Senate Bill S1379

                                 
BILL NUMBER: S1379

SPONSOR: SERRANO
 
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 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 reinvest 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.

 
DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE):

 
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 Environmental 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 contribution s 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 vehi-
cles which return small interest income.  This is appropriate 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 long-term
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 equi-
ties and other investment vehicles that, with the exercise of due dili-
gence, could be utilized in appropriate circumstances to diversify the
Trust's investments with respect to the longer-term funds and enhance
the return realized on that portion of the Trust's portfolio. The
Prudent Investor Rule, which was enacted to govern the investment deci-
sions of fiduciaries, 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 Investor Rule, if enacted by the Legislature, would need to be
included in an amendment to the Trust's investment guidelines in accord-
ance with the Public Authorities Law § 2925.

 
PRIOR LEGISLATIVE HISTORY:

2019-20: S.6502A - Referred to Finance

2021-2022: S.1489 - Referred to Cultural Affairs, Tourism, Parks and
Recreation

2023-2024: S.1461 - Referred to Cultural Affairs, Tourism, Parks and
Recreation

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None to the State.