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).

The bond debt belongs with ESDC, not RIOC. By statute, RIOC cannot take on any debt....

Roosevelt Island resident Trevre Andrews followed the discussion between Mr. Farance and Mr. Polivy and asked Mr. Polivy:

Dear Mr. Polivy,

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.

Mr. Polivy responded to Mr. Andrews, Mr. Farance and the rest of the Roosevelt Island community in this message I received last Friday.

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.

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

Links to the supporting documents are provided in this post.

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.