Without state legislative approval, can the New York Governor designate the Urban Development Corporation (Empire State Development Corporation) to administer the federal Small Cities Community Development Block Grant program?

Plain-English summary

Governor Pataki designated the Urban Development Corporation (doing business as Empire State Development Corporation, or ESDC) to administer the Small Cities component of the federal Community Development Block Grant (CDBG) program for New York. The federal Department of Housing and Urban Development (HUD) questioned whether the Governor needed state legislative approval for this designation. The Executive Chamber asked the AG to opine.

The AG said no legislative approval is required. The Governor's designation is consistent with federal law.

The Small Cities CDBG program funds community development activities in non-entitlement areas (cities with populations under 50,000, towns, counties not designated as urban counties). Title I of the Housing and Community Development Act of 1974 gave states the option to administer their Small Cities program starting in 1982. Before 1998, New York and Hawaii were the only states still letting HUD run the program directly. The 1998 transition was the issue.

The federal statute (42 USC § 5302(a)(2)) defines "State" to include "any instrumentality thereof approved by the Governor." The federal regulations defer to state interpretations of "instrumentality" so long as those interpretations are explicit, reasonable, and not plainly inconsistent with the Act (24 CFR § 570.481(a)). HUD's review of state administration of the program gives "maximum feasible deference" to state interpretations (24 CFR § 570.480(c)).

UDC is a state instrumentality. The State Legislature created UDC by statute as "a corporate governmental agency of the state, constituting a political subdivision and public benefit corporation" (NY Unconsolidated Laws § 6254(1)). That language is the New York legal label for a state instrumentality. Federal law defining "state" to include "any instrumentality" plainly reaches that kind of entity.

UDC's statutory powers map onto the Small Cities CDBG program objectives. UDC may undertake projects providing housing for persons of low income (NY Unconsolidated Laws § 6253(6)(a)) and projects for clearance, replanning, reconstruction, and rehabilitation of substandard areas under NY Const Art XVIII (§ 6253(6)(c)). UDC may also engage in multi-purpose industrial, civil, small and medium business, and economic development projects (§ 6253(6)(b), (d), (f), (g)). UDC may accept federal grants (§ 6255(25)) and do all things necessary to carry out its purposes (§ 6255(28)).

The CDBG program's primary objective is to develop viable urban communities by providing decent housing, suitable living environments, and economic opportunity principally for low- and moderate-income persons (42 USC § 5301(c)). UDC's portfolio of authorized activities aligns with that mission. ESDC, the operating name, has a network of regional offices to administer the program at the community level. DHCR (the state's lead agency for the consolidated plan) collaborated with ESDC in submitting the required plan amendments to HUD.

The AG concluded that the Governor's designation requires no legislative authorization. UDC is an instrumentality of the state under federal law; New York's statutory description as "a corporate governmental agency . . . constituting a political subdivision and public benefit corporation" satisfies the federal definition; and UDC has the legislative authority needed to administer the program.

Currency note

This opinion was issued in 1997. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is the Small Cities CDBG program?

It is the portion of the federal Community Development Block Grant program that funds community-development activities in "non-entitlement areas." Non-entitlement areas are areas that are not metropolitan cities, parts of urban counties, or Indian tribes (42 USC § 5302). Generally that means counties, towns, and cities or villages with populations under 50,000. The state can choose to administer the program itself or let HUD run it directly.

Why does the Governor need authority to designate UDC?

The federal regulation lets the state pick a state agency or instrumentality to run the program, but the designation has to be authorized under state law. HUD's question was whether the Governor's unilateral designation, without legislative ratification, was a valid exercise of state authority.

Why is UDC an "instrumentality" of the state?

NY Unconsolidated Laws § 6254(1) defines UDC as "a corporate governmental agency of the state, constituting a political subdivision and public benefit corporation." That language places UDC squarely within the federal definition of "instrumentality." It is created by state statute, performs public functions, and is governed by state-appointed officers.

Why didn't the Governor need separate legislative action?

The AG opinion concluded that UDC's existing statutory powers (housing, community development, economic development, federal grant acceptance) are broad enough to cover the Small Cities CDBG program. The Governor's designation simply directs UDC to use its existing authority to administer the program. No new legislative authorization is required because no new authority is being created.

What is the role of DHCR in this arrangement?

The Division of Housing and Community Renewal is the state's designated lead agency for the consolidated plan required under federal law. DHCR collaborated with ESDC in preparing the required plan amendments to HUD. The split is administrative: DHCR handles the plan; ESDC handles the program administration.

Could the Legislature override the Governor's designation?

In principle yes, by amending UDC's statute or enacting a separate program-administration statute. The AG opinion holds that legislative approval is not required for the designation; it does not address whether the Legislature could later supersede.

Background and statutory framework

The federal framework is the Housing and Community Development Act of 1974. 42 USC § 5301(c) sets the program's primary objective. § 5302 contains definitions, including "state" as including "any instrumentality thereof approved by the Governor" (§ 5302(a)(2)). § 5306 governs allocation, with § 5306(d)(3)(A) requiring states to pay administrative costs.

Federal regulations are at 24 CFR §§ 570.1 et seq. § 570.3 incorporates the statutory definition of "state." § 570.208 sets national objectives criteria. § 570.420 lays out the Small Cities program structure. § 570.480(c) gives HUD's commitment to "maximum feasible deference" to state interpretations. § 570.481(a) directs HUD to "defer to a state's definitions" of terms not defined in the statute, provided they are explicit, reasonable, and not plainly inconsistent with the Act.

The New York legal framework starts with NY Const Art XVIII (housing) and includes the UDC Act in NY Unconsolidated Laws. § 6252 sets the corporation's purposes. § 6253 lists authorized projects, including subdivision (6)(a) (low-income housing), (b) (industrial), (c) (slum clearance under Art XVIII), (d) (civil), (f) (small and medium business), and (g) (economic development). § 6254(1) defines UDC as a corporate governmental agency, political subdivision, and public benefit corporation. § 6255 enumerates powers, including (25) (accept federal grants) and (28) (do all things necessary to carry out purposes). NY Const Art VII § 7 (gift-of-funds limit on appropriations) is cited but is not the operative provision here.

Citations

• NY Const Art VII, § 7 (appropriations limits, peripheral here).
• NY Const Art XVIII (low-income housing and slum clearance constitutional framework).
• NY Unconsolidated Laws § 6252 (UDC purposes).
• NY Unconsolidated Laws § 6253(6)(a) (low-income housing projects).
• NY Unconsolidated Laws § 6253(6)(b) (industrial projects).
• NY Unconsolidated Laws § 6253(6)(c) (slum clearance and rehabilitation under Art XVIII).
• NY Unconsolidated Laws § 6253(6)(d) (civil projects).
• NY Unconsolidated Laws § 6253(6)(f) (small and medium business assistance).
• NY Unconsolidated Laws § 6253(6)(g) (economic development).
• NY Unconsolidated Laws § 6254(1) (UDC as corporate governmental agency, political subdivision, public benefit corporation).
• NY Unconsolidated Laws § 6255(25) (UDC may accept federal grants).
• NY Unconsolidated Laws § 6255(28) (UDC may do all things necessary to carry out purposes).
• 24 CFR §§ 570.1 et seq. (Small Cities CDBG regulations).
• 24 CFR § 570.3 (state definition).
• 24 CFR § 570.208 (national objectives criteria).
• 24 CFR § 570.420(a), (b) (Small Cities program structure).
• 24 CFR § 570.480(c) (HUD's "maximum feasible deference" to state interpretation).
• 24 CFR § 570.481(a) (HUD defers to state definitions).
• 42 USC § 5301(c) (CDBG primary objective).
• 42 USC § 5302(a)(2) (state includes any instrumentality approved by Governor).
• 42 USC § 5302(a)(4), (a)(6)(A), (a)(17) (metropolitan city, urban county, Indian tribe definitions).
• 42 USC § 5302(a)(7) (related definitions).
• 42 USC § 5306(d)(3)(A) (state administrative cost responsibility).

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/97-F12_pw.pdf

Original opinion text

NY CONST, ART VII, § 7, ART XVIII; NY UNCONSOLIDATED LAWS
§§ 6253(6)(a) and (6)(c), 6254(1), 6255(25) and (28); 24 CFR
§§ 570.1, et seq., 570.3, 570.208, 570.420(a), (b), et seq., 570.480(c), 570.481(a); 42 USC §§ 5301(c), 5302(a)(2), (a)(4), (a)(6)(A) and (a)(7), 5306(d)(3)(A). Without legislative authorization, the Governor may designate the Urban Development Corporation, doing business as the Empire State Development Corporation, to administer the Small Cities component of the federal Community Development Block Grant Program. November 7, 1997

James G. Natoli
Director of State Operations
Executive Chamber
State Capitol
Albany, NY 12224

Formal Opinion
No. 97-F12

Dear Mr. Natoli:
You have informed us that the Governor has designated the New York State Urban Development Corporation (UDC), doing business as the Empire State Development Corporation (ESDC), to administer the federal Small Cities Community Development Block Grant Program on behalf of New York State beginning in 1998. You indicate that the United States Department of Housing and Urban Development (HUD) has questioned the Governor's authority under State law to designate ESDC without State legislative approval. You have requested an opinion on this question. As stated in the Governor's letter to the Secretary of HUD, ESDC will administer the Small Cities community revitalization program and consult on housing programs with the New York State Housing Trust Fund Corporation. August 21, 1997 letter to Secretary Cuomo from Governor Pataki. The cooperation of the two agencies is designed to assure equal program access for all eligible communities and increase participation by those communities. Id. ESDC has a network of regional offices to participate in administration of the program and facilitate community participation. November 4, 1996 letter to Secretary Cisneros from Governor Pataki. The Division of Housing and Community Renewal (DHCR), the State's designated lead agency for preparation of the consolidated plan required under federal law, collaborated with ESDC in preparing required amendments to the plan, which was submitted to HUD. July 2, 1997 letter from

2
Joseph B. Lynch, Acting Commissioner of DHCR, and Joseph M. Del Sindaco, Chief Operating Officer of ESDC, to HUD's Office of General Counsel. Generally, Title I of the Housing and Community Development Act of 1974 gave states the option to administer the Small Cities component of the Community Development Block Grant Program beginning in 1982. New York and Hawaii are the only states that are not currently administering the program. 24 CFR
§§ 570.420(a), et seq. In these states, HUD administers the Small Cities program. Id. The primary objective of the Community Development Block Grant Program, including the Small Cities component, is to develop viable urban communities by providing decent housing, a suitable living environment and expanding economic opportunities principally for persons of low and moderate income. 42 USC
§ 5301(c). This objective is to be accomplished, for example, through the elimination of slums and blight and preservation of property and neighborhood and community facilities important to the welfare of the community; the elimination of conditions detrimental to health, safety and public welfare; and conservation and expansion of housing to provide decent homes and suitable living environments for all persons but principally those with low or moderate incomes. Id.; 24 CFR § 570.208 (criteria applied by HUD to determine whether a federally funded activity complies with one of the national objectives). Specifically, "Title I of the Housing and Community Development Act of 1974 permits each State to elect to administer all aspects of the Community Development Block Grant Program (CDBG) annual fund allocation for the nonentitlement areas [Small Cities component] within its jurisdiction." 24 CFR
§ 570.420(a). Federal law authorizes the allocation of funds to states electing to administer the Small Cities program. 42 USC
§ 5306(d). Funds "shall be allocated among the States for use in nonentitlement areas". Id.

3
Subpart A of Part 570 (24 CFR §§ 570.1, et seq.) describes policies and procedures applicable to . . . "State-administered CDBG nonentitlement funds". Under these regulations, the term State "shall have the meaning provided in section 102(a)(2) of the Act". 24 CFR § 570.3. Under section 102(a)(2) of the Act, "[t]he term 'State' means any State of the United States, or any instrumentality thereof approved by the Governor" (emphasis supplied). See also, 42 USC § 5302(a)(2). In our view, UDC, doing business as ESDC, is an instrumentality of the State within the meaning of the federal definition. We are not aware of any definition of "instrumentality" in federal law and, therefore, believe that the term should be given an ordinary and reasonable meaning taking into consideration the goals of the federal program and existing State law. Significantly, in establishing policies and procedures applicable to states that elect to administer the Small Cities program, federal regulations provide: In exercising the Secretary's obligation and responsibility to review a state's performance, the Secretary will give maximum feasible deference to the state's interpretation of the statutory requirements and the requirements of this regulation, provided that these interpretations are not plainly inconsistent with the Act and the Secretary's obligation to enforce compliance with the intent of the Congress as declared in the Act. 24 CFR § 570.480(c). Further, regarding the meaning of "instrumentality of the state", the regulations provide: Except for terms defined in applicable statutes or this subpart, the Secretary will defer to a state's definitions, provided that these definitions are explicit, reasonable and not plainly inconsistent with the Act. 24 CFR § 570.481(a). The New York State Urban Development Corporation was established by the State Legislature and is defined as "a corporate governmental agency of the state, constituting a political subdivision and public benefit corporation". NY Unconsolidated Laws § 6254(1). In our view, UDC is an instrumentality of the State under the federal definition. Federal law, in defining "state" to mean any state or

4
instrumentality of a state, reasonably was intended to include state agencies and instrumentalities such as the Urban Development Corporation. UDC's powers and duties, as established by the State Legislature, are uniquely suited to carry out the objectives of the Small Cities program under federal law. For example, UDC is authorized to engage in "projects" for the purpose of providing housing accommodations and incidental and appurtenant facilities for persons or families of low income. NY Unconsolidated Laws
§§ 6252, 6253(6)(a). Also, "projects" include plans or undertakings for the clearance, replanning, reconstruction and rehabilitation of substandard and insanitary areas and for other incidental or appurtenant recreational or other facilities in accordance with Article XVIII of the State Constitution (which provides for development of low cost housing for persons of low income and for clearance and rehabilitation of substandard and insanitary areas). Id., §§ 6252, 6253(6)(c). These projects encompass the arrest, prevention and elimination of slums and blight. Id. UDC also is authorized to engage in multi-purpose industrial projects, civil projects, small and medium-size business assistance projects and economic development projects. Id.,
§§ 6252, 6253(6)(b), (d), (f), (g). The corporation has developed moderate income housing in the context of these broad based community development programs. Further, UDC has been authorized to accept gifts, grants, loans and other aid from the federal government and may do all things necessary or convenient to carry out its purposes and exercise its powers. NY Unconsolidated Laws §§ 6252, 6255(25), (28). UDC also has the power to provide funding and resources for the administration of various programs. Id. In this regard, we have been informed by representatives of UDC that the corporation would provide funds and other resources for administration of the Small Cities program. Payment of administrative costs is a state responsibility. 42 USC § 5306(d)(3)(A). Based on the foregoing, we believe that the Governor's designation of UDC, doing business as ESDC, to administer the Small Cities program, is consistent with federal law. Also, this designation by the Governor is consistent with federal regulations defining "state" and allows an agency that is uniquely empowered to meet program purposes and objectives to administer the Small Cities program.

We conclude that, without legislative authorization, the Governor may designate the Urban Development Corporation, doing business as the Empire State Development Corporation, to administer the Small Cities component of the federal Community Development Block Grant Program. Very truly yours,

DENNIS C. VACCO
Attorney General