Barclay Damon
Barclay Damon

Legal Alert

NYS Authorities Budget Office Releases Policy Guidance on Grants and Loans by State and Local Authorities

The Policy Guidance

This week the New York State Authorities Budget Office (the “ABO”) issued Policy Guidance No. 15-01 (the “Policy Guidance”) regarding restrictions on grants and loans made by public authorities with their own funds.

In the Policy Guidance, the ABO states that (1) industrial development agencies (“IDAs”) may not award grants or make loans under any circumstances; and (2) other local authorities (including local development corporations and land banks) may not award grants or make loans of the authority’s own funds unless expressly permitted by its enabling statute.

The ABO was created under the Public Authorities Accountability Act of 2005 for the stated purpose of making public authorities in New York more accountable and transparent. In 2009, the Public Authorities Reform Act reestablished the ABO as an independent office in the New York State Department of State. The ABO’s powers and duties as set forth in the Public Authorities Law include review and analysis of operations and practices of state and local authorities to assess compliance with the Public Authorities Law and other applicable law.

In the Policy Guidance, the ABO refers to a 2014 New York State Attorney General (“AG”) opinion that concluded that the enabling statutes of IDAs do not specifically authorize IDAs to make grants or loans of their own money to any type of entity and that the AG’s office does not believe that such activities are necessary for an IDA to exercise its express powers. The AG opinion concludes that an IDA may not make grants or loans from its own monies. The ABO notes that the AG opinion was consistent with prior opinions by the Office of the State Comptroller.

The ABO directs all state and local authorities that grant or loan their monies without specific legislative authority to immediately end such practice.

The Policy Guidance does not cite any statutory authority for the ABO to direct the fiscal, programmatic and business practices of state or local authorities or to interpret applicable law. The enforcement powers of the ABO are narrow. The relevant powers conferred to the ABO under Public Authorities Law Section 6(2) include:

  1. Initiate formal investigations in response to complaints or appearance of non-compliance;
  2. Issue subpoenas pertaining to investigations;
  3. Publicly warn and censure authorities;
  4. Recommend dismissal of board members or officers to appointing entities;
  5. Report suspected criminal activity to the Attorney General;
  6. Compel a non-complying authority to provide a detailed explanation of the failure to comply with Public Authorities Law; and
  7. Seek an order in the State Supreme Court to require an authority to provide information to the ABO, where such authority has not provided such information upon the ABO’s request.

Conclusion

The legal authority of the ABO to interpret law and to direct fiscal, business and programmatic activities of state or local authorities is unclear. What is clear, however, is that the ABO has determined that all state and local authorities may not grant or loan their own monies without specific legislative authority and that any state or local authority engaged in such programming should immediately cease and desist or be subject to the ABO’s powers described above, including the power to compel an explanation of non-compliance, publicly censure authorities and recommend dismissal of board members.

If you have any questions with respect to your current policies or practices in light of this Policy Guidance or would like assistance in analyzing the Policy Guidance, please feel free to contact Connie Cahill at (518) 429-4296 or mcahill@hblaw.com, Garrett DeGraff at (518) 429-4235 or gdegraff@hblaw.com, Jean Everett at (202) 582-0601 or jeverett@hblaw.com, Susan Katzoff at (315) 425-2880 or skatzoff@hblaw.com, or Thomas O’Mara at (607) 398-3710 or tomara@hblaw.com.