Empire State Development Corporation

Empire State Development Corporation logo

The Urban Development Corporation, doing business as Empire State Development Corporation is a public authority of the state of New York in the United States that has financed and operated several ambitious state projects by issuing tax exempt bonds.



The New York State Urban Development Corporation was conceived in 1968 primarily to build state-subsidized housing projects to stem the tide of urban decay. As with all New York State public benefit corporations it is exempt from many of the restrictions that apply to regular government agencies and can issue bonds without voter referendum approval bypassing the NY's State Constitution limits, and it has the power of eminent domain.

Virtually all state subsidized housing built since 1968 was financed through the corporation. After flirting with bankruptcy in 1975 due to various housing project missteps its mission was refocused to finance other ambitious state projects and has been used frequently by governors to implement projects that circumvent formal Legislative or voter scrutiny. Among its projects was a doubling of the New York state prison system, improvements to Love Canal, construction of the Jacob K. Javits Convention Center, revitalization of 42nd Street (Manhattan), revitalization of Niagara Falls, New York, construction of Battery Park City, construction of Roosevelt Island, planned construction of a new Pennsylvania Station, and planned development of Governors Island.

Since the September 11, 2001 attacks, a subsidiary (Lower Manhattan Development Corporation) was set up to coordinate rebuilding and distribution of billions of dollars in federal funds following the attack, as well as establishing the World Trade Center Memorial Foundation to build the memorial. It was responsible for distributing Liberty bonds that were used to rebuild Manhattan.

Each subsidiary has its own board of directors.

In its early years the UDC was responsible for "the last significant program of publicly assisted housing in the United States".[1] Its "Empire State" web pages now emphasize its role in providing services and incentives to promote the growth of the private sector in New York State's economy.[2] Its current operations are far too diverse and complex to summarize concisely here. There were at least 107 subsidiaries of the UDC as of March 2006.[3] Also in March 2006, the UDC reported outstanding debts of $6.5 billion, about half being for prison construction bonds.[4]


The UDC was created in 1968 by the New York State Urban Development Corporation Act. At the time it was primarily aimed at urban renewal in New York City although its bonds were to be used state wide. State control over projects in the city from the start (and continues to) pose turf conflicts between the New York Mayor and New York Governor (including the fact that the state authority is immune to city zoning).

In order to overcome all obstacles without delay, the UDC was created with (or soon was granted) an extraordinary and unprecedented combination of legal and economic powers. These included the ability (a) to finance its projects by issuing its own bonds (both taxable and tax-free); (b) to condemn land and seize property by eminent domain; (c) to grant generous tax abatements to private property developments it sponsored or encouraged; and finally, (d) to unilaterally overrule local zoning laws of cities and towns (which would otherwise require the UDC and its partners to petition for zoning variances, with the likelihood that these would be denied). All these powers are in the UDC's legal "DNA" and have grown stronger through favorable court decisions over time even while the Corporation's priorities have moved far from its original purpose.

While the UDC was to have ultimately big successes with such projects as Roosevelt Island and Battery Park City[5] it was to encounter major problems in its inner city developments and its efforts to build minority low income housing in white middle-class neighborhoods.

Conversely inner city activists also complained that the projects sometimes damaged inner city neighborhoods. As an example, the UDC's construction of the Harlem State Office Building in 1969 aroused intense opposition from the neighborhood which wanted the resources applied in other ways. Ada Louise Huxtable called the fight "Rockefeller's Vietnam".[6]

In the first years of the UDC, its aim was to facilitate large-scale low-income housing developments in urban neighborhoods that had traditionally been white and middle-class. Many of the projects had devastating impacts on neighborhoods and resulted in white flight and charges of reverse discrimination.

Some of the inner city projects were unable to pay their bonds off and as a result UDC in 1975 toyed with bankruptcy and there were fears that it would bring New York State down with it. The finances were reorganized and the corporation assumed a less aggressive development stance. However "urban development" took on an adverse reputation and it was renamed in 1995 the Empire State Development Corporation.

The move away from a housing mission began in the late 1970s and early 1980s with such projects as the Jacob Javits Convention and improvements to the Apollo Theater.

Mario Cuomo was the first to begin ambitious use of it to get around official scrutiny for public projects. In 1981 voters voted against a $500 million bond issue for expansion of the state prison system to handle increased prison populations arising from the Rockefeller drug laws. At the time New York had 32 adult prisons. Cuomo was to use the bonds to build another 38 prisons — most upstate.[7]

George Pataki used the corporation to process $20 billion in federal aid following the September 11 attacks to rebuild lower Manhattan and build a memorial. It remains to be seen whether the lack of public scrutiny on this has helped or hurt the development process.

An audit released in May 2006 by New York comptroller Alan Hevesi reported that the Corporation loses track of its subsidiaries. At the time the corporation reported 70 active subsidiaries but the audit showed there were 202 subsidiaries still on the books (98 of which were definitely inactive). The audit did not consider this a serious oversight but the corporation is moving to dissolve the inactive corporations.


External links

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