Are New York’s public authorities fixed? Little more than a week ago, Gov. Paterson signed a bill to “rein in” New York’s “free-spending public authorities.”

But State Senator Bill Perkins of Harlem thinks that the convolutions New York’s Empire State Development Corporation (ESDC) put itself through to get the Atlantic Yards basketball arena funded “vitiate the longstanding efforts of the Legislature to reform public authorities and make them more accountable and transparent.”

Moreover, Atlantic Yards may not even pass muster under the law, Perkins says.

How could that happen?ESDC, the state agency in charge of Atlantic Yards, has worked with developer Bruce Ratner to complete the $511 million bond deal for the arena portion of the Brooklyn project through something called the “Brooklyn Arena Local Development Corp,” or BALDC.

But Perkins thinks that ESDC has tried to confer upon BALDC rights that it doesn’t have by statute, because BALDC isn’t a direct ESDC subsidiary. His letter reads in part:

The BALDC does not have the authority to grant a real property tax exemption for the land that it will lease to … Ratner’s arena management company. … The BALDC is subject to Real Property Tax Law

420-a, a different section than the one that applies to public authorities and their subsidiaries …. Under

420-a, not-for-profit property is tax exempt only if the corporation is ‘organized or conducted exclusively for religious, charitable, hospital, educational, or moral or mental improvement of men, women or children purposes.’ … [T]here would seem to be little basis for the BALDC to claim tax exempt status for the Atlantic Yards arena land. … Consequently, payments-in-lieu of taxes cannot be used to secure the bonds, and they are effectively worthless.”

Perkins states further that “ESDC could have easily avoided” this complication “if it had created the BALDC as a formal subsidiary … of the Urban Development Corporation Act, as it would then qualify for a tax exemption” under a different section of the law.

But if ESDC had taken this more straightforward path, it would have had to put the half-billion in bonds to votes by the Public Authorities Control Board (PACB) and by the New York State comptroller.

A PACB vote would mean political complications: the PACB is represented by the governor, the majority party in each of the senate and the assembly, and the minority party in each the senate and the assembly.

So approval might have delayed the bonds past their December 31 sell-by date, when their federal tax exemption expires. (The bond deal is scheduled to close this week.)

Whatever the complexities, the PACB and the comptroller should vote on the debt issuance, because the Atlantic Yards debt carries a moral guarantee from Albany.  A vote “would have required the PACB to undertake a substantive review of the financial merits of the bond issue, which are questionable,” Perkins notes.