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NY Court of Appeals denies appeal in Griffiss LDC case

October 26, 2011

LDCs, which can be created by just about anyone over the age of 18, as well as by local governments, are classified as either local public authorities or private nonprofits depending on how closely they’re related to government functions. This is an important distinction, because local authorities are subject to regulatory requirements and oversight from the Authorities Budget Office and the State Comptroller, while private LDCs only have to comply with the less rigorous provisions of the state’s nonprofit laws. Because many LDCs are created for economic development and other purposes that blur the line between public and private, however, figuring out when they’re public authorities can be a challenge.

The leading court decision on this issue is Griffiss Local Development Corporation v. N.Y.S. Authorities Budget Office, where the Third Department found that the LDC was a local authority subject to the Public Authorities Law based on a number of factors, including the county’s sponsorship and funding of the LDC, the county’s redevelopment contract with the LDC, the LDC’s use of certain local tax funds, and the overall close relationship between the LDC and the county and municipal government.

Although the Griffiss LDC appealed, the New York Court of Appeals decided yesterday not to review the case, so the Third Department’s decision will remain the leading case on the issue. Because the decision doesn’t provide any bright line rules about when an LDC is public or private, however, it’s likely that we’ll see similar cases crop up as the ABO continues to strengthen oversight measures for these entities.

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