TALK OF THE SOUND EXCLUSIVE: New York State Comptroller Rips New Rochelle IDA in Audit Due Out Next Month

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Thomas DiNapoli New York State Comptroller.jpgTalk of the Sound has obtained a copy of an IDA Audit Report of the New Rochelle IDA (NRIDA) which is expected to be released by the Office of the New York State Comptroller (OSC) next month. The document is meant to be public, has been circulated within City Hall but is not on the agenda for the IDA meeting scheduled tomorrow. A brief review of the summary shows why the IDA would prefer to kick the report down the road into the summer months when they hope less people will notice -- it is a devastating report which confirms what many critics have long contended about an IDA with no defined process for approving projects, no effort to monitor ongoing projects and a generally sloppy, make-it-up-as-you-go approach while doling out tens of millions of dollars in bonds, tax incentives and other goodies to politically-connected developers with no particular concern over whether the projects deliver upon promised results.

Read the entire report here: New Rochelle IDA Comptroller Report (PDF)

The audit was meant to answer three questions:

1. Did the Board have formal criteria for selecting the firms or businesses that received sponsorship and economic development incentives, and did it consistently apply those criteria when approving projects?

2. Did the Board design and implement an adequate system to monitor, evaluate, and manage benefits and incentives granted to firms or businesses?

3. Did NRIDA comply with the General Municipal Law (GML) requirement to remit PILOTs to affected jurisdictions within 30 days of receipt?

In short, the answer was "No, No and No".

The OSC found that the NRIDA did not have a checklist of specific criteria for evaluating project owners’ applications, failed to use detailed evaluation criteria and failed to document the reasons for their project approvals. The auditors found the board could not provide any assurance that projects are evaluated in a consistent manner.

As many have long suspected, the NRIDA does not perform a comprehensive cost-benefit analysis for the projects it approves. Of the 10 projects evaluated by the Comptroller, NRIDA did not conduct a single cost-benefit analysis even though developers provided sufficient data for 7 of the 10 projects. The NRIDA never asked for data for the other 3 projects. In short, the NRIDA does not seek to determine if the benefits to the City would exceed the cost of providing tax abatements and exemptions. Not surprisingly, the auditors concluded "NRIDA cannot properly evaluate project applications or be sure of the net benefit to the City.

The audit found that NRIDA officials did not independently verify data supplied by project owners on their application forms which creates the risk that NRIDA could approve unqualified projects and would be unable to provide accurate measurement of ongoing project performance.

The report goes on to state that NRIDA did not monitor the status of ongoing projects to ensure reasonable progress toward the projected benefits described in the original applications so the board cannot be sure the projects will meet their intended goals, or know when they should invoke “recapture” agreements to recover some or all of the benefits provided when projects fall short of their promised goals.

The Capelli organization is on the NRIDA agenda tomorrow, in part to seek extensions on its recapture agreement for Trump Tower which expired in December. A recapture agreement is a clause which allows the City to claim money if a project fails to meet some promise, in this case to lease the retail space at Trump Tower.

The Comptroller warns that when NRIDA officials do not properly monitor ongoing projects and invoke recapture agreements, as appropriate, there is an increased risk that other taxpayers are subsidizing the projects’ financial incentives without receiving the expected benefits to the community. This is precisely what has been occurring since 2009 with Trump Tower.

It will be interesting to see the Board of Education reaction to the news that the NRIDA violated state law by failing to remit approximately $1.3 million in payments in PILOTs to the school district, city and county within 30 days of receipt as required by the General Municipal Law. The Board of Education routinely issues Tax Anticipation Notes (and pays fees and borrowing costs) which is to a certain extent a form of subsidy to the IDA which, in turn, is subsidizing the developer.

NRIDA Pilot Payments-Small.jpg

The report notes that NRIDA projects have, overall, failed to provide promised job gains for New Rochelle. In particular, Parcel 1A (Trump Tower) was supposed to deliver 358 jobs but has, as of December 31, 2008, delivered just 98 for a net deficit of 260.

Comptroller Audit of NRIDA - Jobs-Small.jpg

In their official response, the New Rochelle IDA basically denies everything and says that somewhere they have all the documentation for how they made their decisions, how they verified applications and how they monitored projects.

Apparently the dog ate it.

In perhaps its most feeble response to the Comptroller Audit is the claim that "During times of recession, it is somewhat difficult to hold a project's performance exclusively to the number of jobs created versus forecasted as presented by OSC for the ten projects reviewed."

The audit period is from January 1, 2007 to December 31, 2008. According to the National Bureau of Economic Research's Business Cycle Dating Committee the recession began in December 2007 and appears to have ended in December 2009.

If the recession is the reason Capelli did not lease space or deliver jobs at Trump Tower how to explain that same failure in 2007 when the economy was growing -- or explain that the space is still not leased now even though the recession is said to have ended late last year.

It remains to be seen whether the Board of Education will be comforted by the IDA's assertion that the amount they improperly withheld in PILOT tax receipts is small potatoes - just "less than 1% of [the district's] annual budget". The IDA failed to note that New Rochelle's school budget is one of the largest in New York State.

There is more to the report worth discussing -- we just hit on the highlights. We invite readers to download a copy of the report and add their own observations.

Commenting on this Blog entry is closed.

Political Forechecker's picture
Political Forec... on Thu, 06/24/2010 - 12:06

What do we know about last nights IDA giveaway party to Cappelli? I saw the silver Bentley heading out of the Slum just wondering how much loot they rode out of dodge with?

John D'Alois on Tue, 06/22/2010 - 04:19

This audit really underscores what many have been pointing out for years. Years ago, Anthony Galletta presented our civic association with facts and figures that spelled out the burdens to the city and board of ed as a result of the latest PILOT program being considered for Cappelli. It wasn't pretty. Not long after, as he was pressed to explain the benefits of these abatements, Mayor Bramson stood before the same civic association, put his hand over his heart and "promised" there would be no more abatements now that development has taken off in NR. Shortly after that, the latest PILOT program was announced. For too long the IDA has operated under the radar, answering to no one except the developer du jour, with no real benefit to the city. Socializing the risk while privatizing the rewards. The numbers don't lie. As certain council members rail against anyone who points out the failures of the past as being old news, taking a "what's done is done" attitude, they fail to accept the fact that the very same wheeling and dealing that brought about the downtown failures continues to run the IDA. On WVOX's Bob Marrone show, Barry Fertel once called the critics of these failed policies members of C.A.V.E (citizens against virtually everything). Typically dismissive in his attempt to derail the issue. I can honestly say I haven't heard Mr Fertel come up with any suggestions to turn anything around. Afterall, he voted in favor of the latest extension for Cappelli's MOU. Business as usual. Maybe it should be Councilmen Averse to Vetoing Extensions.
Anyhow, the Comptroller is on the right track as he opens up the IDA to public scrutiny. Sunlight truly is the best disinfectant.

Stephen Mayo on Tue, 06/22/2010 - 07:30

Please don't ever quote Barry Fertel to us so late at night (or early in the morning?). His words pose a real threat to my REM sleep patterns, upon which the next day's generally fragile state of mental acuity is so dependent.

In light of the good Councilmember's thoroughly consistent and uninterrupted record of voting in favor of any budget, large or small, municipal or educational, stated in rupees or rubles, that has ever fallen within the province of his duties on various coercive legislative bodies for well-nigh fifteen years (!), C.A.V.E. can only stand for "Councilmember Adopting Virtually Every" draft spending plan that the city manager and budget director have ever presented.

It would be refreshing, invigorating even, to hear him (or any other component of the Democrat bobble-headed doll-set presently occupying the council chambers) publicly question just one, single: expenditure, bonding-plan or labor union contract demand. Just one!

The good Councilman, who once informed an assemblage of his fellow School Board members, PTA regulars, FUSE (union) delegates, and the usual assortment of harried taxpayers and social miscreants that he was "a very pro-union guy and very proud to support the teachers' union and this budget." This, from a then-Board of Education trustee - a fiduciary of taxpayers and a representative of students and students' parents, statutorily-charged with guarding the financial interests, investments and infrastructure of the New Rochelle public education system!

Is it any wonder that the State Comptroller (incidentally; a loyal, lifelong Democratic party regular himself!) found it necessary to issue such a stinging report concerning the thorough lack of standards and controls at the New Rochelle Industrial Development Authority? With oversight left in the hands of the likes of public-employee union devotees like Fertel, and board membership held by a City Manager with a constant "thumb" in the making of the municipal budget, and another board seat perpetually occupied by a Councilwoman charged with voting on these very same budgets year-in and year-out, what other result might be expected? Could a more obvious conflict of interests and a more obvious compromise of professional and oath-derived standards of ethics be imagined?

Never mind questions about the actual number of jobs "retained" or "created" in the process. Those of us who have been following the machinations of Obama's Great Leap Forward know full-well the creative accounting and anecdotal sleight-of hand that have become the norm among those for whom some economic enterprises (and governmental operations also?) are simply "too big to fail." By and large, these are problems of definition and semantics, which typify the general overstatement, overestimation and puffery that we have come to expect from the New Class Nobility; the permanent coterie of perpetual public office holders, pension recipients, freeloaders and fourflushers.

No; I am concerned with something much more grave. That is, the trading of development incentives and taxpayer-funded grants, contracts and other benefits for the support of the present and future political campaigns and causes of sitting members of various New Rochelle boards and ruling bodies (need we concern ourselves yet with the independent and ever-growing New Rochelle Public Library and board, its burgeoning, separately voted-upon budget, and its freshly-bloated portfolio of bonded indebtedness?).

The trading that is undertaken behind closed doors, in committee meetings "of-the-whole" or sometimes in committee meetings "of something-less-than-the whole," shrouded in mystery, blocked from the view of our ever-shrinking daily Journal News and our brave but harried weekly New Rochelle Sound Report, stubbornly resistant to game FOIL requests of the likes of Talk of the Sound's editor; and then disingenuously presented to the public as the urban-renewing and job-creating accomplishment of some professional and lawfully-constituted independent body, the IDA (all of this, the city manager's office has continually reminded us, according to New York State law, and backed by the awesome full faith and solemn full credit of our "august" New York State legislature!).

The time has come for the City Council to commission an independent and full investigation of the practices and procedures of: the New Rochelle IDA, its general membership and particular woefully conflicted members belonging to the city manager's office and the council itself, with especial attention paid to the glaring absence of candor, accountability and transparency in the gifting of tax abatements, other economic incentives and, other non-economic incentives such as rights to exclusive dealing, Memorandums-of-Understanding etc. granted to the likes of Louis Capelli, Bruce Ratner, their respective companies, and Home Depot and others since the days of Tim Idoni's operation.

If the Democrat-laden body will not act, may we leave it to the Republican-turned-Democrat County Attorney? Or do we pray for the day when some brave new State Comptroller or authentic crime-busting Attorney General, devoted to upholding traditional notions of civic virtue and public integrity, jumps into the fray?

John D'Alois on Wed, 06/23/2010 - 03:49

I'll try to save my Fertel quotes for the afternoon edition of the press. Did you see he was at the Varian campaign headquaters (Spectators) hoping to join in with the Varian election celebration? Oops, wrong team Barry. Kidding aside, your commentary is on point, as usual, speaking to the concerns of so many who have been typically disenfranchised in this city. The ousting of Spano, followed by the Marcotte victory can only be seen as the true begining of meaningful reform. The new push for openness in government is slowly, but surely uncovering the seedy underbelly that has been driving the city bankrupt. Keep it up Steve, but don't lose sleep over it, we'll take the night shift.

Tom Jeferstahl on Tue, 06/22/2010 - 00:26

The old New Rochelle Neighborhood Revitalization Corp. They used a CPA from Massachusetts to hide their thievery. They ditched that corporation after many years of theft. The usual suspects were all involved. The FBI needs to be brought in to New Rochelle to clean house. Nothing else will fix this corrupt city.

WolfWithTheRedRoses on Mon, 06/21/2010 - 23:05

It was eerie how, two and half years ago, another tax break, thanks to the IDA, was awarded to Cappelli.

Back then, the public was given a two week notice. Thousands of ice hockey players from the the high school and modified programs, ice skaters, parents, siblings, and friends signed petitions and begged the Mayor, City Manager and Council members NOT to award any tax abatements and allow Cappelli to close the New Roc Ice Rink until a replacement was built. They closed it anyway.

Thanks to the IDA, we now have an empty building at New Roc where, if you look closely, the ice rink still sits, UNUSED! What a waste!

Yes, the kids got shafted royally, and so did their parents. We're paying for it every day. I hope that the culprits are all exposed and given the punishment they deserve. We can start by voting them out of office and spreading the word.

Peggy Godfrey on Mon, 06/21/2010 - 22:54

When I studied the IDA financial reports quite a few years ago I discovered they had no mention of the New Roc garage bonded debt. Neither did the New Rochelle City budget list this debt or identify the yearly $2 million of city funds being paid for this debt. After several years of requesting this, the City started to list it in the budget.

The New Rochelle Citizens Reform Club, when they learned that the City could require the IDA to hold public hearings when abatements or tax breaks were given, continued to ask our Council which finally did pass a resolution that the IDA must hold public hearings before granting tax breaks.

The Controller had been informed about this IDA's actions several times. His office was asked for an audit in New Rochelle a long time ago.

Anthony Galletta on Mon, 06/21/2010 - 21:13

This is not about a few bad apples. The NR IDA is rotten to the core. The citizens placed on this board are well intentioned but in reality are brainwashed hand maidens to Tim, Noam and the wealthy greedy developers they choose to do busine$$ with. Across the entire state New Rochelle ranked second in total number of tax abatement dollars given away to create one job. When you consider that a democratic comptroller appointed by a democratic assembly harshly criticized the NRIDA which at the time was controlled by a 6-1 democrat controlled city council it doesn't even scratch the surface of how miserably they failed. Time to reorganize, make council representation rotating and board members elected by super majority at the very least. If not abolish altogether as the damage has already been done!

Fifth Ave Guy on Mon, 06/21/2010 - 21:02

After an audit like that, the state should come in and shut the NRIDA down. These kinds of abuses shouldn't be tolerated at any level.

IDA stands for Industial Developement Agency and I don't see anything industrial about these projects, certainly there isn't any manufacturing. And I beleive the IDAs in general were set-up through out the state to foster job creation. If the IDA isn't doing what it was charted to do, then why keep it? The simple answer is that its used for political payback with little or no oversight and guess who's footing the bill? That's right, you and I!

Political Forechecker's picture
Political Forec... on Mon, 06/21/2010 - 20:39

The IDA of New Rochelle is run at the Behest of Mayor Bramson. He has stocked the IDA with his cronies. Sussman is the chair put on by Bramson. She runs it as she see fit. Anyone complaining gets double teamed by Chuck Strome who also was placed on the IDA by Mayor Bramson.There are a few other weak individuals and a couple of mediocre lawyers who derive income from the City of New Rochelle so they don't complain too loudly or they get no work.
Its quite the small gene pool being used by the same Mayor over and over.
He pretends it is a independant body. What a sham, what a scam. And they keep handing out the PILOTS for projects even it they do not meet the criteria for those PILOTS even if they do not provide the jobs that they claim or the sales tax revenue. Never any claw backs from those who get the PILOTS. The worst part about it there is nobody to complain about up in Albany becasue those running the departments to complain to get their marching orders from the same bunch and it just keeps flowing. Only people getting hurt are the tax payers picking up the pieces.

Martin Sanchez's picture
Martin Sanchez on Tue, 06/22/2010 - 01:26

It's obvious that the Bramson administration is run like a criminal enterprise. Call it what it is. The DA, the NY Attorney General or the US Attorney's office should investigate. Ms. Lowey can only protect this young man so much.

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