Assembly Bill A8791

                                BILL NUMBER:A8791

TITLE  OF  BILL:   An act to amend the arts and cultural affairs law, in
relation to directing the natural heritage trust to  invest  its  assets
pursuant  to  the  prudent  investor  act  and  the annual report of the
trust's operations

PURPOSE OR GENERAL IDEA OF BILL: To protect and enhance the resources of
the Natural Heritage Trust (hereafter, "the Trust") thereby  encouraging
the continued use of the Natural Heritage Trust as a focal point for the
receipt of private and public donations to further conservation, outdoor
recreation, historic preservation, and improvements to local waterfronts
throughout the State.

SUMMARY  OF  SPECIFIC  PROVISIONS:  The bill renumbers subdivision 12 of
Section 55.07 of the Arts and Cultural Affairs Law as subdivision 13 and
adds a new subdivision 12 that authorizes the Trust to invest and  rein-
vest  the  funds  of  the  Trust in accordance with the prudent investor
standard of section 11-2.3 of the estates,  powers  and  trust  law  and
pursuant  to  the  provisions  of section 2925 of the public authorities
law.

EXISTING LAW: Section 55.07(1) of the  Arts  and  Cultural  Affairs  Law
authorizes the Trust to accept unconditional gifts, devises and bequests
of  real  and  personal property and to administer and expend funds made
available to the Trust for any of its purposes.
              

Section 55.07(10) of the Arts and Cultural Affairs  Law  authorizes  the
Trust  to  administer,  manage  or  operate any property acquired by the
Trust pending transfer of jurisdiction thereof and  to  retain  for  its
corporate  purposes  any  receipts,  revenue or income derived therefrom
during the pendency of such transfer.

Section 55.13(1) of the Arts and Cultural  Affairs  Law  authorizes  the
Trust  to  retain  the  moneys  of the Trust and deposit it in a general
account and such other accounts as the Trust may deem necessary for  the
transaction of its business.

JUSTIFICATION:  The  Trust  is  a  public  benefit corporation initially
created by Chapter 653 of the Laws of 1968. The  Trust  was  created  to
serve as a focal point for the receipt of private gifts and donations to
further  the  State's  efforts  to  conserve  its  natural  and historic
resources and to revitalize the State's waterfronts. The Commissioner of
Parks, Recreation and Historic Preservation, the Commissioner  of  Envi-
ronmental  Conservation,  the  Secretary  of State, and the Chair of the
State Council of Parks and Outdoor Recreation serve as  members  of  the
Trust.

Because  donations to the Trust are in most cases tax deductible, in the
years since its creation the Trust has served as a  preferred  mechanism
for  private  donations  of money and real property to further important
public conservation initiatives. Donations  to  the  Trust  fund  a.vast

array  of  capital improvements to New York State Parks, Historic Sites,
and waterfront  properties.  Private  contributions  also  support  many
worthy environmental and cultural education programs and performances as
well as numerous recreational programs across the state.

When the Trust receives funds for conservation, recreation, and historic
preservation  purposes,  it  typically  holds  these  funds in dedicated
accounts for an interim period until projects are ready to  receive  and
expend  funding.  The Trust invests such funds in extremely conservative
investment vehicles which return small interest income.  This is  appro-
priate  as  the Trust's investment goal is to assure the preservation of
principal of accounts that are temporarily held in Trust accounts  prior
to their expenditure.

However,  over the years the Trust has received several private gifts to
create permanent endowments to support the long-term operation and main-
tenance of specific parks and facilities. For example, the Trust holds a
$470,000 endowment to support  the  operations  of  the  Emma  Treadwell
Thacher  Center  located  at  Thompson's  Lake  State Park. The Trust is
actively engaged in seeking  private  support  to  additional  permanent
endowments.

Standard  practice  followed by most large non-profit institutions is to
invest permanent endowment funds in a mix of equities and bond  or  cash
vehicles,  to  generate  annual operating income while securing longterm
appreciation of  the  endowment  principal.  However,  currently  it  is
unclear  from  the Public Authorities Law, the Arts and Cultural Affairs
Law and the regulations of the Office of the State  Comptroller  whether
the  investment  by the Trust in equities is authorized. This limits the
investment of the  endowment  funds  held  by  the  Trust  to  extremely
conservative  investments  which  generate  relatively  small amounts of
annual operating income and preclude long-term appreciation of endowment
principal

This bill would allow the investment by the Trust in equities and  other
investment  vehicles  that, with the exercise of due diligence, could be
utilized in appropriate circumstances to diversify the  Trust's  invest-
ments with respect to the longer term funds and enhance the return real-
ized  on  that  portion  of  the Trust's portfolio. The Prudent Investor
Rule, which was enacted to govern the investment decisions of  fiduciar-
ies,  would  provide  sufficient  guidance  to the Trust while similarly
providing appropriate safeguards to protect the public  assets  held  by
the Trust. The authority to invest in accordance with the Prudent Inves-
tor Rule, if enacted by the Legislature, would need to be included in an
amendment  to  the  Trust's investment guidelines in accordance with the
Public Authorities Law §2925.

PRIOR LEGISLATIVE HISTORY: This is a new proposal.

FISCAL IMPLICATIONS: Since this bill affects  the  investment  of  Trust
assets only, there would be no State budget implications.

EFFECTIVE DATE: This act shall take effect immediately.