Reinvent Albany recommends major reforms for Empire State Development, "secretive" state authority with "amorphous mission"

It's gotten relatively little press attention, but a 7/27/23 report from the watchdog Reinvent Albany on Empire State Development, the gubernatorially-controlled state economic development authority (that oversees/shepherds Atlantic Yards/Pacific Park) deserves significant attention, since there's so much to fix.

The headlines so far are State's development arm is secretive and 'vulnerable to corruption,' watchdog says, from Crain's New York Business, and Report gives rise to talk of economic development transparency reform, from Spectrum News.

The full report is available at Reinvent Albany and at bottom.

The overview

From the announcement, Watchdog Report Calls for Major Governance and Transparency Reforms for Empire State Development:

Watchdog group Reinvent Albany’s “Open ESD” report includes 35 specific actions to improve ESD’s transparency, governance, oversight, and ethics. Reinvent Albany wrote the report to encourage the public authority’s Board of Directors and staff, the Governor, Legislature, State Comptroller, and Authorities Budget Office to take many big and small steps to increase public confidence that ESD puts the public first, not the Governor or powerful special interests and business clients. This report follows last week’s publication from Citizens Budget Commission showing that New York state and local governments are spending $11b a year on economic development, many of which involve ESD subsidies and projects.

Reinvent Albany’s “Open ESD” report was written by Elizabeth Marcello, the group’s Senior Research Analyst, who interviewed current and former state officials and experts from academia, think tanks, and watchdog groups, and reviewed hundreds of ESD documents and webpages.

(Note: my blog is quoted at certain points, and I will cite some Atlantic Yards-related references in a follow-up post.)

Key points

The announcement makes key points about vulnerability to corruption, secretive practices, and avoidance of scrutiny:

ESD is among the state authorities and agencies most vulnerable to corruption, pay-to-play, and political abuse. ESD has an amorphous mission that reduces its public accountability, and the Board and senior management are completely controlled by the Governor and show very few signs of acting independently. ESD by design engages in massive, secretive, sole-source deals totally at odds with basic principles of government spending and procurement that emphasize transparency and competitive bidding.

ESD is secretive and does not publicly disclose basic information about many subsidy deals, including the size of the subsidy, subsidy cost per job, and the financial assumptions underlying the subsidy. ESD does publish a huge amount of information, but much of it is more akin to a press release than usable data or honest evaluations of ESD activities that make it clear to taxpayers what their money is actually buying.

ESD officials must obey the New York State Public Authorities Law and Public Officers Law, which establish clear expectations for ethical and transparent behavior by the Board of Directors and staff. These laws are rooted in the principle that government is the public’s business, and the people’s right to know is basic to our society and democracy. Rather than embrace this responsibility, ESD officials and staff too often dodge reasonable questions from the public and journalists and game legal exceptions to delay and/or avoid disclosing records under the Freedom of Information Law. Their general secretiveness is so vexing that progressive and conservative watchdog groups and state legislators had to push for years to create a Database of Economic Incentives – something states like Florida, Wisconsin, and Washington have had for years – but which still does not reveal the total state subsidies an individual business has received over the last decade.

35 recommendations

This report makes 35 recommendations in four areas: Governance, Oversight, Transparency, and Ethics/Conflicts of Interest.

I cited one yesterday--the importance of making Board Materials available three days before meetings--and tomorrow will focus more on Atlantic Yards--but let me point to several more, with a few comments interpolated.

Re governance

First, related to ESD Governance:

The Legislature should pass S989 (Mattera) / A1768 (Colton) of 2023 which requires legislative approval for the creation of any new public authority subsidiaries.

That would include entities like the Atlantic Yards Community Development Corporation. Also:

The Legislature should have to approve the creation of any new LLCs for real estate deals.
The Legislature should rewrite ESD’s mission statement to clearly establish the authority’s purpose and core functions. 

The Legislature should amend the Urban Development Corporation (UDC) Act so that of the nine members of the board of directors, three members total are selected by the State Comptroller and majority leaders of the Assembly and Senate, who select one appointee each. The remaining members can be appointed by the Governor.

Otherwise, it's a gubernatorial rubber stamp. Remember the rarity of a board member approving an Atlantic Yards measure in 2014, "Aye, with reservations"?

Re accountability

Regarding ESD Accountability, the report states:

The State Comptroller should conduct more regular audits of ESD programs and projects. We suggest an audit of ESD compliance with Executive Order 95 of 2013 requiring the publishing of all public data on the New York State Open Data portal, as well as an audit of ESD transparency practices when it comes to megaprojects.
The Authorities Budget Office (ABO) should conduct a governance and operational report/review of ESD.
The Legislature should pass S6746 (Ryan) of 2023 to expand the powers of the ABO. The ABO should have the power to remove board members who neglect to complete required state training, and to dissolve authorities who act outside of their legal authority.
Relevant committees of the State Legislature, such as Corporations, Finance, and Government Operations, should hold regular oversight hearings regarding ESD’s activities, including business subsidy programs and megaprojects, outside of the regular budget hearings.

Regarding jobs:

The Legislature should assess whether ESD’s current definition of “job” (defined as FTE, or full-time equivalent) is adequate and consistent with best practices.
ESD should eliminate the concept of a “retained” job. It is impossible to demonstrate whether a job is retained because of a government subsidy or market conditions.

Of course many of the office jobs initially projected for Atlantic Yards would've been "retained."

Re transparency

Regarding Transparency, the report states:

ESD should publish a schedule of reporting requirements that includes links to relevant reports. In the long term, the Governor and the Legislature should streamline the reporting process so reports are less onerous to ESD staff.
ESD should fully comply with Executive Order 95 of 2013, requiring the publishing of all public data on the New York State Open Data portal. Legislation should be considered in this area if compliance cannot be achieved administratively.
ESD should create and publish on its website an organizational chart like other agencies and authorities, as recommended by the Comptroller’s Standards for Internal Control and the Authorities Budget Office’s Guidance on Public Authority Websites. See, for example, the Office of the State Comptroller’s organizational chart.

Indeed, it's often impossible to understand how ESD works. 

Also:

The Legislature should pass legislation requiring ESD to release all financial documents and analyses related to any project that seizes land (and tax payments) from any locality.

That would include Atlantic Yards/Pacific Park.

Re FOIL

Re Freedom of Information Law (FOIL):

ESD should adopt an Open FOIL “release to one release to all” policy facilitated by enterprise software like New York State’s GovQA. The Port Authority of NY/NJ has been doing this since 2012. Additionally, FOIL requests should be used to prioritize proactive release of information via a “Reading Room,” where documents are publicly available online.

Exactly. Why do I have to ask every six months for the six-month project look-ahead produced by the Atlantic Yards/Pacific Park master developer to be released?

Also:

The Legislature should pass S3502-A (Skoufis) of 2023, which ends the FOIL exemption for consultant reports paid for by the state.

There are many, many consultants working on Atlantic Yards/Pacific Park.

Re financial transparency

Regarding Project and Program Transparency, the report states:

ESD should proactively release detailed financial data for all projects undertaken, including revenue and cost projections. ESD should be explicit about standard financial assumptions embedded in its models and make clear degrees of uncertainty, especially for out-years.

How relevant are the previous ESD reports on Atlantic Yards, which presumed project completion years ago?

Also:

ESD should allow live public comment at its Board meetings so the public can fully and meaningfully participate in Board actions and decisions.

I should've mentioned this yesterday, but it should go without saying. ESD used to allow live public comment, but gave it up at some point, perhaps after COVID hit and meetings went virtual.

Re ESD's website:

ESD should fix dead links and link misdirects on its website.

There are lots of dead Atlantic Yards links.

Also:

ESD should list all subsidiaries on its website and publish all available subsidiary reports.
ESD Board meetings should be made more transparent. ESD should create a database on the New York State Open Data portal that includes Board materials, actions, votes, and recusals.

ESD's response

Spectrum News quoted report author Marcello as calling ESD "very secretive," unwilling to explain cost per job and underlying financial assumptions 

"Anything could be economic development," she said of ESD's scope. "It could take any project that the governor dreams up and it has to take it on."

The article offered ESD a response:

"Reinvent Albany is reinventing the facts," ESD spokeswoman Kristin Devoe said in a statement Friday. "From a historic $100 billion investment by Micron unlocking tens of thousands jobs, to pandemic relief funding that supported more than 40,000 small businesses, ESD is continuing to support the state’s growth in a way that attracts 21st Century businesses from fast-growing sectors, creates and protects critical jobs and moves the economy forward.”

Touting general statistics does not rebut the report. Also from the article:

ESD projects have retained and created more than 174,000 jobs statewide since 2018, generating $27.1 billion in private-sector investment, according to the department.

Wait a sec--one of the points made by Reinvent Albany is that retained jobs shouldn't count. ESD is essentially endorsing that report. 

Also from Spectrum News:

Department officials also tout launching a new webpage dedicated to ESD transparency efforts, and holding about 100 public meetings in the nearly two years since Gov. Kathy Hochul took office. ESD issues more than 50 annual and quarterly program reports, which the department says have been issued more expediently under Hochul.

That sounds like progress, but, at least with Atlantic Yards/Pacific Park, it's clear they're far from transparent.