Essential Oversight of LIPA

As a Long Islander, NYS Comptroller Thomas DiNapoli has unique insight into our power and electric issues. Using the authority of his office to perform thorough audits into LIPA, DiNapoli makes the case that greater oversight is required to protect ratepayers.

Comptroller DiNapoli LIPA oversightThe Long Island Power Authority’s (LIPA) rates continue to be among the highest in the nation.  At the same time, LIPA customers — businesses and families alike —  don’t have the kind of oversight and protection that utility customers in the rest of the state enjoy.   That’s why it’s soessential for LIPA to work to improve its methodologies for calculating costs and provide ratepayers with clear and understandable  information on how rates and rate increases are determined.  I live on Long Island.  I understand and I share the concerns of  all those families and businesses.

Long Islanders need and deserve more protection from exorbitant and unwarranted rate increases.  That’s why I am using the power of my office to shed light on LIPA’s operations.

In addition to the annual filing requirements imposed by Public Authorities Law, my office annually requests  additional information from LIPA.  This year, we sought  supplemental data related to  the disclosure of LIPA’s overbilling for energy losses and other issues.

Recently, LIPA proposed returning a portion of the overbilled funds to ratepayers over a three-year period in the form of rate relief.  Three years is too long; LIPA should return this money to Long Island families as quickly as possible.  My office will continue to monitor how LIPA proceeds on this issue.

Last year, in response to concerns raised by Long Island legislators, my office reviewed LIPA’s preparations for Hurricane Earl.  Our review found that while LIPA appeared to have adhered to established storm protocols in response to Hurricane Earl, there were opportunities to improve the authority’s policies and procedures by exploring alternatives to committing to out-of-area crews so far in advance of a storm. This could save millions of dollars in pre-storm staging costs.

An analysis by my office of budgeted and actual storm cost expenses found LIPA’s 2010 storm costs exceeded the budgeted amount by approximately 640 percent.  The authority’s costs were estimated to total $200 million, while the authority budgeted just $27 million for this expense.  LIPA should take several steps to improve the methodologies used to establish storm cost budgets to balance the need for a rapid and aggressive storm response with the need to contain costs ultimately borne by ratepayers.  In addition, LIPA must provide a detailed accounting and justification of actual costs incurred once these costs are finalized.

In July 2010 my office issued an audit on LIPA’s Oversight of Contracts with National Grid. Our audit found that improvements are needed in LIPA’s monitoring of National Grid’s sales of emission credits from its power plants.  Contrary to contract requirements, National Grid did not report some sales to LIPA, and as a result, LIPA did not receive its share of the proceeds from these sales until we made LIPA officials aware of the issue.

While the failure to report the sales appeared to be an oversight on the part of National Grid, LIPA needs to improve its monitoring to prevent these kind of  errors and ensure that it receives its full share of the proceeds from such sales.

In July 2009 we issued an audit on Internal Controls Over Fiscal Operations that  found LIPA’s annual procurement report for 2007 was not complete.  A number of important contracts were not included in the report and the audit also revealed that several members of LIPA’s Board of Trustees did not always attend Board meetings and others did not receive training as required by law.  The audit recommended that LIPA take action to strengthen its internal controls.  Copies of these audits can be found on our website at www.osc.state.ny.us/audits.

Long Islanders should be getting better service and better protection from their utility company.  LIPA may be not be subject to regulatory oversight by the Public Service Commission (although I support legislation to provide that kind of oversight), but I am committed to keeping the public informed of LIPA’s performance and ensuring that LIPA is providing its ratepayers with the utmost level of transparency and accountability.  Other lawmakers have also said they will hold LIPA accountable as well.

The people of Long Island deserve better.

Political Football

Republicans do the Hora during the election

The Republicans are inching closer to control of the New York State Senate. This is less of an ideological victory of sorts than it is an interesting development in the ongoing power-play of regional interests. At stake are redistricting and determining the identity of the “third man” in the room in Albany. For Long Islanders, it’s about money.

The political and corporate leadership of the Island have long opined over our funding imbalance. In short, we send more money to Albany than we receive. Unfunded mandates, the support of New York City schools and the staggering burden of Medicaid forces local municipalities to install punitive tax measures on businesses and residents. This, of course, is an affront to our sense of fair play. That said, no one would switch places with any community north of the Tappan Zee.

The state as a whole continues to flounder on the eve of another Cuomo administration. And while everyone expects Gov. Cuomo of the Andrew persuasion to be hard-charging, there appears to be little for him to charge at. Layoffs of government workers are a given and public contracts will be broken and battled over in court. Closer to home on the tiny island next door, the astounding resurgence of the financial industry in New York City isn’t enough to cover looming budget gaps in Mayor Michael Bloomberg’s out-year forecasts. Identifying new sources of revenue or trying to figure out where budgets are going to be slashed is anyone’s guess. But insiders are hardly in the prognosticating mood. Instead, everyone is keeping their heads down so as not to be noticed by the governor-elect, in the hopes that avoidance equals survival in what will likely be a bloody term.

Cuomo, who strode to Election Day on the “compared to the last two guys and the cast of lunatics I’m running against you have no choice but to pick me” campaign, has remained radio silent on his plans for straightening out our fiscal woes. His non-endorsement of fellow Democrat, Comptroller Tom DiNapoli, speaks volumes about his intention to govern in a tight-fisted manner. This pales in comparison to the copious amount of ink spent trying to predict whether Cuomo will bury the hatchet with Assembly Speaker Sheldon Silver in the back room or in the back of his head. Either way, front row seats are cheap as we fast approach the Albany cage match of the new millennium.

All of this brings us back to the issue of money and whether Long Island will hold onto its share or part with more of it. The reality is we simply cannot afford to be the state’s piggy bank any longer. Nassau County is teetering on the brink of disaster, and the back-channel chatter of insolvency is getting louder. Even Suffolk County, which has enjoyed the benefit of a more equitable property-tax assessment system as well as having the most frugal county executive in its history, is showing signs of economic stress. 

The great hope is that fate has intervened in the form of the reconstituted Republican delegation from Long Island. With Senators Brian Foley and (likely) Craig Johnson both falling on the “MTA commuter tax” sword, the scales may have positively tipped in the Island’s favor. While I know little about Foley’s successor, Lee Zeldin, I have had the opportunity to get to know Jack Martins, who finally appears to be close to solidifying Johnson’s ouster in a hotly contested bid now a month past the November elections. Martins has been an astute and effective mayor in Mineola where he has carved out a solid niche as a forward-thinking executive. Whether these skills are applicable in a legislative role in Albany remains to be seen. But history has shown that when the LI delegation speaks with one voice (and Republicans rarely vary from the provided script) it is a juggernaut.

Again, this has little if anything to do with ideology—the Long Island delegation could all be from the Rent is 2 Damn High party for all I care—but it has everything to do with strength in numbers. If Sen. Dean Skelos (R-Rockville Centre) is indeed the third man in the room and he has a strong offensive line giving him enough time in the pocket, we stand a better chance of holding our ground while the rest of us figure out how to reinvigorate the local economy before the play clock runs out. Sorry for the hackneyed sports analogy but amidst my normal political ruminations, I’ve got Jets-Patriots on the brain.

Tom DiNapoli For Emperor

The New York gubernatorial candidates invaded Hofstra University this past week for what turned out to be an embarrassing spectacle instead of a legitimate debate. All parties involved should be mortified over this production, particularly on the heels of the 2008 Presidential debate that luminously placed Hofstra on an international stage. No matter. With less than two weeks to go until Cuomo Part Deux, there is precious little time to bother with this fiasco. Long Islanders have something bigger at stake.

Years ago the Press gave up political endorsements for Lent. Because we let our opinions fly freely throughout the year, we calculate that our readers have sufficient ammunition with which to enter the voting booth. (But there is little doubt that our official gubernatorial endorsement this year would be Jimmy McMillan because rent… rent is too, damn, high.) I offer this disclaimer because, even though the Press no longer endorses candidates, I am about to unapologetically proffer the most sycophantic, disgusting endorsement of a candidate this little column can muster.

The most important vote to be cast on November 2nd is for what is perhaps the least understood and most underappreciated job in the state. The office of comptroller is the financial cornerstone of New York’s government. More than ever, this office requires integrity and stability. Someone who cannot be bought, sold, cajoled or persuaded—someone who is beyond reproach and fervently dedicated to the people served by this position, not the person himself who serves in it. The current comptroller is Mineola native, Hofstra graduate and Great Neck resident Thomas P. DiNapoli. Let’s keep it that way.

For decades DiNapoli has represented the best of what New York politics has to offer. His story is familiar to many Long Islanders because DiNapoli has been in office since the age of 18 when he was first elected to serve on a local school board. After two decades in the New York State Assembly and three years as comptroller, he has gained the reputation of being one of the most decent and honest public officials in the state. This reputation was earned among his constituents and colleagues alike, but it’s the latter that his opponent is seizing upon.

Spending one’s entire career in public service no longer carries the esteem it once did; couple that with the fact that DiNapoli was selected for the comptroller’s position by Assembly Speaker Sheldon Silver and it’s easy to see why this is his opponent’s theme. That’s politics. Everyone needs a hook. But don’t be suckered in by this argument. It’s easy to join the chorus of malcontents who denounce the plight of the so-called “career politician” because we are so far removed from the age when that phrase held any air of nobility and distinction. Nevertheless I do find it ironic that someone wishing for a career in politics would criticize someone for already having a career in politics.

Tom DiNapoli is indeed a career politician in the best sense of the phrase because he has dedicated his life to proper governance. No apology necessary. As far as DiNapoli portrayed as an Albany insider because he was appointed to the position, that’s a different situation entirely for which I offer this response: DiNapoli’s colleagues naming him comptroller was political penance – as though their misdeeds would be judged less harshly through this singular altruistic act. It was a moment of unprecedented decency delivered by the most dysfunctional and acrimonious band of jackals in recent New York history. It was a gesture from people who knew that for two decades Tom DiNapoli was the standard bearer for honesty in their chamber, the person every politician measured him or herself against and always fell short. This appointment was their way of honoring someone they were grateful to work with—someone who made them all a little better.

DiNapoli’s political shortcoming is the part of the job so many others live for. He is quite possibly the worst fundraiser and self-promoter in elected office anywhere. He does not long for screen time and is polite to a fault. Instead of campaigning, he works. Instead of grandstanding, he quietly gives credit to others. He cannot be bought, sold, cajoled or persuaded. His lack of exposure is strictly due to his dedication to serving others, and it has cost him donations, endorsements and publicity. And it’s what makes Tom DiNapoli perfect for this job.

We’re fortunate the State Legislature had the presence of mind to do the right thing and place Tom DiNapoli in the comptroller’s position. It’s time for us to do the same—and keep him there.

Governor David Paterson

Something very interesting is happening in Albany.

 David Paterson, the happenstance governor of New York, is finding his footing, getting comfortable in a battle-ready stance and throwing jabs at the legislative body he presides over. And he’s connecting with greater frequency. All of the pundits who have been scoffing out loud at the possibility of David Paterson returning to office next year should sit up and take notice.

 Until this point many have considered Paterson a seat warmer for Andrew Cuomo. His inability to read staff briefings and his refusal to learn braille is a source of constant mockery. Even Rupert Murdoch pointed to Paterson’s impaired vision as a primary reason he is unfit to govern the state. The legislature routinely obstructs his initiatives or ignores him completely. Hell, the President of the United States took time out of his schedule to tell him to step aside next year.

 But an objective look at what has transpired over the past couple of months tells a slightly different story than what the pundits are saying.

 Since being sworn in as Governor, Paterson has gone on a crusade to warn the public that New York State’s finances were spiraling out of control and headed for a wall. His barrage of warnings went virtually unheeded and quickly became verbal wallpaper in the media and in political circles. When NYS Comptroller Tom DiNapoli finally put a figure to the deficit and joined Paterson in a chorus of warnings, the concern grew ever more palpable among New Yorkers while the members of the Assembly and Senate rearranged deck chairs on the Titanic.

 An internal coup during the summer months paralyzed the government and placed a spotlight on their remarkable dysfunction.  This is when an almost imperceptible shift in Paterson’s favor occurred. When Paterson threatened to break the deadlock by appointing a Lieutenant Governor he was ridiculed and brought to court by the legislature. Quietly, a couple of months and appellate court decision later, the governor got his man.

More of a Bad Ass Than We Thought?

Over the past few months the deficit has grown larger while the legislators ignored the governor’s request to get back to work forcing Paterson to once again to take matters into his own hands. He threatened to expand executive authority and begin slashing budgets across the board and forced the legislature back to the table. Say what you will about our beleaguered governor, he is determined to stand up to anyone in his way.

 Some of the insider rap on Paterson may well be true, however. The administration itself is considered by many to be highly disorganized and the governor is said to be increasingly paranoid given how many people are angling to fill his chair. But as the saying goes, just because you’re paranoid doesn’t mean they’re not watching you. Despite some tiny victories, his approval ratings have gone into freefall and talk of his replacement has gained serious momentum. But if the recent local elections are an indication of anything, it is simply that anything can happen. The anti-incumbent wave of emotion may continue unmitigated through next year and send several sitting legislators to the private sector.

The ultimate twist of fate would be if the voters leave Paterson right where he is to captain this ship regardless of what the polls say today.

 Stranger things have happened.

Echo Bubble

The federal debt now stands at $12 trillion. Historic. New York State Comptroller Tom DiNapoli issued a statement warning New Yorkers that the state is “on track to spend $4.1 billion more this year than it will take in,” characterizing this deficit as “irresponsible and unacceptable.” On Long Island we are being squeezed by every taxing authority under the sun. But the government isn’t alone. Homeowners across America are underwater with mortgages they cannot afford and drowning in the highest household debt ratio in history.bubble-300x267

Incredibly, the Dow Jones Industrial Average has crept above 10,000 in recent weeks despite every indicator contradicting Wall Street’s enthusiasm.  

I’m amazed at the level of blind faith the public places in the voodoo wisdom of Wall Street. In daily conversations, economists, investors and the general public blithely repeat figures that track the upward progress of the Dow Jones Industrial Average or the S&P 500 without putting any thought into how Wall Street arrived at these numbers. Unemployment rises and so does the Dow. Consumer confidence plummets and the market rolls on. Foreclosure rates climb, loan modifications fail and the market forges ahead. Our collective optimism is unparalleled in the world; an admirable trait until it runs into the brick wall of reality—and the wall is closer than you think.

We trust somehow that the savvy Wall Streeter in pinstripes, Polo frames and wingtips actually knows what he is doing. Less than two years ago this same swindler was hawking swaps and derivatives built on bad mortgages, and there was a sucker for every share. Today the only sucker is the blogger or talking head on television pontificating about how the economy seems to be recovering. The fact is the blogger and talking head aren’t investing in the market right now because they don’t have any money. Worse yet, they’re drawing economic conclusions from the surge in the stock market and passing it along as gospel. In reality, virtually all of the growth in the market today is from dollars being poured into the market by unregulated hedge funds.

Here we go again.

The hedge funds are investing in equities because it’s the fastest way to turn a buck. Move the market, make your nut, and dump out. But the hedge funds aren’t receiving any money from individual investors either. They’re getting it from the banks through low interest loans and funneling the money back into the equities market for short term gain. See where this is going? The only banks with enough money to loan to hedge funds are the ones that were bailed out by the federal government which had to borrow the money on the international market to support the banking industry. When these notes are due the federal government will dip into the only available revenue source it has to pay down the debt: You and me—the taxpayer.

One of the missed opportunities during the initial months of the young Obama administration was its failure to address the regulatory environment on Wall Street to provide greater transparency in the financial markets. The central problem remains in the Senate Banking Committee whose members are in the pockets of the investment banks and the hedge funds. Make no mistake, Senators Schumer and Dodd run America’s balance sheet, not the Fed. The contributions they receive from the financial sector are mind blowing, which is why the Senate refuses to lift the veil of secrecy from the financial system. If Americans got the chance to peek under the hood of the fiasco that is our economy it would all come crashing down. Either way, it’s coming. The only difference is that we will not be forewarned.

So despite what anyone tells you, we are not in a recovery. People casually refer to last year’s banking collapse as a tsunami. A fast and furious storm that indiscriminately ravages everything in its path. Remember though, it’s not the first wave of the tsunami that kills. It’s the second. My friend Peter Klein, senior VP of UBS Financial Services, describes the period we’re in right now as an “Echo Bubble.” According to Peter, the term was coined by Nobel Laureate Vernon Smith to describe typical post-bubble activity whereby the initial burst is followed by a secondary bubble “during which market psychology matches the extremes of sentiment displayed in the first bubble. Typically, markets do not find a genuine bear market bottom until after the echo bubble bursts.” Put another way, we are returning to the beach to assess the damage of the first wave unaware of the far more dangerous swell that is fast approaching.

So what happens next? This bubble bursts when the first big hedge fund pulls out of the market. Don’t let the man in pinstripes fool you. It’s around the corner.