Bordeleau v. StateBordeleau v. State
In this declaratory judgment action, plaintiff taxpayers challenge the constitutionality of the appropriation of state funds to the Department of Agriculture and Markets (hereinafter Department) and two public benefit corporations (hereinafter PBCs) for ultimate distribution to private entities for the avowed purpose of fostering economic development. The complaint alleges that this funding violates
“When assessing the adequacy of a complaint in light of a
Here, the complaint can be read to allege that certain appropriations in the 2008-2009 budget indirectly gave state funds to private entities in violation of
Defendants do not dispute plaintiffs’ allegation that the challenged funds were ultimately distributed by the Department and the PBCs to private entities. Instead, they contend that, as a matter of law, the appropriations did not violate the NY Constitution because the grant of state funds to the Department and to the PBCs was permissible, those entities then disbursed the funds for proper public purposes with only incidental private benefits and, in any event, the private recipients agreed to perform services or provide other consideration in exchange for the funds. In response, plaintiffs argue that the complaint states a viable cause of action under the NY Constitution because the challenged appropriations subsidize private entities.
Nor can we accept defendants’ argument that proof of a public purpose for the funds that were disbursed by the intermediaries here establishes the legitimacy of the appropriations. The Court of Appeals has made clear that the existence of a public purpose for an appropriation that aids a private undertaking is not the test of whether it is lawful. “However important, however useful the objects designed by the legislature, they may not be accomplished by a gift or a loan of credit to an individual or to a corporation. It will not do to say that the character of the act is to be judged by its main object—that because the purpose is public, the means adopted cannot be called a gift or a loan. To do so would be to make meaningless the provision adopted by the [constitutional] convention of 1846. Gifts of credit to railroads served an important public purpose. That purpose was distinctly before the legislatures that made them. Yet they were still gifts and so were prohibited” (id. at 475).
Defendants next contend that the state funds here were not gifts because they were disbursed by the Department and the PBCs in exchange for services or other valuable consideration. In support of this contention, the State produced an attorney‘s affirmation on behalf of the Department asserting that its funds were expended for activities designed to increase the production, marketing and consumption of certain agricultural products grown and distributed by private interests. The record also contains an affidavit of a senior vice-president of defendant Empire State Development Corporation which alleges that public benefits were derived from its expenditures to private busi-
In any event, defendants’ submissions do not establish, as a matter of law, that the appropriations challenged here pass constitutional muster. Defendants’ argument that the public benefits received constitute adequate consideration for disbursing public funds to private entities is premised on our observation in Matter of La Barbera v Town of Woodstock (29 AD3d 1054 [2006], lv dismissed 7 NY3d 844 [2006]) that the consideration for the transfer of public property to a private entity “may take the form of public benefits or services rendered pursuant to a contract” (id. at 1056). In that case, however, we found that a town‘s grant of a conservation easement to a not-for-profit conservation organization in exchange for the preservation of the land as an undeveloped public park provided a clear public benefit in perpetuity and, as a matter of law, constituted adequate consideration (id. at 1056). We did not consider whether
Nor do the other cases cited by defendants support their argument that, as a matter of law, there was adequate consideration here. We have held that a public entity‘s expenditure of public funds for promotional activities, such as advertising and marketing, will meet the constitutional requirement that a corresponding benefit be received where, unlike here, the activities promote the public entity itself (see Matter Schulz v Warren County Bd. of Supervisors, 179 AD2d 118, 122 [1992], lv denied 80 NY2d 754 [1992]). And while we have also found that payments made by the Commissioner of Agriculture and Markets for publicity designed to create new markets for apples did not violate
Accordingly, inasmuch as plaintiffs allege that the Department and the PBCs passed the appropriated funds on to private entities, and that allegation must be accepted as true, we find that the complaint indeed states a cause of action for violation of
We turn next to plaintiffs’ additional cause of action alleging violations of
Finally, we find no merit in the argument by defendants International Business Machines Corporation and West Genesee Hotel Associates that this action was properly dismissed as against them because plaintiffs lack standing to sue them. Since the complaint alleges that state funds were unlawfully disbursed to those defendants and they do not deny that they have received at least some of the funds, plaintiffs have standing to join them as recipients of the funds pursuant to
Mercure, J.P., Peters, Spain and Kavanagh, JJ., concur.
Ordered that the order is modified, on the law, without costs, by reversing so much thereof as granted defendants’ motions to dismiss the first cause of action; motions denied to that extent and matter remitted to the Supreme Court to permit defendants to serve answers within 30 days of the date of this Court‘s decision; and, as so modified, affirmed.