The Job Development Authority, creator of BALDC (issuer of AY debt) & staffed by ESDC, fails to file annual report, budget info, mission statement
In one important official accounting, the JDA--which has no dedicated staff--appears to be a cipher.
Nearly alone among state authorities, it didn't submit a mission statement, an annual report, or a budget report, according to the first annual report by the state Authorities Budget Office (ABO).
The unusual transaction
Last December, Perkins in a letter to Attorney General Andrew Cuomo asked a question that, to my knowledge, has never been answered:
In essence, the ESDC crafted an unusual transaction whereby a nearly defunct entity, the Job Development Authority (JDA) was used to form the Brooklyn Atlantic Yards Development Corporation (BALDC) which then issued the $511 million worth of arena construction bonds.Such a review by the PACB might have delayed the arena bonds, possibly beyond the end-of-year deadline for a crucial tax exemption.
I believe that the bond issuance was done in this manner to avoid a review by the Public Authorities Control Board (PACB) and the state Comptroller. I respectfully request that your office issue an opinion as to whether the process employed during the bond issuance was legal, as the public must have utmost confidence in the processes of government.
I asked the ESDC why no filing had been made by the JDA, whether it would be made, and whether the BALDC would be included.
I got the following response last week from spokeswoman Elizabeth Mitchell:
ESDC has been working towards a JDA filing, and has held discussions with ABO about filing for JDA. JDA is a legal entity distinct from ESDC without a separate staff (ESDC staff functions as JDA’s staff, although JDA has an independent board) and much of the information asked of public authorities is not applicable. Therefore we have been working to prepare a customized filing that takes into account JDA’s unique nature, and once the prior three years of filings are complete, we will immediately file this year’s report. We are currently preparing these filings and hope to submit them within the next few months. As the Brooklyn Arena Local Development Corporation is an affiliate of JDA, information regarding it will be covered in JDA’s filing.There was no explanation for the delay.
But it does seem clear that the JDA can serve as a vehicle for the ESDC to shed some of the responsibilities, as Perkins charged.
The JDA had better file its report. The Utica Observer-Dispatch, in an editorial yesterday, wrote:
Among the duties of the independent office is to oversee the operations and finances of public authorities to assure they are acting in the public interest, and to collect, analyze and disseminate organizational, operational, performance and financial information on the authorities for the purpose of making it available to the public. The office can’t do that without the annual reports.Report issued July 1; salaries draw focus
Nicole Hanks, deputy press secretary for the Office of the State Comptroller, said that office has the ability to suspend Industrial Development Agencies that fail to file reports. The comptroller also can audit multiple public authorities, she said, share findings and refer cases to the appropriate public officials. Finally, the Budget Authorities Office can investigate, recommend and/or suspend public authorities/directors that are delinquent, Hanks said.
The ABO was created by the Public Authorities Reform Act, effective in March, that was pushed by Perkins and, especially, Westchester Assemblyman Richard Brodsky, now a Democratic candidate for Attorney General.
The report was greeted mostly with a shrug; the New York Times on July 12 offered a City Room post, headlined A Magnifying Glass on Public Authorities, which summarized the issues, but ignored the JDA.
Reuters, in an article headlined Top NY state bureaucrats earn nearly $128,000/year, focused on some statistics:
Almost 5,000 bureaucrats who work for New York public authorities earned an average of $127,915 in 2009, according to the first report by an agency created to safeguard the public interest.Scroll down for details on how 26.5% of staffers at the ESDC earn more than six figures. (However, only one, low-paid staffer drew a bonus, while several other authorities were reported by the ABO on July 9 as giving out many bonuses.)
Brodsky, upon the report's issuance, released a statement, focusing on the issue of authority debt and compliance with the ABO:
“We’ve clearly made progress in reigning in the state’s 700+ Soviet-style bureaucracies. But we’ve just scratched the surface of the reforms needed to be put into place. We finally have objective numbers on the huge amount of authority debt and a list of some of the authorities that have not complied with the law. The law only became effective March 1st and the phase in of the law’s requirements such as whistleblower provisions and enhanced fiduciary duties and many other reforms is just beginning. The ABO must be vigilant and decisive in confronting authorities that are not obeying the law.”Unelected authorities have been used to issue debt, thus evading legislative oversight. Brodsky recently sponsored legislation that would require debt reduction policies for all state authorities, the largest of which, the Dormitory Authority and Metropolitan Transportation Authority, make up almost half of the debt outstanding by State Authorities.
Brodsky also cited efforts by the ABO, working with the Governor’s Office and the Legislature, to identify public authorities that no longer function or serve their public purpose. Already legislators are trying to dissolve about 130 authorities.
From the report
Here are some excerpts:
Key Provisions of the Public Authorities Reform ActReporting and property transactions
Central to the Act was the codification in Public Authorities Law of the Authority Budget Office as the independent Authorities Budget Office and vesting this recreated office with additional powers and responsibilities.
Additional Responsibilities of Public Authority Boards
The Public Authorities Reform Act contains a number of provisions specifically related to the role and responsibilities of board members:
• Effective March 1, 2010 the directors of state and local public authorities, and their official designees, are required to sign an Acknowledgment of Fiduciary Duty. The purpose of this requirement is to focus board members on their legal obligations, including understanding that these duties are the means by which the board carries out the mission of the authority (See Policy Guidance 10-01).
• By March 31, 2010 state authority boards of directors, in cooperation with the management of the authority, were to review and consider the intended purpose for which the authority was created and to file with the Authorities Budget Office a statement defining that mission and the measures the authority would use to evaluate annually its performance against that mission. Local authorities are required to file a mission statement and performance measures by March 31, 2011 (see Policy Guidance 10-02).
• Each board is now required to perform an annual self-evaluation of its performance, measured against the authority’s mission statement, the authority’s goals and values, and the expectations of those served by the authority and the state as a whole.
• The boards of public authorities that issue debt are now required to establish a finance committee to review the authority’s proposed debt issuances; to make recommendations to the full board concerning the nature and appropriate level of the authority’s debt; and to make recommendations to the board concerning the appointment and compensation of bond counsels, investment advisors and underwriting firms.
The report indicates new rules that would make it more difficult for authorities like the Metropolitan Transportation Authority to sell off property like the Vanderbilt Yard below market value and/or to renegotiate the deal, as it did last year (which Brodsky said would violate board members' fiduciary duty, though the new law had not yet passed):
Additional Responsibilities of Public AuthoritiesTask force report coming
The new Act imposes added reporting responsibilities on public authorities. In addition to providing the ABO with mission statements and performance reports, public authorities will also be expected to provide information on their current organizational structure and the composition of committees, background information on the formation of the authority and the professional experience of board members and management, and more complete financial information pertaining to the authority’s operating risks, long term liabilities and property transactions. Specific new requirements include:
...Property dispositions at below fair market value that do not involve a governmental or public entity or are not consistent with the mission of the authority may be subject to the review and approval of the Governor and the Legislature. As part of the transaction record, such disposals would require a full description of the asset, its appraised value, the names of the parties involved in the transaction, an explanatory statement of the purpose of the transaction and a written determination by the board that no other reasonable alternative to a below fair market transaction was feasible.
The report notes that a task force is still working:
When Governor Paterson signed the public authorities reform legislation into law in December, 2009, he also established a task force of individuals knowledgeable in corporate governance to assist the ABO interpret and implement the purposes of the Act. The charge of the task force is to provide policy guidance and to make recommendations concerning implementation of the Act, particularly concerning the parameters and scope of the fiduciary duty of public authority boards of directors and to address the resource requirements necessary for the ABO.Compliance issues
The task force will issue its final report by August 15, 2010.
Below are excerpts regarding compliance. Note that the JDA is an outlier among state authorities, as indicated in the bolded section below, though even those authorities that are compliant have not necessarily followed the spirit of the law:
General Observations on Public Authority ComplianceSalary issues
By all measures, the Authority Budget Office has been successful in achieving consistent annual reporting by state authorities. For the 2009 reporting period, the rate of compliance by state authorities exceeded 90 percent. Only 5 of 46 covered state authorities failed to file 2009 annual reports with the ABO, while 2 of 46 failed to file 2010 budget reports. The percentage of compliance by local industrial development agencies is similar to that of state authorities. As important, there appears to be a genuine effort being made by the management and staff of these authorities to meet statutory reporting deadlines and to treat those deadlines seriously so as to avoid appearing on a public list of non-compliant authorities.
As of March 31, 2010 State public authorities were required to submit a proposed mission statement and performance measures. The intent of this new reporting requirement was to have boards of directors focus increased attention on the actual mission of the authority, especially in light of recently enacted reforms. The board was expected to take the time to discuss, re-think and reach agreement on the authority’s mission and to draft a mission statement that reflects the consensus thinking of the board and the authority’s statutory purpose. The mission statement, as re-adopted by the current board, should be specific enough so as to be able to assess the authority’s performance and to measure its success in achieving its intended purpose.
Only the Erie County Medical Center and the Job Development Authority, out of the 46 state authorities, failed to submit this information to the ABO. While statistically this is a high rate of compliance, it is apparent, after a preliminary review of these mission statements, that many State public authorities did not take advantage of this opportunity to do the due diligence that was expected by the statute and Policy Guidance 10-02. It appears that some boards of directors did not formally re-adopt a mission statement, which is a likely indication that little or no serious discussion on this topic took place. In some cases, the ABO received copies of the authority’s enabling statute, which is not a substitute for a mission statement, or mission statements that were adopted many years ago and may no longer be germane to the core activities of the authority. Other mission statements were overly broad or so unclear and generic as to make them ineffective as a standard by which the performance of the authority could be measured.
Among large agencies, the ESDC (formally the New York State Urban Development Corporation) comes in second behind the Dormitory Authority in terms of percentage of staffers earning more than $100,000, clocking in at 26.5%, or 115 out of 434.
Yes, there are many more people at the MTA earning six figures, but they represent a much smaller percentage with than the ESDC.
(Click on graphic to enlarge.)
One of the best places to earn a high salary is the United Nations Development Corporation, which was created in 1968 "to assist the United Nations community with its office space and other real estate needs." Five of eleven staffers earn more than six figures.