NY gov scraps asset maximisation body

Nearly a year after he backed the creation of an oversight body for coordinating private investment in large-scale public works projects, New York Governor Paterson has scrapped the idea, leaving its implementation up to the next administration and raising questions about its future.

The so-called State Asset Maximisation (SAM) Board was the signature recommendation of a special commission Paterson created in October 2008 to examine how the state could better deliver essential public services such as building roads and repairing bridges which New York could nil afford.

David Paterson

The idea was sound: the state faces an $80 billion infrastructure spending deficit over the next 20 years, according to an August report by State Comptroller Thomas DiNapoli. But its timing proved lethal, as a bitter battle over a $9.2 billion deficit in the state’s next fiscal year budget appears to have trumped Paterson’s determination to make the SAM Board a reality.

“Due to persistent budgetary concerns the formation of the SAM Board has been put on hold until the next administration,” Elizabeth Mitchell, a spokesperson for the Empire State Development Corporation, said in a statement to InfrastructureInvestor.com. The Empire State Development Corporation, an economic development body within the state’s executive branch, was to be the home of the SAM Board.

But other problems also siphoned increasing amounts of Paterson’s time. In late February, the New York Times reported that Paterson had interfered in a domestic violence case involving one of his close aides, David Johnson. In response, Paterson told the Times he would ask Andrew Cuomo, New York’s Attorney General and a contender in the upcoming gubernatorial race, to investigate his administration’s handling of the case. Shortly thereafter, Paterson bowed out of the race, despite earlier indications that he would run for re-election no matter what.

Due to persistent budgetary concerns the formation of the SAM Board has been put on hold until the next administration Elizabeth Mitchell

In light of this, some view Paterson’s decision to not move ahead with the SAM Board as a positive step.

“It's best in the long run because the appointees will come with the backing of the new, stronger governor. The only downside is it'll take more time,” said Sean Patrick Maloney, a lawyer at Kirkland & Ellis who drafted the executive order creating the SAM Commission when he was still employed with the governor's office.

Whether the next state administration will implement the SAM Board is unknown. Though Paterson backed the idea, there is no requirement for the next governor to do so. And private investment in infrastructure remains such a controversial idea that changes in political power can often cancel such initiatives. Last month, for example, an election on the French island of Reunion in the Indian Ocean led to the cancellation of a €1.6 billion private development of a tram train because the newly-elected leader opposed the idea.

It's best in the long run Sean Maloney

In New York, an gubernatorial election is scheduled for November and Cuomo is widely regarded as a strong Democratic candidate for the office. But it is unclear where he stands on the creation of a body like the SAM Board. A spokesperson for Cuomo did not return a request for comment before press time.

Whoever ends up taking over the governor’s mansion, the Empire State Development Corporation hopes he or she will press on with the creation of the SAM Board. “It is our hope that the next administration will constitute the SAM Board as soon as possible, and that it will pursue the vision set forth by the Commission,” Mitchell said.

That vision included the creation of a strong, central body that would formalise a consistent approach for evaluating potential projects for private investment and bringing those opportunities to market. The body was to be composed of several appointees selected by Paterson.

In December, the Commission’s Executive Director, Sam Barend, told InfrastuctureInvestor.com that Paterson was still in the process of selecting the names for the SAM Board and “as soon as he makes a decision on the names or shortly thereafter, we will be moving forward”. But in the end, he never offered any names for approval.

It is not known whom Paterson had in mind for the composition of the SAM Board. But Carl McCall, the former state comptroller who chaired the Commission, was widely anticipated to continue on as chairman of the Board.

McCall was did not return a request for comment before press time.

Despite Paterson’s backing away from plans to create the SAM Board, the Commission that recommended it has made several important contributions to the state’s planning for big public works projects. It identified 26 projects that could benefit from private participation, among them statewide bridge improvements, high-speed rail, transmission and distribution infrastructure, data centers and wireless telecommunications infrastructure.

Mitchell, the Empire State Development Corporation spokesperson, said that several of those projects are now “moving through various state entities”.

For example, in December 2009 the New York Power Authority released a request for proposals to develop offshore wind power projects Lake Erie and or Lake Ontario. That was a project backed by the Commission. The Commission also supported the development of solar power. A 100 megawatt photovoltaic power project was procured by the Power Authority in January and now has several bids under evaluation.

New York’s Office of Taxpayer Accountability has moved forward with another Commission recommendation: the creation of an inventory of the state’s assets in an effort to better understand what real estate the state owns and how it could best manage its assets.

A request for proposals for such an inventory was issued by the office in March and a contractor is expected to be selected by the end of this month, according to the request for proposals.