Creates the authorities budget office; repealer

Section 2 of the bill would amend Public Authorities Law ("PAL") § 2 by adding a new subdivision 6 to define "authorities budget office" as the entity established pursuant to PAL § 4.

Section 3 of the bill would amend PAL § 2(5) to replace a statutory reference to the previously established authority budget office (L. 2005, ch. 766, § 27) with the phrase "authorities budget office."

Section 4 of the bill would designate PAL Article 1, §§ 1 and 2 as Title 1 and provide a new title heading: SHORT TITLE:; DEFINITIONS.

Section 5 of the bill would amend PAL Article 1 by adding a new Title 2 to establish a new IABO, as follows:

* New PAL § 4 would establish the IABO as an independent entity within the Department of State.

* New PAL § 5 would create the position of Director of the IABO, who would be appointed by the Governor, upon the advice and consent of the Senate, for a term of 4 years. The salary of the Director would be established by the Governor within the limit of available funds, in an amount no less than the salaries of certain state officers holding the positions indicated in Executive Law § 169(1)(d).

* New PAL § 6 would set forth the powers, duties and authority of the IABO.

* New PAL § 7 would require the IABO to issue to certain elected officials and members of legislative committees annual reports with conclusions and opinions concerning the performance of public authorities and to study, review and report on the operations, practices and finances of state and local authorities.

Section 5-a of the bill would repeal L. 2005, ch. 766, § 27, which established the current Authority Budget Office.

Section 6 of the bill would amend PAL §§ 2800(1) and (2) to enhance the reporting requirements for state and local authorities.

Section 6-a of the bill would create a new PAL § 2800(4) to permit the IABO, upon application of any authority, to waive any reporting requirements upon a showing that the authority meets the criteria for a waiver established by the IABO's regulations.

Section 7 of the bill would amend PAL § 2801 to specify that each state and local authority must provide budget information on operations and capital construction for the next fiscal year and the current fiscal year and the actual receipts and expenditures for the last completed fiscal year, on an annual basis not more than 120 days and not less than 90 days before the commencement of its fiscal year in the case of a state authority, and not more than 90 days and not less than 60 days before the commencement of its fiscal year in the case of a local authority.

Section 8 of the bill would make technical changes to PAL §§ 2802(1) and (2) in relation to the submission to the appropriate entities of a copy of each state or local authority's annual independent audit report.

Section 9 of the bill would amend PAL § 2806 to make technical changes in relation to the submission of personnel reports by state and local authorities.

Section 10 of the bill would amend PAL § 2824 (1) to require that board members of state and local authorities perform their duties as board members in good faith and with that degree of diligence, care and skill which an ordinarily prudent person in like position would use under similar circumstances, taking into consideration the views and policies of any elected official or body, or other person and ultimately applying independent judgment in the best interest of the authority, its mission and the public. Section 10 of the bill would also amend PAL §§ 2824(4) and (6) to mandate that the audit committee of any board have at least 3 independent members, who must constitute a majority on the committee, and that members of the audit committee be familiar with corporate financial and accounting practices. Section 10 of the bill would also amend PAL §§ 2824(7) to mandate that the governance committee of any board have at least 3 independent members, who must constitute a majority.

Section 11 of the bill would create a new PAL § 2824(8) requiring that board members of each state and local authority or subsidiary thereof which issues debt to establish a finance committee to be comprised of not less than 3 independent members who must constitute a majority on the committee and who must possess the necessary skills to understand the duties and functions of the committee. PAL § 2824(8) further provides that it will be the responsibility of the members of the finance committee to review proposals for the issuance of debt by the authority and its subsidiaries and make recommendations.

Section 11-a of the bill would amend PAL § 2827 to provide for the removal by the appointing authority of an authority member who breaches his or her fiduciary duty. Neither PAL §2827 nor PAL § 2824(1) provide for, nor is it the intent of this bill to create, a private right of action for a breach of fiduciary duty.

Section 11-b of the bill would amend PAL § 1678(5) to make the appointment of the Executive Director of the Dormitory Authority of the State of New York ("DASNY") subject to confirmation by the Senate in accordance with new PAL § 2852.

Section 11-c of the bill would amend PAL § 354(6) to make the appointment of the Executive Director of the New York State Thruway Authority ("Thruway Authority") subject to confirmation by the Senate in accordance with new PAL § 2852.

Section 11-d of the bill would amend PAL § 1004 to make the appointment of the Chief Executive Officer of the Power Authority of the State of New York ("NYPA") subject to confirmation by the Senate in accordance with new PAL § 2852.

Section 11-e of the bill would repeal PAL § 2824(3), which prohibits any board member, including the Chair, from serving as a public authority's Chief Executive Officer, Executive Director, Chief Financial Officer, Comptroller, or any other equivalent position while also serving as a member of the board; and it would add a new subdivision 3 to prohibit any Chair who is also the Chief Executive Officer from participating in setting the level of compensation of the Chief Executive Officer.

Section 11-f of the bill would amend PAL § 1020-f to make the appointment of the Chief Executive Officer of the Long Island Power Authority ("LIPA") subject to confirmation by the Senate in accordance new PAL § 2852.

Section 11-g of the bill would create a new PAL § 2852 in relation to Senate confirmation of certain chief executive officers. New PAL §2852 provides that with respect to the appointments of the chief executives for the DASNY, the Thruway Authority, NYPA, and the LIPA, the Senate must vote to confirm any such appointment within 60 days of its submission to the Senate during session, or if such submission is made when the Senate is not in session, within 7 days of the convening for session. If the Senate fails to vote to confirm any such appointment within the time set forth in this section, such appointment would be deemed confirmed without any further action by the Senate. As used in this provision, "session" refers to the regular session of the legislature that typically occurs during the months of January through June each year.

Section 12 of the bill would create a new PAL § 2824-a to require each state authority to submit to the IABO on or before March 31, 2010, and each local authority to submit to the IABO on or before March 31, 2011, a proposed authority mission statement and proposed measurements which the IABO would be required to post on its website.

Section 13 of the bill would amend PAL § 2825(2) to make a technical change to reference L. 2005, ch. 766.

Section 14 of the bill would create a new PAL § 2870-a, in relation to the review of state authority contracts by the Comptroller, as follows:

* New PAL § 2870-a(1) permits the Comptroller, at his or her discretion and upon notification, to review state public authority contracts or categories of contracts in excess of one million dollars (a) to be awarded by a state authority to a single source, a sole source or pursuant to any other method of procurement that is not competitive, or (b) which are to be paid in whole or in part from monies appropriated by the state to a state authority for such contractual expenditure. PAL § 2870-a(1) provides that any contract subject to such review will not be a valid enforceable contract without first having been approved by the Comptroller. PAL § 2870-a(1) also requires the Comptroller to promulgate such rules and regulations as may be necessary to carry out his or her responsibilities under this section, including but not limited to the standards for determining which contracts will be subject to his or her review and for approving such contracts.

* New PAL § 2870-a(2) provides that where the Comptroller has notified a state authority that any contract or category of contracts will be subject to his or her approval, the authority must include in each such contract a provision informing the other party that the contract is subject to the Comptroller's approval. If the Comptroller has not approved or disapproved a contract subject to his or her approval within 90 days of submission to his or her office, the contract will become valid and enforceable without such approval.

* New PAL § 2870-a(3) provides that the Comptroller will not review:

o contracts entered into for the issuance bonded indebtedness; o contracts entered into by hospitals established under PAL Article 10-C that are for: * projects approved in accordance with Public Health Law Articles 28, 36, or 40 or Social Services Law Article 7; * projects approved in accordance with Mental Hygiene Law Articles 16, 31, 32; * services (including but not limited to physicians, hospital administrators and medical groups), affiliations or joint ventures for the provision or administration of health care services or scientific research; * payment for direct health care services or goods used in the provision of health care services; or * participation in group purchasing arrangements. o contracts entered into for the procurement of goods or services made to meet emergencies; o contracts of purchase or sale made by an authority on a recognized market for goods, services, or commodities in question in accordance with standard terms and conditions of purchase or sale at a market price; o contracts for the purchase, sale or delivery of power or energy, fuel, costs and services ancillary thereto, or financial products related thereto, with a term of less than five years; and o contracts for the sale or delivery of power or energy and costs and services ancillary thereto for economic development purposes pursuant to PAL Article 5, Title I or Economic Development Law Article 6.

Section 14-a of the bill would provide that no public authority shall enter into any contract under which the public authority has a substantial proprietary interest in a hotel or convention center project unless the contract requires as a material condition that the contractor or a subcontractor thereof enter into a labor peace agreement with a labor organization that represents hotel employees in the state, for a period of at least five years.

Section 15 of the bill would make technical changes to PAL § 2896(3) relative to the publication by each public authority of a report listing all real property disposed of by such public authority, and require such report to be delivered to the IABO in addition to the Comptroller, the Director of the Budget, the Commissioner of General Services, and the legislature.

Section 16 of the bill would create a new PAL § 2975(3-a) to provide that a direct portion of the funds collected from public authorities by the State representing an allocable share of state governmental costs attributable to the provision of services to public benefit corporations, shall be allocated to fund the IABO.

Section 17 of the bill would create a new § 2827-a, in relation to subsidiaries of public authorities, as follows:

* New PAL § 2827-a(1) generally prohibits state authorities from organizing any subsidiary corporation unless the legislature enacts a law permitting the authority to organize a specific corporation. New PAL § 2827-a, however, provides that a state authority may organize a subsidiary corporation if: (a) the subsidiary corporation will do a project or projects which the state authority has the power to pursue pursuant to its corporate purposes; (b) the primary reason for the subsidiary corporation is to limit the potential liability impact of the subsidiary's project or projects on the authority or because state or federal law requires that the purpose of a subsidiary be undertaken through a specific corporate structure; and (c) the subsidiary corporation makes the reports and other disclosures as are required of state authorities.

* New PAL § 2827-a(3) provides that a subsidiary corporations formed under PAL § 2827a(1) cannot issue bonds, notes or other debts except to its parent corporation, and in that case, only in an amount that does not exceed, at any time, a principal amount of $500,000 or, during the 9 months after the formation of the subsidiary, $1 million.

* PAL § 2827-a(6) requires any subsidiary to provide to the Chair and Ranking Minority Member of the Senate Finance Committee and the Chair and Ranking Minority member of the Assembly Ways and Means Committee, and each Chair and Ranking Minority Member of the Assembly and Senate Committees on Corporations, Authorities, and Commissions, a report on such subsidiary public benefit corporation.

* PAL § 2827-a(7) exempts hospitals established under PAL Article 10-C from certain provisions regulating subsidiaries, so that such hospitals would be able to create subsidiaries that can issue debt, so long as the purpose for which the subsidiary corporation is organized is a project or projects which such entity has the power to pursue pursuant to its corporate purposes. PAL § 2827-a(7) further provides hospitals may not organize a subsidiary for the purpose of (a) evading the requirements of an existing collective bargaining agreement; or (b) replacing or removing a certified employee organization.

Section 18 of the bill would create a new PAL § 2856 requiring every authority that is not subject to a statutory limit on bonds, notes, or other debt obligations it may issue, to submit to the IABO a statement of intent to guide the authority's issuance and overall amount of bonds, notes, or other debt obligations.

Section 19 of the bill would amend PAL § 2897(3) to provide that the disposal of any property which, because of its unique nature is not readily valued by reference to an active market for similar property, must be accompanied by an appraisal.

Section 20 of the bill would amend PAL §§ 2897(6)(c) to permit disposals and contracts for disposal of property to be negotiated or made by public auction without public advertising of bids pursuant to PAL § 2897(a) and (b), under the circumstances permitted by PAL § 2897(7). Section 20 of the bill would also amend PAL § 2897(6)(d) to require an explanatory statement the circumstances of each disposal by negotiation of any real property disposed of by lease if the estimated annual rent over the term of the lease is in excess of $15,000.

Section 20-a of the bill would create a new PAL § 2897(7) to permit a public authority to transfer an asset for less than its fair market value in three situations.

First, below-market transfers would be permitted where the transferee is a government or other public entity, arid the terms and conditions of the transfer require that the ownership and use of the asset remain with the government or any other public entity, thereby ensuring that an authority-to-public entity transfer would not be a means to pass through property to a private entity.

Second, a below-market transfer by a public authority would be permitted if the purpose of the transfer is within the purpose, mission or governing statute of the authority.

Third, in the event a public authority seeks to transfer an asset for less than its fair market value to other than a governmental entity, and the disposal would not be consistent with the authority's mission, purpose or governing statutes, the proposed transfer would be subject to denial by the Governor, the Senate, or the Assembly. The Governor and each house of the legislature would be required to take any such action within 60 days of receiving notification of such proposed transfer during the months of January through June, but if the legislature receives notification of a proposed transfer during the months of July through December, the legislature may take any such action within 60 days of January first of the following year. If no such resolution or certification is performed within 60 days of such notification of the proposed transfer to the Governor, Senate, and Assembly, the public authority may effectuate such transfer. However, with respect to such a transfer by a local authority, if its governing statute provides for the approval of such transfer by the executive and legislative branches of the political subdivision in which such local authority resides, and the transfer is of property obtained by the authority from that political subdivision, then such approval shall be sufficient to permit the transfer.

Finally, new PAL § 2897(7) requires that before approving the disposal of any property for less than fair market value, the board of an authority shall make a written determination that there is no reasonable alternative to the proposed below-market transfer that would achieve the particular purpose of such transfer.

Section 21 of the bill would amend Executive Law § 310(11)(b) to included "state authority" under the definition of "state agency," relative to the participation by minority group members and women with respect to state contracts.

Section 21-a of the bill would amend Executive Law § 310(13) of the executive law to amend the definition of "services" to include banking relationships, the issuance of insurance policies or contracts, or contracts with a contracting agency for the sale of bonds, notes or other securities.

Section 22 of the bill would amend PAL Article 9 by adding a new Title 12. to establish a whistleblower access and assistance program, as follows:

* New PAL § 2986(1) provides definitions for new Title 12.

* New PAL § 2986(2) requires the Director of the IABO to develop and recommend to the legislature a whistleblower access and assistance program.

* New PAL §2986(3) provides that any communications between an employee and the authorities budget office pursuant to this provision must be held strictly confidential by the IABO, unless the employee specifically waives in writing the right to confidentiality

Section 23 of the bill would create a new PAL § 2857 to provide that no state or local authority shall fire, discharge, demote, suspend, threaten, harass or discriminate against an employee because of the employee's role as a whistleblower, insofar as the actions taken by the employee are legal.

Section 24 of the bill would amend PAL Article 9 by adding a new Title 12-A to regulate public authorities lobbying contacts, as follows:

* New PAL § 2987(1) provides definitions for new Title 12-A, including "lobbyist," which has the same meaning as defined in Legislative Law § 1-c.

* New PAL § 2987(2) provides that every state authority shall maintain a record of all lobbying contacts made with such authority. * New PAL § 2987(3) provides that every member, officer or employee of a state authority who is the contacted by a lobbyist must make a contemporaneous record of such contact containing the day and time of the contact, the identity of the lobbyist and a general summary of the substance of the contact. For purposes of this section, contact means communication between a "lobbyist," as defined, and a person within a state authority who can make or influence a decision on the subject of the lobbying.

Sections 25, 26, 27, and 28 of the bill would make conforming changes to certain sections of the PAL to reflect the repeal of PAL § 2824(3) in section 11-e of this bill.

Sections 28-a through 28-i of the bill would provide for the transition from the prior Authority Budget Office to the new IABO established by this bill, and provide for the transfer of the appropriation for the office.

Section 29 of the bill would repeal a chapter of the laws of2009 amending the public authorities law and the executive law, relating to the creation of an authorities budget office, as proposed in legislative bills numbers S.1537-C and A.2209-C.

Section 30 of the bill is a severability provision.

Section 31 of the bill would provide for an effective date of March 1, 2010; provided, however that the amendments to Executive Law § 310 made by § 21 of this bill would not affect the expiration of that section and would be deemed to expire therewith; provided further, that §§ 11-b, 11-c, 11-d, 11-f and 11-g of this bill would not apply to any Executive Director or Chief Executive Officer appointed prior to its effective date; provided further that § 14-a of this bill would expire and be deemed repealed on June 30, 2012; and provided further, that § 20-a of this bill would apply only to the disposal of property authorized by the board of a public authority after such effective date.

Existing law

Chapter 766 of the Laws of 2005.

Prior legislative history

The Assembly and the Senate passed S.1537-C/A.2209-C in 2009.

Justification

This bill would strengthen the Public Authorities Reform Act of 2005 by creating an independent authorities budget office with expanded enforcement, oversight, and regulatory responsibilities. This new office would serve as an improved conduit of public information concerning the operations and finances of public authorities. The bill would also demand more transparency and accountability in relation to the formation of subsidiaries, the disposal of property, the letting of contracts, the decision-making of board members and lobbying contacts with public authorities.

Public authorities provide an expedient way to finance state capital projects and provide government services. Indeed, the dollar amount of outstanding general obligation state debt is a fraction of the debt held by public authorities for which the state has a financial obligation. The dual nature of public authorities makes their oversight and regulation a complex undertaking. This bill seeks to strike a balance by promoting and protecting the public interest relative to the governmental nature of these entities, while at the

same time preserving the operational efficiencies inherent in corporate entities.

Fiscal implications

The current Authority Budget Office has a staff of seven professionals and a budget of approximately $1.3 million. The creation of the IABO, with expanded enforcement, oversight, and regulatory responsibilities will drive costs above current levels. It can be expected that this new office will require legal and investigatory staff, as well as additional analytical and compliance personnel in order to meet these new duties. It is estimated, based on the provisions of this bill, that these resource needs for the office could total an additional $2.7 million on an annualized basis. This estimate does not include one-time costs associated with establishing, relocating and equipping the new office, nor does it include any additional costs that might be incurred by the Office of the State Comptroller pursuant to this bill. The bill provides for funding for the IABO to be allocated from the assessment imposed on public authorities.

Effective date

This bill would take effect would take effect March 1, 2010; provided, however that the amendments to Executive Law § 310 made by § 21 of this bill would not affect the expiration of that section and would be deemed to expire therewith; provided further, that §§ 11-b, 11-c, 11-d, 11-f and 11-g of this bill would not apply to any Executive Director or Chief Executive Officer appointed prior to its effective date; provided further that § 14-a of this bill would expire and be deemed repealed on June 30, 2012; and provided further, that § 20-a of this bill would apply only to any disposal of property authorized by the board of a public authority after such effective date.