Update On Roosevelt Island Development Bond Debt - RIOC Has No Obligation To Repay Original Bonds To NY State According To RIOC Audit Committee Chair
Image of Bond Debt From Painependant
In previous posts last November, Roosevelt Island Residents Association (RIRA) Planning Committee Chair Frank Farance questioned whether there were long term bond obligations owed by the Roosevelt Island Operating Corp (RIOC) to agencies of the State of New York. Mr. Farance wrote:
In the prior issue of the WIRE and on the Roosevelt Islander Blog, my letter suggested as much as a $400 million liability for RIOC. I was wrong. I've looked into the supporting paperwork and it appears that almost a BILLION dollars are due to UDC (Urban Development Corporation, now named Empire State Development Corporation - ESDC). According to the Revenue Allocation Agreement of August 3, 1988:...Roosevelt Island Operating Corp (RIOC) Board Member and Audit Committee Chair Howard Polivy answered Mr. Farance:
There are some very basic misunderstandings in Mr. Farance’s recent letter to the Wire. Let’s start at the beginning. The New York State Urban Development Corporation (UDC) was conceived in 1968 primarily to build state-subsidized housing projects. UDC is now doing business as Empire State Development Corporation (ESDC).Roosevelt Island resident Trevre Andrews followed the discussion between Mr. Farance and Mr. Polivy and asked Mr. Polivy:
The bond debt belongs with ESDC, not RIOC. By statute, RIOC cannot take on any debt....
Dear Mr. Polivy,Mr. Polivy responded to Mr. Andrews, Mr. Farance and the rest of the Roosevelt Island community in this message I received last Friday.
I appreciate the information you provided to the Roosevelt Island blogger but I believe we need some more clarification particularly in light of the numerous failing municipalities across the country and questionable financial practices that continue to be ongoing inside and out of New York City. The issue of the island budget is immensely important to homeowners and residents on the island and without our scrutiny and attention to detail many of us are not convinced there are enough checks and balances on RIOC and the state to give everyone a clear picture of the finances.
If the bond debt used to develop the island doesn’t belong to RIOC why is RIOC making any effort to pay it back?
Can you direct me to where I would find the specific terms of the bonds used to improve the island?
Would residents who have bought condominiums on the island retain ownership after the RIOC lease of the island is up and if so what is their responsibility to pay off any remaining RIOC obligations?
Thank you, I appreciate your time in answering my questions.
The debt created when Roosevelt Island was developed was issued by, and remains the responsibility of, the Urban Development Corporation (now ESDC, the Empire State Development Corporation). RIOC financial responsibilities to its related state agency, ESDC, are strictly limited, and specified in the Revenue Allocation Agreement. Specific "taxes" and "rents" are designated by mutual agreement to flow directly to ESDC and do not appear on RIOC's books. The only funds payable from RIOC arise as surplus after normal Operations are provided. This means that RIOC is, first and foremost, responsible to serve the development and operating needs of Roosevelt Island. Only after funds are not needed to serve its community operations is it permitted to send funds off to ESDC. Since no one can be sure that an operational surplus actually exists until after the responsibility to provide the enumerated community services is discharged, no net payments are anticipated until the Master Lease terminates.Links to the supporting documents are provided in this post.
RIOC, an independent political subdivision of the State of New York, does not have any portion of the original UDC debt. Since RIOC's limited responsibility to ESDC is contingent, both as to amount and timing, it does not appear on the balance sheet.
Howard Polivy
Member, Board of Directors, RIOC
Chair, Audit Committee
A webcast of the most recent RIOC audit committee meeting is here.
UPDATE 12/13 - Audio webcast of RIOC Audit Committee December 7 meeting is below.
21 comments :
That's exactly how I read the Agreement and was never really convinced by Frank why he had to make an issue out of this. Nothing in there was reason for concern. Moneys that are explicitly outlined in this agreement go to the ESDC. Nothing more, nothing less. None of these sources will really ever dry out so there will always be something to pay them.
What does happen to condo ownership once the lease ends and the Island reverts to the city? Is this spelled out somewhere?
I also emailed Mr. Polivy today with some additional questions that fall along the lines of what Frank had asked. I want to be clear that my motivation here is just to get an understanding of the entire budget of the island. Three years ago, I think many of us would have just said, "Eh, what could possibly go wrong," but with rotten books in many institutions, over leveraged investments, and things that are mysteriously "off the books" because of semantics, all with leaders who drop everything and run when there is a problem I think it is our responsibility to ask these questions and get clear answers. I don't even think we have determined there is a problem yet, there is just a lack of clarity. I don't think this is a problem that Mr. Polivy created, but so far he seems to be the only one trying to explain it. I think this is the responsibility of all RIOC board members and I wish they would be asking these questions instead of us.
Mr. Polivy,
I would appreciate if you could answer each one of my
questions separately.
Could you please provide a list, or direct me to a list
of Specific "taxes" and "rents" are designated by
mutual agreement to flow directly to ESDC and do not appear on RIOC's books?
Based on your response what you are really saying is RIOC
is not making and does not plan on making any payments to ESDC until the Master
Lease terminates, correct?
But
then you say that Since RIOC's limited responsibility to ESDC is contingent,
both as to amount and timing. What is RIOC’s responsibility to ESDC and
what is it contigent on? Is it contingent on whether or not community
operations are served, and if so who determines if community operations are
served, ESDC, the state, RIOC, the residents?
Following that line of thinking what do you anticipate
happening after the Master Lease Terminates? Will the ESDC have any legal
authority to collect any debt owed?
If they do not have legal authority to recollect the debt
then are you saying no future interaction with ESDC will be required by the
island or any resident on it?
I appreciate your time and thoughtfulness helping us
understand this.
Frank, I am really trying hard to understand your concern but either we are reading different documents or we are interpreting them in different ways. The sources of money that are used to pay the ESDC are spelled out in detail. There are no other clauses that make the RIOC responsible for anything besides whatever is left after paying operational costs shall go toward the debt payments. You keep quoting the passages that mention the interest rate but what does that prove?
I think Mr. Polivy has been stating that the RIOC "will never be responsible for paying directly/indirectly this debt/liability" a couple times now. Oh, and I entirely understand why he doesn't owe you any further explanation. Your style and tone is really not helping.
The concern comes when 60 years down the road ESDC takes RIOC to court and argues the operational costs are paid for and they want some return on their debt. And maybe ESDC hits some hard times sooner than 60 years down the road and needs to start recalling that debt earlier and takes this issue to court or to the state legislature. There are many operational costs that a court might see as in excess of what is necessary. These costs ultimately effect the value of the properties on the island and that is what everyone should be concerned about. Apartments in bankrupt cities with minimal services and a lot of debt are worth less. Even the perception of debt can affect these values.
I see. Well, we do have the legal document that spells it all out. Do we have to fear anything? Does the RIOC have to fear anything? In the end it is the ESDC who has to start the ball rolling but I don't think we should live in fear because of that. Is there any reason why all of the sudden we have to look at this closer? It looks like the risk lies with the ESDC. I am not a lawyer, though, and as always a court will decide if it has to go that far.
Do you have any source of information that actually back up your fears on how this is all going to go down? We all know about the Agreement between the RIOC and the ESDC. What else are you using to come to such conclusions? How do you know that the moneys that the ESDC is already getting from the RIOC is not sufficient. You seem to focus on the "extra" money that the RIOC has to give up after paying operational expenses (which there is and will be any). It seems there is a lot of guessing with some "glass half empty" mentality at play here.
YetAnotherRIer, I consistently get the impression that you want us to turn away from understanding potential RIOC issues. To paraphrase you, you have a rosy "glass full" approach.
We know that leases and such need to have a life of at least 30 years, which is why Rivercross needed to extend its ground lease to get a $50 million mortgage (Rivercross had less than 30 years on its ground lease, Mr. O'Conor has reported on this previously). Many of the residents of the WIRE buildings have been aware of these kinds of advance timings because of the ground lease renewals for their buildings. That's the way it has been explained to us by real estate attorneys and RIOC/DHCR/ESDC.
You say "You keep quoting the passages that mention
the interest rate but what does that prove?", but the interest rate tells us how much the debt/liability is increasing each year. Mr. Polivy might indicate the RIOC Board's position is RIOC isn't going to pay off the debt/liability, but what happens to it? I grows precisely at the interest rate, as described in the documents.
Furthermore, I recall that RIOC has had a surplus in its budgets recently ... wouldn't that surplus (income exceeded expenses) be the kind of thing that would be applied to this debt/liability? It seems like RIOC isn't following their agreement.
Finally, I don't understand why Mr. Polivy continues to maintain that certain debts/liabilities are kept off RIOC's audited financials.
The only reason why I keep posting this is because your arguments are not convincing enough. And all you do is repeating the same arguments over and over again. I am unable to follow you and therefore disagree with you that we have a potential problem on our hands. Polivy gave his arguments and they are in line with the agreement. Everything else is rhetoric and numbers maximized for effect. SInce neither you nor I are versed enough to interprete the laws that would guide us to resolve this problem maybe the RIRA should ask somebody to do some pro-bono work and go over this agreement with all of us.
I keep pointing to the provisions, Mr. Polivy does not. I don't understand why you feel Mr. Polivy's arguments are better, yet he provides no citations or substantiation. You say "Polivy gave his arguments and they are in line with the agreement", yet each time I disprove his statements (read: NOT in line with the agreement), you ignore that. For example, Mr. Polivy has stated that the amount does not continue to grow, yet I've provided excerpts and citations that point to the ongoing interest.
Likewise for yourself, you never disprove any of my points, you just say, "Why worry?". I then go on to explain why we should worry, and your response is "I'm not convinced".
However, others understand the concerns (e.g., Trevre above).
I'm sorry, I don't believe I'll ever convince you. Should I still respond to your comments?
The thing is that you just seem like you want to bust balls. When it comes to RIOC Board members, you always seem to be opposed to what they are doing. If there is an argument, you're always on the other side. The complaining is endless with you. You even complain about street vendors. Come on Dude, get a life already... or just run for the Board again.
roosevelt, maybe you only notice the complaints. I've supported Board members in a variety
of ways, too. Maybe you missed my posts around the time of Hurricane
Irene, I was speaking about the RI CERT (community emergency response
team) and why it is important. I've supported and volunteered in that organization
since 2006 -- an organization that is lead by Mr. Polivy. Mr. Polivy is well aware my criticisms are well-intended. Ditto for my compliments to Mr. Shinozaki (who generally has good ideas/analyses).
I avoid the polarized framework of "either you're with us or you're
against us". There is a time for compliments, and a time for criticism.
If we lived in another town, we'd have no problem complaining and
blogging about the mayor, the trustees, the budget, and property taxes, even though they involve fellow residents.
Here, we've been brainwashed by the constant rhetoric (e.g.,
the WIRE) that we distinguish between residents and non-residents: only
residents can do good (i.e., we should never criticize them otherwise it will hamper so-called "democracy" efforts) and
non-residents can only do bad.
For example, a couple issues ago in the WIRE it was complaining about the *non-resident* RIOC staffer (who must be blamed because he is a non-resident) regarding the elimination of the senior Shoppers Bus.
Really, had the RIOC Board done their job and read the agreement, i.e., committed a half hour of reading to this important decision of the Board that will affect us for the next several decades, then they would have easily discovered the problem. One might ask: what's so special about having residents on the RIOC Board if they feel uncomfortable getting their hands dirty reading a document? Certainly, we'd never give a Pass to a non-resident board member (hey, you wanted to be on the board, we expect you to do board-quality work).
Which gets back to my long running complaint, not just about RIOC but RIRA too: we have double standards for residents and non-residents.
If you consider local governments/public-entities elsewhere, you'll see that the kind of complaints I raise are commonplace.
Your concern is based on your own interpretation of the agreement. The things you are worried about are not spelled out and are speculations. My interpretation is different. Yes, there is probably no way for us to consolidate our ideas and thinking about this. It's just your all-knowing tone that grates on me and makes me comment on this.
And here you have my total support. There are a lot of things that are not going right on this island. BUT... Yelling and bullying, though, is not getting anybody anywhere. There were quite few a things you've done as the RIRA president, for example, that made me steam. The way you dealt with the results of the transportation study, for example. Or that one incident when "Blue Beard" got in trouble by the PSD for taking pictures. You are full of great ideas but you seem absolutely unable to let things that go against your ideas into your consideration.
My name is Roozevelt, spelled with a 'z'. And, ok - I can definitely see your points about Residents & Non-Rsidents. I can also see your point about a time to compliment and a time to complain. It's just that you come off sometimes like you know everything about everything. I can see your passion for our wonderful island, and that's why I suggested you run for the Board again. This way, you can work on the issues, instead of taking so much time and space writing on this Blog, sometimes coming off as if you are insulting people. By the way, I hope I'm not doing the same thing here.
My name is Roozevelt, spelled with a 'z'. And, ok - I can definitely see your points about Residents & Non-Rsidents. I can also see your point about a time to compliment and a time to complain. It's just that you come off sometimes like you know everything about everything. I can see your passion for our wonderful island, and that's why I suggested you run for the Board again. This way, you can work on the issues, instead of taking so much time and space writing on this Blog, sometimes coming off as if you are insulting people. By the way, I hope I'm not doing the same thing here.
Whether you agree with his conclusions/interpretations or not on a particular issue, Frank is doing a public service to Roosevelt Island residents by bringing previously unreported information to the attention of the public.
As a result of his efforts, RIOC has and will be providing answers to questions that are of interest and importance to many people who live on Roosevelt Island in my opinion.
Thanks for that well written expalnation. I think the reason the other people you speak of, who know about this stuff, are residents of Rivercross (some of them RIOC Board Members) and they are only concerned with their Building's i$$ue.
Can someone please tell me the name of the ballet teacher in the Sports Center in 1988? Thank you
I think her first name is Parsla and her last name began with "V".
Parsla Vintere
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