Tuesday, March 10, 2009

Report From RIRA President - RIOC Budget Questions, Forced RIRA Resignations, Lego Robots and Resident Softball League

Image of March 2009 RIRA Common Council Meeting

RIRA President Frank Farance sends the following report to Roosevelt Island residents. This message was also published as the RIRA column in the 3/7/09 Main Street WIRE. Mr. Farance addresses issues on the RIOC Budget Process (Inadquacies?), the forced resignation of RIRA Members from the RIOC Board by Governor Patterson for no good reason, a Lego Robotic competition and a resident softball league.
1. Serious Questions About RIOC's Finances. Members of RIRA's RIOC Budget Analysis committee has met a couple times. We're delayed because RIOC is not providing the information we requested. We will continue to meet. About two weeks ago, RIOC announced that they overstated their cash position in year 5 (2013-2014): they were off by a factor of two, leaving them with $19 million in the bank and negative cash flow at the end of this 5-year, $72 million spending spree — not to mention, a staff increase of 50% (2001-2008). (This assumes Southtown 7-9 won't be built in the next couple years, which seems likely because the developers are choosing not open Southtown 5-6 for poor market conditions.)

Aside from our information requests, questions remain:

Question #1: When do the NPV (Net Present Value) payments run out for Southtown 5-9 (an answer for each building)?

Question #2: Assuming Southtown 7-9 will not be built and capital expenditures (e.g., maintenance) will continue at its current rate of $8 million per year (as per RIOC President Steve Shane who said we should expect $5-8 million of annual capital expenditures indefinitely), are we able to continue spending indefinitely at this rate? If not, when does the money run out?

Question #3: With the same assumptions as Question #1, except that Southtown 7-9 are built within the next 5 years, are we able to continue spending indefinitely at this rate? If not, when does the money run out?

Question #4: Assuming 0% inflation, unchanging costs, and assuming we have to spend another $72 million 20-25 years from now as the present generation of infrastructure wears out, what will RIOC's finances be at that point? Will we be able to pay for these large capital expenditures? What is the plan for paying these in the generation afterwards in 40-45 years from now?

Question #5: What are the cash flow and cash balance projections for years 6-10?

In short, I'm very concerned that we're going to run out of money — possibly as soon as years 8-10. I think we've gotten here via poor decision-making over the years. First, in the 1990's Governor Pataki said that Roosevelt Island should be "self-sufficient", which means that we pay City, State, and Federal taxes (of which very little comes back to us) and we pay for the Island's upkeep (pot hole repair, AVAC maintenance, etc.) through our rents or our merchant's rents. Second, in the past ten years, RIOC negotiated sweetheart deals giveaways for the Octagon and Southtown developments, which crippled the Island for future income. Third, rather than annual payments (e.g., WIRE and Manhattan Park buildings) RIOC agreed to Net Present Value (lump sum) payments — NPV itself isn't bad if you have the competent financial management and financial discipline (which RIOC hasn't done well on either count).

Really, if DHCR mandates this kind of long-term budgeting and reserve planning for Mitchell-Lama buildings throughout New York State, why does RIOC pretend that this kind of financial management is impossible? Why don't the RIOC ex-officio members from the State Budget Office and DHCR complain about RIOC finances? Doesn't the State have an interest in seeing the long-term viability of RIOC's finances?

2. RIOC and Governor's office force members to resign from RIRA. Jonathan Kalkin said "I have just been informed that Governor Paterson's office, upon a second review of my file and the file of possible new board members, has stated that I must regretfully resign my position as a RIRA Council Member. On the original review I was not told to resign. Since I have been informed, I officially and regretfully resign from my seat on the Roosevelt Island Resident's Association.". I asked Steve Shane for an explanation and he said that RIRA sometimes provides advice to RIOC and, thus, this might affect a board member's fiduciary responsibility. My immediate reaction is: Hogwash! Could you explain how RIOC Board Members' decision-making is affected? Isn't RIOC's argument the same one against John F. Kennedy becoming the US President: because he is Catholic, he might take direction from the Pope and not the public. It also reminds me of the December issue the RIOC employee who was harassed and lost his work because he joined RIRA — RIOC and the State seem to have a punitive approach to people involved in RIRA. But let's get back to the worrisome issue of RIOC Board members and their fiduciary responsibility: why do they show no interest in the long-term budget and long-term financial viability of RIOC? Shouldn't this be their most fundamental concern? Shouldn't they be asking the same questions about RIOC's finances?

3. First Lego League. Through the Roosevelt Island Youth Program, Michael Acevedo and I will helping Island kids build Lego-based robots this spring for a robot competition. I'll have more details soon, see firstlegoleague.org.

4. Adult Softball League. I used to run the Roosevelt Island Softball League (slow pitch, 6-12 arc) in the 1990's and I'm thinking about it this year. We need at least 3-4 teams. We'll decide on co-ed or separate men/women teams depending on the turn out.


Anonymous said...

"Isn't RIOC's argument the same one against John F. Kennedy becoming the US President: because he is Catholic, he might take direction from the Pope and not the public."

What a childish argument. I think the RIRA and the RIOC are much more interconnected (and rivals in some way) than the US government and the pope. Please, if you want to be taken seriously think of better arguments. This was really bad.

Anonymous said...

So what do we do to join the softball league or enter a team?

Anonymous said...

Wow! So now RIRA has a RIOC Budget Analysis Committee that REQUESTS information. I wonder, does Frank Farance go to other Corporations requesting to see their Financials so he can analize them. Does he go into City Hall requesting to see their books. I'm sure the Mayor would be glad to let him have whatever he wants. NOT!

Anonymous said...

Seems like since Mr. Farance was not approved as a Board Member, he has issues. And to think, this is who we voted as RIRA President. Whew!


RIOC is a NY State Public Benefit Corporation not a private sector corporation. It is perfectly appropriate and advisable for an independent set of eyes to examine the budget document particularly since it is we residents who will be impacted adversely by any errors or mistakes in its preparation.

Though one might disagree with him at times, Mr. Farance should be congratulated for his efforts, not ridiculed.

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