Does Kahn/FDR Memorial Site Control Designation Violate the NY State Public Authorities Act? Does It Even Matter To RIOC?

Image of Kahn/FDR memorial from NY Times

In a post earlier this week on Public Authorities School for RIOC directors, I referenced a series of email exchanges between RIOC President Steve Shane and myself dealing with the issue of a possible violation of the Public Authorities Act by RIOC Board members in approving conditional site control of the southern portion of Southpoint Park to FERI for the Kahn/FDR memorial. If that is in fact the case, it might lead to the revocation of such approval. Below is the full October 21 exchange.

My initial inquiry to Mr. Shane:

Can you explain why the Public Authorities Act does not apply to awarding conditional site control to FERI for the southern portion of Southpoint Park as RIOC asserts it does for the vacant Main Street retail stores?

The awarding of conditional site control to FERI is certainly a disposition of real property, In fact, the value of that property is much, much larger than the value of the vacant Main Street retail stores and the proposed site control to FERI has at least the appearance of the sort of non-competitive transaction, in terms of land value and support of local politicians, that gave rise to the Public Authorities Act in the first place. I think that the Public Authorities Act may require RIOC to issue a RFP to develop the site as a park in accordance with the Roosevelt Island General Development Plan and allow other potential park concepts to compete with the FERI FDR memorial plan before executing a site control agreement with any party.

I understand you have asserted that conditional site control for FERI at Southpoint Park is no different than that which was given for both the Octagon and Riverwalk Developments. However, the difference between these two prior instances of site control for Roosevelt Island real estate is that the Public Authorities Act was not in force at the time of these transactions. It is now in force and should apply to FERI and the Southpoint Park site.

In addition, the Public Authorities Act exception RIOC has carved out for the renewal of existing RIOC owned tenant leases does not apply to the site control of Southpoint Park by FERI because FERI did not, and does not, have an enforceable legal right to the land prior to the execution of a valid conditional site control agreement. If FERI had any such right, there would have been no need for the RIOC Board to consider this item at the 9/11 Board meeting.

You have previously indicated that any significant change to the Tennis Club/Sportspark would require a RFP pursuant to the Public Authorities Act. Therefore, why does the Public Authorities Act not require a RFP for the southern portion of Southpoint Park as well so that other park proposals may fairly complete with FERI?

I am reminded of a conversation we had regarding the 1974 memorandum not binding the City and State to the FERI FDR memorial. At that time you dismissed such an idea as not being relevant. Apparently it was relevant since FERI has subsequently sought site control of the property, something you and they wrongly thought they already had.

Similarly, it may be that the 9/11 Board action approving site control for FERI without abiding by the requirements of the Public Authorities Act is not valid. I would think that prior to the execution of any conditional site control agreement with FERI, fiduciary obligations and responsibilities compel RIOC management as well as the RIOC Board members to have legal counsel review whether such action violates the Public Authorities Act.I hope you agree that in this instance, it does not matter if one is for or against the FERI FDR Memorial. If in fact, the award of site control to FERI does violate the Public Authorities Act, the award should be revoked. If it does not, then the designation can proceed.

Mr. Shane responds:

Even in your blood lust, you must admit that there is a difference between a private activity (canal land development, stores (even when in the public interest as service stores), tennis facilities, etc.) and a public purpose to be carried out by a not for profit and to be operated by the government. The effect of the 1974 agreement may be subject to legal determination, but certainly is not an illegal construct. Land value is not a consideration. I get that you, in your infinite wisdom, have decided that the FDR Memorial is not what you want for Roosevelt Island and that it offends you mightily that others might hold a contrary view. So it goes.

I reply:

So, it is the official legal opinion of RIOC management that the Public Authorities Act does not apply if a non profit is given control of land owned by a NY State Public Benefit Corporation such as RIOC. Is that correct? Upon what authority, other than your own opinion, is that based? Has RIOC counsel given a legal opinion on issue?

No blood lust here - just a private citizen trying to hold NY State employees accountable to the public. Nothing wrong with that - is there?

I have not heard back yet from Mr. Shane.

I also sent this email message to the resident RIOC Board Members, Assembly Member Kellner and State Senator Serrano together with the above email exchange with Mr. Shane.

Yesterday, I sent an inquiry to RIOC President Steve Shane inquiring of him why the Public Authorities Act regarding the disposition of RIOC owned real estate does not apply to the conditional site control agreement awarded to FERI for the FDR Memorial at Southpoint Park during the 9/1 Board meeting. I fail to see why a RFP is required for a tenant trying to lease one of the Main Street vacant retail stores but a RFP for other park developers is not required before FERi is allowed to control the southern portion of Southpoint Park. Mr. Shane replied that the reason why Public Authorities Act does not apply to FERI is that it is a non profit organization. That does not make any sense because non profits and their supporters can exert the same type of undue political influence on State corporations and Agencies as commercial ventures which the Public Authorities Act is intended to prevent. I asked him upon what his opinion is based but have not heard back from him with his answer.

Before the conditional site control agreement with FERI is executed, I respectfully request that members of the RIOC Board ask RIOC's legal counsel, or perhaps the State Comptroller or another independent legal counsel, to determine whether the 9/11 act of the RIOC Board of Directors awarding conditional site control to FERI for the FDR memorial without issuing a prior RFP was a violation of the Public Authorities Act. I would also request that this issue be raised at the 10/23 RIOC Board of Directors Meeting. This issue is not a matter of whether one supports or opposes the FERI FDR memorial. It is about following the law and the proper decision making process on Roosevelt Island.

I may be wrong. Perhaps there is some exception that excludes the Public Authorities Act from applying in this situation. But, it should at least be reviewed, the law complied with and fiduciary obligations obeyed. As NY State Attorney General, Elliot Spitzer issued this 2006 opinion letter advising of exceptions to the Public Authorities Act applying in the disposition of real estate by NY State Authorities. Spitzer wrote:

... As outlined in the legislative history, these requirements were intended to help ensure that authority property would be disposed of fairly, at an appropriate value, and without being steered towards particular purchasers.

The statutory examples of the types of purposes that satisfy the public health, safety and welfare exception are also instructive as to the intended scope of this exception. The specific examples listed - the prevention or remediation of a substantial threat to public health or safety, the creation or retention of a substantial number of job opportunities or substantial source of revenues - indicate that this exception was intended to be narrowly construed....

Nothing about a non-profit exception to the Public Authorities Act. Does it appear that the Kahn/FDR memorial boondoggle at Southpoint Park fits any of those narrow exceptions listed in the former Attorney General's letter to you?