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Legislative Memo

Darren Suarez
Director of Government Affairs
T 518.465.7511
www.bcnys.org

BILL:

S.6406-C /A.9006-C ELFA Article VII Budget Bill- Part TT

Support

SUBJECT:

Transfer of Canal Authority to New York Power Authority

 

DATE:

April 1, 2016

 

The Business Council of New York State opposes Part TT of S.6406-C /A.9006-C which would authorize the transfer of the Canal Corporation from New York State Thruway Authority (“Thruway”) to the New York Power Authority (“Power Authority”). The bill would amend the Canal Law to transfer the powers and duties relating to the canal, the canal lands, the canal system, and all State assets, equipment, and property owned or used in connection with the canal system, from the Thruway to the Power Authority.

The Business Council opposes the proposed transfer because the canal system has been a drain on the Thruway that has contributed to the deterioration of the Thruway Authority’s finances over the past decade. The Business Council is highly concerned that the same erosion of the Power Authority will occur. There is substantial doubt that the Power Authority will be able to sustain the Canal Authority and still deliver low-cost electricity in New York State.

The Canal Corporation was established as subsidiary of the Thruway Authority in 1992 to operate and maintain the Canal System. Prior to its transfer the Canal Corporation previously was the responsibility of the New York State Department of Transportation.

Currently, the Canal Corporation’s income of approximately $205,000 annually (recreational $165,000, commercial $40,000) fails to cover the Canal’s annual expenses ($131 million in FY 2014, $105.6 million in FY 2015 and $93.7 million in FY 2016). Since the transfer, the Canal Corporation has been a burden to the Thruway Authority requiring increased Thruway tolls to fund the operations of the Canal.

The Canal System is complex and costly to operate. It includes 524 miles of waterways for four canals (Erie, Oswego, Champlain, and Cayuga-Seneca) and consists of 2,387 structures, including 57 locks, 20 lift bridges, 56 permanent dams, and 11 movable dams. The Corporation also maintains approximately 300 miles of adjacent recreational trails and 22 reservoirs that are used to manage the Canal System’s water levels.

As a tourist attraction, the Canal System is an economic driver to the villages, hamlets, and towns that line it, with estimates suggesting that canal-related tourism generates nearly $400 million in revenues. But the Canal System no longer functions as a commercial economic engine and should be moved to an authority or entity with a goal to increase tourism.

The New York Power Authority operates vital economic development power program that have proven to help retain and create jobs through allocations of low-cost power. The Power Authority currently operates Recharge NY, Replacement Power, Expansion Power, Western New York Power Proceeds Allocation, the Municipal and Rural Cooperative Economic Development Program and the Preservation Power Program. Thus, the Power Authority plays a critical economic development role in the State by providing low-cost power to businesses. That role should not be compromised by this illogical transfer.

In recent years the Power Authority has voluntarily contributed to the State General Fund.┬áThe Authority’s trustees have adopted a policy statement related to voluntary contributions, transfers, or other payments to the State by the Authority. The policy requires the Trustee of the Authority to take into account, among other considerations, anticipated future receipt of revenues and payment of ongoing expenses and debt service.

That policy allows the Authority’s Trustees to make an annual determination if the Power Authority can afford to make a contribution to the State. If the Canal Corporation is transferred to the Power Authority, the Trustees will be obligated to fund the Canal regardless of the fiscal condition of the Power Authority.

At present, decreases in the wholesale power market are resulting in declining revenues for the Power Authority. Through its participation in the wholesale electric markets, the Authority is subject to electric energy price, fuel price and electric capacity price changes that impact the revenue.

The June 30, 2015 Financial Statements of the Power Authority report a substantial decline in power sales from $1.427 billion in 2014 to $ 1.051 billion in 2015. Net income declined in the same time period from $140 million to $28 million.

Due to the uncertain net income at the Power Authority, the vital importance of the Authority’s economic development power programs, and the financial burden of the Canal Corporation, The Business Council respectfully opposes this legislation.