Plaintiffs claim economic development grants are unconstitutional

Section: Main,  Page: A3

Date: Tuesday, April 27, 2010

ALBANY -- The billions of dollars New York sends to corporations each year stand in stark contrast to the current state deficit, noted a Buffalo lawyer who is trying to halt the long-standing practice of pork barrel spending, or giving grants to targeted industries in hopes of spurring economic growth.

"Schools are being closed. Parks are being closed," said James Ostrowski, who was appealing an earlier dismissal of his suit in state Supreme Court in Albany County.

He was requesting that the state's Appellate Division, Third Department, allow the suit to proceed.

Ostrowski's opponents, including New York state and IBM, had moved to dismiss his suit. Among other points, they say economic development grants aren't actually "gifts" that are constitutionally prohibited, but are instead deals in which companies agree to take certain actions in return for public funds.

"These are either not gifts because there is consideration given in return ... or if it's a gift, it's a gift to a public (benefit) corporation," said Paul Groenwegen, representing the state.

State government is not supposed to simply hand money to private corporations or individuals. The state argued that it uses grants to public organizations such as the Empire State Development Corp., which in turn uses them to lure or keep companies in the state.

That's apparently what happened with a $65 million grant to IBM, argued their lawyer, Teena-Ann Sankoorikal.

In return for that grant, IBM in 2008 agreed to retain 1,400 jobs in New York and add another 1,000.

Ostrowski has been pursuing his "Stop the Pork" lawsuit since 2008. IBM was one of several firms initially identified as pork recipients, although Ostrowski on Monday said he wouldn't object if the company is removed from the suit.

He is suing on behalf of a group of tax activists who believe the state shouldn't be sending money to private coffers and the intermediaries such as the ESDC or other public benefit corporations or public authorities. Those, he contends, are legal artifices for allowing state handouts.

The argument appeared to resonate at least to some extent among the justices. "You are saying that you can do indirectly what you can't do directly?" asked Justice Thomas Mercure, who noted that Ostrowski's legal brief describes public authorities as money launderers.

Ostrowski later said there was no set timetable for a decision, but he believed it could in about a month.

Rick Karlin can be reached at 454-5758 or