Atlantic Yards project, has left with a valedictory report warning of the need for further reform, including this common-sense statement, "In an era when government is instructed to behave more like business, the failure to receive value for its investments is a crisis that can no longer be ignored."

Unmentioned in the six-page report (embedded below) is Atlantic Yards, nor the state's failure to receive any value for giving away arena naming rights.

Indeed, "the massive transfer of public property into private hands... not... accompanied by commensurate public benefits" hints at Yankee Stadium ("publicly funded sports facilities by IDA's") and the Columbia University expansion ("university construction using eminent domain powers") but not the equally controversial Atlantic Yards.

But Brodsky, who ran unsuccessfully for Attorney General, does get the politics:
To be sure, the rhetoric of job creation and economic development is powerfully expressed by elected officials, authority leaders and private sector beneficiaries of these transfers. But in the end the State has failed to protect its assets and interests.
And the issues he cites in the report, including added staff and increased power for oversight (the need for which I've previously reported), remain basic. Brodsky told City Hall News the future if very much up in the air:
Ultimately, ensuring that PARA is enforced is up to everyone in state government, he said, not just one legislative chamber or one governor.

“Everyone, the speaker, the new chair, the members, the governor, the comptroller. This is real and big and it has enemies,” Brodsky said. “Everyone is on the hook.”
The report

The Final Report Of the Committee On Corporations, Commissions, and Authorities, 2010, Recommendations For Continuing Legislative Reform Of Public Authorities, begins:
The historic Public Authorities Reform Act (PARA) took effect on March 1, 2010. This sweeping legislation builds on the reforms enacted in the Public Authorities Accountability Act of 2005 (PAAA), bringing long-needed reform and fundamental change to New York’s “Soviet-style bureaucracies,” improving the lives of all New Yorkers and the financial future of the state.

The legislation is a fundamental, top to bottom reform of New York State’s 700 public authorities. Members of public authority boards now have an explicit fiduciary duty to the authority and its public mission, and are no longer being beholden to or controlled by those who appoint them. State authorities must submit to the Comptroller all no-bid contracts costing over $1 million and those paid for with appropriated funds. They are required to follow MWBE, lobbying disclosure, and reporting requirements, and must create a whistle blower program to protect those who report authority misconduct.

Perhaps most importantly, the legislation creates an independent Authorities Budget Office (ABO) with powers of investigation, referral, and oversight. The ABO has already begun to ensure that authorities abide by all elements of the new law. Going forward, there are additional reforms that will ensure that New York State continues its leadership role in the effort to make public authorities more effective and accountable. The success of the authority reform effort is by no means assured. Vested interests, both within and without the network of public authorities are already seeking to weaken the new legal reforms, and to minimize enforcement of the law. It would be unfortunate and unnecessary if this were to occur. We have spoken with the ABO [and] the Millstein Advisory Task Force, held hearings and investigations on various state and local authorities and compiled the following recommendations we believe are most important to protect and enhance the reform mission going forward.
The recommendations

The recommendations include:
  • Dissolution of Unneeded Public Authorities
  • Ban “Bonuses” and Contingent Compensation
  • Increase Funding for the ABO (The ABO has been designed and approved for a staff of about 30. It currently employs only 7 persons. It should be budgeted for a staff of at least 15 in the next fiscal year.)
  • End Evasion of PARA and Other State Laws
  • Improve Enforcement of PARA (The Millstein Task Force has recommended that the Office of the Attorney General and the State Inspector General designate investigators and lawyers to assist the ABO with enforcement of the law, believing that collaborative enforcement is the key to keeping with PARA’s statutory intent. We concur. Three small statutory changes would enhance the enforcement powers of the ABO:
  • Expand and Clarify the Fiduciary Duties of Board Members
  • Require Public Authorities to Implement Risk Management and Oversight
  • Amendments to PARA to Streamline Reporting Requirements, and ABO Board of Directors
The conclusion

The report states:
Conclusion: The Continuing Public Authority Crisis

The reform of state authorities is well and truly begun. Transparency has already dramatically increased. Oversight by the Legislature, the ABO and most recently by the State Comptroller is regular and effective. Authority behavior has already improved.

These accomplishments are fragile. If the Governor and Legislature undermine the authority of the ABO, if adequate resources are withheld, if the ABO persists in its timidity in the face of wrongdoing, if state and local authorities continue to seek to evade PARA and other state laws, then the system will revert to its incarnation as a series of “Soviet-style bureaucracies.” The recommendations contained in the Report will go far in preventing that outcome.

But a larger problem remains unsolved, and lands squarely on the desks of the new Legislature and new Governor. Historically, authorities have flourished for good and bad reasons. They became vehicles for the provision of public services, for the insulation of elected officials from politically sensitive decisions, and for the issuance of public debt outside of existing legal requirements. But they also became vehicles for the transfer of billions of dollars of public wealth into private hands. It is this latter phenomenon which remains out of control. The State Constitution has provisions to prevent such transfers, including the gift and loans provision and the debt provisions. With the support of Governors, Legislatures and the Courts those protections have been eroded. In some areas, judicial erosion of the constitutional protections was a response to widely accepted arguments of necessity. There was a need for revenue backed financing, while the Constitution permitted only full faith andcredit debt, and for public/private cooperation and new financial strategies that fell afoul of previous Constitutional doctrine. The courts responded. But the massive transfer of public property into private hands that resulted was not foreseen and is not justified. It has not been accompanied by commensurate public benefits. Public authorities became the vehicle for such transfers, be they publicly funded sports facilities by IDA's, or an Empire Zone program run by ESDC, or university construction using eminent domain powers, or distribution of the public's below-market-value electricity and real estate, state authorities have been giving away public assets and receiving little in return. To be sure, the rhetoric of job creation and economic development is powerfully expressed by elected officials, authority leaders and private sector beneficiaries of these transfers. But in the end the State has failed to protect its assets and interests.

In an era when government is instructed to behave more like business, the failure to receive value for its investments is a crisis that can no longer be ignored. Why, for example, does ESDC refuse to seek an equity interest in entities in which it invests funds? Other sovereign wealth funds, including TARP, have learned well that public funds need the same protection and return as private funds. Why do authorities fail to assure adequate wage levels for jobs created with public funds? Why is there no effective way to measure and monitor job creation? What criteria are used to hand out tax preferences and reductions, and what is their total cost? As state government grapples with the cost of providing essential services, and reduces them, state leaders need to address and answer these questions. It is the great, unaddressed next step in authority reform.
Other coverage

Here's coverage on the Times Union Capitol Confidential blog, source of the document embedded below.

An AP article made it into the Wall Street Journal under the bland, misleading headline Local Nonprofits Face New Scrutiny
ALBANY—A committee of the New York state Assembly says the agency that oversees more than 700 public authorities in New York needs statutory authority to impose fines on the quasipublic entities that fail to report their borrowing, bonus payments or other activities.

In a report Monday, the Committee on Corporations, Commissions and Authorities says more than 100 authorities are essentially defunct and hundreds more are duplicative and should be shuttered.

The report urges applying technical analysis and common sense, noting a recent "disturbing trend" by local governments in establishing not-for-profit organizations that assert they aren't subject to the oversight.

Richard Brodsky, chairman of the committee, says the efforts to make changes under the Authorities Budget Office have begun.

Brodsky Report on Public Authorities

2 comments:

  1. So, why is Brodsky silent on AY? Why did he fail so miserably on it over the years? It was a poster child and he let it go.

    ReplyDelete
  2. We don't know. Some other controversies may be easier to take on--after all, Yankee Stadium was essentially done.

    My speculation was that Brodsky was wary of taking on Assembly Speaker Sheldon Silver. Brodsky was vociferous in his disagreement, as explained in this exchange summarized from Michael D.D. White's Noticing New York blog.

    http://atlanticyardsreport.blogspot.com/2010/05/noticing-new-yorks-white-puts-ag.html

    Whatever the reason, the circumstantial evidence of Brodsky's distance from AY is pretty clear.

    ReplyDelete