Letters on the $97 million in Garvies Point financing (debt)

Honorable Thomas P. Dinapoli, State Comptroller
Office of the State Comptroller
110 State Street
Albany, New York 12236
Dear Comptroller DiNapoli,

In a letter to the City Hall of the City of Glen Cove dated October 16, 2014, Deputy Comptroller Gabriel F. Deyo spoke at length about the refusal by the City and its leadership to heed the recommendations made to it by your office in a letter dated October 15, 2013. Some of the concerns from your office that prompted the recommendations that were later ignored by the City of Glen Cove include the city’s operating deficit, the lack of a rainy-day fund, and a high percentage of debt compared with revenues.

In September of 2015, your office also released a Fiscal Stress Report, with the purpose of warning local government officials and their taxpayers when fiscal data shows harder times ahead that could trigger tax increases, cuts in services, or other difficult results of poor fiscal-management. In that report, you listed Glen Cove among 15 municipalities deemed to be in “significant stress.” Even worse for Glen Cove, that classification showed the City was actively working against its best interests financially, considering that it moved from the “Moderate Fiscal Stress” category the year before.

On the evening of June 22nd, 2016, the Glen Cove Industrial Development Agency (IDA), held a hearing on the RXR Realty application for financial assistance. According to Newsday, the same City of Glen Cove that has been deemed by your office to be in “significant [financial] stress,” is now considering a plan to help fund a development plan with $97 million in bonds, and upwards of $120 million in both bonds and tax breaks.

I am writing to you and your office to ask for help. The City of Glen Cove has a proven track record of poor financial management, as communicated by your office. Your office has repeatedly flagged the City of Glen Cove for its poor or outright negligent fiscal management and performance, in ways that I or any other concerned citizen could only wish to convey. Now, the same City that refuses to address the issues that have brought it into the “significant stress” category in the Fiscal Stress Report released by your office is prepared to issue more than $100 million in bonds and tax breaks to a multi-billion dollar company. The Mayor consistently tells the public that the Tax Increment Financing (TIF) method brings no liability to the City and its tax payers. If that is true, then why don’t all municipalities utilize this? If that is true, then why doesn’t the developer utilize this? And if that isn’t true, then how can the public have faith in its public institutions when lies like these can be spread without any correction?

Your biography on the State Comptroller website says that you have “aggressively fought misuse of public resources, strengthened one of the nation’s public pension funds, and consistently spoken out against fiscal gimmicks, imprudent actions and government inefficiency.” State Comptroller DiNapoli, I write to ask you to please dig into this potential fiscal gimmick, speak out against these continued imprudent actions, and research the possibility of a potential fiscal gimmick. The City of Glen Cove is on a negative financial trajectory as pointed out by your office repeatedly, and I can only imagine how $120 million in bonds and tax breaks to a developer would exacerbate that even worse.

 

Truly yours,

Adam Ramadan

 


 

Honorable Thomas P. Dinapoli, State Comptroller
Office of the State Comptroller
110 State Street
Albany, New York 12236

Last September,  many of the citizens of Glen Cove were shocked and dismayed that the City of Glen Cove (specifically the Mayor and a majority of the City Council) voted to pass a budget that included a $3.5 million I.O.U. from the anticipated sale of the waterfront property. At that time, your office sent a letter to the City admonishing this type of budgetary practice.

Now, less than a year later, many citizens are again shocked and dismayed to find that the City  (circumventing the City Council) has proposed that the Glen Cove IDA (only four  appointed members with the Mayor as Chairman) issue a bond for over $97 million dollars on behalf of RXR (the contracted redeveloper of the waterfront property). What was once considered the redeveloper’s responsibility – the contruction and maintenance of the public parks and amenities –  is now to be funded by the city with this loan. The loan theoretically would be paid back with future tax revenue from the project.  In addition, the redeveloper is demanding exemption from sales, use and mortgage taxes worth an estimated $24 million and a reduction in property taxes by a “still-to-be-determined amount.”  I say “demanding” as they have gone on record as saying “the project won’t be built without the assistance.”

On June 22nd, the IDA had a “public hearing” on RXR Glen Isle Partners Application for Financial Assistance. The City’s attorney for the waterfront project gave what amounted to a 35 minute sales pitch, painting a very rosy picture but gave NO specific details about the financing. Each citizen that got up to speak was given 3 minutes for their comments.  NO questions were answered. The IDA claimed they would post answers on their website within 10 days.  However, the “public comment period”  for written comments ended on June 25th… ONLY THREE DAYS? (Shouldn’t it be more like 30 days?) In my written comment (which I sent via CERTIFIED MAIL) I requested that this $97MM bond be put to a referendum by the citizens of our city. This is just too grave a decision to be made by only FOUR people… to be decided with impunity.

The City has not yet conveyed the property to the redeveloper, so we have yet to see that $3.5 million dollars to close the budget gap. And now, the city is about to hand over nearly $125 million to RXR, in a sweetheart deal where the citizens will not see any financial benefit for some 30 to 40 years. In the meantime, we will be saddled with a $97 million debt, and more… a 10 year build out with heavy construction –  bringing more than 25 trucks in and out of our neighborhood several times every day, light and noise pollution, construction that has the very real potential of disturbing known contaminants and releasing them into the atmosphere as well as into Glen Cove Creek. Once it is built – we will have 1,110 more residences with upwards of 75,000 sq ft of office space and 25,000 sq ft of retail space. Upwards of 2500 more cars… All located on a dead end street with one way in and one way out, and  nowhere near public transportation. Our municipal services will be overburdened: our schools, the already taxed sewage treatment plant, water supply, and fire department (There will likely be a need for full-time, paid firefighters with proper equipment to fight fires in highrise buildings – where will the funds for that come from?). The increased (already horrible) traffic will impact not only the city but all the surrounding towns and villages as well.

Will it be be the panacea for Glen Cove that is represented to be?  That’s the $97 Million dollar question.

I hope you and others in the Comptroller’s Office will continue to shine a light on this city’s elected and APPOINTED financial decision makers and aggressively fight “misuse of public resources… and speak out against fiscal gimmicks, imprudent actions and government inefficiency.”

Thank you for your time and consideration.

Sincerely,

Amy Peters

cc:
Gabriel F. Deyo

Ira McCracken


 

Camille Byrne, Executive Assistant/Secretary
Glen Cove Industrial Development Agency
City Hall, 9 Glen Street
Glen Cove, New York 11542

 

RE: Comments on RXR Financial Assistance Application

Mayor Spinello often touts the waterfront project because it will return “blighted” land to the city tax rolls. By granting the $97MM financial assistance that RXR Glen Isle Partners has applied for, the city is giving away any potential tax benefit for the next 30-40 years.

City attorney, Michael Zarin, stated at the June 22, 2016 public hearing that the financing will be non-recourse to the city and thus the city bears no risk. However, there is an enormous amount of risk in this type of financing.

First, by granting tax abatements and using TIF financing to put $97MM of tax payer dollars towards the waterfront infrastructure, the city is subsidizing this developer. In reality, whatever taxes are paid by this developer (after all the tax breaks granted) will not come close to covering the city’s operating expenses to support the residents of the development. Other taxpayers will be forced to subsidize the expense of school, water, police, fire, and other costs associated with the increased population in the 1,110 new units and means taxpayers will end up paying their own share plus a share to subsidize Garvie’s Point.

Second, who will be the actual guarantor for the $97MM bond? If the IDA and Glen Cove are not “on the hook” to repay the lender, who is? The application from RXR Glen Isle Partners, LLC lists three parties involved – Posillico Partners, RXR Glen Isle Holdings LLC, and RXR Real Estate Opportunity Fund II. L.P. Yet, no financials for any of those entities have been included in the application. In the section requesting financials, the application states, “N/A – Newly Formed Entity”. If the entity borrowing the money and responsible for paying it back has no financials and no assets, how will it pay back the loan? Furthermore, what lender would lend millions of dollars to a business that has no financials to prove that the loan will be paid back?

Most people have heard the phrase “buy low, sell high” and try to pursue that philosophy when investing. The City of Glen Cove has done the opposite with regard to real property – Glen Cove buys high and sells low. In 2013, Glen Cove purchased approximately 2 acres for $1MM to build a new water well. That parcel, costing about half a million dollars per acre, is land-locked, not waterfront, and borders the Oyster Bay LIRR train tracks (further diminishing its value). The City is currently planning to sell the 52 acres of waterfront property for $15MM, which equates to about $288K per acre, 42% less than the $500K spent on the land purchased for the water well. In addition, the Doxey property of about 1 acre at Garvie’s Point was acquired through eminent domain by Glen Cove and the city promised to pay $1.3MM for that land. If that is the value for the city to purchase waterfront property, why turn around and sell the property at almost an 80% discount? It appears that the sale price already accounts for incentives to the developer and therefore no tax breaks should be granted.

It is extremely curious that earlier versions of the LDA (land development agreement) between the city and the developer had the price to purchase the land at about $25MM. The land was also originally required to be remediated to a level for commercial use. Over the last several years, the price of the land was reduced 40% to $15MM yet is being delivered at a higher standard, cleaned up for restricted residential. Yes, the remediation of the land has largely been funded by grants. However, most of those grants are 80/20 grants where the city has to pay for 20% of the expense when receiving 80% from the grant. In addition, the majority of grants are distributed as reimbursements after work is done. In those cases, the city has to lay out the funds, usually by borrowing money and paying interest on it before the grant reimburses the principle amount. This is just another example of how the taxpayers are taking on the risk and burden of subsidizing this project for the developer.

As I’m sure you’re aware, the mission statement of the Glen Cove IDA is “to promote, facilitate, and assist in the acquisition, construction, and improvement of industrial, commercial, cultural, and educational facilities that advance economic welfare of the community by job creation, economic activity, and prosperity for the citizens of the City of Glen Cove.” Nowhere in the mission is the purpose to increase residential development in the city. The state comptroller’s office assesses the productivity of all IDAs across the state. One of the key performance metrics of examined is “expenses per job gained”. In the most recent report released in June 2016, the 2014 average cost per job created across the state by IDAs was $3,965. Glen Cove was the second worst IDA in the entire state at a cost of $31,901 per job. If the IDA operating expenses remain flat and the waterfront creates the 222 new jobs stated in the application, the cost per job is still almost twice as much as the state average at almost $8,000.

Until the answers to all these questions are resolved and provided to the public, no public financing should be provided to RXR for the waterfront project.

Spread the Word!Share on Facebook
Facebook
Email this to someone
email