Two local assemblymen are asking the New York Power Authority to back away from a decision to use $5.4 million of the proceeds from the sale of unallocated hydropower to fund the Launch NY program to help fledgling businesses.

The Western New York Power Proceeds Allocation Board on Monday approved the funding for Launch NY, a state-sponsored initiative to assist start-up companies that also will conduct the nationwide business plan competition that is part of Gov. Andrew M. Cuomo’s “Buffalo Billion” initiative.

“It is inappropriate to be funding a Buffalo Billion project out of the finite resources available to the proceeds board,” said Assemblyman Robin L. Schimminger, D-Kenmore, who co-authored a letter Friday to the Power Authority board criticizing the use of the power proceeds money to fund Launch NY.

“If the governor wants to have a business contest, that’s great,” said Schimminger, who wrote the letter with Assemblyman Dennis Gabryszak, D-Cheektowaga. “To fund it out of Western New York Power Proceeds funds is just not appropriate.”

The assemblymen urged the Power Authority board “not to support” the use of the power proceeds funding for Launch NY at its board meeting Tuesday.

Anthony J. Colucci III, chairman of the Power Authority Proceeds Board, issued a statement Friday evening defending the use of the power proceeds as consistent with the region’s plans for economic development.

“The numerous Western New York representatives on the Regional Economic Development Council supported this very type of effort in developing a regional strategy,” he said. Launch NY is patterned after the successful Jumpstart Cleveland, a program that began in 2004 to accelerate the success of entrepreneurs and has grown to include 440 clients. The program is credited with the creation or retention of more than 1,500 jobs.

The Launch NY program, which aims to help companies in 27 upstate counties, is set to receive $5.4 million in funding – almost a quarter of the $23.2 million that has been set aside for economic development projects within 30 miles of the Niagara Power Project. The funds were raised through the sale of Niagara hydropower that was sold in the open market because it had not been allocated to a local company.

Local business officials and politicians fought for years to have the proceeds from the sale of unallocated power set aside for local development projects, but only recently succeeded through the formation of the power proceeds board. Monday’s awards were the first that the panel has made.

The assemblymen were joined in opposition to the Launch NY funding by the Buffalo Niagara Partnership, the local business group that was a driving force in the effort to have the proceeds from the sale of unallocated hydropower set aside for economic development projects within the Buffalo Niagara region. They said the power proceeds funds is an especially powerful economic development tool because it is cash, rather than tax incentives or other subsidies that have a less immediate impact.

“We want to make sure the intent of the legislation is followed,” said A.J. Wright, the Partnership’s manager of government affairs. “The proceeds are supposed to be used to support economic development within 30 miles of the Niagara Power Project.”

The assemblymen said the allocation to Launch NY ran contrary to the criteria for distributing the power proceeds funds in several respects. They said the funds are being used to support a business plan competition, which is contrary to the requirement that they be used to create jobs.

They said it was questionable whether the winners of the business plan competition would meet another requirement of the proceeds legislation that recipients have a long-term commitment to the region. The winner of the business plan competition will be required to locate their business in the region for one year.

The assemblymen also said the Launch NY program falls short on requirements that recipients of the power funding make capital investments in the region. They also noted that Launch NY is expected to provide support services and investment to companies in counties stretching from Buffalo to Syracuse and Binghamton, far beyond the 30-mile limitation on proceeds funding.