On December 6, The Newburgh Advocate received several documents in response to a Freedom of Information Law Request made to the New York State Authorities Budget Office regarding the Orange County Industrial Development Agency’s $500,000 grant to the Newburgh Armory Unity Center. Despite the fact that the transaction is illegal in multiple ways, all the players involved continue to look the other way and there has been no regulatory action apart from a limp report issued by the ABO.
It was back on June 24 that I first asked about the propriety of the proposed OC IDA grant in this post, “Can Orange County IDA give Armory $500,000?” In that post, I wrote that there are two main barriers to such a grant, according to the ABO, in that there is no statutory authority for IDAs to do this and that there is a “civic facilities prohibition” that has been in effect since 2008 and specifically prohibits the provision of financial aid to nonprofit civic facilities such as the Armory.
On July 18, I posted this Open letter to the Orange County IDA, I reiterated these two issues, in addition to a statement from the State Comptroller’s Office that “IDAs cannot give gifts/grants of their own monies.” I also asked the OC IDA to get an opinion from the State Comptroller on whether the grant is legal.
On July 25, 2011, the post Orange County IDA justifies grant covered the OC IDA meeting of July 20th at which the Chairman Jim Petro presented the board’s justification for the grant, quoting a section of N.Y. GMU. LAW § 852:
It is hereby further declared to be the policy of this state to protect and promote the health of the inhabitants of this state and to increase trade through promoting the development of facilities to provide recreation for the citizens of the state and to attract tourists from other states. The use of all such rights and powers is a public purpose essential to the public interest and for which public funds may be expended.
However, when asked to respond, the ABO clarified that the passage above is modified by §854, which limits the types of financial assistance industrial development agencies can give. (For the full explanation, see the post.)
At their August 17 meeting, the Orange County IDA made some technical changes to the grant, now calling it a “project expenditure” instead of a grant, and while the original plan for the grant had been to give the funds to the Armory to cover such expenses as personnel or other “soft costs” (since philanthropist Bill Kaplan’s foundation would be paying for the “hard costs” of construction, renovation, etc.) that aspect of the grant had changed, too. Now the grant would only be covering “hard costs” such as “construction, reconstruction, and improvements of the Newburgh Armory Building, or to furnish, equip, and maintain the building.”
Additionally, the structuring of how the money is given to the Armory changed–instead of giving the money directly to the Armory nonprofit (as originally planned) the IDA would reimburse receipts from vendors up to the yearly allotted amount of $100,000 for five years.
It is not clear how these superficial alterations, though, except the IDA from the civic facilities prohibition, for example, or any of the other ways in which this grant is not legal (no statutory authority, can’t give grants of its own money, etc.) Another lesser question I raised in the post on the August 17 meeting was whether there should have been a public hearing, since the law indicates that IDA projects of financial assistance in excess of $100,000 must have one.
What’s happened since then
On October 17, 2011, the ABO issued a Special Report on Industrial Development Agency Grant Awards to Private Entities. In it, the ABO examines grant awards given by 29 IDAs, including the Orange County IDA. While the report gives a good introduction to some of the relevant legal issues, it falls short in making definitive statements about whether or not these expenditures are legal, instead hedging statements with modifiers such as here: “Such awards would appear to be inconsistent with the ABO’s reading of General Municipal Law” (emphasis added.)
Also, at the conclusion of the report, the ABO closes with a milquetoast recommendation that the IDAs might possibly want to think about, if nothing else is going on:
The ABO does not question the intentions or motives of boards of directors in making these funding decisions. The purpose of this report is to raise, as an issue, how IDAs direct their money to community projects and private entities. As a result of this report, the ABO suggests that IDA boards undertake a thorough review of their organizations’ enabling legislation, missions, and financial assistance policies to make sure that all activities in which they are engaged are statutorily appropriate and mission-driven.
This is disappointing, to say the least. The mission of the ABO is, among other things, “[i]nvestigating complaints made against public authorities for non-compliance or inappropriate conduct,” and their powers and duties, among other things, are
- Enforcing compliance with statutory requirements, including publicly warning and censuring authorities for non-compliance and recommending the dismissal of officers and directors.
- Investigating and acting on complaints concerning the failure of a public authority to comply with State law.
- Issuing reports of its activities, findings, analysis and recommendations.
Why would the ABO shy away from making a definitive legal statement, recommendation, or regulatory action of enforcing state law, which is one of its powers and duties?
The Untouchable Sacred Cows
With the Armory Grant, there are multiple sacred cows involved that I believe prevent public criticism of this grant, no matter on how many levels it is illegal. Instead, we must bow down and accept that these saints know best, even if it’s breaking the law, because to raise the slightest objection is to render oneself a persona non grata.
- Bill Kaplan, the millionaire philanthropist, who offered to match the $500,000 grant and even offered to double it to $1 Million if the OC IDA would do the same (Mr. Petro deferred.) Mr. Kaplan is Newburgh’s most prolific benefactor, and while he is friendly and affable, who would want to provoke his wrath? I asked Mr. Kaplan why the Armory/OC IDA wouldn’t contact the State Comptroller Thomas DiNapoli’s Office for an opinion on this, but he said the IDA told him it was fine.
- Deirdre Glenn, the executive director of the Newburgh Armory Unity Center, formerly executive director of Newburgh’s Habitat for Humanity. Ms. Glenn is another Newburgh legend. However, her saintly acts have not meant that she is incapable of making mistakes. For example, she pressured the city to give Leyland and Habitat a $300,000 loan at a time when banks refused to make such a loan. The city went ahead, despite dissension by Coucilwoman Mary Ann Dickinson, and a few years later, when the loan was heading toward default, the city ended up writing off $150,000 of the original loan. I do not believe Ms. Glenn or Mr. Kaplan have any particular interest in whether the OC IDA grant is legal or not, so long as they get the money.
- Jim Gagliano, and, by association, the FBI. Mr. Gagliano was profiled in the New York Magazine love fest article, “Welcome to Newburgh, Murder Capital of New York,” from September 25, 2011. He is the supervisory FBI agent for the region, and also coaches basketball at the Armory on Saturday mornings. He showed up at a city council meeting when the contract with the Armory nonprofit was being considered, although he did not speak. With the local FBI head a blind supporter, who is going to trample on toes and quibble about the intrinsic nature of industrial development agencies promoting economic development?
- The children. When in doubt, invoke the children. It happens all the time, and this case is no different.
- The gang members. In the Orange County IDA attorney Philip Crotty’s letter to David Kidera, head of the ABO, in response to the ABO’s report mentioned above, Mr. Crotty writes that “[t]he Orange County IDA is doing its best to create jobs for our people young and old, whether they are gang members, community college graduates, four-year college graduates, or laid-off employees in need of a fresh start.” This is quite extraordinary.
- The tourists. In the OC IDA’s correspondence and in statements made at meetings, a repeated justification for the grant is that it will generate “tourism” which will, in turn, presumably generate “economic development.” However, the numbers given at the July OC IDA meeting by Glenn and Kaplan seemed grandiose in terms of what the tourism/economic impact would be, and there was no justification for the numbers, and also no binding commitment to the IDA that these numbers would actually be met. This runs counter to initiatives and tightening of regulations both by Governor Andrew Cuomo and State Comptroller Thomas DiNapoli to ensure that expenses and projects run by IDAs actually deliver the benefits and impacts they say they will–or else.
Who’s doing the grilling?
The ABO has been thorougly informed of this situation but, to date, has taken no further action other than the report mentioned above. I have also been in touch with the State Comptroller’s office (with whom Mr. Petro, in conversation with me a month or two ago, would not give an answer as to why he would not just contact them directly.)
Perhaps there will be better luck with Attorney General Eric Schneiderman, from whose office I recently received an acknowledgment dated December 2 regarding my complaint.
