Legislative Update from the
NYS Assembly Committee on

Authorities and

Sheldon Silver, Speaker • Richard Brodsky, Chair • September 2007

Message from the Chair. . .

Assemblyman Richard Brodsky

The Committee on Corporations, Authorities and Commissions has spent the past four years investigating public authorities throughout New York State, holding public hearings on the activities of State authorities from Long Island to Buffalo and issuing Reports on our findings. Whether you are concerned with mass transit, economic development, public debt, school construction, or the environment, public authorities are directly exercising enormous power over your lives.

The Committee’s investigations of authorities last year found numerous cases of mismanagement at the MTA, the Empire State Development Corporation, the Olympic Regional Development Authority, and other State authorities. The Committee has also advanced several important pieces of legislation, including passage of three Internet security laws that have made New York a leader in Internet safety and introduction of a comprehensive legislative package to further reform the State’s public authorities.

More specific information on the Committee’s work is contained in the pages of this newsletter. As always, if you have any questions or concerns, please feel free to contact me.

Best Wishes,
Richard Brodsky

Committee’s Legislative Package Leads New York to the Forefront of Internet Security

Chairman Brodsky has worked with Committee members and other legislative colleagues to enact a comprehensive package of Internet security laws that has transformed New York into a national leader in Internet safety. The Assembly and Senate unanimously passed three bills authored by Assemblyman Brodsky in 2006 to protect consumers against Internet fraud. The legislative package included the Anti-Phishing Act (Chapter 64 of 2006), the Computer Breaking and Entering Act (Chapter 558 of 2006), and the Modem Hijacking Deterrence Act (Chapter 650 of 2006). Taken together, these three bills represent a giant leap forward to protect the safety and security of Internet users.

The Anti-Phishing Act

This legislation was signed into law last June to combat the growing Internet fraud called “phishing,” which is the act of sending an e-mail falsely claiming to be an established, legitimate enterprise in an attempt to scam the user into surrendering private information that will be used for identity theft. The FBI calls phishing the “hottest and most troubling new scam on the Internet.” The Anti-Phishing Working Group has found that 150 million phishing e-mails are sent to people every day and millions of people have lost personal information. The Anti-Phishing Act of 2006 will allow the Attorney General, industry, and nonprofits to bring civil actions against the perpetrators of Internet phishing.

“We have taken a huge step forward to protect consumers throughout this State from online fraudsters who take advantage of and scam people. This bill will allow companies, citizens, and the Attorney General to flex their cooperative muscles to stop them,” said Assemblyman Brodsky.

The Computer Breaking and Entering Act

This legislation makes the unauthorized use of a person’s computer illegal by creating a new section of law to specifically deal with computer crimes. The Computer Breaking and Entering Act will ensure that New York State law keeps up with ever-changing computer technology to prosecute those who intentionally disrupt, steal personal information, or plant malicious programs on people’s computers without authorization. This legislation covers technologies such as spyware, adware, and other malicious software that lead to identity theft.

Assemblyman Brodsky said, “Thieves no longer have to break into one’s home to steal vital information; they can do it remotely with the same devastating results. The Computer Breaking and Entering Act is a way to prosecute those who dump malicious spyware, adware and other viruses onto people’s computers.”

The Modem Hijacking Deterrence Act

Modem hijacking occurs when someone inadvertently downloads software from the Internet that reprograms the person’s computer modem to make international long distance calls. The victim does not learn of the scam until he or she receives a bill with unauthorized international charges. Those responsible for disseminating the malicious software team up with foreign carriers to split the money that the foreign carrier receives from the victim’s long distance company. Modem hijacking costs consumers and telecommunications companies millions of dollars annually.

The Modem Hijacking Deterrence Act will allow the Attorney General and the companies adversely affected by modem hijacking to bring civil actions to recover costs from the unauthorized use of telephone numbers.

Assemblyman Brodsky said, “For too long these fraudsters have taken advantage not only of the citizens of New York, but the companies who have had no choice but to pay these thieves their pirate’s ransom. This first-of-its-kind bill will stop these fraudsters in their tracks.”

Committee Investigation Leads to Reform of ORDA and the Invitation Protocol for Congressional Winter Challenge

After a five-month investigation into the Olympic Regional Development Authority (ORDA), with a focus on the annual Congressional Winter Challenge (CWC), the Committee issued a report, which has led to significant reforms of the CWC invitation process. The CWC is intended to increase federal funding for ORDA and the Lake Placid region and is hosted by the Olympic Regional Development Authority (ORDA) with partial financing by the Power Authority of the State of New York (PASNY). While this is a laudable goal, the Committee’s investigation revealed that federal funding has actually declined significantly since the event was first held, with federal funds declining from $2.75 million in 1999 to $345,652 in 2006. The Committee also found that invitations to the CWC were subject to undue political influence.

“For several years, people who have no influence whatsoever over federal appropriations for the Olympic facilities have been invited to the Congressional Winter Challenge by people who shouldn’t be making the invitations in the first place,” said Assemblyman Brodsky. “As a result the CWC has failed to increase federal funding to the Olympic facilities. By making sure that only people who can influence federal funding decisions are invited, this new invitation protocol will increase the chance that the Congressional Winter Challenge will actually help in obtaining federal funds for the Olympic facilities.”

In a public hearing on July 25, ORDA President and CEO Ted Blazer admitted that there had been problems in the past with the invitation process and agreed to work with Chairman Brodsky to reform the invitation protocol for the Congressional Winter Challenge. Key provisions of the new protocol include:

photo Assemblyman Brodsky chairs a hearing to investigate ORDA.
  • ORDA and the U.S. Olympic Committee (USOC) have the sole power to invite individuals to the CWC.

  • Invitations must be extended on a non-partisan basis.

  • ORDA and USOC shall only invite Congressional Members and key staff who can help secure federal funds for the Olympic site, including those who have direct oversight over USOC, serve on Appropriations Committees, are part of the joint Congressional leadership, or are part of the NYS Congressional delegation.

ORDA and USOC may invite individuals not explicitly listed above if their support is sought to promote a valid ORDA/USOC purpose and may solicit recommendations from government offices for individuals to invite if these recommendations are accompanied by a reason for the invitation and are made public.

Committee Continues Oversight of the MTA

The Committee has continued its oversight of the MTA and has raised concerns about some of the authority’s policies and capital projects. Chairman Brodsky held two public hearings on the MTA in 2006 that addressed the MTA’s five capital projects, the MTA’s operating and capital budgets, the fair market value of the West Side Rail Yards, labor relations, gaps between platform and trains on the Long Island Rail Road, and much more. Two areas of concern for the Committee include escalating costs for the 7 line extension and the undisclosed use of surveillance cameras in subway stations.

New York City has agreed to provide $2.1 billion to cover the cost of construction for the 7 line extension, which will run from Times Square to the Javits Center. Currently, the cost of the project is estimated at $2 billion with $100 million in reserves. However, the Committee has raised serious concerns that the project could exceed this estimate, which could imperil the MTA’s finances if the City makes the MTA cover all costs beyond the initial $2.1 billion. In this scenario, other capital projects could lose MTA resources if there is a cost overrun, such as the Second Avenue line or East Side access. These cost concerns have led the MTA to only partially build a planned stop at 10th Avenue and 41st Street, which will ultimately be counterproductive since the cost of the project will rise dramatically if not included in the initial construction. The new Executive Director of the MTA, Eliot Sander, recently stated in response to a letter from Chairman Brodsky that it’s the City’s obligation to pay all costs associated with the 7 line extension, and the MTA would not cover cost overruns.

Over the past year the MTA has installed 1000 surveillance cameras in subway stations throughout New York City. “While it is essential that the MTA take steps to improve security on the subway system, personal privacy should also be respected. An appropriate balance can be reached between security and privacy by requiring that the MTA notify the public that such cameras exist,” said Assemblyman Brodsky. Currently, the MTA has no policy about public notification. Chairman Brodsky has introduced legislation that would require the MTA and other agencies to post notices in subway stations when surveillance cameras are in use and would also require public hearings prior to the installation or modification of a surveillance system. Public disclosure would not only protect privacy in public places, it could also deter criminals or terrorists from acting in the first place.

Committee Investigates Mismanagement at Empire State Development Corporation

The Committee has continued to investigate the Empire State Development Corporation (ESDC) and has uncovered a pattern of abuse, mismanagement, and apparent violations of State law. As the key public authority responsible for economic development in New York State, it is crucial that the ESDC is managed effectively and with the utmost transparency. The Committee held a public hearing on December 18, 2006, that addressed numerous issues and found that the ESDC ran a $20 million deficit in 2006, which is projected to increase to $30 million in 2007. Some of the major issues addressed at the hearing include:

Real Estate Transactions in Violation of Public Authorities Law

Chairman Brodsky has raised serious questions about the legality of two recent transactions in Manhattan in which the ESDC sold real estate at 633 Third Avenue and purchased property at 125 Maiden Lane. The ESDC’s sale of property at 633 Third Avenue is in direct violation of State law because there was never an appraisal of the value of the property, which is required by the Public Authorities Accountability Act of 2005. The property was sold to Time Equities, Inc. despite the existence of higher bids. Furthermore, the sale of 633 Third Avenue and 125 Maiden Lane were closed on the same day, by the same company, and the same broker. While ESDC contends that the two transactions were separate, the facts suggest that they may in fact have been part of an exchange, which would be covered by other sections of the Public Authorities Law. The ESDC never informed the two major candidates for Governor of the transaction, which will require moving the agency twice in a relatively short period of time. Finally, part of Time Equities’ bid was an agreement to rent two floors at 633 Third Avenue to the Governor’s office for $45/square foot, but they are currently charging $75/square foot. The ESDC’s new downstate Chairman, Patrick Foye, is exploring whether the State can get out of the contract.

Empire Zone Abuse

The Committee has been investigating the Empire Zone program for nearly four years and has uncovered a systematic pattern of abuse and mismanagement. One of the most serious abuses involves businesses that make themselves appear “new” and thus eligible for Empire Zone tax breaks simply by changing their name. The Committee has also found that hundreds of businesses continue to collect tax breaks despite failing to meet the job-creation targets that these tax subsidies were predicated upon. Other cases of fraud and mismanagement include local officials that have sold Empire Zone allotments, companies that receive tax breaks while simultaneously outsourcing New Yorkers’ jobs, and a pattern of some of the biggest political donors receiving the largest Empire Zone awards. The cost of these abuses is huge: the cost of the program has soared from $30 million in 2000 to $546 million in 2006.

Chairman Brodsky has led the effort to reform the Empire Zone program, including helping to pass fundamental reforms of the program in 2005, and continues to press the ESDC and the State Tax Department to track companies that have changed their name to collect tax subsidies and to follow-up on companies that have not met their job-creation targets. “The Empire Zone program can play an important role in strengthening local economies in New York State,” said Assemblyman Brodsky. “At the same time, we must remain vigilant to ensure that companies do not abuse the system. Cracking down on these abuses will not only save taxpayers hundreds of millions of dollars, it will also protect the great majority of companies that have played by the rules.”

Inadequate Assistance to Minority- and Women-Owned Business Enterprises (MWBE)

The ESDC is charged with providing many services to assist MWBE businesses, but the Committee has found that the ESDC has grossly underperformed in this area due in large part to inadequate staffing. For example, out of $45 million in procurement contracts awarded by the ESDC in 2005-2006, only 1.1% went to minority-owned businesses and 5.5% to women-owned businesses. Furthermore, the ESDC has had an unacceptably long waiting list for certification of MWBE businesses in the past, although there are signs that this is improving. “Fostering MWBEs is an important function of the ESDC that has been practically ignored in recent years. It is essential that the ESDC recommit itself to assisting minority- and women-owned businesses, and hire the staff necessary to do the job,” said Assemblyman Brodsky.

Committee Pushes for Further Reform of Public Authorities

Chairman Brodsky has introduced a comprehensive legislative package to reform public authorities that has been jointly introduced with the New Jersey Legislature. The package consists of two broad bills, one that focuses solely on the Port Authority of New York and New Jersey (PANY/NJ), which requires passage in both states, and a second that expands New York’s Public Authority Accountability Act of 2005.

“For far too long public authorities have operated behind closed doors without any real oversight or accountability, and the result has been a systemic pattern of corruption and mismanagement. We enacted major reforms of New York’s public authorities in 2005, but the reforms need to go further and we must extend oversight to the Port Authority. This legislative package will make sure that these Soviet-style bureaucracies finally work in the interest of the people of this State,” said Assemblyman Brodsky.

The Public Authority Accountability Act of 2005 (A.9007) was the most comprehensive authority reform bill ever passed in New York State. However, the independence of the newly created Inspector General and the Budget Office are compromised by being placed in the executive branch, and additional standards are required to make public authorities truly accountable and transparent.

“The Public Authority Accountability Act of 2007” builds upon the public authority reforms passed in 2005. Some of the key reforms in this new legislation include:

  • Truly Independent Inspector General: The Inspector General will have subpoena power to investigate corruption and abuse in public authorities, and will be separate from the executive branch and the Attorney General’s Office.

  • Independent Budget Office (IBO): The IBO will collect and analyze information about the budget for public authorities to issue reports, and will be separate from the executive branch and the Comptroller’s Office.

  • Debt Reform: Unless specifically authorized under an existing debt cap or by an act of the Legislature, no public authority may issue bonds or any other form of debt.

  • Comptroller Approval of Contracts: The Comptroller will have the power to review public authority contracts.

Other provisions of the Public Authority Accountability Act of 2007 will strengthen rules governing the disposition of property by authorities, establish higher standards for public authority committee members, create a temporary commission to review the operation of public authorities, and prohibit the creation of new public authority subsidiaries or affiliates without specific legislative authorization. The “Port Authority of New York and New Jersey Reform Act” will extend these reforms to the Port Authority and requires passage of identical legislation in New Jersey.

Committee Protects Access to Affordable Phone Service

Chairman Brodsky led the effort to block a misguided attempt to deregulate New York’s telecommunications industry. The deregulatory plan was proposed by the Public Service Commission (PSC) last March and would have allowed phone companies to increase the price for basic service up to 300% in parts of the State, charge customers more for additional services such as call waiting and voice-mail, and weakened customer service requirements.

Assemblyman Brodsky was a party to the PSC’s deregulatory proceedings last spring where he argued that the Administration should halt the proceeding to give all parties sufficient time to thoroughly examine the probable consequences of the regulatory changes. Brodsky also joined with Senator Thomas Morahan (R-Rockland) to introduce legislation that would force the PSC to halt deregulation until a comprehensive study is completed. These efforts were ultimately successful, as the PSC not only backed away from the deregulatory actions but actually reversed course and found that Verizon had failed to provide adequate repair service in and around New York City.

“The PSC’s about face on telephone service quality is a huge victory for New York consumers. Not long ago the Commission was planning devastating deregulatory changes that would have abandoned New York’s historical commitment to ‘universal and affordable service.’ My Committee has issued reports showing Verizon’s dramatic decline in service quality, but until now this evidence was simply ignored by the PSC. I want to thank the broad coalition of State legislators, consumer groups, and labor unions that united to stand up for fair, affordable phone service for all New Yorkers,” said Assemblyman Brodsky.

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