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Canal Side Conflicts of Interest

The public recently learned of the unseemly contract between the Empire State Development Corporation and the Harris Beach law firm. At a minimum, an “appearance of impropriety” was created when ESDC received a $105 million allocation from the New York Power Authority to support the Canal Side project, and then turned around and hired as the project’s bond counsel the law firm where NYPA’s chairman of the board works.

But the appearance of impropriety reflected by the bond counsel contract pales in comparison to the conflict of interests that surrounds the decision in February 2010 approving NYPA’s $105 million grant to the Canal Side project. A basic understanding of the approval process mandated by New York law helps to place the ethical shortfall into context.

In 1987, the State Legislature created the New York State Economic Development Power Allocation Board to serve as a watchdog agency to ensure that the Power Authority allocates electric power and grants “industrial incentive awards” to businesses according to specific criteria and requirements. Pursuant to the enunciated standards, NYPA’s largesse is meant to benefit companies with a proven commitment to New York State that are experiencing “serious, long-term distress.” Additionally, EDPAB regulations prohibit the use of economic power in support of a business facility “primarily used in making retail sales of goods or services to customers.” To assure compliance with the pertinent criteria, NYPA submits its proposals to EDPAB, and its proposed development plans cannot go forward without the approval of three members of the EDPAB’s four-person board.

On February 2, 2010, EDPAB held a “special meeting” by way of a video conference. The only agenda item was NYPA’s proposal to accelerate its funding of the Canal Side project and provide the Erie Canal Harbor Development Corporation a $105 million “industrial incentive award” for harbor development. Three members of EDPAB participated in the meeting, including its chairman, Kenneth Schoetz. Mr. Schoetz is also employed as ESDC’s “Senior Vice President—Regional Offices,” and serves as chair of the Peace Bridge Authority.

ECHDC is a subsidiary of Mr. Schoetz’s employer, ESDC, and ESDC played the important role of “lead agency” during the environmental review process for the Canal Side project. Despite his dual role as EDPAB chair and ESDC employee, Mr. Schoetz provided the crucial third vote approving NYPA’s $105 million financial assistance to the Canal Side project.

The multiple roles played by Ken Schoetz provide the public with a glimpse of the all-to-cozy relationship between various economic development agencies and officials. Symbolically, at the time he voted to approve NYPA’s development plan for the Canal Side project, the EDPAB chair was in the ESDC regional office at 95 Perry Street, space it shares with the project’s “sponsor,” ECHDC.

No wonder the public distrusts the motives and decisions of NY’s economic development agencies.

Arthur J. Giacalone, East Aurora

Giacalone is attorney for the plaintiffs in Goldman et al v. Bass Pro et al.

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