Category Archives: Newburgh Local Development Corp.

Public Authority Roundup: Newburgh Land Bank, IDAs etc.

Newburgh Community Land Bank Misreports Staffing

The Newburgh Community Land Bank is getting a bit of a press buzz for its recent spot on NPR–in particular, “Executive Director, Madeline Fletcher.”  Ms. Fletcher has worked for the NCLB for several years.

However, in the Authorities Budget Office Annual Report on Public Authorities in New York State, issued July 1, 2014, on page A2, “Authorites that indicated No Staff in 2013,” is listed the Newburgh Community Land Bank.

Contradicting this is NCLB’s 2013 Financial Report, which lists “Consultant Fees” of $64,167.

The ABO provided this response:

Newburgh Community Land Bank reported having no staff in the Public Authorities Reporting Information System (PARIS) in 2013.  Staff working at the authority but being paid, in whole or in part, by another entity, or staff working at the authority pursuant to a personal services contract with another entity should be listed as staff, as well as individuals whose salaries are being reimbursed by the authority. This is a common reporting error that we come across when we perform reviews on authority information in PARIS.

Data presented in the tables in the 2013 Annual Report is as reported by public authorities. While the ABO attempts to identify significant data discrepancies, it cannot verify the accuracy of all of the information reported. Thank you for bringing this to our attention.

City of Newburgh Local Development Corporation Still in Limbo Land

Another interesting find in the ABO’s annual report was that the city’s LDC is still alive–even if just barely.  There’s a footnote indicating that the ABO is aware that the city has decided to dissolve the entity, but as of yet it has not done so.  It was March 2013 when I wrote this post about dissolving the NLDC, which then City Manager Herbek was endeavoring to do.  The IDA and the City Council must feel no urgency to take care of this little bit of housekeeping, to let the years fly by without a second thought.  Technically, the NLDC should be reporting each year if it is still in existence.

LDCs and IDAs Reform

Another highlight from the annual report begins on page 49, information about Assembly bill A.9773 introduced May 2014.  This is a collaborative product of the ABO, the legislature and the Advisory Task Force on Public Authority Reform.

 

Pulling the Plug on the NLDC

IMG_1507

Two years after former IDA Director Ed Lynch asked the Authorities Budget Office for more time to consider what to do about the delinquent Newburgh Local Development Corporation, it looks like the city has finally come to the conclusion to pull the plug.

A recent FOIL request to the ABO revealed that the city’s Industrial Development Agency and City Manager Richard Herbek had been given a warning by the ABO about the delinquency of the Local Development Corporation.  The LDC has been getting warnings since at least 2011, when I wrote about them here and here.

From one of those earlier posts, dated June 13, 2011, I wrote:

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. [Emphasis added]

Following up on that, in a post from October 10, 2011, I wrote:

During that [June 20, 2011] meeting, the minutes state that “Mr. Whyatt proposes convening a special LDC meeting at which the IDA members can vote as a majority on any actions it deems necessary, such as obtaining banking records, determining assets, etc.”

However, it is not apparent that any action has been taken.  NLDC last appeared as an agenda item at the July meeting, but the chairman preempted discussion by saying there was nothing to discuss, and moved on to the next agenda item.  It has not reappeared since.

Teri Waivada, the IDA’s current executive director, shrugged off responsibility for the NLDC, stating that it has never met with the IDA’s current board members, although she believes the corporation is still active (which does not make any sense to me, unless by “active” she means it has not yet been officially dissolved):

teri

For his part, City Manager Herbek writes that the city will be reviewing how to disband the NLDC:

abo-herbek

Final Thoughts

Is there any reason to keep the NLDC?  As I have written previously, local development corporations can do things that industrial development agencies can’t, such as provide funding for nonprofits.  At the county level, our Orange Count Industrial Development Agency board asked the county legislature a few years ago to create the Orange County Funding Corporation, a local development corporation, for just this purpose.  When Mount Saint Mary College was looking for bonding money to help pay for a construction project, they went to the OCFC, and were successful in getting bonds.

The Mount did not go to the Newburgh Local Development Corporation, if they even knew it existed.  Should they have?  Would it be a good idea for Newburgh to have its own funding entity for nonprofits and small businesses?

As someone who has sat through countless Newburgh IDA meetings, and a good many Orange County IDA meetings, as well as countless Newburgh City Council meetings, in my opinion it is just not worth it.

Officially the NLDC board is made up of the city council plus the IDA board.  The IDA has toyed with the concept of doing something about the LDC, but they have a difficult enough time carrying on regular business as it is.  In contrast, the county IDA (who make up the board of the OCFC as well) has a board that is a well-oiled machine, and includes financial professionals.

The Newburgh IDA cannot compete with them in terms of resources.

In this case, to get the NLDC operational again would demand meetings of the existing gigantic board of twelve members to come to a consensus about what to do, even if that is to appoint a new board and/or alter the NLDC bylaws.  This idea seems preposterous, especially since the board has never met in the two or more years it has been officially listed as delinquent with the state.

To have one LDC to cover Orange County (I do not know of other LDCs in cities or villages of the county, although their existence would not surprise me) is perfectly reasonable.

The only potential thorn I foresee is that the NLDC board must meet to approve dissolution.  Despite requests by the ABO for over two years, the city has dragged its feet.  I wish City Manager Herbek luck in herding the cats.

Charter Change Needed for Article XIV

Let every eye negotiate for itself / And trust no agent; for beauty is a witch / Against whose charms faith melteth in blood. –Much Ado About Nothing (II, i, 178-180)

I read the following letter at Monday evening’s city council meeting.

Re: Charter Change Needed for Article XIV—Department of Planning  and Development

Dear Mayor, City Council, and City Manager,

On the city’s new website, under “Job Opportunities” there is a listing for the “Director of Business and Industrial Development.”  I object to this position as it does not exist in the city’s charter.  Furthermore, the Planning and Development Department needs to have its powers and duties corrected in the city charter.

I am attaching Article XIV of the city charter, entitled “Department of Planning and Development.”  Please note that this article assigns the duties of managing the Industrial Development Agency, Local Development Corporation, and Community Development Agency to the Director of Planning and Development.  Currently, the IDA has elected to hire its own, independent employee to administer the IDA; no one has administered the LDC in years; and the CDA no longer exists.

Where does this new position fit into the department?  Will you also be hiring a Director of Planning and Development?

Why is it that most of the duties and responsibilities assigned to the “Director of Business and Industrial Development” aren’t handled by the IDA’s executive director?

Whatever you do with this new position, ultimately what is needed is a thorough evaluation of how Planning and Development is performing, whether services overlap or are duplicated with the IDA, recommendations for changes, and finally, a charter update.  In my opinion, the review and charter change should happen before any new hires are made.

Sincerely yours,
A. Jane Johnston

Ignoring the LDC had consequences

I wasted time, and now doth time waste me… Shakespeare, Richard II

If you’ve been reading any Newburgh news that’s been sandwiched between the Hurricane reports the past few days, you know about the audit that was issued by the State Comptroller’s Office this past Thursday.  The document is 31 pages in its entirety, can be downloaded from the link highlighted above, and has been summarized by both the Record and midhudsonnews.com (in both cases, though, relying on the press release and Herbek’s righteous retort.)

For my part, I would like to draw your attention to the LDC.  The State Comptroller points out that the city’s hired CPA firm was unable to complete the 2007 audit because they “lacked the records necessary for the CPA to complete the audit” (page 8.)  A second auditor completed audits for 2008 through 2010, but while “the second CPA was able to complete the audits and express an opinion, the CPA issued a disclaimer that financial information relating to the Local Development Corporation and Industrial Development Agency was not included, as the records were not available.”

Herbek mixes up the public authorities

In his letter of response August 14, Herbek addresses various items he disputes on behalf of the city.  And on the point of the problem with the annual auditors being incapable of rendering an opinion, and/or noting that LDC and IDA records were not available, he offers this recommended revision to the State Comptroller’s audit:

Although the second CPA was able to complete the audits and express an opinion, they issued a “qualified” opinion due to the omission of financial information from the Local Development Corporation (LDC) and Industrial Development Agency (IDA), whose records were not available.  It also should be noted that the City’s request for State legislation to dissolve the LDC has been pending for several years…

Actually, the city government, including the IDA, manager Herbek and city council, have collectively totally ignored the Newburgh Local Development Corporation.  For years the Authorities Budget Office would send a letter to the LDC stating it was out of compliance (no board has officially met as the LDC in years) and it would be promptly ignored by all of the above parties.  Despite the rare statement made by an IDA board member that a meeting of the LDC was in the works, nothing ever happens.  Herbek has simply mistaken the LDC with the NCDA, which was in fact dissolved two days after he wrote his letter, on August 16.

Ignoring the LDC, even though it puts the council and IDA board members at risk of censure, since they are technically still members of the LDC board according to its articles of incorporation, is likely to continue.

 Other thoughts, briefly

  • Newburgh should be ashamed of this audit, with its crazy practices, city council members who admit they don’t understand the financial statements, and no attempt to get the proper training for the Newburgh comptroller and staff as well as the council.  It seems obvious that if a council member is complaining about this to the state comptroller’s office, that he is probably not the only one who can’t read the financial statement, there are others on the council in the same boat and training is needed.  If the council is to avoid being slammed for poor oversight, they need to learn how to give good oversight.  Simply hiring Dwight Hadley as a financial consultant is not sufficient.
  • Re. the Cable Service Franchise Fees: the city should bring back the committee that never was, but that is in our charter, §C15.20. Cable Television Advisory Committee.

 

1 in 3 Newburgh public authorities has pulse

NCDA, NLDC, NIDA: all are in various states of legal limbo

The City of Newburgh has three public authorities: the Newburgh Community Development Agency (NCDA), the Newburgh Local Development Corporation (NLDC), and the Newburgh Industrial Development Agency (NIDA.)  None of the three are currently engaged in the activities for which they were created, although the NIDA shows signs of life.

NCDA status: terminal

The NCDA was formerly known as the Newburgh Urban Renewal Agency.  In its earlier years it had its own board and director, although it was later restructured such that the NCDA board became the Newburgh City Council.  In recent years, the agency was essentially dormant, a mere repository for various parcels of land with a board–the council–that never held a meeting.

In 2008 Elaine and Hector Lopez filed a personal injury lawsuit against the NCDA.  Ms. Lopez had fallen on NCDA property near the foot of South Street.  Corporation counsel of the time Geoffrey Chanin wanted the city council to meet as the NCDA and empower Lourdes Zapata-Perez, the economic development director, to act on behalf of the NCDA.  The majority of the council balked, refusing to take responsibility for another agency, although this refusal did not abnegate their responsibility.

The NCDA was also a delinquent agency according to the Authorities Budget Office, an oversight office of New York State.  Required reports and audits were not submitted.

When Bernis Nelson became corporation counsel, she made it her goal to dissolve the agency and transfer the land and any other assets and liabilities to the City of Newburgh.  While there were a few voices who questioned whether the NCDA could function as a land bank, Ms. Nelson prevailed, and the city council voted to dissolve the NCDA.  (A land bank would later be approved by the city February 28, 2011; it is structured as a nonprofit with 4 city appointees and 5 non-city appointees, with representatives from the city’s nonprofits and other groups.)

The Lopezs have settled their suit, receiving $15,000 this past March.

All that remains is for the language in the state code to be stricken.  The first bills that attempted to accomplish this were not successful.  The bills were reintroduced under new numbers, and their current status is:

In the Senate:
S2845 02/02/2011 REFERRED TO LOCAL GOVERNMENT
S4339 06/16/2011 COMMITTEE DISCHARGED AND COMMITTED TO RULES
Reciprocal bills in the Assembly:
S4339 = A2815  07/11/2011 enacting clause stricken
S2845= A7064 04/11/2011 referred to local governments
The state legislature reconvenes in January 2012 so Newburgh may have the ghost of the NCDA in the state code for at least a few more months.

NLDC: to be or not to be, ’twill write off debt

The Newburgh Local Development Corporation, or NLDC, is a delinquent public authority.  A brief history and description of recent events with the NLDC, including correspondence from the ABO threatening censure, is here.  The board of the NLDC, according to its bylaws, consists of the city council, the NCDA and the Newburgh Industrial Development Agency (NIDA).  As such, it would be logical that the city council and the NIDA have responsibility for this entity.

Warned of potential censure by the ABO, NIDA Chairman Joshua Smith said the NLDC would be on the agenda for discussion at the June NIDA meeting.  During that meeting, the minutes state that “Mr. Whyatt proposes convening a special LDC meeting at which the IDA members can vote as a majority on any actions it deems necessary, such as obtaining banking records, determining assets, etc.”

However, it is not apparent that any action has been taken.  NLDC last appeared as an agenda item at the July meeting, but the chairman preempted discussion by saying there was nothing to discuss, and moved on to the next agenda item.  It has not reappeared since.

City Manager Richard Herbek wrote in an email September 23 that the city “has no plans at this time regarding the LDC.”

One disadvantage to outright dissolving the agency would be having to deal with the outstanding debt of $416,716 the city owes the NLDC.  This was money due to the NLDC following the purchase by the City of Newburgh of the old Broadway School to house its new courthouse; NLDC was one of the Den Cass partners who had owned the building.

Additionally, the December 31, 2006 Audit of the NLDC shows a debt to the NIDA of $752,540.

As mentioned in NYS Comptroller DiNapoli’s report linked to on the NIDA home page, and also in his report dealing specifically with LDCs here, local development corporations have recently been used as a legal way to fund civic facility projects, since industrial development agencies in New York cannot participate in such projects.  For example, were the NLDC functioning, it could provide bonds to fund a civic facility project such as the Newburgh Armory Unity Center, or a project at St. Luke’s Hospital, or the Greater Hudson Valley Family Health Center.

At the county level, the Orange County Industrial Development Agency had the Orange County Legislature authorize the creation of an LDC  on May 6, 2010 called “The Orange County Funding Corporation.”  It was created precisely because of the problem the County IDA was facing in being prohibited from funding civic facility projects.  In the preamble of the resolution it states:

WHEREAS, it is essential for the County to support the operation by both for-profit entities and not-for-profit corporations within the County to increase the employment opportunities for residents of the County and the ability to provide financing through the issuance of tax exempt and taxable bonds to projects of for-profit entities and not-for-profit corporations is essential to the continued development, construction, improvement and operation of projects by for-profit entities and not-for- profit corporations; and
WHEREAS, in furtherance of its public purposes, the County has supported the provision of taxable and tax exempt financing by the Orange County Industrial Development Agency (the “Agency”) and of certain other financial incentives to for-profit entities and not-for-profit corporations to promote the creation and preservation of employment opportunities for residents of the County and development of economically sound commerce consistent with the County’s burdens and responsibilities as expressed above;

The state has not looked favorably on the proliferation of LDCs, however, their use continues.

As for the NLDC, at this point it appears that the two responsible parties have no interest in either dissolving the corporation or in removing the corporation from delinquent status by submitting the proper reports and following the required legislation.  Even the threat of censure has not been sufficient for the city council or the NIDA to take action.

NIDA: a pulse, but not full flesh

The board of the Newburgh Industrial Development Agency was the city council members, plus two appointees, until 2008, when an independent board was selected by the city council.  The NIDA board happens to be all male, with seven board members.  The attendance of the board for the past 12 months is as follows:

2010-2011 Bedrosian Curry Gulliver Maldonado O’Shea Penney Smith
9/1/10 X X X X X X
11/1/10 X X X X X X
11/15/10 X X X X X
12/20/10 X X X X X
1/27/11 X X X X X X
2/22/11 X X X X X X
3/21/11 X X X X
4/18/11 X X X X X
5/16/11 X X X X X X
6/20/11 X X X X
7/18/11 X X X X X
8/15/11 X X X X
PRESENT 75% 92% 17% 58% 83% 100% 92%

At the September 2011 meeting, attendance proved to be such a problem that three board members, the NIDA attorney Thomas Whyatt, three members of the Foundry Tenants’ Association (representing the public) as well as Consultant Teri Waivada, City Economic Development Director/Planner Ian MacDougall, a consultant, and recording secretary Kippy Boyle had to wait thirty minutes until an additional board member showed up so that a quorum would be made.

The ABO has declared that the NIDA is delinquent, and therefore cannot offer tax exemptions.  They share this particular dishonor with four other IDAs; they are on the more egregious list of having not complied for the past four years:

The current list of IDAs that have not complied with General Municipal Law Section 859 for 2007, 2008, 2009 and 2010 is as follows:

  • City of Oneida Industrial Development Agency
  • City of Newburgh Industrial Development Agency
  • Town of Erwin Industrial Development Agency

The agency has been working on achieving certification (with the reinstatement of the ability to offer tax exemptions) for the past four years, and at last week’s city council work session, Courtney Kain from the Planning Department stated that the agency should be certified “very soon.”

Until then, the public can access agendas and minutes of the NIDA meetings, and additional information about the agency, from its homepage.

The public can also attend the monthly meetings, although the NIDA does not permit any public comments.  While not a statutory requirement, the Orange County IDA affords the public an opportunity to speak at the end of its meetings.  Considering the impact that IDA projects can have on communities it would seem to be a breath of open government to allow such an addition to the agenda.  At the September 2011 meeting, the three members of the Foundry Tenants’ Association had the mistaken impression that they would be allowed to voice some pressing concerns.  This was vetoed by Mr. Whyatt.

Typically the number of attendees of these meetings can be counted on one hand, and it is difficult to grasp why these constituents may be seen but not heard.

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.