This is the second installment of a five part series discussing the lawsuit seeking to prohibit the use of New York State funds in the construction of the Buffalo Bills’ new stadium. (Part I can be found here.) As the second segment of the series, this article will provide an overview of the two constitutional provisions that the plaintiffs believe will invalidate the use of public funding for the new stadium. This article also includes a summary of legal mechanisms that refute these accusations and allows for the use of public funds in private projects.
According to the plaintiffs, Article VII and Article VIII of the New York State Constitution bar the use of government funds in private sector projects. Therefore, if the plaintiffs are right, the construction of the new stadium would violate the New York Constitution because two governments and multiple public benefit corporations within New York State are using taxpayer funds to aid a private organization—the Buffalo Bills.
Article VII of New York State’s Constitution:
Article VII of New York State’s Constitution restricts the use of state funds for use in private businesses. The Constitution mandates that “the money of the state shall not be given or loaned to or in aid of any private corporation or association, or private undertaking; nor shall the credit of the state be given or loaned to or in aid of any individual, or public or private corporation or association, or private undertaking. . .” [1] This provision, however, does not apply to state funds that assist with educational, mental health or disability purposes. [2] Similarly, this provision does not prevent the legislature from authorizing the loan of state money in certain narrowly defined circumstances to a public corporation for the purposes of aiding business or developmental purposes. [3]
Article VIII of New York State’s Constitution:
Article VIII of New York State’s Constitution in a similar but not identical manner restricts the ability of local governments to make gifts or loans of property or credit unless it falls under a specified exception. New York’s Constitution prohibits “all counties, cities, towns, villages, or school districts from giving any loan, money, or property to an individual or private corporation or association.” [4]
- New York State’s Use of Public Benefit Corporations:
To avoid implicating these constitutional prohibition on gifts and loans, New York State and its counties pass their funds through public benefit corporations. Public benefit corporations include a business corporation incorporated under New York’s Business Corporations Law, a corporation formed under the New York Not-For-Profit Corporation Law, or a corporation formed by special act of the New York State Legislature and that has been declared a public benefit corporation by the state law. New York specifically cites the purposes in which public benefit corporations may be used. These purposes include: (1) providing low-income or underserved individuals or communities with beneficial products or services; (2) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business; (3) preserving the environment; (4) improving human health; and (5) promoting the arts, sciences or advancement of knowledge. [5] The State Legislature has from time to time, on a case by case basis, formed public benefit corporations for additional purposes and over time expanded these purposes such as the creation of the New York State Urban Development Corporation to provide low income housing and later, more broadly, economic development to the state, [6] the Thruway Authority to finance economic development and transportation projects, [7] and the Metropolitan Transportation Authority, which provides public transit in the New York City metro area. [8] The caselaw below also shows that the construction and use of a sports stadiums is in the public’s interests and can therefore be financed by a public benefit corporation. [9]
Currently, New York State uses a public benefit corporation—Empire State Development—to help grow the state economy and encourage business investment through the use of funds. [10] Likewise, Erie County uses a public benefits corporation in the form of Erie County Stadium Corporation to finance the construction of the Buffalo Bills’ new stadium. [11]
The next installation of this series will summarize nearly fifty years of caselaw involving efforts to void public projects based on accusations that they violate New York’s gifts and loans provision. See how this will affect the construction of the Buffalo Bills’ new stadium!
[1] See N.Y. Const. art. VII, § 8.
[2] See id.
[3] See id. Fully, these business and developmental projects include: financing the construction of new industrial or manufacturing plants; the construction of new buildings to be used for research and development; the construction of other business facilities, and for the purchase of machinery and equipment related to such new industrial or manufacturing plants, research and development buildings, and other eligible business facilities in this state. See id.
[4] See N.Y. Const. art VIII, § 1.
[5] See id.
[6] See Bordeleau v. State.
[7] See Schulz v. State, 84 N.Y.2d 231, 251n.1 (1994).
[8] See id.
[9] See Bordeleau v. State.
[10] See Empire State Development Corporation, New York State, https://esd.ny.gov/about-us. Empire State Development Corporation traces its history back to the Urban Development Corporation (UDC), which the State Legislature created in 1968. See id.
[11] See Erie County Stadium Corporation, New York State, https://esd.ny.gov/erie-county-stadium-corporation.
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