Public authorities aren't quite as powerful today as they used to be, due in part to the backlash against Moses' abuse of them. But they remain very crucial, if little-noticed, institutions not just in New York but across the country. They manage an impressive array of America's infrastructure: airports, stadiums, convention centers, transit systems, turnpikes, bridges, tunnels, cargo facilities, sewer and water systems, public housing and even parking garages. These are critical functions. So it seemed like a reasonable request, given the authorities' significance and their checkered past, when Alan Hevesi, the comptroller of New York State, recently asked for a list of all of the state's public authorities. Surely a complete list must exist somewhere, Hevesi thought.
It didn't. So Hevesi's staff went on a public authority hunt. Flipping back and forth through volumes of state statutes, they recorded the names of hundreds of bureaucracies. Some were familiar to citizens, such as the New York State Thruway Authority and the Port Authority of New York and New Jersey. But many were obscure entities that few have ever heard of: the Industrial Exhibit Authority; the Islip Resource Recovery Authority; the Overcoat Development Corp. The list went on and on. This past February, in a report that likened these bodies to a "secret government," Hevesi put the tally of state and local public authorities in New York at 640. Since then, his staff has "discovered" 70 more. They're still not sure they've found them all.
At the very least, it is a sign of weak oversight if a state government doesn't even know how many public authorities are acting in its behalf. But lately there have been other signs of poor management and questionable contracting. The Metropolitan Transit Authority, which runs the subways, buses and commuter trains in the New York City area, was accused of lying about its budget numbers in order to justify a fare hike. In another case, a subsidiary of the Thruway Authority known as the Canal Corp. offered lucrative development rights along the Erie Canal to a campaign contributor of Governor George Pataki's--for a paltry $30,000. Attorney General Eliot Spitzer put it bluntly when he said that "public authorities are becoming to New York what off-balance-sheet partnerships were to Enron."
A consensus is building that something about public authorities is broken in the Empire State--even if Pataki, Spitzer, Hevesi and the legislature don't agree on what to do about it. At the same time that the authorities are being attacked, however, more of them are being created. For example, a new state-local authority was just established to build a convention center in Albany. Discussions are underway to create an entertainment authority to manage sports and arts facilities in Greater Binghamton.
The biggest new entry, however, would be in the Big Apple, where the city and state are talking about forming a development corporation to redevelop the west side of Manhattan. "Public officials can cluck their tongues and say authorities are out of control," notes Steve Malanga, a senior fellow at the Manhattan Institute, a conservative think tank. "But when an issue comes up that they think can't win with the voters, they go back to using authorities."
ONE STEP REMOVED
Public authorities have been around since the 1920s, when good- government reformers suggested that quasi-independent agencies might perform certain tasks more efficiently than government could. There were good reasons to believe that, and there still are today. "Public authorities are pretty darned useful," says Kathryn Foster, a planning professor at SUNY Buffalo.The original argument was essentially that authorities could remove politics from the delivery of basic services. Take sewers. If every rate hike had to go to a public referendum, long-term maintenance might never get done. Authorities are meant to circumvent such political messiness. They're typically set up one step removed from city, county or state government. They're supposed to enjoy the managerial freedoms of the private sector, while retaining some of the accountability that is so important in the public sector.
It's not easy to generalize about authorities. Not only do they perform vastly different functions but they're also structured quite differently from state to state. Some authority boards are elected, while others are appointed by governors or mayors. A few cross political boundaries, such as the Delaware River Port Authority, whose board is appointed by the governors of Pennsylvania and New Jersey. Some receive appropriations from legislatures, but most authorities can raise money on their own, from tolls, fares or user fees, and some can levy taxes on the public at large.
One thing that is clear about authorities is that their number is growing faster than that of any other slice of American government. It's difficult to pin down an exact figure for the whole country, precisely because they are so loosely defined from one state to the next. Nevertheless, the U.S. Census Bureau makes an effort. In 2002, it counted some 35,000 "special district governments"--a label that does not include school districts. By contrast, there were only 26,000 of these quasi-governmental institutions in 1977.
Much of this growth is in booming suburbs and exurbs, where development means that there are new water systems to manage, new parks to build, new bus systems to run. More often than not, a public authority is given these responsibilities. But some of the authorities' growth also reflects the changing needs of states and older cities. In Moses' day, many authorities literally paved the way to a new automobile era by building the first highways and bridges. These days, in urban areas, newly minted authorities are more likely to be building arenas and convention centers, or playing the role of lead developer in publicly financed real estate deals.
A new authority's strongest selling point is often its ability to stay focused on a single goal. For example, Washington, D.C., just created a new corporation to finance an $8 billion redevelopment plan along the Anacostia River. The job could have gone to the D.C. economic development department, or to an existing authority that does redevelopment work citywide. But planners didn't want to risk seeing the Anacostia program get lost in an overstuffed portfolio. They preferred to create a separate institution whose managers have one job--redeveloping the waterfront--rather than many.
Another reason why the number of authorities keeps growing is that old ones rarely seem to go away. Look at the Pittsburgh Stadium Authority, created in the 1960s to build and manage Three Rivers Stadium. Pittsburgh demolished that facility four years ago, replacing it with twin football and baseball stadiums--built by yet another authority. Still, the old Stadium Authority lives on, an oddity that nobody paid much attention to until charges hit this summer that an authority accountant had embezzled $193,000. The authority's ostensible raison d'etre is to pay off the bonds on Three Rivers, but Pennsylvania state Representative Jack Wagner thinks that's a bogus excuse. "There's no reason why that authority and the debt can't be merged into another authority," Wagner says. "This is nothing more than a duplication of government services."
CLOSED DOORS
A swell of complaints about alleged impropriety at authorities is what put reform on the agenda in New York. The MTA's budget scam and the canal land giveaway were only the beginning:- The New York Racing Association, the quasi-governmental agency that runs three horse-racing tracks, was indicted as a body and many tellers were convicted of tax fraud and money laundering.
- The head of the New York State Bridge Authority, who was also the father-in-law of a close Pataki adviser, resigned when it was revealed that he had spent $25,000 of the authority's money on personal trips and rung up $80,000 worth of questionable credit card bills.
- Former U.S. Senator Alphonse D'Amato, now a lobbyist, received a $500,000 fee for a placing a phone call to the MTA and persuading the authority to help his client get a loan. (An investigation cleared D'Amato of any wrongdoing.)
Pataki thinks that assessment is too negative. Like New York governors before him, Pataki, a Republican, influences many of the state authorities through his appointment power. His aides say he wants reform, but that much of the recent controversy is little more than political grandstanding. They insist that Spitzer, a Democrat, mostly wants Pataki's job, and another authorities critic, Democratic Assemblyman Richard Brodsky, wants Spitzer's job. Hevesi, too, is an elected Democrat. "We're proud of the work of our authorities," says Joe Conway, a Pataki spokesman.
But it is not just partisans who are calling for reform. Good- government groups have come to see the authorities as a subset of Albany's legendary governance problems (the state budget is typically decided in secret by three men, universally known as the "triumvirate": currently Pataki, Democratic Assembly Speaker Sheldon Silver, and the Senate's GOP Majority Leader Joseph Bruno). "Getting a handle on what the public authorities spend and how much money they raise is very difficult," says Diana Fortuna, president of the nonpartisan Citizens Budget Commission.
Authorities haven't had to report their finances in any consistent way, and their budgets don't show up on the state government's books. Authorities aren't subject to the same contracting or lobbying rules that state agencies are, even though they spend billions of dollars every year. If you want to know why an authority picked one vendor over another for a important contract, it is nearly impossible to find out. Nor is it easy to track how much lobbying contractors do, or how successful they are at it.
Top jobs at authorities are considered plum positions in New York, with salaries that often exceed six figures. Patronage is the prerogative of any governor, of course, but Albany insiders say that Pataki, more than his predecessors, has used the authorities to enrich his friends and campaign contributors. For example, a former mayor of the town of Peekskill, who is also a childhood friend of Pataki's, found his way to an executive vice president job at the New York Power Authority. Another friend, who had headed Pataki's security detail, also got a top job with the power authority. Blair Horner, a lobbyist with the New York Public Interest Research Group, argues that the conversion of authorities into patronage mills defeats their original purpose. "The idea that these authorities are semi-autonomous entities staffed by career civil service types who are divorced from politics has changed. They're now agents of the executive branch who are not subject to the same oversight."
BIG-TIME DEBT
Who are the authorities accountable to? That answer isn't always clear. Pataki is prone to issuing press releases anytime an authority generates good news, such as when the Lower Manhattan Development Corp. (LMDC) opened four reconstructed ball fields in a park on the East River. When events get politically dodgy, however, Pataki tends to emphasize the authorities' independence, keeping his own hands clean.The messy debate over rebuilding the World Trade Center--detailed in Paul Goldberger's new book "Up from Zero"--is a good example of this. Pataki, more than any other public official, held great sway over Ground Zero: His appointees led the Port Authority, which owned the land, as well as the LMDC, which ran the planning process. As early as the beginning of 2002, Pataki could have settled key questions regarding the lease on the Trade Center. But he was in the midst of a re-election campaign that year and might have offended voters who preferred one rebuilding plan over another. Rather than set clear terms for the planning process, he let the governmental, quasi- governmental and private parties involved squabble with each other. "Pataki talked about bringing consensus and public input to the process," Goldberger writes. "But he seemed often to be working to assure that the process would be slow, convoluted and more than a little bit opaque."
Finally, there is the huge amount of debt that New York's authorities have run up. The state is not allowed to borrow money without voter approval, but that rule doesn't apply when it's authorities that are doing the borrowing. Consequently, these entities are used like credit cards. State authorities are currently carrying approximately $114 billion in debt--28 times more than the $4 billion issued by New York State. Much of the authorities' debt is backed by highway tolls, subway fares or other fees. But a staggering amount of it--$43 billion--is supported by state government, meaning that if the authority that issued those bonds defaulted, taxpayers would be on the hook.
It is the job of an institution called the Public Authorities Control Board to ensure that that doesn't happen. But the operations of this board are even harder to decipher than those of the authorities. The PACB was created in 1976, when one of the largest state authorities, the Urban Development Corp., nearly collapsed. The control board must approve any debt issued by the 11 largest state authorities. There are three voting members--each a representative of the Pataki-Silver-Bruno triumvirate--and decisions must be made by consensus. What that means in practice is that the PACB makes its decisions the Albany way: behind closed doors.
Not that the PACB doesn't meet in public. It does, every month, in a vaulted pink room on the first floor of the Capitol. But by the time this happens, all the decisions have been worked out in advance. At its public hearing in September, the PACB zipped quickly through a lengthy agenda, approving $384 million worth of authority financing in exactly 20 minutes. All that remained for public consumption was a pro-forma flurry of motions, seconds and ayes.
Barbara Bartoletti, a lobbyist for the League of Women Voters, attends these meetings regularly, "just so that they know the public is watching." After five years of observing from the back of the room, Bartoletti says the PACB remains a mystery to her. "We're talking about billions of taxpayer dollars," Bartoletti says. "We can't crack why decisions are made the way they are. We don't have a clue about where the money is going and whom it's going to."
GROPING FOR SUNLIGHT
Exactly what can be done about the problems with authorities is open to argument. Pataki favors an approach that aims to do for authorities what the federal Sarbanes-Oxley law did for corporate governance. In February, Pataki's chief of staff issued a memo to the 31 state authorities most tightly under the governor's control. The memo called upon them to implement so-called "model governance principles," developed by corporate governance expert Ira Millstein. Pataki also asked Millstein to head a commission, whose June draft report fleshed these principles out further.Millstein's suggestions include standardizing financial reporting among the authorities, and making more of it publicly available. He also would have each authority appoint an independent audit committee. The bulk of Millstein's recommendations, however, have to do with the authorities' boards. Many boards have developed reputations for rubber-stamping management decisions. Millstein thinks boards should be structured to have more independence. He also thinks that if board members went through extensive training, they might take the oversight part of their job more seriously. "Sunlight and active boards will be as much of a cure as we can get at this point," Millstein says.
Hevesi and Spitzer agree with most of Millstein's proposals, but don't think he goes far enough. They have joined together on more sweeping legislation that would, for the first time in 50 years, prune back the number of authorities in New York. The plan is to have a commission sort out those authorities that have outlived their usefulness, or whose duties can easily be handled elsewhere in government.
Hevesi and Spitzer would make other changes. Their proposal would rewrite lobbying and procurement rules so that authorities and state agencies are treated the same. That means the controller would get a veto over large authority contracts. It also means that anyone who lobbies an authority would have to register with the state lobbying commission. In September, Hevesi added another reform he would like to see: He wants authority spending to be considered "on budget" in the state's books.
Assemblyman Brodsky proposes a different approach, one that was passed by the Democratic Assembly in February, but died in the Senate. Brodsky would create new layers of oversight, including an inspector general's office for public authorities, as well as an independent budget officer. In September, Brodsky upped the ante, calling for a constitutional amendment that would abolish all public authorities, wrapping their functions back into state agencies. That was more a statement of principle than a realistic policy proposal. Still, Brodsky says, "anything authorities can do can be done directly by government on-budget, instead of hidden off-budget."
All the reform rhetoric makes officials at some authorities cringe, especially those that are widely acknowledged to be well run. In over- reacting to a few scandals, they warn, reformers might take away the independence that has allowed some authorities to thrive. Take the state Dormitory Authority, which started in the 1940s building dorms at teachers colleges, and has since become a well-regarded all-purpose builder of school and hospital facilities. Claudia Hutton, the authority's spokeswoman, cautions that a cookie-cutter reform package could cause more problems than it solves. "The New York Power Authority is a power company," Hutton says. "That's awfully different from what we do."
It's unlikely that she has much to fear. Talking about reform in Albany is easy. Doing it is another thing. Individual authorities such as the MTA and Canal Corp. have tweaked the practices that landed them in the headlines. But more sweeping reform of authorities isn't likely, if only because the desire to create more of them remains such a powerful force. Steve Malanga says the situation with authorities is a lot like New York's budget process in general. "It's broken, but it doesn't suit the people in power to fix it."
