More transparency needed in public development deals

The Alms House

The Alms House

Public-benefit corporations, which have been around for hundreds of years, have never been so roundly reviled as they are today. Though they have in many cases richly earned their bad reputations, that doesn’t mean they can’t — and don’t — sometimes serve a useful purpose. Usually created by statute, these government-owned entities start out as having specific, narrow functions to serve a public good. But they often grow far beyond their original purposes, and because the usual governmental constraints are absent the possibility of corruption seems rarely distant.

“The Orange County Industrial Development Agency, with its mission to promote job creation and spur economic growth, has proved to be no slouch in creating its own jobs and stimulating the economy with some rapidly growing checkbooks,” began an August 9 article by James Walsh in the Times Herald-Record. The agency’s annual payroll has reached $457,430 as of last month, the paper said, more than triple what it was in 2010. But not to worry. The article said the Orange IDA, most of whose money comes from fees paid by companies promising to create new jobs, has more than ten million dollars in the bank. That’s the kind of bank balance that without constraints can invite fanciful conceits.

I hesitate to tell you the amount of the assets of the Port Authority of New York and New Jersey, the granddaddy of such entities.


In Ulster County, a sidebar explains, the IDA pays the county government $50,000 a year for administrative services provided by several county employees. According to its minutes, the Ulster IDA didn’t process any new inducements last year (it’s done two so far in 2016). The Orange County IDA, by contrast, processed applications from about 14 companies last year.

Monroe County executive Cheryl Dinolfo wants to shut down all the local development corporations, a related kind of public-benefit corporation, in her county. Their susceptibility to scandal and corruption is extraordinarily well documented, the Rochester daily paper The Democrat & Chronicle editorialized on August 16. The paper suggested other municipalities consider the same drastic remedy.

State comptroller Tom DiNapoli has been an avid watchdog of New York State IDAs which don’t fulfill their job-creation promises. DiNapoli and many others have been calling for “clawbacks,” or recapture, of undeserved tax benefits. New York State has standardized local IDA reporting procedures through use of a uniform tax exemption policy (UTEP), which provides a guide to the specific criteria by which financial assistance is provided. Ulster County is well above average in its codification of such efforts.


Transparency is essential to the development of public confidence in public-benefit corporations. Public benefits are not measured solely in terms of dollars. If the public is to believe that favoritism is not the crucial asset in securing contracts with government or non-profit agencies, then the public agency or corporation must specify as clearly as possible what benefits it is looking for and what criteria it will use in determining these benefits.

Now we go to a very recent case study involving the former county alms house at 300 Flatbush Avenue. Two years ago, Ulster County government formally transferred ownership of the 21-acre property on the Kingston-Ulster border to the Ulster County Economic Development Alliance (EDA), an agency pursuing economic opportunity whose seven members include three assistants to the county executives and four other designees generally favorable to him. The EDA hired local commercial real-estate agent Joe Deegan to try to sell the alms house and the surplus former county jail across town. Deegan went to work marketing the properties.

Deegan says he was given no more specific instructions. The EDA held no public hearings on the matter, and until the sale it conducted its discussions with Deegan only in executive session. Transparent this process wasn’t.

The county legislature successfully sought designation of the building as a historic property, something that may not initially have made it easier to sell. After considerable time, the EDA announced the sale of the alms house to RUPCO, Ulster County’s leading local non-profit developer whose mission is to create homes, support people and improve communities and whose vision is to create strong, vibrant and diverse communities with opportunity and a home for everyone.

RUPCO paid $950,000 for the property. EDA chair Julie Lonstein said that RUPCO was “expected to create 34 housing units in the historically significant Alms House building and 32 senior residences in a new building.” Some retail businesses, offices and other commercial components could be constructed. She said the property at 300 Flatbush Avenue would return to the tax rolls.

Approval for the transaction sailed through the county legislature over the opposition of the three Kingston legislators, David Donaldson, Peter Loughran and Jennifer Schwartz Berky, all Democrats. Their most vocal argument was that Kingston already had more than its fair share of affordable housing for the low-income population.

Donaldson said he expected the county-owned building at 300 Flatbush Avenue to be sold for housing, but not that kind of housing. “The fix was in…over a year ago,” said the outspoken Donaldson, who recounted an impromptu meeting about a year ago with RUPCO chief executive officer Kevin O’Connor, who told him “what he was going to do with the property…He was going to have affordable housing…and I said there was no way in hell I was going to support that. I really don’t think it should be affordable housing at this point.”

A week after the deal, two higher bids emerged, $975,000 from a Singapore investment firm and a million dollars from Kingston-based developer Mike Piazza. These are now backup bids should the RUPCO deal be derailed.


It’s my personal opinion that the deal for the alms house was honorable, and that both RUPCO and Deegan played their roles without a hint of corruption or favoritism. In fact, I believe that despite its present leadership in supplying affordable housing in Ulster County, Kingston could and should do more (there’s no space here to elaborate on that position). But I also believe that the complete lack of transparency that characterized the process constituted unacceptable governmental behavior. And I even wonder whether the alms house needed to be transferred from county government to its less encumbered vassal, the EDA, in the first place.

The state Office of General Services is no stranger to property transfers, leases, requests for proposals, and other tools of public administration. It is accustomed to complex transactions of all kinds. It’s also heavily bureaucratic, with all manner of endless budgetary delays, political intrusions and silly rules. We’re talking about New York State, after all.

But the enquiring reader should look at some of the processes that provide transparency, especially where big bucks are involved. Specifications can be tight, alternatives sophisticated and inclusive, process steps clear and measurable, goals for consummated deals involved. Its proposals, all written down in painful detail, can be contested in court if they’re not precisely followed.

The alms house didn’t need an enormously complex request for proposals (RFP). But it needed something — and it didn’t get it. What would the right balance of goals have been? Let’s construct a back-of-the-envelope hypothetical.

Sales price is the most important single goal. How about 50 percent? Compatibility with the neighborhood? Maybe ten percent. Demonstrated capability of the developer? Maybe another ten percent? Accomplishment of a public benefit (housing, economic development, number of jobs created)? Say 20 percent. The remaining ten percent could be awarded for the appropriateness of the site plan, projected energy savings, protection of historic elements, aesthetic considerations, etc.

You get the idea.

The fact is that none of this was done. The instruction to Deegan was: Sell it.

No wonder the bids that came in immediately after the RUPCO deal was struck were for slightly more money but contained few details.

The public benefits for the project include not just the amount of money bid. The time to think about and plan for a competition including these other elements is not when the envelopes are opened but when the RFP is prepared.

No transparency, no trust.

“If we have property that belongs to the county and we’re seeking the highest and best use, then we need to have a strategy,” Kingston legislator Schwartz-Berky is quoted in Kingston Times as saying. “It needs to be organized. This is a signal that it’s not.”


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