LDC warned of censure, dissolution

The Newburgh Local Development Corporation (NLDC) has not been compliant with the New York State Authority Budget (ABO) requirements.  Currently listed as a delinquent agency, the NLDC board of directors and officers are at risk of censure, and the agency at risk for dissolution, according to correspondence yielded from a FOIL request to the ABO.

NLDC warned of delinquency in July 2010

On July 28, 2010, David Kidera, the director of the ABO, warned the NLDC that the NLDC was “out of compliance with state law” after not filing any required reports and asked for a written explanation to be emailed by August 17, 2010.

Planning director Ed Lynch responds

On August 18, Planning Department Director Ed Lynch responds to the ABO’s request.  He writes:

With reference to the Newburgh Local Development Corporation… the entity exists but no attention has been focused on the value or not of its continued existence.  I have been told that it has a Governing Board of 12 individuals, consisting of the 5 members of the City Council and the 7 members of the IDA, who have not met for well over a year.  Insofar as I am only a month holding the position of Director of Planning and Development, I am only beginning to appreciate the magnitude and complexity of agency issues here.  Also, as you may know, Newburgh is operating with deficit financing approved by the State and staff is extremely limited in terms of addressing your concerns.

Because the effort that might be needed to re-create a [LDC] in the future might be substantially more than an effort needed to provide the information you are demanding, I would ask your patience in allowing us more time to be able to evaluate the benefit or not of maintaining the LDC.  If you agree to allow us more time to evaluate the agency’s usefulness, I would appreciate your informing us in writing.

The letter is copied to Courtney Kain, but not to any of the board members of the NLDC.

Warnings given in January and February 2011

The ABO did not give any written response to Mr. Lynch, as he had requested, to indicate that more time would be allowed.  Instead, in January they sent a strongly worded email about the NLDC:

This is to inform you that your public authority has not filed a budget, annual and/or audit report as required by Public Authorities Law.  As a result, your authority is out of compliance with state law.  You have 30 days to take appropriate corrective action and to file all delinquent reports with the [ABO]…

This communication is considered a public warning, issued by the [ABO]… The failure to file these reports within 30 days may result in additional sanctions being imposed against the authority and its board of directors.  The [ABO] also reserves the right under its general powers and duties to subpoena such records, books and information as it may require should your authority continue to ignore its legal reporting obligations.

After no response from the City of Newburgh, another ABO warning was sent in February:

On January 4, 2011 your Authority was notified that it had not filed one or more of the following reports with this Office…

At that time, you were advised that your authority had 30 days to file all outstanding reports with the [ABO]… That warning included an official warning that additional sanctions would be imposed against the board of directors and officers of your Authority should you fail to take action to rectify this situation and remain out of compliance.

This letter is to inform you that should your Authority fail to file all outstanding reports by March 4, 2011, the [ABO] will formally censure your board of directors and officers… This letter of censure will be made public and will be available to other oversight and regulatory bodies.

NLDC now on the agenda

Asked for comment, Mr. Lynch provided a copy of his letter to the ABO from last August and emailed that “No decision has been made by City Council or IDA Board as to how to proceed.”

Newburgh Industrial Development Agency chair Joshua Smith said the old NLDC bylaws describe the board “as the city council and the IDA.  We have at least twice asked the council to join us in a meeting.  I plan to raise the issue again at our next meeting.”  That meeting will be June 20, at 7 p.m. in City Hall.

ABO responds

I asked the ABO if, from the January and February 2011 emails, they were considering further action regarding the NLDC.  This is how they responded:

The ABO, as a matter of policy, reserves the right to exercise any and all of its statutory enforcement powers.  We routinely inform any delinquent or non-compliant public authority of this fact as part of any correspondence we may have with them.  This action could include an official warning, censure or recommendation that a board of directors be suspended or dismissed.  We make every effort to work with an authority to correct problems before initiating such action.  While no specific action has been taken against the Newburgh LDC, we would expect that should the LDC remain out of compliance through the end of June it will appear on our updated list of non-compliant authorities.  This list will be made public with the release of our Annual Report.  You should be aware that the publication of this delinquent list constitutes an official warning of non-compliance.

NLDC History

The NLDC has been in existence since the late 1980s.  In this certificate of partnership formation for Den Cass, dated January 9, 1990, then Mayor Donald Presutti signed for “City of Newburgh Local Development Corporation.”  Den Cass was the private-public partnership that owned and ran Broadway School after receiving a Urban Development Action Grant around 1986 until the building was sold back to the City of Newburgh to house the Newburgh City Court in 2008.  When the city council passed the courthouse bond on September 4, 2008, part of what eased its passage was removal of repayment of the NLDC loan totaling $416,715 (in addition to not paying back the NLDC, the city council also voted to not pay back the UDAG for $560,000.)

According to the bylaws of the NLDC, its board members consist of the city council, the board of the Newburgh Community Development Agency, and the Newburgh Industrial Development Agency.  Until recently these three entities were the same exact people, with the exception of the IDA also consisting of two additional appointees to the city council.

The NLDC gave loans to other businesses in addition to the Broadway School partnership.  A July 8, 1996 city council minutes makes reference to one NLDC effort:

Grow America Fund: This joint venture of the City’s Local Development Corporation (LDC), National Development Council and the Chamber’s Newburgh Area Industrial Development (NAID), has pooled $50,000 in contributions by NAID and the LDC in order to leverage in excess of $400,000 in loan authority for Orange County business.  The LDC underwrites the loans, and a committee of LDC and NAID members reviews and approves same.

NLDC Recent Activity

The NLDC has not met as a board for several years.  A records search shows the NLDC most recently listed as a plaintiff in the Savoy litigation of 2003 (along with co-plaintiff the City’s IDA).  Other most recent filings include a satisfaction of mortgage document filed May 8, 2009, and signed by Lourdes Zapata as Director of the NLDC.   Prior to that, Robert McKenna signed a satisfaction of mortgage document as Director of the NLDC in 2005, although it wasn’t filed until 2007.