State censures economic agencies

JOHNSTOWN – The state Authorities Budget Office announced Thursday it has censured the boards of directors of 13 public authorities, including those for the Fulton County Center for Regional Growth and the Fulton County Economic Development Corp., for “persistent failure to comply with state law.”

In particular, the ABO says those local economic development agencies need to be more public with their records. The ABO has long contended the CRG and EDC are public agencies, while the agencies themselves claim they are private.

ABO Director David Kidera issued a news release announcing the censures by his agency, which was created as an independent office stemming from the 2009 Public Authorities Reform Act.

A censure letter, sent to individual directors of each authority, was issued due to the “collective failure” of the directors to take appropriate action when their authorities were previously warned they were out of compliance with state law, the release said.

Kidera stated in the release, “Those prior warnings constitute reasonable evidence that the board was made aware of this situation. The fact the board continues to ignore its obligations under state law is unacceptable. This continued inaction demonstrates a fundamental misunderstanding of a director’s fiduciary responsibilities.

“The board members of these 13 authorities were given every opportunity to comply with state law,” Kidera added in the release. “We were compelled to take this enforcement action when directors neglected their legal responsibilities over several years and failed to respond adequately to previous warnings issued by our office. “

The release said the censure becomes part of the public record, and disclosure of the letter may be required by federal securities law should the CRG and EDC enter the bond market in the future.

This brings to 38 the number of authorities censured by the ABO for non-compliance since October 2011.

CRG President and Chief Executive Officer Michael Reese said today he hopes the ABO and CRG can sometime in the future conduct a news conference with the media about the public and private dispute.

“We corresponded with Mr. Kidera over the summer,” Reese said. “He said the CRG is a public authority. The Authorities Budget Office has made the wrong decision. That’s what we’ve been saying for three years.”

The stated mission of the ABO in its news release is to “make public authorities more accountable and transparent and to act in the public interest consistent with their intended purpose.”

The ABO and the CRG – the parent company of the EDC – have clashed several times in recent years.

The ABO in fall 2010 began seeking more transparency in the EDC and records of the Crossroads Incubator Corp. – another corporation under the CRG umbrella – after finding out $3 million in bonuses were paid to former EDC and CRG executives Jeff Bray and Peter Sciocchetti. The CRG is still trying to recover the bonus money.

The EDC in March gave up a legal battle against the state over whether the EDC should be classified as a private agency, which it continues to claim. The EDC had sued the ABO after the office told the EDC it is a public agency and its records and meetings must be open to the public.

The EDC claimed it is a private entity and not subject to the state Public Authorities Accountability Act of 2005. But the EDC in March withdrew an Article 78 petition against the ABO. The Article 78 was designed to determine whether the ABO exceeded its powers by writing a letter demanding the EDC comply with the Public Authorities Accountability Act.

An Oct. 1 censure letter was sent to CRG board Chairman Dustin Swanger, who couldn’t be reached this morning for comment. The letter, in part, stated the CRG “is a local authority as defined in Section 2(2) of Public Authorities Law and subject to the accountability and reporting requirements of that law, and the enforcement authority of the ABO due to CRG’s affiliation with Fulton County.”

The CRG and county last October announced a new partnership.

The county Board of Supervisors allocated $40,000 to the CRG to help with ongoing legal costs in an effort by the CRG to recover the bonus money through the court system.

The new partnership also makes the CRG more accountable to the county, triples the county’s taxpayer-funded allocation to the agency to $75,000 for 2013, and allows the appointment of county supervisors to the CRG board.

Starting Jan. 1, the Board of Supervisors has had an increased role in governance of the CRG. For example, the CRG is now required annually to file audited financial statements with the county board chairman. The new marketing agreement includes several other requirements as well, such as having the county’s allocation go toward marketing only.

County payments to the CRG will be based on submission of monthly vouchers, similar to the method used by other county-sponsored programs. The CRG assumes the responsibility for administering all loan pools currently administered by the EDC. The CRG also must adopt a balanced 2013 budget and a staffing plan based on realistic revenues.

Michael Anich can be reached at