BBAC NEWSLETTER
TO: Batchellerville Bridge Action Committee Members
FROM: Peter VanAvery
DATE: February 6, 2005
As the Hudson River-Black River Regulating District has learned, an audit by New York State Comptroller Alan Hevesi can be an unpleasant affair. But the situation has the potential to get a lot worse if, after the auditors have come and gone, the Comptroller's Division of Investigation gets into the act. And that's happening now. In recent days, two investigators from the Comptroller's office and one from Attorney General Eliot Spitzer's office have visited the region to interview three people about the District's activities. According to media reports, the probe is focused on the disposition of surplus vehicles and various other financial and budget issues.
Meanwhile, as the Comptroller promised in November, his investigators also are reviewing the District's provision of full-time salary to its Secretary-Treasurer and its Legal Counsel for part-time work, as well as the propriety of reporting full-time service credits to the New York State Retirement System for both individuals.
If you are looking for an example of how the Regulating District repeatedly works against us, just consider its continuing court battle with Niagara Mohawk and Erie Boulevard Hydropower. Since creation of the reservoir in 1930, only downstream property owners that benefit from flow regulation -- e.g., energy firms that operate hydro plants -- have been required to pay for its operation and maintenance. In fact, those energy firms pay most of the tab. Now, however, they are challenging their assessments for the years 2000 to 2004 and are suing for $10 million in refunds. The argument: The cost of running the District should be shared by lakeshore property owners -- since, Niagara Mohawk argues, they also benefit from the existence of the reservoir.
As a key weapon in this court battle, the energy firms are employing a very helpful (to them) document titled "Hudson River Flow Regulation Benefit Study." This study looks at ways to expand the legal definition of the reservoir's "beneficiaries," and it places lakeshore property owners at the top of the potential hit list. Who paid for this study? Why, the Regulating District! And thereby hangs a tale. (Caution: You might want to clamp a clothespin on your nose before reading further.)
Our story starts several years ago when various stakeholders, including Niagara Mohawk, were negotiating the rules and regulations eventually embodied in the 2002 Federal license on the reservoir. The facilitator for those negotiations was Gomez and Sullivan Engineers, P.C., of Utica, and its bill was jointly paid by the NYS Department of Environmental Conservation and Niagara Mohawk. One requirement of the resulting license was that the District should conduct a study to identify other possible beneficiaries of the reservoir that could share in its cost.
To perform this study, the District signed up ... guess who? ... Gomez and Sullivan Engineers. Apparently, the District had no qualms about hiring a firm that had numbered Niagara Mohawk among its clients to conduct a study that had the potential to ease the assessment load on that same power company. Conflict of interest anybody?
Until its December 13, 2004 board meeting, the District had said little publicly about the study ... although it had posted the text on its web site. At that meeting, David Cherubin of Crane, Greene & Parente, a law firm retained as Special Counsel to the District, emphasized that the study had never been approved or accepted by the board. Further, he delivered some "preliminary" opinions. As reported by the official minutes of the meeting, here's the one that most impacts us: "There is an expressed conclusion that permit holders are statutory beneficiaries under the Environmental Conservation Law, and he believes this is a very questionable conclusion." He did not mention that Niagara Mohawk held the opposite opinion and was employing the study in its lawsuit. That, my friends, is called spin by omission.
I received my information about Niagara Mohawk's use of this study as a legal weapon from a state government source outside the District. To the best of my knowledge, this information has never been publicized. One segment of Niagara Mohawk's lawsuit is now before a judge in the state Supreme Court, and we'd better hope that he rules in favor of the District ... because an unfavorable decision could cost us. Unbelievably, the District has not made accruals against possible losses. In addition, we could find ourselves sharing the cost of operating the reservoir plus paying the annual access permit fee.
At its January 10, 2005 meeting in Latham, nearly one year after it began to consider the matter, the board awarded a $38,500 contract to Bollam, Sheedy, Torani and Co. of Albany to conduct an independent performance audit of the access permit system. Since the system is supposed to be self-supporting, the audit’s result will determine future access permit rates. The fee increase (does anyone seriously expect a reduction?) will take place in fiscal year 2005/2006.
Hardly anything the District does is without controversy, and this audit is no exception. The audit was proposed by the Great Sacandaga Lake Steering Committee, a self-appointed group composed of the Great Sacandaga Lake Association, the Fulton County Chamber of Commerce, and the GSL Fisheries Federation. At the District's December 13, 2004 board meeting in Johnstown, a spokesman for that group said that they had planned to dissolve the organization once the audit was under way. However, after hearing a rumor that the District had selected an audit firm that had agreed in advance to bring in a predetermined cost figure for the access permit system, he said that they now intend to stay active and monitor the process.
As well they should ... because they are going to "own" any fee increase. A year ago, we proposed that the District initially sponsor a management consulting study of its entire operation with a view to streamlining the authority, reducing headcount, merging offices, and increasing productivity. That should have been done first, followed by the independent performance audit of the access permit system. Since it was not, the forthcoming fee increase will be larger than it should have been. And as for the widespread rumor that the audit is "fixed," that shows you how little trust the District has earned from the stakeholders it regulates.
As I write, the lake's level is at 756 feet above sea level. This is nearly six feet above the target level, but about 4.5 feet lower than the actual level a year ago today.