NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A173A
SPONSOR: Paulin TITLE OF BILL:
An act to amend the not-for-profit corporation law and the public
authorities law, in relation to the applicability of open meetings and
freedom of information laws to certain not-for-profit corporations
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to impose greater transparency and account-
ability on those not-for-profit corporations that engage in municipal
economic. development and function as an instrument and subsidiary of
local government.
SUMMARY OF PROVISIONS:
Section 1 of the bill would add a new subdivision (h) to section 104 of
the not-for-profit corporation law, which would require the Department
of State to transmit to the Authorities Budget Office a copy of any
filed certified of incorporation which indicates such Certificate has
been filed on behalf or at the behest of a municipal corporation, public
authority, or district.
Section 2 of this bill would amend section 402 of the not-for-profit
corporation law, by requiring those wishing to file certificates of
incorporation to note on their certificates whether they have received
the relevant consent of the Authorities Budget Office, if applicable.
Section 3 of this bill would amend section 402 of the not-for-profit
corporation law, by requiring those wishing to file certificates of
incorporation to note on their certificates whether such corporation is
being incorporated on the behalf of or at the behest of a municipal
corporation, public authority, or district.
Section 4 of this bill would amend section 404 of the not-for-profit
corporation law, by requiring those wishing to incorporate certain types
of corporations, such as those corporations where a majority of board
members are appointed by elected officials of any municipal corporation,
to obtain the consent of the Authorities Budget Office prior to filing
certificates of incorporation.
Section 5 of this bill would amend subparagraph 2 of paragraph (d) of
section 1411 of the not-for-profit corporation law by making a technical
change to account for changes added in Section 8 of this bill.
Section 6 of this bill would amend paragraph (d) of section 1411 of the
not-for-profit corporation law by requiring, in, regard to the mandatory
public hearing to consider the sale or lease of municipal property to a
local development corporation, that such advanced notice of said meet-
ing: be given 21 days in advance of the hearing; describe the property
at issue; describe the proposed consideration for the sale; include an
estimated current fair-market value of the property at issue; and
include a statement of the intended use of the property by the corpo-
ration.
Section 7 of this bill would amend paragraph (i) of section 1411 of the
not-for-profit corporation law by placing certain statutory requirements
and limitations on the contracts entered into between a local develop-
ment corporation and a municipal corporation, public authority, or
district in relation to one of said corporations' corporate purposes.
Section 8 of this bill would amend subdivision 1 of section 2 of the
public authorities law by expanding the definition of "state authority"
to include certain membership corporations as defined in the state
finance law. This section would further amend subdivision 2 of section 2
of the public authorities law by expanding the definition of "local
authority" to include certain not-for-profit corporations, such as those
corporations where a majority of board members are appointed by elected
officials of any municipal corporation, or those which pay staff of a
local or state government to provide administrative support.
Section 9 of this bill would amend section 2829 of the public authori-
ties law to subject all state and local authorities as well as their
subsidiaries and affiliates to the open meetings law and freedom of
information laws, as well require such authorities to stream their meet-
ing.in real-time.
Section 10 provides the effective date.
JUSTIFICATION:
Local development corporations (LDCs), as well as other types of not-for
profit corporations like Health Research Incorporated, are often used by
governments as a means to indirectly finance government operations and
projects. These LDCs and similar private entities, however, are exempt
from many of the constitutional and statutory provisions that guide the
operations and financial transactions conducted by local governments,
despite how, as a practical matter, they often function as an instrument
and subsidiary of local government.
While such organizations mostly do great work in developing their local
economies and serve an important quasi-governmental role, reports from
the Authorities Budget Office, the State Comptroller, and good govern-
ment groups have exposed that LDCs and such other non-profits are too
frequently used solely to circumvent these constitutional and statutory
restrictions that apply to projects directly undertaken by a local
government, as well as to circumvent transparency and public scrutiny
laws through such entities status as private organizatiOns. The end
result of this, lack of transparency, accountability and restraint has
been a significant waste of taxpayer dollars and public resources.
When organizations rely on taxpayer resources to operate, they should be
subject to strong oversight and be held accountable. With such entities
holding presently around $20 billion in outstanding debt, New York's
taxpayers deserve far more accountability and responsibility with how
their money is being spent and leveraged by such entities. To protect
the interests, of the taxpayer, our localities, and the state, this bill
seeks to subject these LDCs and other similar not-for-profits to greater
governmental accountability and public transparency, as well as to reign
in some of their more problematic activities.
PRIOR LEGISLATIVE HISTORY:
A.3715c of 2023 and 2024, ordered to third reading. Same as S.2727b,
passed Senate.
A.4575b of 2021 and 2022, ordered to third reading. Same as S.4339b,
passed Senate.
FISCAL IMPLICATIONS FOR STATE. AND LOCAL GOVERNMENTS:
None noted.
EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall have
become a law; provided, however, that the provisions of subparagraph 2
of paragraph (d) and paragraph (i) of section 1411 of the not-for-profit
corporation law, as amended by sections six and eight of this act shall
not apply retroactively to contracts or agreements between a local
development corporation and a municipal corporation, state or local
authority, or district entered into prior to the effective date of this
act.
STATE OF NEW YORK
________________________________________________________________________
173--A
Cal. No. 6
2025-2026 Regular Sessions
IN ASSEMBLY(Prefiled)
January 8, 2025
___________
Introduced by M. of A. PAULIN, OTIS, JACOBSON, SHIMSKY, ALVAREZ -- read
once and referred to the Committee on Corporations, Authorities and
Commissions -- ordered to a third reading, amended and ordered
reprinted, retaining its place on the order of third reading
AN ACT to amend the not-for-profit corporation law and the public
authorities law, in relation to the applicability of open meetings and
freedom of information laws to certain not-for-profit corporations
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 104 of the not-for-profit corporation law is
2 amended by adding a new paragraph (h) to read as follows:
3 (h) The department shall transmit electronically to the authorities
4 budget office a copy of every certificate of incorporation filed or
5 delivered where the incorporator has indicated on the certificate that
6 such incorporator is filing said certificate on the behalf or at the
7 behest of a municipal corporation, state or local authority, or
8 district.
9 § 2. Subparagraph 2-b of paragraph (a) of section 402 of the not-for-
10 profit corporation law, as added by chapter 23 of the laws of 2014, is
11 amended to read as follows:
12 (2-b) If it is not formed to engage in any activity or for any purpose
13 requiring consent or approval of any state official, department, board,
14 agency or other body, or does not require consent pursuant to paragraph
15 (w) of section 404 (Approvals, notices and consents) of this article a
16 statement that no such consent or approval is required. Such statement
17 shall be deemed conclusive for purposes of filing by the department of
18 state. If subsequent to submitting the certificate of incorporation for
19 filing, the corporation plans to engage in any activity requiring
20 consent or approval pursuant to section 404 [(approvals] (Approvals,
21 notices and consents) of this [chapter] article, the corporation shall
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD00315-04-6
A. 173--A 2
1 obtain such consent or approval and accordingly amend its certificate of
2 incorporation pursuant to article eight of this chapter.
3 § 3. Paragraph (a) of section 402 of the not-for-profit corporation
4 law is amended by adding a new subparagraph 9 to read as follows:
5 (9) A statement whether the corporation is being incorporated on the
6 behalf or at the behest of any municipal corporation, state or local
7 authority, or district. If so, the incorporator shall identify such
8 municipal corporation, state or local authority, or district.
9 § 4. Section 404 of the not-for-profit corporation law is amended by
10 adding a new paragraph (w) to read as follows:
11 (w) Every certificate of incorporation which includes any of the
12 following shall have endorsed thereon or annexed thereto the consent of
13 the director of the authorities budget office:
14 (1) indicates that one or more individuals who serve as officers or
15 employees of any municipal corporation, state or local authority, or
16 district shall: (i) select either a majority of the corporation's board
17 of directors or the corporation's chief executive officer; (ii) consti-
18 tute a majority of the voting strength that selects either a majority of
19 the corporation's board of directors or the corporation's chief execu-
20 tive officer; or (iii) serve as: (A) a majority of the corporation's
21 board of directors; or (B) in their official capacity, the corporation's
22 chief executive officer; or
23 (2) indicates that such corporation is being incorporated on the
24 behalf or at the behest of any municipal corporation, state or local
25 authority, or district.
26 The director shall make such inquiry into the purposes of the proposed
27 corporation as the director shall deem advisable.
28 § 5. Subparagraph 2 of paragraph (d) of section 1411 of the not-for-
29 profit corporation law is amended to read as follows:
30 (2) Notwithstanding the provisions of any general, special or local
31 law, charter or ordinance to the contrary, such sale or lease may be
32 made without appraisal (except as may be necessary in regard to subpara-
33 graph (4) of this paragraph), public notice[,] (except as provided in
34 subparagraph (4) of this paragraph), or public bidding for such price or
35 rental and upon such terms as may be agreed upon between the county,
36 city, town or village and said local development corporation; provided,
37 however, that in case of a lease the term may not exceed [ninety-nine]
38 twenty-five years and provided, further, that in cities having a popu-
39 lation of one million or more, no such sale or lease shall be made with-
40 out the approval of a majority of the members of the borough improvement
41 board of the borough in which such real property is located.
42 § 6. Subparagraph 4 of paragraph (d) of section 1411 of the not-for-
43 profit corporation law is amended to read as follows:
44 (4) Notice of such hearing shall be published at least [ten] twenty-
45 one days before the date set for the hearing in such publication and in
46 such manner as may be designated by the local legislative body, or the
47 board of estimate as the case may be. Such notice shall also include: a
48 description of the property at issue; the value of the proposed consid-
49 eration to be received from the sale or lease; the current estimated
50 fair market value of the asset; and a statement of the intended use or
51 disposition of the property by the local development corporation.
52 § 7. Paragraph (i) of section 1411 of the not-for-profit corporation
53 law is amended to read as follows:
54 (i) Contracts between a municipal corporation, public authority, or
55 district and a local development corporation.
A. 173--A 3
1 Any contract or other agreement between a local development corpo-
2 ration and a municipal corporation, state authority or local authority,
3 or district for one or more of the purposes enumerated in paragraph (a)
4 of this section shall: (1) cause the local development corporation to be
5 defined as a local authority pursuant to subdivision two of section two
6 of the public authorities law; (2) provide for the municipal corpo-
7 ration, state authority or local authority, or district to receive fair
8 and adequate consideration; (3) be subject to the requirements of arti-
9 cle five-A of the general municipal law; and (4) have a term not to
10 exceed twenty-five years, subject to one or more subsequent renewals for
11 a term not to exceed twenty-five years each upon the mutual consent of
12 the parties; provided however that a contract with a municipal corpo-
13 ration shall not be used to finance the municipal corporation's oper-
14 ations or to acquire or improve an asset for use of the municipal corpo-
15 ration.
16 (j) Effect of section.
17 Corporations incorporated or reincorporated under this section shall
18 be organized and operated exclusively for the purposes set forth in
19 paragraph (a) of this section, shall have, in addition to the powers
20 otherwise conferred by law, the powers conferred by paragraph (c) of
21 this section and shall be subject to all the restrictions [and], limita-
22 tions and obligations imposed by [paragraph] paragraphs (e) [and para-
23 graph], (g) and (i) of this section. In so far as the provisions of
24 this section are inconsistent with the provisions of any other law,
25 general or special, the provisions of this section shall be controlling
26 as to corporations incorporated or reincorporated hereunder.
27 § 8. Subdivisions 1 and 2 of section 2 of the public authorities law,
28 subdivision 1 as added by chapter 766 of the laws of 2005 and subdivi-
29 sion 2 as amended by chapter 257 of the laws of 2011, are amended to
30 read as follows:
31 1. "state authority" shall mean (a) a public authority or public bene-
32 fit corporation created by or existing under this chapter or any other
33 law of the state of New York, with one or more of its members appointed
34 by the governor or who serve as members by virtue of holding a civil
35 office of the state, other than an interstate or international authority
36 or public benefit corporation, including subsidiaries of such public
37 authority or public benefit corporation; or (b) certain membership
38 corporations as defined in paragraph (d) of subdivision five of section
39 fifty-three-a of the state finance law.
40 2. "local authority" shall mean (a) a public authority or public bene-
41 fit corporation created by or existing under this chapter or any other
42 law of the state of New York whose members do not hold a civil office of
43 the state, are not appointed by the governor or are appointed by the
44 governor specifically upon the recommendation of the local government or
45 governments; (b) a not-for-profit corporation, other than a fire corpo-
46 ration, a public group self-insurer regulated under the workers' compen-
47 sation law, statewide association of local governments or local offi-
48 cials, or business improvement district, affiliated with, sponsored by,
49 or created by a county, city, town or village government; (c) a local
50 industrial developmental agency or authority or other local public bene-
51 fit corporation; (d) an affiliate of such local authority; [or] (e) a
52 land bank corporation created pursuant to article sixteen of the not-
53 for-profit corporation law; or (f) a not-for-profit corporation, other
54 than a fire corporation, a public group self-insurer regulated under the
55 workers' compensation law or statewide association of local governments
56 or local officials, or business improvement district, that (i) has
A. 173--A 4
1 issued or has the authority to issue tax exempt debt or (ii) provides
2 state or municipal tax exemptions through its participation in a project
3 undertaken in furtherance of its purposes.
4 For the purposes of paragraph (b) of the opening paragraph of this
5 subdivision, "affiliated with, sponsored by, or created by a county,
6 city, town or village government" shall also include, but not be limited
7 to, entities: (a) where one or more individuals who serve as officers
8 or employees of any county, city, town, village: (i) select either a
9 majority of the not-for-profit corporation's board of directors or the
10 not-for-profit corporation's chief executive officer; (ii) constitute a
11 majority of the voting strength that selects either a majority of the
12 not-for-profit corporation's board of directors or the corporation's
13 chief executive officer; or (iii) serve as: (1) a majority of the not-
14 for-profit corporation's board of directors; or (2) in their official
15 capacity, the not-for-profit corporation's chief executive officer; or
16 (b) which pay staff of a state or local government or state or local
17 authority to provide administrative or operational support.
18 § 9. Section 2829 of the public authorities law, as added by section 1
19 of subpart B of part SS of chapter 58 of the laws of 2024, is amended to
20 read as follows:
21 § 2829. State and local authorities subject to the open meetings and
22 freedom of information laws. All state and local authorities, as such
23 terms are defined in section two of this chapter, as well as all subsid-
24 iaries and affiliates of such state and local authorities, as such terms
25 are defined in section two of this chapter, shall be subject to the
26 provisions of articles six and seven of the public officers law relating
27 to the freedom of information and open meetings laws respectively. All
28 state and local authorities, as well as all subsidiaries and affiliates
29 of such state and local authorities, shall, to the extent practicable,
30 stream all open meetings and public hearings on their website in real-
31 time, post video recordings of all open meetings and public hearings on
32 their website within five business days of the meeting or hearing and
33 maintain such recordings for a period of not less than five years.
34 § 10. This act shall take effect on the thirtieth day after it shall
35 have become a law; provided, however, that the provisions of subpara-
36 graph 2 of paragraph (d) and paragraph (i) of section 1411 of the not-
37 for-profit corporation law, as amended by sections five and seven of
38 this act shall not apply retroactively to contracts or agreements
39 between a local development corporation and a municipal corporation,
40 state or local authority, or district entered into prior to the effec-
41 tive date of this act.
