PROCUREMENT LOBBYING LAW
FREQUENTLY ASKED QUESTIONS (FAQs)
Replaces previously released version in its entirety
4.19. How do the State Finance Law provisions apply to Revenue Contracts? (Last Updated: 6/14/2010)
In general, the State Finance Law provisions only apply to certain kinds of revenue contracts engaged in by certain Governmental Entities. State Finance Law §§139-j(1)(i) and 139-k(1)(i) set forth two requirements for a revenue contract to be governed by these provisions. The first part addresses which Governmental Entities’ revenue contracts are subject to these requirements. It provides that only the revenue contracts of the following Governmental Entities are subject:
- state agencies [State Finance Law §139-j(1)(a)(1)];
- public authorities, public benefit corporation or commission created by or existing pursuant to the Public Authorities Law [State Finance Law §139-j(1)(a)(4)];
- public authorities or public benefit corporations with at least one gubernatorial appointee or who serves by virtue of office [State Finance Law §139-j(1)(a)(5)];
- the industrial development authorities and local public benefit corporations covered by this law [State Finance Law §139-j(1)(a)(6)]; and
- subsidiaries and affiliates of such a public authority [State Finance Law §139-j(1)(a)(7)].
Thus, revenue contracts entered into by either house of the Legislature or the Unified Court System are not covered by these new requirements.
Second, it provides that the provisions are only applicable to those revenue contracts where the covered Governmental Entity gives or grants a concession or franchise. Thus, in order to trigger the requirements, the written agreement must give or grant a concession or franchise.
Definitions of “franchise” may vary. General Business Law Section §681 (3) defines the term “franchise” as a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which: (a) a franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor, and the franchisee is required to pay, directly or indirectly, a franchise fee; or (b) a franchisee is granted the right to engage in the business of offering, selling or distributing goods or services substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising or other commercial symbol designating the franchisor or its affiliate, and the franchisee is required to pay, directly or indirectly, a franchise fee. Applying this definition in the context of the State Finance Law, a franchise involves a Governmental Entity conferring the right to engage in a specific business of the State of New York or to exercise State powers under a contract or agreement with a Governmental Entity where the recipient is required to pay a fee to engage in such activity.
While the definition of “concession” also varies, it is generally defined as a government grant for a specific privilege. A concession is usually given in the context of the private operation of any business within a public park that generates revenue. In this context, the important aspects of a concession appear to be a service which might properly be operated in a park, terminable at will by the Governmental Entity and granted for a reasonable fee. According to a 1988 opinion by the Office of the State Comptroller, whether an agreement grants a concession “is a question of fact which must be resolved by examining the elements of the agreement.” Op. State Compt. 88-60. Therefore, a covered Governmental Entity should make a fact-specific determination whether the terms of a revenue contract involve the giving or granting of a concession.
Additionally, a covered Governmental Entity must keep in mind that in accordance with statute, revenue contracts with an estimated annualized expenditure under $15,000 would not trigger the requirements.