View full size

Gov. David Paterson and legislators quietly borrowed state money in 2010 to give to their favorite baseball clubs, veterans halls, museums and even a racetrack casino at the same time they were cutting jobs and support for schools, health care and other basic public services.

As state leaders were loudly debating which state parks to close, they approved a $1 million state grant to the Tioga Downs Racetrack — a private business with $28 million in revenue last year, records show.

The Syracuse school district laid off teachers. But some of New York’s wealthiest schools were still given state grants to resurface running tracks and buy Smart boards, bleachers and a scoreboard, records show.

That’s because previous governors and legislators have built up $7 billion in slush funds for projects of their choice. Over the last 14 years, state leaders have created at least a dozen different programs that allow them to borrow money off of the state’s normal books for projects loosely defined as economic development or community enhancement.

These slush funds were the subject of a 2004 investigation by The Post-Standard, and tough times have not killed the practice.

The money continues to be handed out at the discretion of the majority party in each house with no competition among similar projects, little concern for a group’s financial need and often a nod toward political supporters.

Taxpayers will be paying off the debt, with interest, until at least 2037, for projects already in the works.

The state will have to spend $450 million this year to pay off old debts. That means an average family of four will contribute almost $100 to pay down debt on such projects as Yankee Stadium and new turf sports fields for the College of Saint Rose in Albany.

Last year, the state approved borrowing money for a new children’s bathroom and sauna at a Bronx fitness center, a water spray park in Suffolk County and a Tuscan craft center at a Staten Island botanical garden. The Forest Hills Gardens Corp. was awarded $1 million to restore a brick walkway in an exclusive Queens neighborhood that describes itself as a private community of mini-mansions with private roads and lush green spaces.

Assemblyman Al Stirpe, D-North Syracuse, was able to announce a windfall last September just as he was fighting to save the seat he eventually lost. Stirpe announced that the state would invest $28 million to turn a former General Electric building in Salina into a nanotechnology research and development facility.

The officials at the news conference couldn’t say where the money was coming from, only that it had the blessing of Assembly Speaker Sheldon Silver. And when it comes to the slush fund, that’s all you need to know.

There could be a fight coming over this money. Gov. Andrew Cuomo has proposed to redirect $340 million of unspent slush funds. He would take that share away from legislators and put it in the hands of new regional economic councils led by Lt. Gov. Bob Duffy.

Cuomo says he wants to make the process competitive and help projects that more people in the region support. Legislators, of course, want to keep the money.

Another option is not to borrow and spend any more money. But no one seems to be talking about that.

$5 billion borrowed

Over time, the state has authorized a total of $7 billion in borrowing under more than a dozen different names and acronyms, such as NYEDP, NYSEDAP and NYSTAD. The programs are hard to track. The money does not go through the normal channel — the state comptroller’s office.

Instead, the money is handled by two independent public authorities — Empire State Development (ESD) and the Dormitory Authority of the State of NY (DASNY). ESD and DASNY are state-created entities with their own boards of directors and their own bank accounts. They borrow money for the Legislature and the governor, and the state pays them back with income tax revenue.

So far, the state has borrowed $5 billion for slush funds.

State leaders came up with this system, known as “backdoor borrowing,” to get around a provision in the state constitution that prohibits the state from going into debt without first asking voters.

The borrowing helps rank New York’s per-capita debt the fifth highest among states. Each New Yorker pays $2,953 for all state debt, according to the Division of Budget.

About one-third of the grants have been for $150,000 or less. But the money has also financed multimillion-dollar projects, such as the Centers of Excellence. The largest is $1.4 billion for Advanced Micro Devices, a computer chip fab plant in Malta that was a pet project of former Sen. Majority Leader Joseph Bruno and then-Gov. George Pataki.

The first slush fund was created in 1997 for $425 million. New pots of money started to appear most years until 2008. The state is still awarding grants from that first 1997 account.

That is why local legislators are still talking about giving $15 million for a convention center hotel in downtown Syracuse.

In 2005, Sen. John DeFrancisco, R-Syracuse, started the process by simply approaching Bruno on the Senate floor and privately asking for $5 million. Bruno said, “Go for it.” Then, DeFrancisco asked majority-party legislators in the other house to approach Silver.

In the end, the Senate, Assembly and governor each promised $5 million with no application, no public debate and no plans. Since then, there have been many delays and, at this point, it is not even clear which property would receive the money.

View full size

Some win, some lose

Gov. David Paterson made a big deal of saying there was no new borrowing in the 2010-11 budget. He vetoed 7,000 member items legislators wanted to pay for with this year's revenue.

“Member items,” in Albany language, are pay-as-you-go cash grants that legislators pass out as they please. The governor — describing it as urgent belt-tightening — vetoed thousands of these grants.

He wiped out $5,000 that legislators gave to North Syracuse Babe Ruth League, but the state wasn’t hostile to all youth baseball. Just six miles away, the Cicero Amateur Sports baseball league remained in line for $250,000 in borrowed money for new fields.

Brian DeMonte, vice president of the Cicero league, said he felt kind of guilty when Assemblyman Stirpe offered a half-million dollars. In the end, the league only took half. Then, the economy crashed, and he wasn’t sure it would still be available. It was.

“I didn’t quite understand how it all worked, and I didn’t ask any questions because I didn’t want to know how it works,” DeMonte said.

Big payout for track

Soon after Paterson's July vetoathon, the state awarded $1 million to Tioga Downs Racetrack.It is a privately owned racetrack and casino in Nichols in the Southern Tier. The state, which licenses Tioga's racing and video lottery terminals, takes 37 percent of the profits.

After paying the state, Tioga Downs had $28 million in revenue last year, according to the New York State Lottery.

But the racino wanted more state help.

Jay Dinga, senior financial analyst for Tioga Downs, said the racino wants to add a 136-room, $50 million hotel. But the current septic system would not support that kind of traffic. So the racino’s owners asked Sen. Tom Libous, R-Binghamton, for a state grant to build a wastewater treatment plant. He responded with $1 million. The first award letter at DASNY was dated last July — the same month Paterson rejected the thousands of small member items.

Dinga argued that a new hotel would employ 76 people, in addition to the current 325, and would draw more visitors to the region. After paying for marketing, capital investments, payroll, taxes and other expenses, he said, the racino had a profit of $518,000 last year.

Tioga Downs has paid $2 million property taxes and contributed $91.7 million to the state since it opened in 2006, he said.

Its owners also contributed plenty of money to the election campaigns of Cuomo, Libous and Senate Democrats, who controlled the pot of money last year. Jeff Gural, principal owner, contributed $94,000 to legislators and governors in a position to choose grants and give racing licenses over the last two years, records show. The company also contributed $5,000 to Libous last year.

A project derailed

The people who run the Martisco Passenger Station Museum needed a home for the stacks of magazines, old train schedules and other books people have donated over the years. So they approached DeFrancisco at a breakfast and asked for money.

He responded with a $50,000 state grant that would help the group build a new room next to the 1870 passenger station that is their museum on a quiet hill in the town of Camillus.

As he sorts the materials, museum President Al Kallfelz says now he isn’t sure the project was such a great idea. They’ve run into problems with the contractor and the project sits unfinished.

Also, he said, you can buy about eight shelves worth of the magazines they’ve collected on two disks. And they only really take about six calls a year from people who want information from their stacks. He said they could have donated the materials to a library that already has four walls, but he wasn’t sure how much anyone else would be interested.

“Hindsight being a good thing, we probably shouldn’t have built the damn thing,” he said. “We should have just put it in a shed.”

View full size

Conflicts and contributions

Schools in Central New York cut teachers, bus routes and sports in 2010. Meanwhile, the Port Washington Union Free School District, was approved for a $150,000 grant to resurface its running track and buy new bleachers and a score board. The Hicksville Union Free School District was approved for a $100,000 grant for the purchase and installation of Smart Boards.

Port Washington is five times wealthier than, for example, the Onondaga or Solvay districts in Central New York.

Those grants came courtesy of then-Sen. Craig Johnson, a member of the Democratic majority, who was fighting for re-election in one of the closest races in the state.

As proof of the political nature of these grants, Senate Democrats withdrew nine of Johnson's grants after he lost the November election to Sen. Jack Martins, a Republican.Announcements of free money abound in election years. But they are not always enough to save a seat.

The Bayside Historical Society threw a farewell party in the Officers Club ballroom for Sen. Frank Padavan, R-Queens, who lost the November election. He had sponsored a $374,000 grant to renovate the former Officers Club. He had also donated his baby grand piano, according to a Patch news story.

Legislators often look to their own hobbies and personal interests when they decide who will win a grant, and the system allows it, as long as they don't profit from it.

Padavan awarded a $250,000 grant for the Padavan-Prellar baseball fields for a new refreshment stand, larger bathrooms and office space, records show.

DeFrancisco once awarded $90,000 to the Frank DeFrancisco Eastwood Community Center. The center was named for the senator’s father, who died in 2001.

Sen. Thomas Morahan, R-New City, helped the Hibernian House of Rockland County obtain a $50,000 grant to help improve handicapped accessibility to the second-floor meeting hall. Morahan was a longtime Hibernian. He died in July, and the Rockland County Ancient Order of Hibernians played the bagpipes at his funeral, according to a news story.

One legislator is about to be sentenced to jail time in connection with kickbacks he took on contracts that involved state grants he funneled to his own nonprofits.

Former Sen. Vincent Leibell, R-Patterson, pleaded guilty in federal court in December to evading taxes on kickbacks he took in connection with state money he directed to two nonprofits he set up. The Putnam Community Foundation and the Hudson Valley Trust have accepted a combined $9.5 million in grants over the years, records show. Leibell was accused of extorting kickbacks from attorneys on the senior center projects, according to news reports.

In recent years, the state has tried to at least make conflicts of interest more transparent.

Cuomo, as attorney general, insisted that groups fill out a form to declare if the sponsoring legislator or any related parties have any financial interest in the project and that the legislator has not been paid off.

The Bethel Woods Performing Arts Center disclosed on its form that one of its members might give a campaign contribution to the legislator who sponsored the grant. Empire State Development approved it, anyway.

Alan Gerry, the man behind the project, made a $5,000 contribution to Sen. John Bonacic that was recorded in campaign finance reports on the same day the senator secured a $250,000 grant to improve lighting in the parking lot and entrances for the disabled. Gerry is worth $1.6 billion, according to Forbes.

The state has already helped the performing arts center with $14.2 million in slush fund grants, awarded by Bonacic, Pataki and the late Assemblyman Jake Gunther, D-Forestburgh. Bonacic said that he would continue to help the project anytime he can.



'We're making a difference'

Legislators argue that the system works because only they are in the best position to know the needs of their districts. And no one argues harder than the grant recipients that their projects are worthy.

Jody Rogers, parks and recreation director for the town of Cicero, said organizers of the CanTeen teen center were turned down by both the state and federal governments when they applied for traditional, competitive grants.

They looked to their local legislators. Stirpe came up with $250,000.

“When we end up going into one mass pot for the state of New York, sometimes the suburban areas get lost when they’re up against some of the critical areas within the urban areas,” she said. “I’m sure people might look at it and say that money should go somewhere else, but for us, it’s critical for our program, and we’re making a difference for youths’ lives every day that we’re open.”

DeFrancisco chose the Italian American War Veterans John Venditti Post 1 in Syracuse for a $50,000 state grant.

Commander George LePorte said he was delighted that the group had enough money to put in a ramp and bigger bathrooms to accommodate wheelchairs and a deck for disabled veterans to enjoy the clambakes.

“We have an important function. We like to consider ourselves veterans helping veterans because nobody else is doing it. I know on the surface, it sounds biased and perhaps it is. Unless somebody comes up with a better plan, that is the way it is,” he said. “You work within the framework of that which is.”

Read The Post-Standard's 2004 series on New York's slush funds

New York's Slush Funds: October 2004 The Post-Standard

Contact Michelle Breidenbach at mbreidenbach@syracuse.com or (315) 470-3186.