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State Comptroller criticizes ESDC for lack of transparency, no-bid contracts

State Comptroller Thomas DiNapoli, who not coincidentally is running for election next Tuesday (for the post to which he was appointed in 2007), on October 27 issued a brief report criticizing the Empire State Development Corporation (ESDC).

The press release was headlined DiNapoli Public Authority Spotlight: Urban Development Corp.: Hundreds of Millions Spent on No-Bid Contracts and High Salaries.

News of the high salaries--more than a quarter of staffers earning six figures--actually surfaced in June, in a report from the Authorities Budget Office, and it's hardly surprising that the ESDC (the name under which the agency mainly does business) has awarded no-bid contracts.

After all, ubiquitous consultant AKRF has often been chosen, via no-bid contracts, to conduct environmental reviews, such as for Atlantic Yards and the Columbia University expansion.

"We also are able to hire people on the basis of a sole source if we can articulate a rationale for why it would be cost effective or otherwise appropriate," ESDC General Counsel Anita Laremont said at a tense oversight hearing in January.

But DiNapoli put a number on it, stating that the Urban Development Corp. awarded 32 contracts worth $344.9 million in fiscal year 2008-09 without seeking competitive bids. By contrast, it awarded 97 smaller contracts, with a value totaling $216.1 million, through a competitive process.

Need for accountability

“These numbers raise more questions than answers,” DiNapoli said in his news release. “The state’s public authorities spend billions of dollars of taxpayers’ money in the dark shadows of state government. We’ve been auditing authorities like the MTA to hold them accountable, and the Public Authorities Reform Act will help shed light on no bid authority contracts. But there’s still too much taxpayer money being spent without enough taxpayer accountability.”

Under the Public Authorities Reform Act of 2009, DiNapoli's office has the authority to review all non-competitive public authority contracts greater than $1 million.

Outstanding debt

As of March 2010, DeNapoli reported, the Urban Development Corp. had $8.4 billion in outstanding debt, of which $8.2 billion was state-supported debt borrowed without voter approval. This represents 18 percent of all outstanding state-supported public authority debt.

Lack of transparency

The report suggests that the authority lacks transparency, including the murky role of the Job Development Authority (JDA), which as of July had failed to file required reports and, unmentioned in this report--was the entity that formed the Brooklyn Arena Local Development Corporation to issue tax-exempt arena debt:
There is a remarkable lack of clarity and transparency with regard to the enmeshed structure of the State’s economic development entities.

...Still, little is known about many of UDC’s subsidiaries or the relationship of those entities with UDC as the parent organization. UDC is required to report subsidiary financial and other data as part of a consolidated filing, pursuant to various reporting requirements in the Public Authorities Law and related regulations. Entities which are not identified as subsidiaries, such as the New York Job Development Authority, must report independently.

However, while the JDA and its programs are administered by UDC, the JDA has not filed many of the independent reports required since 2005. Provisions in the Public Authorities Reform Act 2009 grant the Authorities Budget Office (ABO) expanded power to initiate formal investigations, publicly warn and censure noncompliant authorities, recommend suspension or dismissal of officers or directors, report suspected criminal activity to the Attorney General, and commence proceedings in State Supreme Court to seek records, documentation or other information required to perform its duties. These provisions were enacted, in part, to improve the responsiveness and compliance rates of all authorities.

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