“It’s a voluntary contribution we’re making.  If NYPA didn’t do this, they’d have to get funding someplace else.”  NYPA CEO Richie Kessel quoted in The Buffalo News, February 7, 2009.

On the morning of Tuesday, February 3, Richie Kessel, the new CEO and President of NYPA sat, alone, in front of a videoconference camera in Westbury, Long Island.  In light of the import of the matters to be considered by NYPA that day Richie wore a billowing light-colored, short-sleeved polo shirt and chinos.  Kessel, a full-time, highly compensated chief executive, declined to travel the 21 miles from Westbury to NYPA headquarters in White Plains so he plugged in at public expense from Westbury Expedite studio in Nassau County.

Kessel and the NYPA Board were gathered to discuss and consider the transfer of $488 million of NYPA funds to the State to help bridge a budget deficit of about $1.6 billion in the current budget year and $14 billion in the next.

Kessel and the NYPA Board approved two separate transfers of $318 million in fiscal years 2009 and 2010 pursuant to a memorandum of understanding and a “voluntary contribution” of $170 million.  Bank of America, Ernst & Young and Hawkins Delafield & Wood advised NYPA and the preordained approval of transfer of NYPA’s excess funds to the State was duly obtained although three members of the then six-member NYPA Board voted no or abstained.  So, instead of reducing electric rates to hard-pressed upstate manufacturers, Kessel’s NYPA threw its excess funds into the State budget maw.

NYPA will receive no interest on the amounts transferred and there is no obligation on the part of the State to repay the money except that the Division of the Budget has generously agreed to include a request to the Legislature for appropriation of the funds in the future.  Indeed, it was pointed out at the meeting that the State had not promised, nor was there a general obligation, to repay the funds.  Whether the Legislature will in fact deign to repay those funds at some future date; whether the State will then have the wherewithal to repay those amounts; and how badly the inflation, expected to follow the current federal super fiscal stimulus will erode the purchasing power of the advanced funds are all open questions.  Some observers wonder whether the discredited rating agencies will arise from their decade-long slumber and consider the impact on NYPA’s credit rating.  As every schoolchild knows, a reduction in the authority’s rating would lead to an increase in NYPA’s cost of money.

Interestingly, having made the voluntary contribution deal with the Governor’s office, Kessel was silent during the meeting except for one perfunctory question but, as is his practice, spoke to Tom Precious of The Buffalo News following the meeting and provided the typically blustery quote included above.

A colloquy between two NYPA trustees may indicate that more avaricious designs on NYPA cash await:  The newly appointed Vice Chair assured the Board and public that NYPA could endure a “50% decline in revenues or more” and maintain its credit ratings or at worst experience a slight downgrade after the approved transfers suggests to some that he believes NYPA has more to give.  An upstate trustee responded that NYPA would have to be “more stringent in the future with respect to these ‘voluntary contributions’ and whether they met the “deemed feasible and advisable test” of State law.

NYPA bondholders, customers and rating agencies should worry whether the State, having been temporarily sated by this tasty $488 million morsel to solve the relatively small current year deficit, will now move to consume other cash amounts on the NYPA balance sheet to fill the yawning $14 billion deficit in the upcoming fiscal year.  A review of the NYPA financials reveals additional decommissioning and other cash balances available for the taking.

Finally, after the vote on these questionable cash transfers, one member of Kessel’s staff reported, as previously requested, that, yes, NYPA had bought the trustees Directors and Officers Insurance.  Given the next demands that are likely to come from the Governor’s Office, a healthy D&O policy seems well advised.

Street Corner Conservative will be watching the other monies held by NYPA which are at risk as long as Kessel remains at NYPA and will keep its readership posted.

Street Corner Conservative.com has filed a request under New York State Freedom of Information Law with the FOIL Officer of the New York Power Authority requesting certain public records of NYPA relating to the whereabouts during business hours of the peripatetic CEO of NYPA, Richie Kessel, who is solely focused on spending time in his native habitat, Nassau County.

Specifically, Street Corner Conservative has demanded access to Kessel’s schedule, phone logs and information about NYPA’s proposed merger with LIPA that Kessel has been pursuing.

Street Corner Conservative will keep its readers informed of NYPA’s response to the FOIL request.

The following is the text of the letter sent to NYPA’s FOIL officer:

New York Power Authority
Office of the Secretary
123 Main Street
15-M
White Plains, NY 10601

Ladies and Gentlemen:

I am a taxpayer and resident of the State of New York and pursuant to New York Public Officer Law and the provisions of the regulations of the New York Power Authority (NYPA) adopted pursuant to the Public Officer Law (21 NYCRR Part 453), I demand access to the following records by email to me if possible:

1. Copies of the schedule and/or calendar kept and compiled on a daily basis by or on behalf of the President and Chief Executive Officer (CEO) of NYPA from September 23, 2008 through and including February 13, 2009;

2. Phone logs of calls from and to the President and CEO of NYPA from September 23, 2008 through and including February 13, 2009;

3. Information as to each NYPA facility or office the President and CEO of NYPA was physically present in during each business day of the period from September 23, 2008 through and including February 13, 2009;

4. Information and records as to discussions, memoranda, financial and analyses and information as to any proposed merger, consolidation, combination or other transaction of any kind between or among NYPA and the Long Island Power Authority created (whether or not by or on behalf of NYPA) from September 23, 2008 and through and including February 13, 2009.

If all of the records I have requested cannot be e-mailed to me, please inform me by e-mail of the portions that can be e-mailed and advise me of the cost for reproducing the remainder of the records requested.

If the requested records cannot be e-mailed to me due to the volume of records identified as responsive to my request, please advise me of the actual cost of copying such records onto a CD-ROM, if that is possible.

Please advise me of the cost of providing paper copies of the requested records.

If my request is deemed to be too broad or not to reasonably describe the requested records, please contact me via e-mail so that I may clarify my request and, when appropriate, please advise me as to how NYPA records are filed, retrieved, or generated.

If for any reason any portion of my request is denied, please inform me of the reasons for the denial in writing and provide the name, mailing address, and e-mail address of the person to whom an appeal should be directed. Thank you for your expected cooperation.

Very truly yours,

George J. Marlin

Richie Kessel permitted Governor Paterson and Albany legislative leaders to raid $476 million from NYPA to fund the state’s operating deficit.

The governor’s Department of Budget has not disclosed if NYPA will be repaid and the enabling legislation does not specify a loan interest rate or payback date.

In agreeing to hand over the money, Kessel has acted egregiously.  Instead of being the ratepayer’s champion and shouting it’s wrong to plunder their treasury, Kessel told The Buffalo News:  “It’s a voluntary contribution we’re making.  If NYPA didn’t do this, they’d have to get funding from someplace else.”

What a lame rationale.  Apparently, it never entered Kessel’s head that he has a moral obligation to protect the financial interests of NYPA ratepayers and bondholders.  If there’s surplus money he’s supposed to use it to bring down electric rates or pay down bonded debt – not hand it over to his political masters.

Richie Kessel has always been more concerned with preserving his job and issuing self-congratulatory press releases than standing up for ratepayers.  As Chairman and CEO of the Long Island Power Authority, he took his marching orders from political bosses and lobbyists.  As a result, Long Islanders pay the highest electrical rates in the nation.

NYPA employees and ratepayers should be aware that last week Kessel hired LIPA’s vice president of Government Affairs, Thomas DeJesu, to do the same post at NYPA.  DeJesu, a minor Long Island political hack, is reputed to be the cousin of New York’s unelected Comptroller, Thomas DiNapoli.

Using NYPA money as a “one shot” revenue to balance the state budget is an outrageous abuse of power.  NYPA ratepayers and bondholder trustees should voice their outrage over Kessel’s fiscally irresponsible act.  If they don’t rein him in, Kessel will run NYPA into the ground just as he did LIPA.

This commentary I wrote, Marlin: Kessel to blame for the power authority’s woes, appears in the February 13, 2009 edition of the Long Island Business News.

This article I wrote appears in the New York Post on January 30, 2009.