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February 26, 2004
Legal ReformOther

THE push to overhaul New York's public authorities was kicked into higher gear this week by a package of "reform" proposals from state Comptroller Alan Hevesi and Attorney General Eliot Spitzer.

Recent allegations of bidding and contracting irregularities at the Thruway Authority and Metropolitan Transportation Authority (MTA), both controlled by appointees of Gov. Pataki, have certainly provided plenty of fodder for critics of the current system. But behind the political smoke, the state's top two elected Democrats are targeting a legitimate issue.

The comptroller estimates that New York has over 640 state and local authorities, including many technically classified as "public benefit corporations." Seventeen state-level authorities now account for more than $105 billion in debt, a third of it underwritten by state appropriations. The Dormitory Authority alone has nearly $30 billion in outstanding bonds, which is more than most states.

Hevesi describes this as "a large semi-secret unsupervised government empire." That's stretching it a bit. In fact, the largest authorities at least are subject to fairly rigorous financial disclosure standards and are regularly audited. This is more than can be said for the state Legislature - itself a $200 million-a-year operation.

What's more, the authorities didn't spawn themselves. For the better part of six decades, New York governors and legislators have been in the habit of creating new authorities for the thinly veiled purpose of circumventing debt restrictions and shifting often dubious project expenses outside the glare of tax-supported budgets.

No one was surprised when Albany's knee-jerk response to the World Trade Center attack was the creation of yet another authority, the Lower Manhattan Development Corp. - even though the LMDC doesn't do anything that couldn't have been done just as well by any number of existing agencies.

And the beat goes on. Last year the Legislature created five new state and local authorities, with seven more called for under bills pending in the current session.

Hevesi and Spitzer say the authorities should be subject to stronger corporate-governance standards, like those enacted by Congress in response to the corporate-accounting scandals. They also are calling for expanded disclosure by individuals lobbying authorities for contracts and other goodies. These are both good ideas.

But by far the most original and provocative of their proposals calls for the creation of a state commission empowered to order the consolidation or elimination of authorities, subject to legislative override. This is a step in the right direction - but doesn't go nearly far enough. For example, the operations of many authorities could be wholly or partially privatized on a competitive basis - a possibility that Hevesi and Spitzer either overlooked or chose to ignore.

If such a commission was ever formed and took its work seriously, the list of candidates for elimination would be very long but would certainly include the following:

Battery Park City Authority: Including untapped development rights, the entire Battery Park City complex could be worth over $1 billion to the city (its designated ultimate owner) if transferred to private owner-managers by sale or long-term lease.

Roosevelt Island Operating Corp.: Another Rockefeller-era development entity, albeit on a more modest scale than Battery Park, the RIOC should also give way to private management and operation.

New York Power Authority: In 2000, NYPA sold its two nuclear plants to a private operator. That leaves 17 generating plants and 1,400 miles of transmission line to go.

State of New York Mortgage Agency: In a time of low interest rates and more liberal financing standards backed by aggressive federal lending agencies, could someone explain why this relic of the 1970s still needs to exist?

New York Racing Association: Not actually an authority, but the next worst thing: a private nonprofit corporation with a monopoly franchise over thoroughbred racing, which has predictably led to corruption and mismanagement. The franchise should be broken into regional pieces and competitively bid to private operators.

Off-Track Betting: Speaking of horse racing, the state's six regional OTB corporations are notorious patronage mills with their own histories of inefficiency and mismanagement. They, too, should be privatized on a competitive basis.

Obvious political motivations aside, the Hevesi/ Spitzer package ultimately treats only one symptom of New York's all-encompassing disease: an excessive reliance on public-sector solutions, fed by enormous debt and high taxes. The ultimate cure is smaller government.