Saratoga Economic Development Corp. not subject to state oversight, judge rules

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ALBANY — The Saratoga Economic Development Corp. has scored a landmark victory in its long-running assertion that it is not subject to the state oversight given to public authorities.

Unless the state Authorities Budget Office successfully appeals Tuesday’s ruling by a state Supreme Court judge, it must give up on what it has sought to achieve since the mid-2000s: oversight of SEDC, a private nonprofit that Saratoga County pays to provide economic development services.

SEDC President Dennis Brobston said Thursday he was elated at the ruling, which may end a dispute that began in 2005.

“They always felt that they could bully us and that was how they approached it, all the time,” he said. “We felt the work we did was very important to do the way we do it.”

The ABO was created to make public authorities more accountable and transparent and help ensure they act in the public interest for the purposes for which they were created. It did not respond to a phone call and email request for comment for this story.

SEDC does provide some transparency, though it stops short of a cost-benefit analysis.

As a tax-exempt 501(c)(3), it must file a Form 990 with the IRS, and multiple groups aggregate such filings online for public review. Also, as part of its contract, it provides the county with its salary schedule, tax return, budget and details on how it spends the money the county pays it — which was $225,000 this year, less than a quarter of its budget.

ABO made a preliminary determination in October 2008 that SEDC qualified as a public authority under state Public Authorities Law, prompting years of back-and-forth between the two. ABO didn’t make a final determination that SEDC was a public authority until October 2020; SEDC challenged that in court in February 2021.

In its response to the challenge, ABO said it has been monitoring SEDC’s activities since 2005 and determined it not only meets the statutory definition of a local authority but acts like one, and ABO considers the funding arrangement a direct appropriation for SEDC to serve as the county’s lead economic development agency. 

ABO asserted the relationship between the SEDC and county is structured to evade the state Public Authorities and Accountability Act of 2005 and the Public Authorities Reform Act of 2009, and that ABO considers it a public private partnership.

In his decision this week, acting Supreme Court Judge Richard M. Koweek shot down ABO’s case point by point, citing legal precedent and citing gaps in ABO’s own arguments.

ABO did not challenge SEDC’s assertion that it was created by the private sector for the private sector, with no involvement by the county and no requirement for it to work with the county, Koweek wrote. He also noted that SEDC is managed and run entirely by private-sector personnel.

The relationship, he wrote, is an arm’s-length contract for fee-for-service. Nothing in the record shows SEDC is affiliated with, or sponsored by, local government.

Koweek also responded to an affidavit submitted by acting ABO director Ann Maloney, saying she improperly attempted to add new facts to an existing case begun under her predecessor. But he nonetheless decided to consider her assertions, he wrote, and they did not change his ruling.

“We were surprised he did it like that,” Brobston said.

Unmentioned in the ruling was a seemingly glaring indicator that SEDC is not a public entity: The county essentially fired SEDC from 2014 to 2019 after SEDC wouldn’t allow the county Board of Supervisors to place its own members on the SEDC board to provide oversight.

The majority of the county board opted in 2014 to create a new economic development agency, the Saratoga County Prosperity Partnership, that was county-controlled and received the majority of its funding from the county.

The county paid the Partnership much more than it had paid the SEDC but never saw the results it hoped for, only minimal business development and job creation. SEDC, meanwhile, continued to operate on its own, with more success.

By 2019, the county brought SEDC back under contract to work side-by-side with the Partnership. In early 2022, the county essentially shut the Partnership down.

Stillwater Supervisor Ed Kinowski was one of only two supervisors to vote against SEDC’s return in 2019, because it refused to submit to the ABO oversight he thought it should have.

He said Thursday he still believes that, and was surprised by the ruling.

“I think it will have a negative impact on other cases that come before the state,” he said.

But the ruling is the law, Kinowski said. “This was a nice break for SEDC, it’s not hanging over the county’s head any more, it’s resolved. That’s how I look at it.”

Clifton Park Supervisor Phil Barrett was opposed to terminating SEDC in 2014, was in favor of its return in 2019 and favored shutting down the Partnership in March 2022.

“It is very important that SEDC remain separate and distinct from the county,” he said. “It’s been very beneficial for the county and we’re very pleased with the performance and the relationship over the last few years.”

Barrett said the county contracts with other organizations, including chambers of commerce and the Cornell Cooperative Extension, and doesn’t seek to place supervisors on their boards of directors. 

The experience with an economic development agency directed by county supervisors — the Prosperity Partnership — was a colossal and expensive failure, he added.

Barrett is very comfortable with the level of transparency SEDC provides as part of its contract, and doesn’t see the need for any further oversight by the ABO. He expects SEDC’s relationship with the county will expand now that the Partnership is out of the picture. The county allocated $350,000 to the Partnership this year.

Brobston said there’s accountability built into the county-SEDC relationship in that it continues in one-year increments. If SEDC doesn’t produce results, the county doesn’t have to rehire it.

But SEDC does claim results, and massive results — 400-plus businesses assisted, $18 billion-plus in investments, 18,000-plus jobs created, thousands more jobs retained since its formation in 1978.

Some of those wins came in solo efforts, other victories came as part of a team, most notably the GlobalFoundries computer chip factory in Malta, the largest project in upstate New York in generations — a more-than $15 billion investment, not counting $1 billion worth of expansion efforts underway now.

Categories: Business, Clifton Park and Halfmoon, News, Saratoga County

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