NY Court of Appeals affirms ABO’s separate reporting requirement for IDA and affiliated LDC
The New York Court of Appeals released an opinion last week dealing with public authority reporting requirements. The case, Madison County IndustrialDevelopmentAgency v. NYAuthoritiesBudget Office, involved the ABO’s determination that separate annual reports had to be filed by the Madison County IDA and a local development corporation that it was closely affiliated with. The court affirmed the ABO’s determination, finding that it wasn’t arbitrary or capricious, and it also discussed some broader issues related to the ABO’s powers and the classification of LDCs as “affiliated” or “subsidiary” public authorities. While the court emphasizes how narrow its holding is, the discussion of LDCs is still pretty significant give that the Court of Appeals has only considered LDCs in two previous cases (one holding that they’re subject to FOILand the other dealing with property taxes).
The court noted at the outset that Madison County IDA is a local public authority, which makes it subject to the reporting requirements in the Public Authorities Law. The LDC involved in this case was the Madison Grant Facility Corporation (“MGFC”), which the IDA had incorporated to administer certain grant funds and limit its liability for any violations of the grant conditions caused by third-party contractors. This “affiliation” between the IDA and the MGFC was enough to classify the MGFC as a local public authority, but its certificate of incorporation also expressly acknowledged its status as a local authority under the Public Authorities Law. When the ABO sent a notification to the MGFC that it was required to submit annual financial reports, however, the IDA responded by claiming that the MGFC was its “subsidiary” and requesting permission to file consolidated reports. The IDA didn’t provide any legal basis for this sort of exception from the reporting requirements, and the ABO explained in a subsequent letter that it had concerns about the “loss of transparency and accountability” implicit in this sort of consolidated reporting. The ABO was also skeptical about the IDA’s ability to create “subsidiary” corporations, and the Attorney General issued a formal opinion upon referral of the matter that confirmed the ABO’s suspicion that IDAs have no legal authority to create “subsidiaries.”
Despite the ABO’s concerns and the questions raised by the Attorney General’s findings, the Madison County IDA nevertheless filed consolidated reports in 2015 with the MGFC. It explained in a letter to the ABO that the MGFC had no financial activities due to delays in the grant funding, and it also referenced the FAQs on the ABO’s website, which explained that in some circumstances subsidiaries would be permitted to file consolidated annual reports. The ABO did not agree, and it sent an final letter determination at this point and denied the IDA’s request for consolidated reporting. The ABO’s decision was subsequently affirmed by both the Supreme Court and the Appellate Division.
The Court of Appeals also affirmed the ABO’s determination as reasonable and neither arbitrary nor capricious in light of the statutory reporting requirements for public authorities, which apply to “each” and “[e]very” state and local authority. More persuasively, the court also emphasized that the statutory reporting requirements had to be interpreted in light of the purposes of the Public Authorities Law to provide financial transparency and public oversight. The court specifically recognized the importance of the the Public Authorities Accountability Act of 2005, which was intended to “”promote public confidence in the financial and operating integrity of these institutions” by expanding the information required to be disclosed to the government and public.” The court also noted that additional reforms were enacted in the Public Authorities Reform Act of 2009, which expanded the powers and resources of the ABO so that it could “better “police” state and local public authorities. As the court, explained, “the ABO was given broad authority to “request and receive from any state or local authority… such… information, books, records, other documentation and cooperation as may be necessary to perform its duties.” In light of this context, the ABO’s insistence on separate reporting was reasonable and fully consistent with its statutory grant of power.
The court also concluded that ABO’s decision was not ultra vires, as it limited its denial to the narrow issue of separate reporting requirements and if did not make any final determination as to whether MGFC was a “subsidiary” or not. While the ABO explained in its letter determination to the IDA that it would not treat the MGFC as a subsidiary for purposes of its consolidated reporting request, the court explained that this decision fell far short of making any specific determination that the IDA “lacked authority” to incorporate the MGFC as a subsidiary. As the court explained: “a local development corporation such as MGFC, which is “affiliated” with a local IDA, is also a local authority subject to the PAAA and, as such, has reporting obligations. Regardless of whether MGFC is also a subsidiary, it is clearly an “affiliate” of MCIDA within the meaning of the statute. The PAAA does not contain a reporting exception for subsidiaries of local authorities, and petitioners have not identified any other statute or regulation that excused MGFC from its obligation to separately report.”
See also:
Amy Lavine
Patricia Salkin
Scott Fein
Public Authorities 