Regular Session - April 15, 1996
3210
1
2
3
4
5
6
7
8 ALBANY, NEW YORK
9 April 15, 1996
10 3:02 p.m.
11
12
13 REGULAR SESSION
14
15
16
17 LT. GOVERNOR BETSY McCAUGHEY ROSS, President
18 STEPHEN F. SLOAN, Secretary
19
20
21
22
23
3211
1 P R O C E E D I N G S.
2 THE PRESIDENT: The Senate will
3 come to order.
4 Would everyone please rise and
5 join me in the Pledge of Allegiance.
6 (Whereupon, the Senate and those
7 present joined in the Pledge of Allegiance to
8 the Flag.)
9 May we bow our heads in a moment
10 of silence.
11 (Whereupon, there was a moment of
12 silence.)
13 The reading of the Journal,
14 please.
15 THE SECRETARY: In Senate,
16 Sunday, April 14. The Senate met pursuant to
17 adjournment. Senator Farley in the chair upon
18 designation of the Temporary President. The
19 Journal of Saturday, April 13, was read and
20 approved. On motion, Senate adjourned.
21 THE PRESIDENT: Without
22 objection, the Journal stands approved as read.
23 Presentation of petitions.
3212
1 Messages from the Assembly.
2 Messages from the Governor.
3 Reports of standing committees.
4 Reports of select committees.
5 Communications and reports from
6 state officers.
7 Motions and resolutions.
8 Senator Marcellino.
9 SENATOR MARCELLINO: Madam
10 President. I wish to call up my bill, Print
11 Number 6213, recalled from the Assembly, which
12 is now at the desk.
13 ACTING PRESIDENT KUHL: The
14 Secretary will read.
15 THE SECRETARY: Calendar Number
16 449, by Senator Marcellino, Senate Print 6213,
17 an act to amend the Environmental Conservation
18 Law.
19 ACTING PRESIDENT KUHL: Senator
20 Marcellino.
21 SENATOR MARCELLINO: Mr.
22 President. I now move to reconsider the vote by
23 which the bill was passed.
3213
1 ACTING PRESIDENT KUHL: The
2 Secretary will call the roll on reconsideration.
3 (The Secretary called the roll on
4 reconsideration.)
5 THE SECRETARY: Ayes 42.
6 ACTING PRESIDENT KUHL: The bill
7 is restored.
8 Senator Present.
9 SENATOR PRESENT: Mr. President.
10 On behalf of Senator Holland, I call up his
11 bill, Print 5072A, recalled from the Assembly,
12 which is now at the desk.
13 ACTING PRESIDENT KUHL: Secretary
14 will read.
15 THE SECRETARY: Calendar Number
16 407, by Senator Holland, Senate Print 5072A, an
17 act to permit the reopening of the optional
18 20-year retirement plan.
19 ACTING PRESIDENT KUHL: Senator
20 Present.
21 SENATOR PRESENT: Mr. President.
22 I now move to reconsider the vote by which this
23 bill was passed.
3214
1 ACTING PRESIDENT KUHL: The
2 Secretary will call the roll on reconsideration.
3 (The Secretary called the roll on
4 reconsideration.)
5 THE SECRETARY: Ayes 42.
6 ACTING PRESIDENT KUHL: The bill
7 is before the house.
8 Senator Present.
9 SENATOR PRESENT: Mr. President.
10 I now offer the following amendments.
11 ACTING PRESIDENT KUHL:
12 Amendments are received and adopted.
13 Senator Spano.
14 SENATOR SPANO: Mr. President.
15 I'd like to offer amendments to the following
16 Third Reading Calendar bills:
17 Senator Hoblock, page 11,
18 Calendar 196, Print 3555;
19 Senator Marcellino, page 19,
20 Calendar 450, Senate Print 6316;
21 Senator Cook, page 23, Calendar
22 Number 511, Senate Print 3584;
23 Senator Holland, page 24,
3215
1 Calendar 529, Senate Print 5536A;
2 Senator Sears, page 31, Calendar
3 594, Senate Print 5973A;
4 Move that these bills retain
5 their place on third order.
6 ACTING PRESIDENT KUHL:
7 Amendments are received and adopted. The bills
8 will retain their place on Third Reading
9 Calendar.
10 Senator Spano.
11 SENATOR SPANO: On behalf of
12 Senator Bruno, I ask that Senate Bill 722 be
13 discharged from committee, and be recommitted
14 with instructions to strike the enacting clause.
15 ACTING PRESIDENT KUHL: The
16 Secretary so directs.
17 Senator Trunzo.
18 SENATOR TRUNZO: Mr. President.
19 Please place a sponsor star on Calendar Number
20 130.
21 ACTING PRESIDENT KUHL: Calendar
22 Number 130 will be starred at the request of the
23 sponsor.
3216
1 Senator Skelos.
2 SENATOR SKELOS: Mr. President.
3 I believe there are three privileged
4 resolutions. If we could take up the first one
5 by Senator DeFrancisco, I ask that the title be
6 read. If you could then recognize Senator
7 DeFrancisco for comments and then adopt the
8 resolution.
9 ACTING PRESIDENT KUHL: Secretary
10 will read the title to the privileged resolution
11 by Senator DeFrancisco.
12 THE SECRETARY: By Senator
13 DeFrancisco, Legislative Resolution, honoring
14 the Student Council and Members of the Onondaga
15 Hill Maple -- Middle School Community Outreach
16 Program (C.O.P.S.) for the first place in the
17 Middle School Division of the 49th Senate
18 District "Good News! Good Kids!" Student
19 Recognition Program.
20 ACTING PRESIDENT KUHL: Senator
21 DeFrancisco.
22 SENATOR DeFRANCISCO: Thank you,
23 Mr. President. I rise to congratulate the
3217
1 students who are present in the chambers today
2 from the Onondaga Middle School -- Onondaga Hill
3 Middle School.
4 Each of these individuals have
5 been involved in a project that is part of a
6 program that we started when I first got into
7 the Senate. I thought that many students, many
8 young people were normally spoken of negatively
9 in the press and negatively of in the media and
10 there were a lot of good things that were being
11 done; hence, the name of the program, "Good
12 News! Good Kids!"
13 This year it's grown into a
14 program that has been -- got the involvement of
15 over 3,000 students in my district and the
16 middle school winner is Onondaga Hill Middle
17 School, and basically what they did, I'm going
18 to have to read some of these things because
19 their outreach efforts were so substantial, that
20 affected so many parts of the community, that I
21 think I should read some of these areas.
22 First of all, they raised $200
23 for the Rescue Mission for some food services.
3218
1 They donated more than 1500 cans of food to the
2 Salvation Army. A $250 donation that they were
3 able to raise through various sources for the
4 Ronald McDonald house. They brought in 70 coats
5 for the Catholic Charities Coat Drive and
6 brought in some money for the SPCA and Humane
7 Society. They also raised $3500 for the benefit
8 of the Central New York Make A Wish Foundation,
9 and they assisted elderly homeowners, raking
10 lawns, and also collected Christmas gifts for a
11 needy family.
12 In other words, they did a lot of
13 things for our community; and because of that,
14 we're honoring them here today, and I would urge
15 that we have a unanimous adoption of this
16 resolution and congratulate these students and
17 all the students who are doing good things, the
18 good kids of our communities.
19 Thank you.
20 ACTING PRESIDENT KUHL: Is there
21 any other Senator wishing to speak on the
22 resolution?
23 (There was no response.)
3219
1 Hearing none, the question is on
2 the adoption of the resolution.
3 All those in favor, signify by
4 saying aye.
5 (Response of "Aye.")
6 Opposed, nay.
7 (There was no response.)
8 The resolution is unanimously
9 adopted.
10 Senator Skelos.
11 SENATOR SKELOS: Mr. President.
12 I believe there is a privileged resolution at
13 the desk, by Senator Connor. I ask that it be
14 read in its entirety and then if you would
15 recognize Senator Connor for a comment prior to
16 its adoption.
17 ACTING PRESIDENT KUHL: Secretary
18 will read the privileged resolution by Senator
19 Connor in its entirety.
20 THE SECRETARY: By Senator
21 Connor, Legislative Resolution, proclaiming
22 April 15, 1996, as United States Naval Armed
23 Guard Day in tribute to the members of the
3220
1 United States Navy who served as gun crews
2 aboard merchant ships during World War II.
3 Whereas, members of the United
4 States Naval Armed Guard from the State of New
5 York, who served so valiantly and honorably in
6 World War II to protect this country's freedom,
7 deserve a special salute from this Legislative
8 Body; and
9 Whereas, this Legislative Body is
10 justly proud to honor the members of the United
11 States Naval Armed Guard who served as gun crews
12 aboard merchant ships during World War II;
13 On April 15, 1941, members of the
14 United States Naval Armed Guard began
15 preliminary training as gun crews to serve
16 merchant ships;
17 Known as the "other Navy" during
18 World War II, Navy Armed Guard crews manned the
19 guns of merchant ships struggling to deliver men
20 and material to Europe and the Pacific; and
21 Whereas, the story of some
22 144,970 members of the Navy Armed Guard,
23 particularly their exploits in the Battle of the
3221
1 Atlantic, is a little-known legend of heroism,
2 sacrifice and cruelty by an unforgiving sea and
3 violent death from torpedoes, gunfire and bombs;
4 One in nine of all merchant
5 ships, or 710, were sunk resulting in the death
6 of 1,810 members of the United States Naval
7 Armed Guard;
8 Naval Armed Guard members earned
9 58,186 commendations and awards, including the
10 Navy Cross, Legion of Merit, Silver Star and
11 Bronz Star;
12 86,198 Armed Guards served aboard
13 Navy destroyer escorts and on infantry and tank
14 landing craft delivering Marines and soldiers to
15 the invasion beaches; and
16 Whereas, Armed Guards with
17 minimal and often antiquated firepower were
18 constantly pitted against the superior gunfire
19 of surfaced submarines, hostile vessels and
20 attacking aircraft;
21 The majority of Armed Guard crews
22 sailed the globe aboard slow moving merchant
23 ships packed with explosives or aboard tankers
3222
1 with their volatile cargoes of aviation fuel;
2 Numerous crews were forced to
3 abandon flaming and sinking ships in subfreezing
4 temperatures, struggling for survival in open
5 lifeboats as they floated amidst Arctic ice
6 floes; and
7 Whereas, documents are only
8 recently surfacing which detail Naval Armed
9 Guard exploits, suffering and gallantry against
10 overwhelming odds;
11 There are only 746 surviving
12 members of the United States Naval Armed Guard
13 currently residing in the State of New York;
14 No greater debt is owed than that
15 owed to those who gave their lives for their
16 beloved nation; and
17 Whereas, having exhibited their
18 patriotism during World War II, these men
19 demonstrated their love for their country and
20 now merit the highest praise from their state,
21 New York; now, therefore, be it
22 Resolved, That this Legislative
23 Body pause in its deliberations to proclaim
3223
1 April 15, 1996, as United States Naval Armed
2 Guard Day in tribute to the members of the U.S.
3 Navy who served as gun crews aboard merchant
4 ships during World War II; and be it further
5 Resolved, that copies of this
6 resolution, suitably engrossed, be transmitted
7 to Mr. Charles A. Lloyd, National Chairman and
8 Secretary, United States Navy Armed Guard World
9 War II Veterans; Mr. Henry M. Carringi,
10 Chairman, New York State Chapter, U.S. Navy
11 Armed Guard; and Mr. Lyle E. Dupra, Historian,
12 U.S. Navy Armed Guard World War II Veterans.
13 ACTING PRESIDENT KUHL: Chair
14 recognizes Senator Connor.
15 SENATOR CONNOR: Mr. President.
16 In the context of all the many, many heroes of
17 World War II -- and we are all here today
18 enjoying freedom and peace because of the great
19 sacrifices made by men and women in all of the
20 armed forces in that great conflict. It was
21 called to our attention sometime ago that
22 members of the Naval Armed Guard, about whose
23 heroics and exploits we have heard in the
3224
1 resolution, were desirous of being made eligible
2 for the New York State Conspicuous Service
3 Cross; and at my request, Senator Dollinger took
4 the lead and provided the documentation so that
5 the members -- surviving members of the Naval
6 Armed Guard were, indeed, made eligible and were
7 awarded the New York State Conspicuous Service
8 Cross.
9 It is now planned to bring forth
10 and have installed a plaque commemorating the
11 heroic efforts of the Naval Armed Guard and
12 those members from New York State who served so
13 gallantly in World War II.
14 Today, we're now talking -- it is
15 now the 55th anniversary of the birth of the
16 United States Naval Armed Guard, and we pause to
17 commemorate their heroics, and I think we ought
18 to also note what they adopted as their motto
19 which was, "We Deliver," and deliver, indeed,
20 they did, deliver safely, armaments, supplies
21 and fighting men throughout the world.
22 Today, we're fortunate to have
23 with us Mr. Henry Carringi, the New York State
3225
1 Chairman of the U.S. Navy Armed Guards Veterans
2 of World War II, and I believe five of his
3 comrades from the Capital District Area.
4 Gentlemen, we can not and will
5 not forget your 810 comrades who give their last
6 full measure of devotion for this nation; and,
7 today, we say to you and the other 740 surviving
8 members of the Guard who reside in this state
9 thank you and, without a doubt, you delivered.
10 Mr. Carringi is with us in the
11 gallery with his comrades.
12 (Applause.)
13 Thank you, Mr. President.
14 ACTING PRESIDENT KUHL: Senator
15 Farley.
16 SENATOR FARLEY: Yes.
17 Senator Connor, I would like to
18 rise to support your resolution because my
19 oldest brother, John Farley, was a combat
20 Merchant Marine veteran and sailed on a number
21 of ships, and the appalling loss of life that
22 happened with the Maritime Services and the
23 Armed Guard and the bravery that they -- because
3226
1 they were very vulnerable, usually on ships that
2 carried ammunition and bombs and so forth, and I
3 know the stories that my brother has told me
4 about the heroism and so forth of the Armed
5 Guard and what they did.
6 It was only recently that this
7 house and the other house recognized Merchant
8 Marines as veterans, and I was pleased to be
9 part of that, and I think it's so important. I
10 know that the Armed Guard has been very
11 supportive of the Merchant Marine Veterans, as
12 they are of you, and they are all very grateful
13 for the protection that the Armed Guard gave to
14 these gallant people that provided all the
15 efforts for the war effort.
16 And, Senator Connor, I would be
17 honored if I could go on your resolution.
18 ACTING PRESIDENT KUHL: Senator
19 Connor.
20 SENATOR CONNOR: Mr. President.
21 I'd certainly be happy to have all the members
22 of the Senate join me in sponsoring this
23 resolution.
3227
1 SENATOR SKELOS: No objection.
2 ACTING PRESIDENT KUHL: Senator
3 Connor, I see a great number of members who
4 would like to be on that, so why don't we take
5 the standard process of putting everybody on as
6 a cosponsor of the resolution except those
7 people who indicate to the desk later that they
8 don't wish to be on.
9 SENATOR CONNOR: Okay.
10 ACTING PRESIDENT KUHL: Is there
11 any other Senator wishing to speak on the
12 resolution?
13 Senator Hoblock.
14 SENATOR HOBLOCK: Thank you, Mr.
15 President.
16 Just very briefly, and I want to
17 acknowledge and thank Senator Connor for
18 bringing this resolution forward.
19 You know, as indicated in the
20 resolution, that this is not only an important
21 function that these brave men and women did -
22 did perform, but it's a little-known action that
23 they performed. You know, you've got to -- you
3228
1 got to get your personnel and your equipment
2 there, and you've got to get them out, and
3 that's exactly what this organization did, and
4 they did it very heroically during the second
5 world war and many other conflicts in the
6 history of this country.
7 So I'm proud to rise and join
8 with my colleagues in this resolution and
9 commending the debt owed to these individuals.
10 ACTING PRESIDENT KUHL: The
11 question is on the resolution.
12 All those in favor, signify by
13 saying aye.
14 (Response of "Aye.")
15 Opposed, nay.
16 (There was no response.)
17 The resolution is unanimously
18 adopted.
19 Senator Skelos.
20 SENATOR SKELOS: Mr. President.
21 I believe there is a privileged resolution by
22 Senator Paterson at the desk. I ask that it be
23 read in its entirety, please recognize Senator
3229
1 Paterson, and then if we could adopt the
2 resolution.
3 ACTING PRESIDENT KUHL: Secretary
4 will read the privileged resolution by Senator
5 Paterson in its entirety.
6 THE SECRETARY: By Senator
7 Paterson, Legislative Resolution, memorializing
8 the life of Ronald H. Brown, United States
9 Secretary of Commerce.
10 Whereas, it is the sense of this
11 Legislative Body to memorialize the life of one
12 of our nation's most distinguished statesmen,
13 Secretary of Commerce, Ronald H. Brown; and
14 Whereas, born in Washington,
15 D.C., in 1941, Ronald H. Brown grew up in
16 Harlem; focused and determined, Ronald H. Brown
17 earned a scholarship and attended Middlebury
18 College in Vermont;
19 He received his law degree at St.
20 John's University School of Law, attending at
21 night, while working by day as a welfare case
22 worker for the City of New York;
23 Ronald H. Brown served his
3230
1 country with loyalty, honor and great
2 distinction in the United States Army for four
3 years; he served in both Germany and Korea; and
4 Whereas, the first African
5 American to hold the office of United States
6 Secretary of Commerce, Ronald H. Brown is
7 considered by many to have been the finest
8 Secretary of Commerce in the history of the
9 United States;
10 Secretary Brown served on the
11 President's National Economic Council, the
12 Domestic Policy Council and the Task Force on
13 National Health Care Reform; he also was
14 Chairman of the Trade Promotion Coordinating
15 Committee, the Co-Chair of the United States
16 Russia Business Development Committee, and the
17 U.S.-Israel Science and Technology Commission
18 and led President Clinton's initiative on the
19 revitalization of the California economy; and
20 Whereas, a lawyer, a negotiator,
21 a pragmatic bridge builder, and the highly
22 successful immediate past chairman of the
23 Democratic National Committee, Secretary Brown
3231
1 brought wide experience to the challenge of
2 building a strong private-sector/public-sector
3 partnership; he was quite certain of his mission
4 to promote long-term economic growth with
5 emphasis on rebuilding our nation's industrial
6 base and working with small business owners and
7 minority entrepreneurs to create and expand
8 employment opportunities; and
9 Whereas, Ronald H. Brown's life
10 was cut short but he died while serving his
11 nation, attempting to fulfill his goal as
12 Secretary of Commerce, to place American
13 business in the front-line of the economic
14 development in war-torn countries such as the
15 former Yugoslavia; and
16 Whereas, Ronald H. Brown's life
17 mirrored a compelling commitment to public
18 service, his rise to prominence was forever
19 grounded in humanitarian concern; his life and
20 accomplishments are a source of pride for all
21 Americans; now, therefore, be it
22 Resolved, That this Legislative
23 Body pause in its deliberations to memorialize
3232
1 the life of Ronald H. Brown, the 30th Secretary
2 of Commerce of the United States; and be it
3 further
4 Resolved, that a copy of this
5 resolution, suitably engrossed, be transmitted
6 to the family of Ronald H. Brown.
7 ACTING PRESIDENT KUHL: Senator
8 Paterson.
9 SENATOR PATERSON: Thank you, Mr.
10 President.
11 And I would like to particularly
12 thank Senators Seabrook and Senator Montgomery
13 for their assistance in compiling the
14 information and preparing this resolution.
15 It was really a very sad day the
16 day following our break last Wednesday, when I
17 awakened to read in the newspaper that the first
18 black Dean of a New York law school, Dean
19 Haywood Burns of the City University of New York
20 law school, had passed away along with two other
21 professors in a car accident in South Africa
22 during a lawyers conference in preparation for
23 the legal changes made in that particular
3233
1 country.
2 Nearly two hours after that, we
3 heard the report, as did all Americans, of the
4 tragic flight from Tusla to Dubrovnik in which
5 there was a crash about a mile outside the air
6 field that killed United States Secretary of
7 Commerce Ron Brown.
8 I knew Ron Brown personally. He
9 is one of four individuals who I knew personally
10 who were on that flight. The others were
11 Catherine Hoffman of the Bronx, New York; also
12 William Morton, who was born in Wheeling, West
13 Virginia, and raised in Denver, Colorado, and
14 was just buried this Saturday in Wheeling, West
15 Virginia; and also Carol Hamilton of New
16 Rochelle, New York, who wrote press releases for
17 me when I first started running for public
18 office.
19 So it is the first time in my
20 life, and I would hope that no one in this
21 chamber ever goes through the experience, of
22 actually finding out of the loss of four
23 personal friends in one day, and particularly
3234
1 dissatisfying because of their unique
2 contributions that they made to this country and
3 also internationally, as this was a trip to try
4 to arrange for the building of the
5 infrastructure of what we know as Bosnia in the
6 wake of this terrible civil disaster that has
7 befallen that country and the outlying areas.
8 It is unfortunate that this would
9 be the epicenter of the event that would take
10 the life of the Secretary who was born in
11 Washington, D.C., in 1941 but was raised in
12 Harlem and actually lived in the Theresa Hotel
13 at 125th Street and Seventh Avenue, what is now
14 known as Adam Clayton Powell Boulevard, just
15 across the street from the office building that
16 I work in where my district office is. Ron
17 Brown grew up there and achieved tremendous
18 accolades in Middlebury College in Vermont and
19 then later as a lawyer for 12 years as the
20 general counsel to the National Urban League and
21 its vice-president, as the counsel to the Senate
22 Judiciary Committee, and then on as chair of the
23 National Democratic Committee and then the 30th
3235
1 Secretary of Commerce.
2 But these are just the
3 credentials that often amplify the life's work
4 of individuals but don't really speak to their
5 character and their commitment and the personal
6 lives that they shared and what they meant to
7 their friends and to their associates and to all
8 those touched by them. Ron Brown was a unique
9 figure. The resolution discusses the United
10 States-Russia Business Council that he founded
11 to try to create an economic empowerment for
12 those who live in Russia after the fall of the
13 Iron Curtain. The United States and Israeli
14 Science and Technology Task Force, where
15 actually it is the Israeli government and
16 Israeli citizens who are trying to give back to
17 Americans since we rate so low in comparison to
18 the other countries in terms of the scientific
19 aptitude of our young students, and also the G-7
20 Conference in Poland, in which Ron Brown in 1993
21 took members of the African National Conference
22 right after the first elections were held in
23 South Africa as a way of stimulating two
3236
1 countries that were in their growth state, one
2 after the fall of communism, one after the fall
3 of apartheit to try to demonstrate that their
4 likenesses could be a way to set parameters for
5 what would be a pattern of development and
6 planning that would inure to the benefit of
7 countries all around the world.
8 Ron Brown, who was the Chair of
9 the Democratic National Committee and may be
10 described as progressive in his political
11 ideology, had a great number of points of view
12 that might somewhat differ and would have a
13 great deal of appeal to those who might espouse
14 kind of a conservative philosophy, particularly
15 as he chaired the Task Force on National Health
16 Care because of his ideas that there were some
17 forms of privatization that could better improve
18 the delivery of health care services, and
19 particularly managed care, to those who were
20 recipients of Medicaid. This was something that
21 he discussed in a conference a year and a half
22 ago which I had the pleasure to have been
23 invited to.
3237
1 I introduced Ron Brown on
2 December the 15th of 1995 before the Harlem
3 International Trade Center when he opened up a
4 new Harlem import-export trade service to
5 promote greater contact between business leaders
6 from this country who live in the innercities
7 with those who lie overseas.
8 So his unique scope of thinking
9 is what really separates competence from
10 excellence, which is why he is remembered so
11 well, which is why so many Americans care about
12 his loss.
13 It was a tragic day two weeks ago
14 Wednesday, when the first African-American mayor
15 of a large city died in Cleveland, Ohio, and his
16 name was Carl Stokes, elected in 1967; also the
17 death of Dean Haywood Burns and Ron Brown, the
18 30th Secretary of Commerce that this country has
19 had; and yet the similarity of these individuals
20 may be one of hue, but it really was one, also,
21 of purpose as have so many Americans in the
22 short time they shared with us on this planet
23 made such an astounding contribution, the
3238
1 benefits of which we still continue to reap.
2 I only hope that with our often
3 dilapidated educational systems, the poor health
4 care that is delivered to our communities, the
5 many obstacles that people who live in the areas
6 such as a Ron Brown that there will be others
7 who might come along to take their place. Colin
8 Powell, the Chair of the Joint Chiefs of Staff,
9 said the other day that with the tuition the way
10 it is in our City University right now he doubts
11 that he would have been able to have gotten the
12 education that he inevitably received.
13 But whatever our points of view
14 and whichever ways we differ, we always
15 recognize the contributions that were made by
16 those who believed in their purpose and stood
17 for them. They fought, they suffered, and in
18 this case they paid, but we won, and what we
19 have won is the enlightenment of freedom and the
20 enlightenment of knowledge that they offered us.
21 And, hopefully, we can continue
22 as we try to solve the myriad problems that the
23 world still has left in its virtue that we might
3239
1 solve.
2 Thank you.
3 ACTING PRESIDENT KUHL: Any other
4 Senator wishing to speak on the resolution?
5 (There was no response.)
6 Hearing none, all those in favor,
7 signify -- of the resolution, signify by saying
8 aye.
9 (Response of "Aye.")
10 Opposed, nay.
11 (There was no response.)
12 The resolution is adopted.
13 The Chair recognizes Senator
14 Goodman.
15 SENATOR GOODMAN: Mr. President.
16 It's my happy privilege this afternoon to
17 introduce to the chamber a very noted celebrity
18 from the world of dance, television and the
19 movies. She is seated in the front of the
20 chamber, and her name is Marge Champion, and all
21 of you will certainly remember Marge and Gower
22 Champion as two of the outstanding dancers and
23 cultural contributors during the golden era of
3240
1 MGM movies and on television itself.
2 Marge Champion is an
3 extraordinarily vivacious lady, who is here with
4 a delegation representing the arts community,
5 and I must say that it gives me special pleasure
6 to point out that she and her husband became
7 synonymous with grace and romance in dance. I
8 think a quote from her says, "We had a romantic
9 quality because we were really in love," which
10 is a very refreshing development in this day and
11 age, and they developed a style over the years
12 doing a variety of guest appearances and
13 ultimately came into the big time appearing in
14 such films as "Showboat," "Give a Girl a Break,"
15 "Three For The Show," "The Swimmer," "The G.E.
16 Theater," "Toast of the Town," "The Dinah Shore
17 Show," and, indeed, she won an Emmy Award for
18 her choreography for "Queen of the Stardust
19 Ball," in 1975.
20 As we all know, the Senate is in
21 the forefront in the Albany firmament of those
22 who care about culture and try very hard to
23 advance it in every way possible, and it's
3241
1 always a refreshing and delightful experience to
2 have leaders of the art world come to see us for
3 a brief visit.
4 And may I ask that we accord a
5 special New York welcome to Marge Champion.
6 (Applause.)
7 ACTING PRESIDENT KUHL: Senator
8 Skelos, Senator Paterson has indicated to the
9 desk that he would like to open up the last
10 resolution that was adopted for all the
11 members. I know that probably most members
12 would like to be on it. So why don't we take
13 the same procedure. We'll put all the members
14 on the last resolution honoring former Commerce
15 Secretary Ron Brown unless they indicate to the
16 desk that they do not wish to be on it.
17 Senator Skelos.
18 SENATOR SKELOS: Mr. President.
19 At this time, if we could take up the
20 noncontroversial calendar.
21 ACTING PRESIDENT KUHL: Secretary
22 will read the noncontroversial calendar.
23 THE SECRETARY: On page 11,
3242
1 Calendar Number 186, by Senator Levy, Senate
2 Print 371, an act to amend the Vehicle and
3 Traffic Law, in relation to civil penalties
4 imposed for alcohol or drug related offenses.
5 ACTING PRESIDENT KUHL: The
6 Secretary will read the last section.
7 THE SECRETARY: Section 2. This
8 act shall take effect on the first day of
9 November.
10 ACTING PRESIDENT KUHL: Call the
11 roll.
12 (The Secretary called the roll.)
13 THE SECRETARY: Ayes 57.
14 ACTING PRESIDENT KUHL: The bill
15 is passed.
16 THE SECRETARY: Calendar Number
17 207, by Senator Hoblock, Senate Print 5173A, an
18 act to amend the Criminal Procedure Law and the
19 Penal Law, in relation to definition of juvenile
20 offender.
21 SENATOR PATERSON: Lay it aside.
22 ACTING PRESIDENT KUHL: Lay the
23 bill aside.
3243
1 THE SECRETARY: Calendar Number
2 212, by Member of the Assembly Hochberg,
3 Assembly Print 5707C, an act to amend the
4 Criminal Procedure Law, in relation to a
5 defendant's right to supporting deposition.
6 ACTING PRESIDENT KUHL: The
7 Secretary will read the last section.
8 THE SECRETARY: Section 5. This
9 act shall take effect 180 days.
10 ACTING PRESIDENT KUHL: Call the
11 roll.
12 (The Secretary called the roll.)
13 THE SECRETARY: Ayes 57.
14 ACTING PRESIDENT KUHL: The bill
15 is passed.
16 THE SECRETARY: Calendar Number
17 233, by Senator Present, Senate Print 992A, an
18 act to amend the General Municipal Law, in
19 relation to authorizing the designation of rural
20 economic development zones.
21 SENATOR PATERSON: Lay it aside.
22 ACTING PRESIDENT KUHL: Lay the
23 bill aside.
3244
1 THE SECRETARY: Calendar Number
2 296, by Senator Skelos, Senate Print 6072A, an
3 act to amend the County Law and the General
4 Municipal Law, in relation to authorizing
5 counties.
6 ACTING PRESIDENT KUHL: Lay the
7 bill aside.
8 SENATOR SKELOS: Lay it aside for
9 the day.
10 ACTING PRESIDENT KUHL: Lay the
11 bill aside for the day at the request of the
12 sponsor.
13 THE SECRETARY: Calendar Number
14 393, by Senator Skelos.
15 SENATOR SKELOS: Lay it aside for
16 the day.
17 ACTING PRESIDENT KUHL: Lay the
18 bill aside for the day at the request of the
19 sponsor.
20 THE SECRETARY: Calendar Number
21 395, by Senator Saland, Senate Print 5106A, an
22 act to amend the Social Services Law and the
23 Education Law, in relation to the protection of
3245
1 pupils.
2 ACTING PRESIDENT KUHL: The
3 Secretary will read the last section.
4 THE SECRETARY: Section 5. This
5 act shall take effect on the first day of
6 January.
7 ACTING PRESIDENT KUHL: Call the
8 roll.
9 (The Secretary called the roll.)
10 THE SECRETARY: Ayes 57.
11 ACTING PRESIDENT KUHL: The bill
12 is passed.
13 THE SECRETARY: Calendar Number
14 418, by Senator Libous, Senate Print 4493A, an
15 act to amend the General Business Law, in
16 relation to the storage, sale and rental of X
17 rated and MC-17 rated films.
18 ACTING PRESIDENT KUHL: The
19 Secretary will read the last section.
20 THE SECRETARY: Section 2. This
21 act shall take effect on the first day of
22 January.
23 ACTING PRESIDENT KUHL: Call the
3246
1 roll.
2 (The Secretary called the roll.)
3 THE SECRETARY: Ayes 57.
4 ACTING PRESIDENT KUHL: The bill
5 is passed.
6 THE SECRETARY: Calendar Number
7 459, by Senator Hoblock, Senate Print 5796, an
8 act to amend the Civil Service Law, in relation
9 to the use of credits for veterans and disabled
10 veterans.
11 ACTING PRESIDENT KUHL: The
12 Secretary will read the last section.
13 THE SECRETARY: Section 2. This
14 act shall take effect immediately.
15 ACTING PRESIDENT KUHL: Call the
16 roll.
17 (The Secretary called the roll.)
18 THE SECRETARY: Ayes 57.
19 ACTING PRESIDENT KUHL: The bill
20 is passed.
21 THE SECRETARY: Calendar Number
22 478, by Senator Larkin, Senate Print 6057, an
23 act to amend the Real Property Tax Law, in
3247
1 relation to school districts which levy taxes on
2 behalf of a school district.
3 ACTING PRESIDENT KUHL: The
4 Secretary will read the last section.
5 THE SECRETARY: Section 2. This
6 act shall take effect on the first day of
7 January.
8 ACTING PRESIDENT KUHL: Call the
9 roll.
10 (The Secretary called the roll.)
11 THE SECRETARY: Ayes 57.
12 ACTING PRESIDENT KUHL: The bill
13 is passed.
14 THE SECRETARY: Calendar Number
15 588, by Senator Goodman, Senate Print 6282.
16 SENATOR LEICHTER: Lay it aside.
17 ACTING PRESIDENT KUHL: Lay the
18 bill aside.
19 Senator Skelos, that completes
20 the noncontroversial calendar.
21 SENATOR SKELOS: Mr. President.
22 If we could take up the controversial calendar
23 at this time.
3248
1 ACTING PRESIDENT KUHL: Secretary
2 will read the controversial calendar, beginning
3 with Calendar Number 207.
4 THE SECRETARY: On page 11,
5 Calendar Number 207, by Senator Hoblock, Senate
6 Print 5173A, an act to amend the Criminal
7 Procedure Law and the Penal Law.
8 SENATOR PATERSON: Explanation,
9 please.
10 ACTING PRESIDENT KUHL: Senator
11 Hoblock, an explanation of Calendar Number 207
12 has been asked for by the Acting Minority
13 Leader, Senator Paterson.
14 SENATOR HOBLOCK: Mr. President.
15 This bill amends various sections of the
16 Criminal Procedure Law and the Penal Law to
17 include certain weapon offenses within the class
18 of offenses for which 12- to 15-year-old
19 juvenile offenders maybe prosecuted in the
20 Criminal Courts. This is a "may" bill in the
21 sense that the prosecutor can determine to
22 prosecute these individuals, that is, 12-, 13-,
23 14- or 15-year-old individuals that are
3249
1 criminally responsible for certain weapon
2 offenses.
3 ACTING PRESIDENT KUHL: Senator
4 Paterson.
5 SENATOR PATERSON: Thank you very
6 much, Mr. President. If Senator Hoblock would
7 just yield to a few questions.
8 ACTING PRESIDENT KUHL: Senator
9 Hoblock, do you yield to a question?
10 SENATOR HOBLOCK: Sure.
11 ACTING PRESIDENT KUHL: Senator
12 yields.
13 Yes, Senator Leichter, why do you
14 rise?
15 SENATOR LEICHTER: I'm sorry to
16 interrupt. Is Calendar 418 still in the house?
17 ACTING PRESIDENT KUHL: They tell
18 me it's gone, Senator.
19 SENATOR LEICHTER: Okay. Thank
20 you.
21 ACTING PRESIDENT KUHL: Senator
22 Paterson.
23 SENATOR PATERSON: Well, Mr.
3250
1 President, there are a number of things that
2 have been asked for in the house; and when they
3 are gone, we just have to move forward.
4 Senator Hoblock, if I were just
5 going to summarize the legislation, it appears
6 that we have taken many of the crimes that we
7 can charge 14- and 15-year-olds and impose that
8 on 12- and 13-year-olds; and where we only
9 usually try 13-year-olds as adults for murder,
10 when we move the age back to 12, we are now
11 adding in all the other offenses that 14- and
12 15-year-olds were traditionally charged with.
13 I was listening to some remarks
14 that the Attorney General was making recently
15 about prevention; and what I'm wondering with
16 this introduction of legislation is, how far are
17 we going to go? Are 10- and 11-year-olds next?
18 Are we just continually lowering the age at
19 which we can charge individuals with crimes, at
20 the same time not really addressing the issues
21 of prevention; and is there any prevention
22 mechanism in this bill that you can describe?
23 SENATOR HOBLOCK: Senator
3251
1 Paterson, there is no direct prevention
2 provisions in the bill. But let me say that
3 since last year when we've had this bill on the
4 floor and debated it on that particular issue,
5 you know, I have been saving a number of
6 articles and other pieces of material that have
7 come across my desk on juvenile crime, and I
8 have also been gathering some information on
9 what it is we spend now in the State of New York
10 on youth prevention and diversion alternatives,
11 and various other programs, and it seems to me
12 that we spend now millions and millions of
13 dollars on a number of programs, some of which
14 are working, hopefully and optimistically, and
15 some of which are not working; and in spite of
16 the programs and in spite of the millions of
17 dollars that we spend -- and, hopefully, it is
18 all being spent in the right way and, in fact,
19 is doing some good -- there are certain
20 individuals, perhaps not a great number of them,
21 that choose to take up this life of crime, and
22 it has been said to me by several district
23 attorneys, that whether we like it or not, there
3252
1 are some of these individuals even in this age
2 category that are hardened criminals; and, in
3 fact, we would like the alternative to or the
4 option to have to prosecute them.
5 So to answer your question, there
6 are many prevention programs already in place;
7 and had they been working and accomplishing all
8 the goals we would like to have them accomplish,
9 we probably wouldn't be talking about this bill.
10 ACTING PRESIDENT KUHL: Senator
11 Paterson.
12 SENATOR PATERSON: Thank you, Mr.
13 President. I'm afraid you're right about that,
14 Senator Hoblock, but just to be specific, we -
15 in our proposed budget of this year, we have a
16 $3 million cut in special delinquency programs
17 $2.5 million in runaway programs; and special
18 education funding, we cut by 50 percent. So I'm
19 just saying that while we are addressing what
20 may be the outgrowth of the problem in your
21 bill, what may be the catalyst for why we are
22 standing here talking about your bill is
23 something that seems in a sense a little
3253
1 contradictory, and what I would add to that is
2 that in light of the cuts for Division for Youth
3 services, which would actually take control of
4 these cases -- and we would assume there would
5 be more of them based on the number of people I
6 would assume would be prosecuted under the
7 change in law that you are proposing -- how are
8 we going to do anything about these 12- and
9 13-year-olds and 14- and 15-year-olds who come
10 under the net if this legislation is passed if
11 we are operating with a fraction of the
12 resources?
13 SENATOR HOBLOCK: Well, I'm not
14 sure I can totally answer that question,
15 Senator. Again, you know, this is not a
16 mandatory. They don't have to be prosecuted
17 under these sections. This is up to the
18 district attorney based on the circumstances of
19 the crime.
20 And I might add that, you know,
21 we are not the only state that is not only faced
22 with this problem but has attempted to do
23 something about it, and in the area of juvenile
3254
1 offenders, there's a number of states across
2 this country that have even gone further than
3 what this bill proposes in trying to deal with
4 what they see as that small part of the
5 population, unfortunately -- and hopefully those
6 numbers will stay very small -- have to be dealt
7 with a different way and that we can't
8 generalize and have one glove fit all when we're
9 talking about juvenile crime and juvenile
10 offenses.
11 ACTING PRESIDENT KUHL: Senator
12 Paterson.
13 SENATOR PATERSON: Thank you,
14 Senator Hoblock. Thank you for the answers.
15 Mr. President, on the bill.
16 ACTING PRESIDENT KUHL: Senator
17 Paterson on the bill.
18 SENATOR PATERSON: Mr.
19 President. I can't compliment Senator Hoblock
20 on the bill. What I think I can compliment him
21 on is not going as far as they have done in
22 other states because I feel that, generally, we
23 are going in the wrong direction in this
3255
1 particular area.
2 If you talk to people that run
3 youth facilities or you look at the statistics,
4 the recidivism does not come necessarily as a
5 result of just the release from the youth
6 facility. It comes as a result of the
7 environment that the individual goes back to
8 rather than the one that's actually treating.
9 What we're doing is blaming the
10 fact that there is recidivism on the facilities
11 and then cutting the budgets for the facilities,
12 and then, at the same time, adding to the
13 numbers of young people who are in the net of
14 the criminal justice system and then,
15 inevitably, adding to those who are in the
16 correctional system by trying them as adults.
17 In my opinion, we're adding and
18 subtracting in a way that we don't really come
19 out ahead. Certainly, any person, regardless of
20 their age that commits a crime must be punished,
21 but when we recognize the difference in
22 comprehension and attainment of acuity of those
23 who are actually committing crimes, we recognize
3256
1 that there is a difference between a 15-year-old
2 and a 12-year-old, and that this may be an
3 answer that may certainly -- if under the
4 definition of what a crime is and what
5 punishment is certainly fits, there is no reason
6 not to lower the ages to 11 or 10 or 9
7 eventually, when we are really not addressing
8 the full issue of the kind of rehabilitation
9 that we can do that, in most cases, will
10 actually make the difference between what would
11 be a life of crime for some people and true and
12 honest rehabilitation.
13 We just don't think this is
14 actually the answer. It certainly makes sense
15 in a cursory way because when a crime such as a
16 murder is committed, it's felt by adults. It's
17 effected in that way. It certainly doesn't make
18 a difference who commits the crime. We all feel
19 the same anguish; yet in the same sense, we're
20 really talking about different individuals, as
21 opposed to when an 18-year-old commits a crime,
22 even a heinous one, as compared to when a
23 12-year-old does.
3257
1 So we recommend that this bill be
2 defeated. In spite of the fact that its purpose
3 is good, the reality is that the effect is only
4 going to put younger people in facilities
5 longer, take them away from any kind of
6 situation that might reverse their plight, and
7 in our opinion exacerbate the problem rather
8 than cure it.
9 ACTING PRESIDENT KUHL: Senator
10 Montgomery.
11 SENATOR MONTGOMERY: Thank you,
12 Mr. President. I would like to ask the sponsor,
13 Senator Hoblock, if we would answer a question.
14 Senator Hoblock, these 12- and
15 13-year-olds that we're talking about in this
16 bill, these would currently be considered mules,
17 would they not, more or less? In the language
18 of the drug people, they are mules more or
19 less.
20 SENATOR HOBLOCK: I suppose in
21 that area of activity, potentially. But keep in
22 mind that these are offenses that would be
23 committed with a weapon.
3258
1 SENATOR MONTGOMERY: I had a
2 conversation with one of the commanding officers
3 in my district, and one of the things that he
4 said to me was that the reason that young
5 children this age are involved in various kinds
6 of criminal activity is that they're essentially
7 used as couriers, and they are used because they
8 are below age.
9 So my assumption is -- and I'm
10 just wondering if you thought about this, as
11 well -- that once we remove the 12-year-olds,
12 then the 9- to 11-year-olds are going to become
13 the same kind of little mules. Would you not
14 suspect that that would happen since that's what
15 happens with the 12-year-olds now?
16 SENATOR HOBLOCK: I don't think
17 so, Senator Montgomery. I think what we're
18 trying to get at with this bill, as I say, just
19 looking at what's taking place over the past
20 year. You know, there's an article in the
21 Buffalo News, and this is the type of crime
22 we're talking about. We got a 12-year-old boy
23 who is charged with stabbing an elderly Buffalo
3259
1 woman to death, and he couldn't face more than
2 18 months. The prosecutor called out for the
3 ability to do something about this individual.
4 It was a -- even though at 12-year-olds, they
5 were talking about a hardened criminal.
6 We're talking about, in Buffalo,
7 drug related shootings involving 13- and
8 14-year-olds -- shootings now. This is not
9 possession of weapons or so-called mule. We're
10 talking about a 14-year-old killing an
11 individual after having a quarrel between an
12 elderly woman and a young girl. We have a
13 situation right here locally in which our
14 district attorney said, "You have tough kids
15 under the age of 16 and these kids should be
16 treated as adults in certain criminal
17 situations." We want to get the word out. You
18 don't engage in criminal acts as a juvenile.
19 Now, there's hundreds of these
20 that have occurred across this state in the past
21 year. We're not talking about every 12- and
22 13-year-old charged or involved in this activity
23 but, unfortunately, there are those few that we
3260
1 have to deal with, and district attorney, law
2 enforcement official, you read articles and
3 statistics from other states, this is the only
4 way we have to do it.
5 President Clinton said himself
6 this is not the time to weaken our laws when we
7 are dealing with juvenile crime. We have to go
8 the other way. I say this, that if, in fact,
9 what we've had in place worked, then why are we
10 talking about this? It's not working, and
11 that's why we have this bill.
12 SENATOR MONTGOMERY: Senator
13 Hoblock, if you will continue to yield.
14 ACTING PRESIDENT KUHL: Senator
15 Hoblock, do you continue to yield?
16 SENATOR HOBLOCK: Sure.
17 SENATOR MONTGOMERY: In the same
18 vein, do you anticipate then that eventually
19 we're going to be right back here debating the
20 same bill for 10 and 11-year-olds? Because they
21 are now going become logical next recruitment
22 age groups by people involved in crimes because
23 they are not now part of the net. So it's very
3261
1 likely that we going to be back next session
2 talking about 10 and 11-year-olds. Would you
3 say that?
4 SENATOR HOBLOCK: I would hope
5 not. I would hope not, and I would hope we
6 would be able to come back here in a year or two
7 and repeal what it is we're saying about 12 and
8 13-year-olds. I would hope that we do what I
9 had experienced this morning in going to one of
10 the local grade schools and talking about drugs
11 and alcohol and smoking and getting in trouble
12 and violence and getting along and trying to
13 respect one another and paying attention to
14 teachers and parents and recognizing and
15 respecting the law. Maybe that's what we've got
16 to do so we don't have to have these kinds of
17 things.
18 No, I don't want to go that way,
19 Senator Montgomery. I'd rather go the other way
20 and hoping that we never have to do this; but,
21 unfortunately, we are in a situation where we've
22 got to cut the chase. We've got to do something
23 about it, try to correct it in those instances
3262
1 where it needs to be corrected. Again, this is
2 a "maybe" bill. It's not mandatory. We need to
3 address this problem.
4 SENATOR MONTGOMERY: Thank you.
5 Mr. President, briefly on the
6 bill.
7 ACTING PRESIDENT KUHL: Senator
8 Montgomery on the bill.
9 SENATOR MONTGOMERY: I do hope
10 that Senator Hoblock is correct that we're going
11 to be coming back in a year to repeal this, but
12 I would like to just remind Senator Hoblock and
13 my colleagues of the current budget proposal
14 before us. There is a program that the state
15 calls the Special Delinquency Prevention
16 Program, SDPP, and there has been a cut in that
17 funding, proposed cut in that funding of about 3
18 million. There is a program for helping runaway
19 and homeless youth, and the recommendation is
20 that that be funded at 3.8 million, down from
21 5.3 million last year. Mental health services
22 for youth are reduced by 33.8 million. There is
23 a 50 percent cut proposed by the Governor's
3263
1 budget for at-risk youth.
2 The budget cuts the Division for
3 Youth after care funding -- the budget adds 1.5
4 million to after care funding services for
5 youth, but the cuts in funding for youth
6 prevention, for mental health services, and for
7 all other areas that would give us the capacity
8 to serve, hopefully, these young people have
9 been drastically reduced and the very, very
10 small program that we just instituted two years
11 ago has been cut out entirely and that is a
12 program to provide mental health services in
13 school-based health clinics which we all fought
14 very hard to get, and we all in this room -- I
15 think every Senator in here supports that, and
16 that's gone.
17 So I think there is a bit of
18 hypocrisy in that whole notion that if we just
19 increase the level of punishment and lower the
20 age at which the increased level of punishment
21 can be done that we're going to resolve these
22 issues, and at the same time we're going to cut
23 out any program or reduce our capacity to offer
3264
1 the kinds of opportunities which give people a
2 hope for a different kind of future at the age
3 when it's likely to make the most difference.
4 So I oppose this legislation
5 because I think that we should, first, be
6 talking about what can we do to prevent these
7 young people, because we know that if you are
8 going to bring them into the penal system at 12,
9 there's never, never any hope of reforming them,
10 and so we need to think about how can we keep
11 them out, and I think we're losing the capacity
12 to do that. We're not even talking about it.
13 Nobody wants to discuss it. We don't seem to
14 care enough about it, and so I can't in all good
15 conscience supports legislation which does not
16 in any way speak to the real issue.
17 This is just legislation which
18 speaks to the symptoms; and, Senator Hoblock,
19 I'm looking for legislation from you that talks
20 about the root cause of these young children
21 being so vulnerable to being involved in the
22 criminal justice system.
23 So I'm going to vote no on this
3265
1 legislation, Mr. President.
2 ACTING PRESIDENT KUHL: Chair
3 recognizes Senator Abate.
4 SENATOR ABATE: Mr. President,
5 would Senator Hoblock yield to a number of
6 questions?
7 ACTING PRESIDENT KUHL: Senator
8 yields.
9 SENATOR ABATE: Senator, you
10 stated that there are a number of other states
11 who have tough juvenile justice reform statutes,
12 and it's my understanding -- please correct me
13 -- that there are only four states in the
14 country that allow juveniles to be prosecuted as
15 adults. Even Texas and California do not allow
16 juveniles to be prosecuted as adults beyond the
17 age of 15.
18 So, Senator, can you tell me what
19 states have tougher laws than we have in New
20 York State today.
21 SENATOR HOBLOCK: I had it just
22 in front of me here and if you'll give me just a
23 moment, I will locate it.
3266
1 One in particular, the state of
2 Florida, as I understand, and I don't have the
3 age in front of me, but there was a significant
4 article about what it is they are doing to try
5 and combat the juvenile crime down there.
6 Oop, I have it.
7 SENATOR ABATE: Maybe, Senator,
8 rephrase my question. I'm not aware of any
9 states that prosecute juveniles as adults for
10 these kinds of crimes as young as 12 and 13
11 years of age. Is there anywhere else in the
12 country that is doing that currently, other than
13 for murder and the heinous crimes?
14 SENATOR HOBLOCK: Texas.
15 SENATOR ABATE: Texas is not, to
16 my understanding.
17 SENATOR HOBLOCK: Wisconsin.
18 SENATOR ABATE: At what age?
19 SENATOR HOBLOCK: Wisconsin? It
20 says here that Governor Thompson signed into law
21 a bill that allows juveniles as young as 10 -
22 SENATOR ABATE: For what kinds of
23 crime?
3267
1 SENATOR HOBLOCK: -- to be tried
2 in an adult court for murder, and lowers the
3 age. It doesn't say.
4 SENATOR ABATE: Right. See, that
5 I understand.
6 SENATOR HOBLOCK: It lowers the
7 age for other crimes.
8 SENATOR ABATE: As you know, New
9 York State many, many years ago passed a law, if
10 you are convicted of murder as young as 11 years
11 old, you can be prosecuted as adult. But what
12 we're doing in New York State with your
13 suggested legislation goes far beyond, I
14 believe, any other state in terms of prosecuting
15 people this young for crimes such as possession
16 and use of a gun, putting aside murder and
17 other -- and I just wanted to see, Senator, if
18 you had any other information on that.
19 SENATOR HOBLOCK: Yes, as I say,
20 it obviously varies from state to state. A lot
21 of states are reducing the age in which they are
22 making a lot of the adult offenses applicable,
23 and I understand. I understand the problem. I
3268
1 understand what Senator Montgomery is saying. I
2 understand what you and others are saying about
3 what it is we need to do for these kids.
4 But I guess, my answer to that,
5 Senator Abate, what happens when it doesn't
6 work. What are we to tell the family of that
7 woman and women in Buffalo when there was an
8 offense committed by a 12- or 13-year-old. Do
9 we tell them we have to raise some more taxes so
10 we can have some more prevention and education,
11 and that government is the answer to
12 everything? Let's not try to work with the
13 family. Let's not try to have some respect.
14 No. Let's just have some more prevention
15 programs, and the next time it won't happen.
16 I'm trying to deal with those
17 isolated cases -- hopefully they're isolated,
18 and hopefully they're a handful -- of those kids
19 that choose to do this. Now, if they've already
20 committed the crime, what do we do?
21 SENATOR ABATE: Would the Senator
22 yield to another question?
23 ACTING PRESIDENT KUHL: Senator
3269
1 Hoblock, do you continue to yield?
2 SENATOR HOBLOCK: Sure.
3 ACTING PRESIDENT KUHL: The
4 Senator yields.
5 SENATOR ABATE: I suggest that
6 maybe the response is it's a combination, a
7 balanced approach between punishing these kids
8 who deserve to be punished and also preventing
9 other kids who haven't entered the juvenile
10 justice system from entering it.
11 Are you aware, Senator, that
12 currently under the law if a juvenile commits
13 one of these crimes, they can be placed up to 18
14 months in DFY?
15 SENATOR HOBLOCK: Right.
16 SENATOR ABATE: Are you
17 suggesting through this legislation that 18
18 months is not long enough?
19 SENATOR HOBLOCK: Yes, I am.
20 SENATOR ABATE: Then why aren't
21 we looking at DFY to see in appropriate cases
22 where the sentences could be expanded beyond 18
23 months?
3270
1 SENATOR HOBLOCK: I think that's
2 what I'm trying to do here.
3 SENATOR ABATE: No. I think -
4 it's my understanding that you want to prosecute
5 these juveniles as adults, take them out of the
6 juvenile justice system and put them into the
7 adult system.
8 SENATOR HOBLOCK: Yeah, because
9 as I said, I think there's a lot of them that
10 are really adults.
11 SENATOR ABATE: Even at 12 years
12 of age?
13 SENATOR HOBLOCK: Yes.
14 SENATOR ABATE: For possession of
15 a weapon?
16 SENATOR HOBLOCK: I beg your
17 pardon?
18 SENATOR ABATE: For possession of
19 a weapon?
20 SENATOR HOBLOCK: For that degree
21 of crime, sure. They're not going to be put in
22 jail for years and years as one who would commit
23 a violent crime of some assault, serious
3271
1 injuries, shooting.
2 SENATOR ABATE: Would you say 18
3 months is not enough for mere possession of a
4 gun for a 12-year-old?
5 SENATOR HOBLOCK: It may be. It
6 may be. But that's not to say that under the
7 circumstances of the case the prosecutor can't
8 do that. The prosecutor can put them into the
9 juvenile offender status and put them through
10 DFY. They don't have to treat them as an
11 adult. If it's a onetime, first-time offense,
12 if the circumstances mitigating and extenuating
13 dictate it.
14 I think what we're trying to do
15 here is we're trying to get at what has been
16 referred to by those in the law enforcement
17 community as unfortunately at this age almost a
18 hardened criminal or one who chooses to take
19 that extra step and commit that serious crime.
20 We're not trying to get at every 12- or
21 13-year-old. That's not the intent here.
22 As I say, what happens when they
23 do commit that crime? Are we tipping again this
3272
1 balance of worrying about the defendant not near
2 as much as we worry about the victim and not
3 near as much as we worry about who is coming up
4 next.
5 SENATOR ABATE: Would the Senator
6 yield to another question. I think everyone in
7 this house believes that juveniles have to be
8 held accountable, have to be punished, but I
9 think we're concerned about not just passing
10 laws that sound good and sound tough but are
11 effective.
12 Are there any studies that you
13 can point to that this legislation would deter
14 juveniles for possessing guns or any data that
15 will show that this would reduce juvenile
16 crime?
17 SENATOR HOBLOCK: No, I don't
18 think there are any studies particularly in New
19 York because we haven't had this, and I think
20 that those who are in the business -- and, yes,
21 you can probably talk to a couple of college
22 professors that will dig up theories in
23 anything, but if you talk to the people in the
3273
1 business, and I'm talking to the police
2 officers, those on the street, district
3 attorneys, and those that handle these cases on
4 a day-to-day basis, they are convinced that
5 punishment has to be administered and it is a
6 deterrent. It is a statement to those that we
7 will not stand for juvenile crime. The
8 President of the United States has said that.
9 SENATOR ABATE: Thank you,
10 Senator. On the bill.
11 ACTING PRESIDENT KUHL: Senator
12 Abate, on the bill.
13 SENATOR ABATE: I believe, as my
14 colleagues have said, that this legislation is
15 too broad. It includes not only use of a gun
16 but also mere possession of a gun.
17 Unfortunately, in this day and age, there are
18 young people that are in possession of guns that
19 are not hardened criminals. I believe the
20 juvenile justice system has the wherewithal in
21 terms of length of placement to take care of
22 some of these juveniles. I'm concerned that
23 this is not a balanced approach to fighting
3274
1 juvenile crime. The Senator said we spent so
2 much money on prevention that we need to only
3 look to punishment. I disagree wholeheartedly.
4 We have never invested sizeable dollars in
5 prevention in the juvenile justice system.
6 I know, for one, that there are
7 juvenile intensive supervision programs run by
8 probation throughout the state that are now
9 going to be cut by 25 percent. Until I see a
10 commensurate investment and commitment early on
11 to juveniles so they do not get involved in a
12 life of crime along with efforts around
13 punishment, I don't believe this is a balanced
14 approach. At the same time we're finding so
15 much money to try to prosecute juveniles as
16 adults as the inevitable because we don't think
17 these juveniles can be stopped from a life of
18 crime, we are cutting enormously pretrial
19 services, drug treatment programs, programs in
20 probation and juvenile justice.
21 I agree with my colleague,
22 Senator Montgomery, that let's evaluate. Let's
23 get some input on the effectiveness of these
3275
1 pieces of legislation before we push them
2 forward in the guise of protecting victims.
3 Talk to victims. They don't want just another
4 piece of law on the books that seems to be
5 tough, that has no effect on their safety. I'm
6 afraid this is another piece of legislation that
7 looks good. It sounds tough, but will not deter
8 another juvenile from possessing a weapon.
9 So until we not only get more
10 data, but look at a more rational balanced
11 approach to fighting crime, and that includes
12 strong law enforcement, strong prevention and
13 strong treatment, unless we have all three
14 components, we're not going to be effective in
15 promoting public safety for all New Yorkers in
16 this state.
17 ACTING PRESIDENT KUHL: Chair
18 recognizes Senator Mendez.
19 SENATOR MENDEZ: Mr. President.
20 I wonder if Senator Hoblock would yield for a
21 question.
22 ACTING PRESIDENT KUHL: Senator
23 Hoblock, do you yield to Senator Mendez?
3276
1 SENATOR HOBLOCK: Sure.
2 ACTING PRESIDENT KUHL: Senator
3 yields.
4 SENATOR MENDEZ: Senator Hoblock,
5 is the intention of your bill to put away -
6 let's say put away these young kids so that they
7 learn the lesson and, therefore, the assumption
8 is that people would be achieving greater
9 safety?
10 Would you classify a 12- and 13
11 year-old as a human being who has gone through
12 the entire process of socialization?
13 SENATOR HOBLOCK: I'm not sure if
14 I understand that.
15 SENATOR MENDEZ: You know, kids,
16 since the time they are born, they are
17 socialized into the do's and don't's that are
18 acceptable to society until a certain age. Then
19 they go kindergarten, pre-kinder, grammar
20 school, and then the schools become the
21 secondary socializing agent.
22 So my question to you is assuming
23 that we decide through your bill to take away
3277
1 these kids from the -- to deal with these kids
2 from the juvenile delinquency system and treat
3 them as adults and send them, let's say, to jail
4 where adults are, wouldn't you say then that
5 these kids 12 and 13 years old if they are
6 shipped to prisons where adults are, they will
7 be socialized into crime; and, therefore, since
8 they will not be -- since they will not be
9 staying in jail for life, they will come out as
10 more violent felons; and, therefore, the premise
11 of your bill is one that eventually would not
12 act as the kind of safety that you would want to
13 achieve.
14 SENATOR HOBLOCK: What the bill
15 calls for is the prosecution as adults so that
16 the sentencing could be more severe than it is
17 now. Not necessarily where they are housed but
18 the way they are prosecuted and the sentence
19 they would receive.
20 SENATOR MENDEZ: Mr. President.
21 If you will yield for another question.
22 Are you aware that in today's New
23 York Times, that is an editorial that reports a
3278
1 study that was conducted in New York State and
2 that states the following, that there are at the
3 present time about 4,000 African-American,
4 Puerto Rican and Hispanic kids that have been
5 sentenced -- with the judges that do have
6 discretion in sentencing, they have been -- for
7 the same crimes, they have been sentenced to
8 longer sentences than the other white kids? Are
9 you aware of that?
10 SENATOR HOBLOCK: No, I'm not
11 aware of that.
12 SENATOR MENDEZ: I think if you
13 really want to do something with the situation,
14 we have to start looking very closely at the
15 criminal justice system, because to have two
16 kids -- let's say one who is African-American,
17 let's say, of 13 years of age and one who is
18 white appearing for the same crime in front of a
19 judge and to have that judge to allow the white
20 kid to go free, not to go to jail, and sentence
21 the African-American kid or the Puerto Rican kid
22 or the Hispanic kid to go to jail, I mean that
23 is the kinds of situations that we have to take
3279
1 a look at to then analyze the entire system and
2 then come up with solutions that will not make
3 young people adopt for a lifetime criminal
4 behavior antisocial behavior.
5 Don't you agree with me?
6 SENATOR HOBLOCK: Senator Mendez,
7 I couldn't agree more. I couldn't agree with
8 all of the comments made, but I guess I have to
9 answer by saying what happens when it doesn't
10 work? And it hasn't worked. I mean I think we
11 have seen in this state years and years and
12 years of every year the past 12 to 15 spending
13 more money after more money. As the county
14 executive in this county, I saw what was spent
15 on many of these programs, and all it was, was a
16 battle between providers in an effort to try to
17 get a contract, and I often wondered how some of
18 these worked and the number of kids they
19 actually come in contact with given those that
20 need the service, and it's not working. It's
21 working for some, but it's not working for all.
22 We wouldn't have the statistics we have today,
23 if everything that we're talking about in fact
3280
1 worked.
2 SENATOR MENDEZ: I understand
3 your preoccupation, Senator Hoblock, but the
4 fact remains that your approach involving these
5 kids, 12 and 13 years old, I think is the wrong
6 approach. It will end up eventually helping to
7 create hardened criminals than helping these
8 young people to find a way.
9 So, therefore, I will be voting
10 in the negative, Mr. President.
11 SENATOR HOBLOCK: Okay.
12 ACTING PRESIDENT KUHL: Is there
13 any other Senator wishing to speak on the bill?
14 (There was no response.)
15 Hearing none, the Secretary will
16 read the last section.
17 THE SECRETARY: Section 5. This
18 act shall take effect in 60 days.
19 ACTING PRESIDENT KUHL: Call the
20 roll.
21 (The Secretary called the roll.)
22 ACTING PRESIDENT KUHL: Announce
23 the results when tabulated.
3281
1 THE SECRETARY: Those recorded in
2 the negative on Calendar Number 207 are Senators
3 Abate, Connor, Espada, Gold, Gonzalez, Lachman,
4 Leichter, Markowitz, Mendez, Montgomery, Nanula,
5 Oppenheimer, Paterson, Seabrook, Smith and
6 Stavisky, also Senator Babbush. Ayes 41. Nays
7 17.
8 ACTING PRESIDENT KUHL: The bill
9 is passed.
10 The Secretary will continue to
11 call the controversial calendar.
12 THE SECRETARY: Calendar Number
13 233, by Senator Present, Senate Print 992A, an
14 act to amend the General Municipal Law, in
15 relation to authorizing the designation of rural
16 economic development zones.
17 ACTING PRESIDENT KUHL: Senator
18 Present, an explanation of Calendar Number 233
19 has been asked for by Senator Paterson.
20 SENATOR PRESENT: Mr. President.
21 Senator Paterson. This bill would allow small
22 communities, rural communities to establish EDZ
23 zones if they have a population of less than
3282
1 10,000 if the average income and property wealth
2 in that district is no more than two-thirds of
3 the state average.
4 ACTING PRESIDENT KUHL: Senator
5 Paterson.
6 SENATOR PATERSON: Thank you, Mr.
7 President. Senator Present, would yield for a
8 question?
9 ACTING PRESIDENT KUHL: Senator
10 Present, do you yield?
11 SENATOR PRESENT: Yes.
12 ACTING PRESIDENT KUHL: Senator
13 yields.
14 Excuse me just a minute, Senator
15 Paterson.
16 Could we have it just a little
17 quiet in here. There are a couple of staff
18 meetings in here. Members are wandering
19 around. It is very difficult to hear the
20 discussion of the bill that's going on.
21 Thank you for the interruption,
22 Senator Paterson.
23 SENATOR PATERSON: Thank you, Mr.
3283
1 President.
2 Senator Present. Traditionally
3 these economic development zones, as you will,
4 have been restricted based on size and also on
5 boundary. What I'm just interested in that just
6 wasn't clear enough for me -- it's probably my
7 fault -- is how does what you're proposing vary
8 from the law as it stands right now?
9 SENATOR PRESENT: To be eligible
10 under existing law for EDZ zones, you have to
11 have certain criteria taken from the last census
12 dealing with poverty and other areas like that.
13 It's very difficult for a small community,
14 particularly a rural community, to compete with
15 a city which may have a municipal water system,
16 sewer systems, and this allows the rural
17 communities of under 10,000 population to
18 compete and get those jobs that are now
19 flourishing in many of the ED zones across the
20 state.
21 SENATOR PATERSON: Senator, in
22 other words, what you are doing is you are
23 expanding upon what was perhaps helpful a decade
3284
1 ago; and with the sort of two-thirds of the
2 median population, you are widening the scope to
3 include other areas that would flourish
4 economically, you would presume, if some of
5 these measures that you are proposing would be
6 enacted?
7 SENATOR PATERSON: True. True.
8 It would allow rural New York State to compete
9 with the more urbanized areas who, in the past,
10 have benefited by the EDZ zone creation.
11 ACTING PRESIDENT KUHL: Senator
12 Paterson.
13 SENATOR PATERSON: Thank you, Mr.
14 President. Since we're exempting the limitation
15 of 39 EDZs from previous law, is this going to
16 make it possible to expand; in other words, do
17 you have an idea how many of these zones may
18 exist as a result of this legislation? I'm just
19 wondering if we aren't oversaturating the market
20 a little bit, or diminishing the value of what
21 an EDZ's definition is.
22 SENATOR PRESENT: I don't believe
23 so. I have no idea how many may be created.
3285
1 I'm sure the municipal officials who requested
2 to be determined to be an EDZ zone will make
3 that determination whether it would be
4 worthwhile or not.
5 ACTING PRESIDENT KUHL: Senator
6 Paterson.
7 SENATOR PATERSON: Then, Senator,
8 if there is a kind of unlimited capacity for
9 growth here, would not it be better to restrict
10 it?
11 And in answering that, just
12 finally, the natural boundaries that delineated
13 the contours of the traditional economic
14 development zones don't seem to exist in this
15 legislation. It's not clear to me what the
16 boundaries actually are. So if you could just
17 tell us why you didn't restrict the number and
18 also let us know what you consider the
19 boundaries of the new zones should be, that
20 would suffice.
21 SENATOR PRESENT: Under the
22 proposed legislation, the boundaries would be no
23 more than the two square miles. They would have
3286
1 to meet the zoning requirements for the
2 businesses that would hope to enter there.
3 Other than that, there would be no
4 restrictions. We're dealing with small rural
5 areas, a village or a town.
6 ACTING PRESIDENT KUHL: Senator
7 Paterson.
8 SENATOR PATERSON: Thank you, Mr.
9 President.
10 The legislation seems quite
11 meritorious in its nature. We just caution that
12 there may be a preference of zoning to the rural
13 areas as opposed to those that are more heavily
14 populated, and just on its face, there wouldn't
15 seem to be any need to do that.
16 There certainly was preference in
17 economic development zones that have existed in
18 the past but that preference was very similar to
19 the types of subsidizing that we've always had
20 in this country when we're trying to give an
21 advantage to those who either have been
22 perceived to have been disadvantaged or
23 impoverished or what we're trying to do is to
3287
1 promote a certain type of business.
2 Just the sake of giving an
3 advantage to one area over another is not
4 necessarily a development zone as much as it's a
5 preferential interest, and it's something that
6 we just otherwise need to avoid.
7 Other than that, there isn't
8 anything that we object to in this particular
9 piece of legislation other than the fact that it
10 doesn't seem to have what would be the pragmatic
11 limits that would set the standards for how many
12 of these zones we're going to have, what their
13 boundaries are going to be, and what the
14 criteria to enable a county or an area to meet
15 the threshold test for what would constitute a
16 zone is going to be.
17 ACTING PRESIDENT KUHL: The
18 Secretary will read the last section.
19 THE SECRETARY: Section 4. This
20 act shall take effect on the first day of
21 January.
22 ACTING PRESIDENT KUHL: Call the
23 roll.
3288
1 (The Secretary called the roll.)
2 THE SECRETARY: Ayes 58.
3 ACTING PRESIDENT KUHL: The bill
4 is passed.
5 Secretary will continue to read
6 the controversial calendar.
7 THE SECRETARY: Calendar Number
8 588, by Senator Goodman, Senate Print 6282, an
9 act to amend the Tax law and the Administrative
10 Code of the City of New York.
11 ACTING PRESIDENT KUHL: Senator
12 Goodman, an explanation of Calendar Number 588
13 has been asked for by Senator Leichter.
14 SENATOR GOODMAN: Mr. President.
15 This bill relates to something known as a REIT,
16 R-E-I-T, standing for real estate investment
17 trust. A real estate investment trust is
18 roughly analogous to a mutual fund with regard
19 to equity stocks in that it holds a portfolio of
20 real estate properties which are then made
21 available through the purchase of interest in
22 the real estate trust in a fashion that enables
23 an investor to acquire a diversified cross
3289
1 section of real estate with a relatively modest
2 investment.
3 The purpose of the real estate
4 investment trust instrument is to make a wider
5 market for real property and, in so doing, in
6 the case of the City of New York to stimulate
7 the development of real estate in the City of
8 New York in a constructive fashion.
9 In 1994, New York State real
10 property gains tax, the New York State transfer
11 tax, the New York real estate transfer tax and
12 the New York City transfer tax, were amended to
13 encourage the formation of REITs by
14 significantly reducing the tax liability that
15 would accrue on transfers of real property to
16 REITs.
17 In 1994, amendments were
18 temporary provisions sunsettings on June 30,
19 1996. Under current law for a newly-formed REIT
20 to qualify for a 75 percent reduction in city
21 real property gains tax liability and a 50
22 percent reduction in New York -- in New York
23 State and City transfer tax liabilities, two
3290
1 conditions must be met. First, the realty
2 transferror; that is, the person making the
3 transfer, must remain an interest -- must retain
4 an interest in the REIT equal to 40 percent of
5 the net equity being transferred.
6 Secondly, at least 75 percent of
7 the cash proceeds received by the REIT from the
8 sale of ownership interest in the property must
9 be used to, first, pay down any debt on the
10 property; second make capital improvements on
11 the property; and, third, make tenant
12 improvements or inducements to the occupants of
13 the property.
14 The proposed language in this
15 bill would modify those arrangements in the
16 following fashion:
17 First of all, it would
18 permanently extend the New York State real
19 property gains tax, eliminate the sunset
20 altogether.
21 Second, it would extend the
22 application of the REIT provisions to transfer
23 as to existing REITs, not just newly-created
3291
1 ones, change the 40 percent interest requirement
2 to 50 percent for existing REITs, and eliminate
3 the 75 percent rule for existing REITs.
4 When the law was enacted in 1994,
5 it was frankly hoped that REITs could be formed
6 within the short two-year window provided by the
7 original law. But, unfortunately, that was a
8 period of rising interest rates which
9 discouraged all sorts of real estate
10 transactions, and interest rates in '94-95 in
11 addition to rising, New York found itself in a
12 situation where it had large companies that were
13 involved in the creation of these REITs; and,
14 therefore, the complexity of their proceeding to
15 take advantage of these provisions was denied
16 them due to the shortness of time.
17 What we have now is a situation
18 where interest rates are on the decline. REITs
19 are again being contemplated, and the sunsetting
20 '94 provisions would be a bar to the expansion
21 of the REIT economy.
22 Finally, the enactment of the
23 attached language would result in increased
3292
1 economic activity in the state and especially in
2 the city, which would have additional tax
3 revenue benefit to the city and state.
4 I have a fiscal note from the
5 Deputy Commissioner for Tax Policy Analysis,
6 which indicates that there would be a $2 million
7 reduction of state revenues in fiscal year
8 '96-97, following which they anticipate that
9 there would be an increase in revenue resulting
10 from the increased economic activity.
11 I trust that this rather lengthy
12 explanation covers a few of the minor points you
13 may have had in mind, Senator.
14 ACTING PRESIDENT KUHL: Senator
15 Leichter.
16 SENATOR LEICHTER: Mr.
17 President. Senator Goodman, I don't know if
18 it's a couple of minor points, but I thought
19 there were some interesting statements that you
20 made, so if you would be so good as to yield
21 because I'm trying to understand.
22 ACTING PRESIDENT KUHL: Senator
23 Goodman do you yield?
3293
1 SENATOR GOODMAN: I will indeed.
2 ACTING PRESIDENT KUHL: Senator
3 yields.
4 SENATOR LEICHTER: As you read
5 from your memo, the justification you said was
6 when we enacted this -- and I seem to remember
7 the debate on that. I believe or think that I
8 had some questions about it. But you indicated
9 at that time and raised our expectation in
10 generating a great deal of activity and
11 eventually a higher revenue for the state and
12 the city. Now, you tell us, well, it didn't do
13 any of those things but the reason was -- and
14 I'm quoting, "However interest rates in 1994
15 1995 increased significantly."
16 Senator Goodman, isn't it a fact
17 that in 1995 interest rates declined. You go on
18 to say in your memo and now interest rates are
19 declining. The fact is, as we know and we've
20 seen what's happened to the market, the interest
21 rates have increased significantly in the last
22 two months. I believe in January, the interest
23 rate on the 30-year bond was 6 percent. It's
3294
1 now up to 6.8 percent. So it seems to me that
2 you really have the facts completely reversed.
3 SENATOR GOODMAN: Senator, I'm
4 speaking of long-term trends and not short-term
5 blips in the market.
6 SENATOR LEICHTER: But you -
7 SENATOR GOODMAN: If I may, I'd
8 like to respond as best I can.
9 As you know, the Dow-Jones
10 average has increased by a very significant
11 amount, and in the wake of that, using the
12 30-year government bond to which you refer,
13 there has been a major decline in the overall
14 interest rate and, more particularly, in the
15 following rate which relates to real estate
16 mortgage rates. It is true that they bounced
17 off the bottom and have shown some recent
18 recovery, but relative to their long-term
19 situation, they are in a much lower condition
20 than they were at the time the bill was
21 introduced.
22 SENATOR LEICHTER: Mr.
23 President. If Senator Goodman would be good
3295
1 enough to continue to yield.
2 SENATOR GOODMAN: Consider this
3 an open invitation to any other questions you
4 would like to pose.
5 ACTING PRESIDENT KUHL: Senator
6 continues to yield.
7 SENATOR LEICHTER: Senator, I
8 don't think we're talking about estimates of
9 where interest rates are going. I'm dealing
10 with the actual facts. You say we didn't give
11 this bill or this law a fair chance because in
12 1995 interest rates increased. The fact is that
13 interest rates declined in 1995. You further go
14 on to say that now interest rates are
15 declining. Senator, they haven't declined.
16 They've gone up. So it seems to me that the
17 justification that you state for the bill just
18 isn't there. There may be other factors why the
19 R-E-I-Ts or the REITs did not capture the
20 imagination of investors.
21 SENATOR GOODMAN: Is that a
22 question?
23 SENATOR LEICHTER: Yes.
3296
1 SENATOR GOODMAN: If the question
2 is the same one that you asked before, I will
3 try to give you a similar answer but perhaps a
4 little clearer.
5 Senator, the purpose of the REIT
6 in the first instance is to encourage real
7 estate investment, and relative to the level of
8 mortgage rates and real estate interest rates
9 which are what are at stake in these
10 transactions, we have seen a period of
11 relatively lower rates. I have already conceded
12 to you that in the recent past, they have
13 bounced off the bottom and have shown some
14 proclivity to lower, but again they are starting
15 to rise slightly.
16 The fact of the matter is that's
17 not the principal tusk of the bill. The purpose
18 of the bill is to make it possible to package
19 real estate in a fashion that the REIT makes
20 available that you can not have available in a
21 direct investment in real estate, namely, a
22 cross-section of properties which permit the
23 investor to have diversification in a real
3297
1 estate portfolio; and, hence, what I think we're
2 driving at in the bill -- you may disagree with
3 my analysis of trends in interest rates. You
4 are looking at it month to month. I'm looking
5 at it year to year. In certain periods under
6 discussion, the rates have fluctuated within a
7 broad band, but the fact is that rates are now
8 more favorable than they were.
9 But even if that were not the
10 case, we find that in the two-year period under
11 which this law was in existence, there was
12 insufficient inducement to create REITs, which
13 we believe have a beneficial economic impact.
14 If you wish to debate the
15 economic impact, we can do that, but I trust you
16 realize that the reference to interest rates is
17 relatively peripheral in terms of the
18 fundamental thrust of the bill which is to
19 encourage and increase the packaging of property
20 so that the small investor may have diversified
21 portfolio risk.
22 SENATOR LEICHTER: Mr.
23 President. If Senator would be good enough to
3298
1 yield.
2 Senator, it's not a peripheral
3 issue because the issue really comes down, is
4 there a benefit to the people of the State and
5 the City of New York, and when you presented
6 this bill two years ago, the bill that became
7 law, it was with the expectation, and I know it
8 was genuine on your part, that this would
9 eventually bring in more revenue to the State of
10 New York.
11 Now, since it hasn't done that -
12 and in fact, Senator, I think I heard you say
13 that there was going to be a loss of revenue in
14 this coming year to the state and the city as a
15 result of extending this law and in fact making
16 it permanent. So my question to you is, where
17 is the benefit?
18 SENATOR GOODMAN: Senator, the
19 benefit if you will concede at the outset that
20 the policy approach to REITs is one that is
21 favorable to the economy -- and I have not heard
22 you yet challenge that premise -- then I think
23 the rest follows from that.
3299
1 What I'm saying to you is that
2 when you make it possible to acquire a
3 diversified portfolio of real estate, you widen
4 the appeal of real estate investment to certain
5 investors who would not wish to put all their
6 eggs in one basket, and that is the purpose of
7 this law.
8 Now, during the two-year period
9 in which the law was in effect, it did not have
10 the desired impact. You could ascribe a series
11 of reasons to that. I think interest rates were
12 one. You may or may not agree, but the fact of
13 the matter is that there's, in our opinion,
14 economic desirability in extending this and in
15 eliminating the sunset so that the tax
16 advantages implicit in this proposal will be
17 available on a longer range to a wider variety
18 of investors, and that's at the core of this.
19 SENATOR LEICHTER: Mr. President,
20 if the Senator would continue to yield.
21 ACTING PRESIDENT KUHL: Senator,
22 do you continue to yield?
23 SENATOR GOODMAN: Yes.
3300
1 ACTING PRESIDENT KUHL: The
2 Senator continues to yield.
3 SENATOR LEICHTER: If our purpose
4 is only to benefit wealthy investors -
5 SENATOR GOODMAN: Excuse me. Did
6 you say wealthy?
7 SENATOR LEICHTER: Senator, if I
8 could just phrase my question. If our aim and
9 purpose is to benefit investors -- and most of
10 the people who invest in REITs are not your
11 widows. They're not your ordinary working
12 people who usually put their money in CDs. They
13 happen to be pretty sophisticated investors.
14 Now, if your aim and purpose is I would like to
15 make these people who happen to be primarily
16 wealthy to see that they get a better return,
17 that they pay less taxes, your bill is right on
18 target. No question. It's a great benefit to
19 well-off investors. My question to you is how
20 about the public? How about the treasury of the
21 state of New York?
22 Now, two years ago, I believe you
23 said this is going to, in fact, increase
3301
1 revenue. Now we see it hasn't -- your
2 explanation is, well, interest rates increased
3 in a year when, in fact, they decreased. You
4 now read us a memo which says that we're going
5 to lose revenue. So my question, very clearly,
6 is where is the interest to the public, not to
7 the big, wealthy investor; where is the interest
8 to the public?
9 SENATOR GOODMAN: Senator, you
10 have interpolated this and have injected your
11 own perspective into my remarks which I must, in
12 all respect, tell you I did not make. I did not
13 say this was for the benefit of wealthy
14 investors. If that was your opinion, I think it
15 would be imperative that you produce some
16 evidence that there is some special benefit to
17 the wealthy in this that is not available to the
18 middle class investor who may wish to purchase
19 real estate as an alternative to other types of
20 investment.
21 With the very substantial rise in
22 the Dow-Jones industrial average and in the
23 opinion of some people with the equity market
3302
1 now at an unparalleled high, there are certain
2 risks in that market which might not be
3 available in the real estate market which is
4 only recovering from a long-term real estate
5 recession. So it may be that the little fellow
6 or the middle class investor prefers out of
7 prudence to invest in -- have an interest in a
8 variety of buildings rather than in a variety of
9 companies, and that's something which will be
10 beneficial to all classes. So, please, let's
11 not characterize this as a populace versus
12 capital type of debate. It has nothing to do
13 with that at all. Although, it might be a
14 little easier for you to attack it on those
15 grounds. That is not the fact.
16 The fact is that the bill seeks
17 two things: It seeks to make available in a
18 fashion which would not otherwise be possible
19 investment in a broad gauged package and a
20 diversified package of real estate properties
21 which would be available to people of all
22 investor classes, not merely the wealthy. In
23 fact, it is very likely that the wealthy people
3303
1 can afford to make direct investments in
2 buildings, whereas the less wealthy could only
3 invest in real estate through a medium such as a
4 REIT.
5 Now, secondly, you implied that
6 there is a great loss to be suffered by the
7 state, and that is not the fact. I told you the
8 fiscal impact related to a single year, and in
9 that year we anticipate that this would be more
10 than offset by the events of future years. This
11 is an economic stimulant. We want to encourage
12 real estate to be built. We want to encourage
13 housing to be built. A REIT does precisely that
14 by making it possible for new investors to enter
15 the market in significant numbers and in
16 significant volume which would otherwise not be
17 possible.
18 So with that perspective, perhaps
19 we can persuade you that this is constructive.
20 This is not an example of class warfare, which I
21 gather some of you are very fond of suggesting,
22 but really, that's not the point at all.
23 SENATOR LEICHTER: Mr. President,
3304
1 my -
2 ACTING PRESIDENT KUHL: Senator
3 Leichter.
4 SENATOR LEICHTER: -- my good
5 neighbor across Central Park, I assure that
6 neither geographic nor class welfare -- warfare
7 -- it may be welfare for some, Senator, but
8 that's really what I want to get to, and that is
9 I'm sure you, since you present the bill, have
10 studied REITs. Could you tell us who ordinarily
11 invests in REITs and tell us what is the average
12 investment that somebody makes in a REIT?
13 SENATOR GOODMAN: How many
14 decimal places would you like me to give you in
15 answer to that?
16 SENATOR LEICHTER: Just bring it
17 down to the -- just bring it down to the period.
18 SENATOR GOODMAN: Senator, I'm
19 not in a position to respond to that, other than
20 to tell you that conceptually, it is quite clear
21 that in order to obtain diversification in a
22 portfolio, one can do it through REITs and one
23 could not do it in a comparable number of
3305
1 dollars and single building investment. That
2 should be very evident to you, and I use the
3 analogy of the mutual fund to illustrate this,
4 and if you stop to think for a moment, the class
5 of investors who have been attracted to mutual
6 funds have been at the very least middle class
7 and sometimes upper, lower and lower middle
8 class people who use that medium because they
9 get expert management and they get
10 diversification. That's the purpose of this,
11 and I dare say that to propose that it is only
12 for the benefit of the wealthy is simply
13 unfactual by common sense observation.
14 SENATOR LEICHTER: Mr. President,
15 if Senator Goodman would continue to yield.
16 Senator, to in any way equate
17 REITs and the way they work with mutual funds
18 where you come in for $1,000 or even maybe
19 smaller amounts is just completely wrong. You
20 said you didn't know what -- the figures. Am I
21 wrong when I say that most REITs will not accept
22 investments usually less than 50,000, maybe some
23 at 10,000, but in most instances, isn't it true
3306
1 that the amounts invested in REITs has at least
2 five figures in it and usually more than that;
3 isn't that true?
4 SENATOR GOODMAN: I don't believe
5 that is true, Senator, and you yourself had
6 proposed a very broad range. First you said
7 50,000 and then 10,000. I dare say that there
8 are probably more investors in total volume of
9 dollars invested who come in at the lower end
10 than the higher level.
11 SENATOR LEICHTER: Mr. President,
12 again, if Senator Goodman would be good enough
13 to yield. I'm not the one who's sponsoring the
14 bill. I'm going on my knowledge and information
15 as to REITs and the investment required -- the
16 minimum investment required, to my knowledge,
17 tends to be rather large. This is not an
18 investment for your ordinary small-time
19 investor, people who may be attracted by mutual
20 funds but, Senator, you said that in the long
21 range, this is going to provide economic
22 stimulus. Am I correct that the only figure you
23 have been able to give us is that next year
3307
1 we're going to lose $2 million?
2 SENATOR GOODMAN: The only dollar
3 figure I've given you is two million, but I
4 would estimate that possibly the effect of a
5 REIT investment program such as this could
6 amount to as much as 200 million of economic
7 stimulus.
8 SENATOR LEICHTER: Mr. President,
9 on the bill.
10 ACTING PRESIDENT KUHL: Senator
11 Leichter on the bill.
12 SENATOR LEICHTER: I generally
13 appreciate Senator Goodman's debate on the bill
14 and I find him usually to be very factual. In
15 this particular instance -- and I think this
16 really gets to the core of the argument, and
17 that is who's going to benefit by these
18 investments? What we're doing in this bill is
19 to give up forever, because we're eliminating
20 the sunset, taxes that the state of New York
21 levies on high priced real estate transactions,
22 and we have to take a look at what is going to
23 be the cost to the state of New York.
3308
1 Senator Goodman I know is very
2 actively involved, and I think very commendably,
3 in trying to deal with some of the harsh cuts in
4 the budget. He's working on the arts and other
5 areas too. One of the reasons that we have a
6 budget proposed by the Governor with these harsh
7 cuts is because of the loss of revenue. Now, in
8 some instances we say, okay. We're going to
9 reduce taxes because we see that in the future,
10 there's actually going to be an increase in
11 revenue, but let me tell you, that argument
12 covers a lot of sins and covers instances that
13 are just not so.
14 Now, two years ago Senator
15 Goodman stood before us and said, ladies and
16 gentlemen, let's try it. For two years, let's
17 lower the tax on real estate investment trusts
18 and I'll tell you, we're going to get so much
19 economic stimulus that whatever taxes we lose as
20 a result of this bill, we're going to make up in
21 additional revenue. Now, it comes two years
22 later and says it hasn't worked. He has says it
23 hasn't worked because in 1995, real estate -
3309
1 I'm sorry -- because in 1995, the interest rate
2 increased when, in point of fact, it declined.
3 He says it's going to work in 1996 because the
4 interest rates are now declining when, in fact,
5 they've gone up. So I must say the reason for
6 it certainly doesn't make sense, but then you
7 give us a fiscal note that says we're going to
8 lose $2 million this year.
9 So what we're asked to do is to
10 buy, frankly, a pig in a poke and accept that in
11 the future, this is going to generate so much
12 economic activity. Well, I'll tell you, it
13 isn't. This is just another bill that is very
14 favorable to high priced investors, people with
15 a lot of money, and I see no benefit whatsoever
16 to the public.
17 Let me just point out, one of the
18 features of this bill is that the savings that
19 you have in taxes, you're limited as to what you
20 can do, but what's the limit? The limit is
21 meaningless because you can use those savings to
22 pay off your mortgage. So I really don't see
23 any benefit whatsoever to the public here. I
3310
1 don't see anything that's going to generate more
2 housing; that's going to generate a lot of
3 commercial property that's going to bring down
4 rents. All that's being done by this bill is
5 allowing people to deal in high priced real
6 estate through high priced investments and avoid
7 paying the tax, and the bottom line is, in
8 Senator Goodman's own words as he quotes from
9 whatever fiscal -- whoever prepared the fiscal
10 note, that there's going to be a loss of $2
11 million in revenue. We'll be back here next
12 year in having to deal again with greater budget
13 deficits, having to find money, avoiding cuts
14 and there will be a $2 million hold next year
15 because of this bill, and I predict there will
16 be further holds in future years because the
17 only benefit that anyone's going to see from
18 this bill is going to be high priced investors.
19 ACTING PRESIDENT KUHL: Senator
20 Stavisky.
21 SENATOR STAVISKY: I have
22 profound regard for Senator Goodman. I know of
23 his experience. He was once the finance
3311
1 administrator of the city of New York, and I
2 don't believe that Finance Administrator Goodman
3 would have submitted a proposal for the city of
4 New York which stated fiscal implications
5 undetermined. Finance Administrator Goodman
6 would have been more precise before proposing
7 that the city of New York embark upon a program,
8 and I think it is disappointing to say the least
9 to find this uncertainty, this gap between
10 expectations and reality and the inability -
11 and I'm not saying it was deliberately done to
12 obfuscate, but the inability of the sponsor of
13 this legislation to tell us in more precise
14 terms what are the fiscal implications.
15 This bill should appropriately go
16 to the Senate Finance Committee. It should not
17 be on the floor. If the Senate Finance
18 Committee passes muster on this bill, then I
19 believe we should take another look at it and we
20 should have more information available to us,
21 but not in the present form, and accordingly,
22 because of the uncertainty as to the price tag,
23 because of the uncertainty as to the benefits,
3312
1 because of the confusion between what the bill
2 is to accomplish in terms of lost revenue and
3 what it will accomplish in terms of stimulus to
4 the economy and especially because we're on the
5 verge of decimating so many programs that are so
6 important to so many communities throughout the
7 state, I think there should not be a blind man's
8 bluff giveaway, which is what this is, a blind
9 man's bluff giveaway unless we know the
10 ramifications.
11 Senator Goodman, would you be
12 willing to have this legis... I'd ask Senator
13 Goodman to yield.
14 SENATOR GOODMAN: Yes, I will.
15 SENATOR STAVISKY: Would you be
16 willing to have this bill past muster with the
17 Senate Finance Committee so we have more
18 accurate information as to the fiscal
19 implications so we are not left with the word
20 "undetermined" which appears on your bill
21 memo? In all probability, if there is a
22 reasonable argument, a reasonable, factual
23 information that is presented, the Senate
3313
1 Finance Committee would look favorably on such
2 legislation.
3 Ron -- Senator Stafford is a
4 reasonable person. The members of his committee
5 are informed legislators, and I think this bill
6 belongs in the Senate Finance Committee instead
7 of on the floor of this chamber, and I would ask
8 Senator Goodman, would he consider sending it to
9 the appropriate place, the Senate Finance
10 Committee, so we could get more precise
11 information as to what the fiscal implications
12 may be?
13 ACTING PRESIDENT KUHL: Senator
14 Goodman, did you hear the question?
15 SENATOR GOODMAN: I will be happy
16 to respond. Senator, unfortunately, I cannot
17 accede to your request because I think that it's
18 an inappropriate and unreasonable one for a
19 reason I will now share with you.
20 I have in my hand a letter from
21 Merrill Lynch dated in January -- January 4, and
22 it says, "Although, as you know, Merrill Lynch
23 is headquartered in New York City and is one of
3314
1 the largest financial service firms in the
2 world, recently Merrill Lynch has been extremely
3 active in the initial public offerings of real
4 estate investment trusts.
5 "I'm writing you at the
6 suggestion of several New York City private real
7 estate clients who are valuating the merits of
8 going public in the form of a REIT. These
9 clients view the current New York real estate
10 transfer tax structure as an impediment to going
11 public. An amendment of the tax structure could
12 encourage a number of New York City real estate
13 companies to pursue initial public offerings.
14 "Since 1991, more than 40
15 companies have gone public as REITs raising
16 $10.1 billion with total company value greater
17 than 15 billion. In addition, existing REITs
18 re-issued an additional approximate $2.6 billion
19 during the period. None of these companies has
20 any significant real estate holdings in New York
21 City." I'm just going to take a moment to scan
22 this to give you the most germane parts that I
23 think will interest you, Senator.
3315
1 SENATOR STAVISKY: Senator
2 Goodman, if I may interject -
3 SENATOR GOODMAN: Senator, if you
4 don't mind, I'm in the process -
5 SENATOR STAVISKY: I'll wait.
6 SENATOR GOODMAN: -- of responding
7 to that, and I'll ask your indulgence for one
8 moment.
9 "If the City and state of New
10 York are able effectively to address the current
11 tax burden, which would exist in the event of a
12 sunset, we are aware of at least $2 billion in
13 potential REIT initial public offerings that
14 could be completed for companies with New York
15 City real estate. Through 1996, the total might
16 be greater than five billion. This new equity,
17 in addition to capital raised for these
18 companies on an ongoing basis, would be used to
19 pay down debt, thereby reducing the mortgage
20 loan exposure of key lenders who may then be
21 willing to liberalize their tight credit policy
22 for New York City real estate, acquire new
23 properties, develop and/or renovate properties
3316
1 which would generate construction jobs in New
2 York City. The ability to complete new initial
3 public offerings is obviously contingent on
4 receptive capital markets in general."
5 Now, Senator, in responding, the
6 reason that I do not think this bill should be
7 set aside is that I think this gives you further
8 weight of evidence to the effect that this would
9 be a major economic stimulant measurable in
10 billions of dollars. I'm further advised that
11 one of the major mutual fund companies does make
12 available through REITs investments as low as
13 $1,000 per investor, and in that case, although
14 Senator Leichter is apparently -- oh, there he
15 is. He's within earshot, so I'm happy to be
16 able to tell him that my information is that
17 there are available "trushes" of $1,000 at a
18 time, Senator. So your hypothesis that this is
19 something that provides an investment
20 possibility only for the rich is obviously
21 rebutted by that fact.
22 ACTING PRESIDENT KUHL: Senator
23 Stavisky.
3317
1 SENATOR STAVISKY: If I may
2 interpret what Senator Goodman has said -- and I
3 don't want to put words in his mouth -- it
4 appears that unless Merrill Lynch gives
5 approval, Senator Goodman is now willing to
6 refer this piece of legislation with the
7 spurious price tag to the Senate Finance
8 Committee where it properly belongs. Merrill
9 Lynch is not a voting member of the New York
10 State Senate. If we as elected representatives
11 of all parts of the state have questions, then
12 we are the ones who will vote on this and we are
13 the ones who may request that a piece of
14 legislation with a spurious evaluation of its
15 implications in terms of benefits and in terms
16 of losses -- we should be able to get a clearer
17 picture from the Senate Finance Committee to
18 which this bill properly should be referred.
19 I do not believe that we should
20 be voting and making decisions in the dark, and
21 if we are not going to have a report from the
22 Senate Finance Committee on this piece of
23 legislation, then until we know the price tag
3318
1 and until we know benefits and until we know the
2 costs, then I will be voting in the negative on
3 this piece of legislation, and I hope that
4 others who are fighting for the restoration of
5 programs, of importance to their constituents,
6 will act accordingly.
7 I wish to be recorded in the
8 negative when the last section is read.
9 ACTING PRESIDENT KUHL: Senator
10 Paterson.
11 SENATOR PATERSON: Thank you, Mr.
12 President.
13 If Senator Goodman would be so
14 kind as to yield for a couple of questions.
15 ACTING PRESIDENT KUHL: Senator
16 Goodman, do you yield?
17 SENATOR GOODMAN: Yes, I will,
18 Senator.
19 ACTING PRESIDENT KUHL: The
20 Senator yields.
21 SENATOR PATERSON: Senator, the
22 most recent Crane's magazine has actually a
23 front page article on the real estate investment
3319
1 trusts, and it talks about some of the things
2 you mentioned before. In a sense -- my counsel
3 advised me that actually is in a sense like a
4 mutual fund for real estate investment or maybe
5 ten years ago, sort of like a Keogh plan for
6 investors where a person that doesn't have a
7 great amount of money can invest with others and
8 combine their resources and perhaps derive some
9 kind of benefit from the -- from real estate,
10 and in this most recent article, they talk about
11 the fact that they feel the -- that the interest
12 rates are going down as you previously stated
13 and, therefore, there would be an opportunity
14 for there to be a great investment in this
15 area.
16 So my question to you is that,
17 although at this point it has been something
18 that maybe I might concede to you has been
19 beneficial for the smaller investor, is it not
20 possible that some of the major investors seeing
21 the trend may come in; they may invest; they may
22 get involved in a REIT and then after the two
23 years, now that we don't have a real restriction
3320
1 on how much profit can be derived -- previously,
2 approximately 25 percent would have been the
3 limit since 75 percent of any monies that were
4 invested out of it had to come from what would
5 be purchased or reinvestment or repayment of
6 debts -- that now there would be a greater
7 opportunity for the larger investor to, in a
8 sense, cash out after a couple of years, get the
9 tax benefits and then realize the profit, kind
10 of a windfall.
11 SENATOR GOODMAN: I'm sorry,
12 Senator. I was momentarily distracted in
13 attempting to get some additional information
14 out of another document that I have before me.
15 Could you just restate the basic thrust of the
16 last part of the question so I can respond?
17 SENATOR PATERSON: I'm saying as
18 the legislation is prepared -- and we're
19 assuming that much of the information that you
20 gave earlier sounds pretty consistent with what
21 people who examine these types of markets seem
22 to understand, that it is kind of a -- has
23 traditionally or at least up to this point has
3321
1 been sort of a mutual fund for real estate
2 investors, and that it has been something that
3 has benefited the smaller investor, that it's
4 not just something for very wealthy people, that
5 as a result of that and the interest rates which
6 may be lowering, that larger investors may come
7 in, make large investments in putting their
8 property into a REIT and then after the -- they
9 have derived the tax benefits, not having to
10 pay, you know, at the level that they would have
11 otherwise, but after about two years, they would
12 in a sense cash out, that at that point having
13 gotten the benefit and there being no
14 restrictions on where any additional monies are
15 invested, that it doesn't have to go to
16 reinvestment, or it doesn't have to go to
17 purchase, or it doesn't have to go for payment
18 of debts, that they would then in a sense just
19 take the tax break, hold the money for a period
20 of time and then take it out because there isn't
21 any restriction on how much profit that they can
22 accrue.
23 SENATOR GOODMAN: Thank you,
3322
1 Senator.
2 I understand what you're driving
3 at. The answer is that if you were a real
4 estate investor and you owned a large property,
5 let's say a $10 million building, at any time
6 you are at liberty to dispose of that property
7 unless it's rent controlled and subject to
8 restricted sale and in so doing, you are cashing
9 out your investment. You are also benefiting,
10 if you are a beneficiary of the tax abatement
11 provisions with their sliding scale, 15-year
12 reductions in real estate taxes, you're
13 benefiting from the encouraging tax climate
14 which has been deliberately created by the city
15 of New York to permit the construction of
16 buildings and otherwise unused space.
17 So as a general policy, we have a
18 society which seeks to encourage people to
19 build, which gives them certain tax benefits to
20 get them to build and particularly so in the
21 wake of a very depressed period in the real
22 estate market where there's been great
23 reluctance, in many instances, to start new
3323
1 properties, and what this basically provides is,
2 if you will, a large pump priming mechanism
3 which has been denied to New York realtors.
4 Although heavily used in other parts of the
5 country with great benefit, it's been denied in
6 New York because we have these bars and
7 restrictions which make it unprofitable and, in
8 fact, a dangerous investment for many people to
9 come in with real estate development.
10 What we are trying to do here by
11 eliminating this sunset is to give this an
12 extended period of time in which to let the pump
13 be primed, but what I want to stress is that I
14 appreciate your creating a response to Senator
15 Leichter's early dubiety with regard to the fact
16 that I used a mutual fund analogy. This is
17 analogous to a mutual fund and, in fact, some of
18 the large mutual fund companies are creating
19 REITs at this very moment and would be
20 encouraged to do so if this sunset were to be
21 removed. The removal of the sunset lifts a bar
22 to real estate development at a time when we're
23 doing everything within our power to cause the
3324
1 real estate market to recover from its recent
2 very deep recession which it is not yet fully
3 out of. I think anything that this Legislature
4 can do to encourage that is something which this
5 house should think very kindly of and should
6 support.
7 As far as my good friend and
8 respected colleague, Senator Stavisky's
9 assertions that this is blind man's bluff and
10 that this is -- I have forgotten his exact
11 language. It was frankly rather derogatory with
12 respect to the intent of the bill, not to its
13 sponsor, but I must say, Senator Stavisky, this
14 is a level of suspicion which I think is not
15 warranted by the facts of the case. We're
16 trying in broad daylight to create tax
17 incentives to the development of real estate in
18 New York. Strip away all the trappings and
19 what's left is a desire to cause more real
20 estate to be built. Is there a profit motive in
21 this? Of course. If there weren't in a free
22 enterprise economy, no one would touch it with a
23 30-foot pole. The days of government
3325
1 subsidization of housing on a giveaway basis are
2 now gone and the voters have made it clear, I
3 think in the last state election, that they want
4 to try to get the system of free enterprise to
5 give its benefits to the state of New York, and
6 I don't think that anyone will be harmed by this
7 but a great many people could be very heavily
8 benefited.
9 ACTING PRESIDENT KUHL: Senator
10 Paterson.
11 SENATOR PATERSON: Mr. President,
12 with the approximately two hours and 45 minutes
13 of broad daylight left, I wondered if Senator
14 Goodman would indulge me with the answer to
15 another question.
16 ACTING PRESIDENT KUHL: Senator
17 Goodman, do you yield?
18 SENATOR GOODMAN: To answer your
19 questions, the daylight period will be extended,
20 Senator. I yield.
21 ACTING PRESIDENT KUHL: The
22 Senator yields.
23 SENATOR PATERSON: Thank you,
3326
1 Senator.
2 I don't think that Senator
3 Goodman, Mr. President, and Senator Leichter
4 were really that far apart. I think Senator
5 Leichter's premise was that anyone who's in a
6 position to invest had to, just by that nature,
7 be in a preferred financial position in this
8 state. I think that Senator Goodman was right
9 that when you look at all investments and you
10 weigh what the real estate investment trust is,
11 it really is not the kind of boondoggle that
12 other investments have been calling for those of
13 the highest wealth and in the highest percentile
14 of salary accumulation that they would be the
15 only ones to participate but, Senator Goodman,
16 as we have always allowed a certain number of
17 tax abatements and certain incentives, in this
18 particular situation, what I'm afraid of is not
19 the incentives, as I think I've pointed out
20 before. I'm very much in agreement with you up
21 to that point.
22 What I'm talking about is that
23 the transfer taxes would be eliminated for an
3327
1 individual who went into the REIT, just for -
2 with a reduced transfer tax for purposes of
3 personal gain, stays in for an ephemeral period
4 and then basically cashes out without having to
5 endure some of the encumbrances as if the
6 individual had just gone ahead and made the
7 regular purchase, and what I'm suggesting and
8 again asking just for clarification is isn't
9 that a possibility under the legislation as it's
10 proposed, that we will have this result of
11 individuals who get a specific individual
12 advantage which, in our opinion, is one of the
13 factors that contributed to the lapse in the
14 real estate market some nine years ago?
15 SENATOR GOODMAN: Senator, as I
16 think I explained at the outset of my
17 explanation of the bill, whoever sells the
18 property would be required to retain an interest
19 of 50 percent for existing REITs.
20 SENATOR PATERSON: Which is -
21 SENATOR GOODMAN: And that is
22 actually being changed from 40 to -- we're
23 changing it from 40 to 50.
3328
1 SENATOR PATERSON: That's an
2 increase of ten percent -
3 SENATOR GOODMAN: That's correct.
4 SENATOR PATERSON: -- over what
5 the existing ownership was, which is actually a
6 very good step, but I guess my question is, does
7 that cancel out the other factor being the 75
8 percent of monies that have to be reinvested for
9 purchase or for repayment of debt or for
10 investment that now would be eliminated and
11 would, in my opinion, create what would be an
12 unlimited opportunity for profit? In other
13 words, does that increase in ten percent from 40
14 to 50 percent of ownership negate what could be
15 the loss of revenues as a result of those
16 individuals who made -- who took advantage of
17 the tax incentive and in a sense derived a
18 personal profit out of it?
19 SENATOR GOODMAN: Just a moment,
20 Senator. I'm consulting with counsel to be sure
21 we give you an accurate -- I'm informed,
22 Senator, that the 75 percent provision to which
23 you refer -- and let me just repeat what it is
3329
1 so that everyone's clear what we're talking
2 about. At the present time, at least 75 percent
3 of the cash proceeds received by the REIT from
4 the sale -- that's the existing REIT -- from the
5 sale of ownership interest in the property must
6 be used either to pay down any debt on the
7 property or to make capital improvements to the
8 property or to make tenant improvements, and
9 what we are faced with is the fact that no other
10 state has this requirement and as a result, we
11 are losing the business that would otherwise be
12 able to be brought into New York with respect to
13 that category of REIT.
14 Now, let's be very candid about
15 this. What we're trying to do is to bait our
16 hook, and we're baiting our hook with an
17 advantage that the existing REITs do not have
18 because, otherwise, they won't -- the fish won't
19 swim in our waters at all. If you want to catch
20 a fish, in this instance, you have to do it with
21 a succulent worm and not with a shriveled-up,
22 piddling, little worm that no fish would touch
23 with any dignity. So with that thought in mind,
3330
1 I have to concede that there is the problem you
2 raise, but I hope it will be more than offset by
3 the fact that we will have a full platter.
4 ACTING PRESIDENT KUHL: Senator
5 Paterson.
6 SENATOR PATERSON: You're right,
7 Senator. There has to be an inducement that
8 would be profitable to the investor, and we
9 don't have a problem with that.
10 I guess my one last question is
11 somewhat of a follow-up to a certain extent on
12 issues raised earlier by Senator Stavisky, which
13 is that since we are not in a position to really
14 know right now, since we're not even really that
15 sure how many REITs have been established and
16 what gain or loss we have already endured and
17 we're now going into a period where we are going
18 to project that we might sacrifice $2 million to
19 see that this program works -- and it's
20 creative. It's certainly an invention that may
21 inure to the benefit of this state in the sums
22 of great numbers of revenues that would come
23 from the success of the REITs, but since we
3331
1 don't have a firm number and we don't know what
2 direction we're going in, would it not be more
3 prudent to at least temporarily establish a
4 sunset of another two years just so that we can
5 examine what the accompanying next couple of
6 years of the REIT market is like?
7 SENATOR GOODMAN: Senator, that's
8 an interesting question, but let me respond to
9 it in this way and with some real conviction.
10 First of all, I think we should
11 -- you're aware of the fact that I have quite a
12 substantial record with regard to matters
13 relating to tenant protection. We've tried our
14 best from this side of the house, not always
15 having our views shared by a majority of my
16 colleagues, to do what we can to make certain
17 that the real estate industry does not press
18 down unfairly on the tenant interest but,
19 Senator, I want to stress to you, the words
20 "real estate" are not dirty words. The real
21 estate industry is an industry which deserves to
22 be developed to the fullest in the most
23 wholesome possible way, providing the best
3332
1 possible inducements, and just as I rigorously
2 attempt to protect tenants against inappropriate
3 incursions, I would protect and hope that we
4 could have a real estate industry which is
5 robust and which will come out of its recent
6 recession at a gallop and not at a trot. I
7 think that this measure is an exceedingly
8 important one, and when you say that we really
9 have no sense of what the effect of this bill
10 would be, I beg to differ.
11 I've read to you from an expert
12 point of view, that of Merrill Lynch, who are by
13 no means the only people involved in this and,
14 Senator Stavisky, really, your attempt to
15 suggest that we are crowning Merrill Lynch as a
16 member of the Senate by my reading from a letter
17 -- a letter from Merrill Lynch is, I think just
18 a little bit extravagant in its assessment of
19 what I'm attempting to do.
20 Let it be said that this firm,
21 which is the largest securities firm in the
22 nation, has stated flatly that since 1991, there
23 has been raised more than $10 billion of new
3333
1 money and probably companies with a greater -
2 with a value in excess of 15 billion. This
3 letter was written some time ago. By now, I'm
4 sure that this probably exceeds 20 to 25
5 billion. Just think of the benefits of $25
6 billion of new money being invested in the New
7 York real estate market at a time when this
8 industry is anemic. This is a blood transfusion
9 at a moment when the patient is starting to
10 recover but is still not yet in robust, good
11 health.
12 I think this house stands to gain
13 a great deal on behalf of our constituents if we
14 can pump new money into the economy, get new
15 homes built, get new buildings built, new office
16 buildings or whatever, in order to permit the
17 City and the state to flourish in a way that it
18 could if there was a real sizzle on the real
19 estate "steak". At the moment, it's simmering.
20 It isn't even a McDonald's 1 burger. It's got
21 to be -- to mix the metaphor a little bit, it's
22 got to be really given a great injection of
23 gustatory enhancement in order to get people to
3334
1 do something, and that's what the bill does.
2 Real estate needs to be stimulated. The economy
3 needs to be stimulated. Jobs need to be
4 stimulated.
5 So in one short sentence, I'll
6 just sum it up by saying this bill is good for
7 the people at all levels of our economy and it
8 should be passed overwhelmingly.
9 SENATOR PATERSON: Senator
10 Goodman, I would demur to your conviction and
11 just add this addendum of sentiment regarding
12 the REIT. I don't think that you have to prove
13 to this chamber in any way that there is a
14 finite coefficient of reward that the estate
15 would actually receive. This market has been in
16 such grave danger for the last nine years that
17 just the innovativeness of the proposal and the
18 definition of its success in other places, I
19 think is sufficient for us to try it. I think
20 quite often the fact that an idea is new is just
21 resisted because nobody can identify what the
22 actual results have been. If that were actually
23 the case, there would have been so many elements
3335
1 of creativity that would have been rejected
2 because nobody knew what the actual result would
3 be.
4 It's -- it's my opinion that the
5 legislation is quite meritorious as it's
6 presented and try to point out that this is not
7 something that is usually engaged in by the
8 super rich, but is actually open to the middle
9 class investor that might have a couple thousand
10 dollars and would like to try some alternative
11 other than that of a mutual fund or some
12 situation where there's an aggregate -- there's
13 an aggregate investment of dollars in different
14 areas by a number of people that come together
15 in a sort of semi-partnership.
16 All we are suggesting, and I
17 suggest this in support of the legislation, is
18 that since we can't accurately state what that
19 amount would actually be, that it might have
20 been a little more foresighted had we just
21 extended this for a period of time when we could
22 actually measure how it's actually doing since
23 we are investing $2 million of taxpayer money in
3336
1 this -- in this -- what could be termed an
2 experiment, but I think you've pretty much
3 demonstrated that it's one that has a risk
4 factor that's certainly pragmatic for us to take
5 at this time.
6 Otherwise, the opportunity for
7 reward and for increased revenues into the real
8 estate market is quite good. As you pointed
9 out, the 75 percent redistribution of any
10 proceeds that were restricted to the building
11 and repairs and repayment of debts is something
12 that does only exist in this state. You raised
13 the ownership factor from 40 percent to 50
14 percent which should somewhat negate the issue
15 that I was raising earlier, the issue of the
16 possibility of individuals deriving personal
17 gain and then getting out of the market and
18 taking advantage of the tax benefit.
19 So all in all, I think that it
20 may have been better to put a restriction and in
21 a sense a sunset just for measure. I would have
22 to support the legislation after listening to
23 your explanation and hope that it does do what
3337
1 you intended it to do.
2 ACTING PRESIDENT KUHL: The
3 Secretary will read the last section.
4 THE SECRETARY: Section 8. This
5 act shall take effect immediately.
6 ACTING PRESIDENT KUHL: Call the
7 roll.
8 (The Secretary called the roll.)
9 SENATOR LEICHTER: Mr.
10 President -
11 ACTING PRESIDENT KUHL: Senator
12 Leichter to explain his vote.
13 SENATOR LEICHTER: -- to explain
14 my vote. Mr. President, if I hadn't convinced
15 myself based on my own arguments that this bill
16 should be defeated, I certainly am convinced by
17 Senator Paterson's argument because he rightly
18 points out this bill is so greedy that it even
19 is retroactive. The whole basis for the bill
20 we're told is we need to bring in more money
21 into real estate investments. Then you make the
22 bill retroactive. You say it hasn't worked. We
23 haven't given it a fair test. You remove all
3338
1 sunsets, and Senator Paterson is absolutely
2 correct, but he's much more generous of spirit
3 and heart than I am.
4 So I must say, Senator, this bill
5 is nothing but a giveaway to large investors,
6 and you're cutting monies that this state
7 desperately needs. We are in great financial
8 trouble. We're in financial trouble because
9 people get up and they say "Let's cut this tax.
10 Let's cut that tax. It's going to stimulate
11 jobs. It's going to stimulate investment. It's
12 going to stimulate growth", and most of the time
13 it doesn't happen, as Senator Stavisky pointed
14 out and again, Senator Paterson, you have
15 absolutely no figures to support your statement,
16 and the fact is that we've got an enormous
17 deficit, Senator Goodman, because you and other
18 people on your side of the aisle got up and said
19 that tax that we're going to pass -- that was
20 last year -- is really going to generate job
21 growth. We had less job growth in 1995 than we
22 had in the last year of the Cuomo
23 administration. You told us that this bill is
3339
1 going to lose us next year $2 million, Senator,
2 so when you're here next year saying "We can't
3 afford these cuts to the arts", just think of
4 that $2 million that you gave away to rich
5 investors.
6 I vote no.
7 ACTING PRESIDENT KUHL: Senator
8 Leichter will be recorded in the negative.
9 Announce -
10 Senator Abate to explain her
11 vote.
12 SENATOR ABATE: I cannot support
13 this piece of legislation at the time basically
14 for the arguments raised by Senator Paterson. I
15 believe that the benefits should be extended. I
16 have some problem with the permanent extension,
17 particularly in light of -- even the
18 justification statement says in the last two
19 years, there has not been enough information
20 because of the interest rates. I don't think
21 any harm is done to the real estate investment.
22 If we extend it temporarily for a period of time
23 and if it's worthy of a future extension, two
3340
1 years from now, a year from now we can look at
2 permanent extension. I hope that the Senator -
3 the sponsor of the bill will look at this
4 compromise. I think there will be greater
5 likelihood of success if it were extended
6 temporarily instead of permanently, and I hope
7 in his good wisdom that he will consider that
8 option.
9 ACTING PRESIDENT KUHL: Senator
10 Abate -
11 SENATOR ABATE: And I will be
12 voting negative because of the word "permanent"
13 extension.
14 ACTING PRESIDENT KUHL: Senator
15 Abate in negative. Announce the results.
16 THE SECRETARY: Those recorded in
17 the negative on Calendar Number 588 are Senators
18 Abate, Leichter and Stavisky. Ayes 56, nays 3.
19 ACTING PRESIDENT KUHL: The bill
20 is passed.
21 Senator Skelos, that completes
22 the controversial calendar.
23 Senator Santiago, why do you
3341
1 rise?
2 SENATOR SANTIAGO: Mr. President,
3 I would like to be recorded in the negative on
4 Calendar 207.
5 ACTING PRESIDENT KUHL: Without
6 objection.
7 SENATOR HOLLAND: No objection.
8 ACTING PRESIDENT KUHL: No
9 objection, Senator Santiago will be recorded in
10 the negative on Calendar Number 207.
11 Senator -
12 SENATOR HOLLAND: Mr. President,
13 is there any housekeeping?
14 ACTING PRESIDENT KUHL: Yes,
15 there is. We can return to motions and
16 resolutions, Senator.
17 The Chair recognizes Senator
18 Farley.
19 SENATOR FARLEY: Thank you, Mr.
20 President.
21 On behalf of Senator Padavan, on
22 page 16, I offer the following amendments to
23 Calendar 367, Senate Print 669-A and I ask that
3342
1 that bill retain its place on the Third Reading
2 Calendar.
3 ACTING PRESIDENT KUHL: The
4 amendments to Calendar Number 367 are received
5 and adopted. The bill will retain its place on
6 the Third Reading Calendar.
7 That completes the housekeeping
8 at the desk, Senator.
9 SENATOR HOLLAND: Mr. President,
10 there being no further business, I move we
11 adjourn until Tuesday, April the 16th, 1996 at
12 3:00 p.m. sharp.
13 ACTING PRESIDENT KUHL: Without
14 objection, the Senate stands adjourned until
15 tomorrow, Tuesday at 3:00 p.m.
16 (Whereupon, at 5:15 p.m., the
17 Senate adjourned.)
18
19
20
21
22
23