Origins
Public benefit corporations in New York State have origins in mercantile capitalism. A shared tradition of English common law and Dutch law may explain their origins.
The New York Court of Appeals provided a thorough history of state laws regarding public authorities in the 1994 case Schulz v. State, 84 N.Y.2d 231. As the court explained, state debt limits were first enacted as a reaction to fiscal crises caused by the state's lending of its credit to "irresponsible" canal and railroad corporations in the early nineteenth century. The state was forced to assume these obligations, which amounted to more than three fifth's of the state's entire debt. In 1846, a referendum requirement was added to the state constitution, prohibiting the state from contracting long term debt without approval by the voters.
As early as 1851, the legislature began to search for ways to evade the constitutional debt limit in order to finance public works projects. Canal certificates, which would be repaid through canal revenues, and which by their terms were not state obligations, were nevertheless held to be unconstitutional in Newell v. People, 7 N.Y. 9 (1852). The court held that the state had a moral obligation to repay the debts if canal revenues proved insufficient, and thus the certificates were deemed "an evasion if not a direct violation of the constitution".
In 1921, the legislature chartered the first state public authority, the Port of New York Authority, as a new vehicle for financing public projects while insulating the state from long term debt obligations. In 1926, the Court of Appeals held in Williamsburgh Savings Bank v. State, 243 N.Y. 231, that the state could disclaim any moral obligation for public authority debts. However, amendments to the 1938 Constitution overruled this case and completely disclaimed the state's responsibility for any public authority debt.
The widespread use of public authorities in New York State was pioneered by Robert Moses in the 1950s and 60s. Much of Moses' power base resulted from his tight control of the Triborough Bridge Authority, which allowed him to earmark revenues from tolls on the bridge for other projects in New York City and around the state. He also served as president of the Jones Beach Parkway Authority (1933–1963), president of the Bethpage State Park Authority (1933–1963), and chairman of the New York Power Authority (1954–1962). Moses, through his control of these authorities, was able to build some of New York's most important public works projects, including the Cross-Bronx Expressway, the Brooklyn-Queens Expressway, and various bridges and parkways. The public authority model allowed Moses to bypass many of the legal restrictions placed on state agencies, allowing him to expedite development but also allowing him to hide project financing, contracting and operational information from public scrutiny. Because of this, he has been criticized for wasteful spending, patronage, and refusing to consider public opposition to his projects.
The 1938 constitutional amendments attempted to limit the proliferation of public authorities by specifying that they could be created only by special act of the state legislature. By 1956, 53 public authorities had been created. In 1990, the Commission on Government Integrity concluded that "At present, so far as Commission staff has been able to determine, no one has even an approximate count of how many of these organizations exist, where they are, much less an accounting of what they do." By 2004, the Office of the State Comptroller had identified at least 640 state and local authorities. The current count stands at 1,098.
Some of the most well known major public benefit corporations in New York State include the Port Authority of New York and New Jersey (actually a bi-state authority created by interstate compact), the Metropolitan Transportation Authority, and the Empire State Development Corporation. New York has hundreds of lesser-known public benefit corporations, including Industrial Development Agencies and local development corporations.
The Public Authorities Accountability Act of 2005 created the Authority Budget Office in order "to provide the governor and the legislator with conclusions and opinions concerning the performance of public authorities and to study, review and report on the operations, practices and finances of public authorities...." The ABO is intended to promote transparency and accountability and to improve authority governance.
Read more about this topic: New York State Public-benefit Corporations
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