Press
Advisory
A press conference on the steps of
city hall on Thursday, November, 1st, will bring together good government,
community and business leaders from all over the city to object to the proposed
restructuring of the NYC Economic development Corporation-a move prompted by
the finding that the quasi-governmental agency had broken the law while
lobbying in favor of the Willets Point development. The press conference, led
by Willets Point United and South Bronx Unite will focus on
the illegal lobbying and the outrageous decision of EDC to grant tens of
millions of dollars in tax payer funds to FreshDirect. The presser will precede
a city council hearing on the merits of the EDC reorganization. The hearing
will be held at 250 Broadway at 1:00 pm.
Where: City
Hall Steps
When: Noon
Date:
November, 1, 2012
Subject:
Protesting the Restructuring of NYC EDC
On July, 3, 2012 the Attorney
general of the State of New York issued a finding-pursuant to a three year
investigation-that the NYC EDC, and its partner the Flushing Willets Point
Corona Local Development Corporation, had violated the law in the lobbying
effort to get city council approval of the 62 acre redevelopment of Willets
Point. The AG found that the EDC had used the local development corporation led
by former Queens Borough President Claire Shulman as an illegitimate front
group, masquerading as a community based organization.
In this illegal lobbying scheme, EDC had
funneled $450,000 in tax payer generated
funds to the LDC to conduct the campaign to get the project
approval-money that has yet to be restituted back to the tax payers. Even more
ominously, EDC then proceeded earlier this year to award the development rights
to a newly constituted Willets Point plan to a partnership composed of the
Related Company and Sterling Equities. The latter firm was a founding member of
the local development corporation that illegally colluded with EDC in the
lobbying for the Willets Point development.
In awarding the rights EDC also
gifted $200 million worth of property that the city had bought from panicked
Willets point landowners back in 2008-land that then Deputy Mayor Lieber had
assured the city council would be fully paid for by any developer that was
selected for the Willets Point project. So in essence, Sterling Equities
participated in an illegal scheme that corrupted the land use review process
and mislead the city council and has now been awarded, by its co-conspirator
EDC, development rights and $200 million worth of property.
This is how EDC operates, unethically
and illegally, outside of any system of checks and balances. Now, having been
cited for illegal lobbying, EDC wants to restructure itself into two separate
entities so that it can make an end run
of state law and continue to lobby!-and to do so by creating a sham
corporation that makes a mockery of the alleged separation.
The restructuring would allow the
agency to accrue to itself even greater power than it currently exercises, and
given the way that EDC has operated over the past ten years, this bodes ill for
communities and small businesses that have suffered while mega real estate
deals have been promoted with little regard for the collateral economic and
environmental damage that they generate. Characteristically, these deals have
been sweetened by huge tax payer subsidies that are given to well-connected
real estate developers-inducements that are unavailable to the unconnected small
businesses.
Willets Point
United will be joined by South Bronx Unite, a community based organization that
is fighting EDC’s outrageous use of taxpayer money to subsidize FreshDirect’s
proposed move from Long Island City to the South Bronx. The FreshDirect deal is
characteristic of how EDC operates against the public interest by excluding
local community voices from development decisions, disregarding environmental
impacts on already overburdened neighborhoods and subsidizing the son of a
billionaire hedge fund operator to unfairly compete against local brick and
mortar grocery stores.
Given the manner in which EDC has
operated, it should behoove the city council to examine the ways in which the
agency’s scope of activity and overall unfettered power can be reined in-and
not expanded as the agency is proposing. From the eviction of wholesalers at
the old Bronx Terminal Market and the outrageous subsidizing of FreshDirect to
the illegal lobbying over at Willets Point, EDC has not operated in a
transparent manner or in the overall public interest. It is time that the city
council devised ways to make it more accountable.
Policy Background
All local development corporations are
incorporated pursuant to the New York State Not-For-Profit Corporation Law, §
1411 ("N-PCL § 1411"), which absolutely forbids any such corporation
from engaging in any attempt to influence legislation. The New York City
Economic Development Corporation ("NYCEDC") has operated since 1961
as a local development corporation. The NYS legislature deliberately restricted
the activities of economic development entities, which it intended to
incorporate pursuant to N-PCL § 1411; and it obviously did so in the public
interest.
N-PCL § 1411, which pertains to local
development corporations, was established by the legislature with the plain
intent of capturing entities such as NYCEDC that engage in economic development
activities. N-PCL § 1411 lists the "exclusively charitable or public
purposes" for which a local development corporation may be operated. Those
purposes are those of the present NYCEDC. The post-merger NYCEDC intends to
carry out substantially the same purposes, while adding a lobbying capability
that is unlawful under the NYCEDC's present structure pursuant to N-PCL § 1411.
If the proposed re-structuring
proceeds, it will result in a perverse circumstance in which the future NYCEDC
performs functions of a local development corporation (including functions of
NYCLDC, which is incorporated as a local development corporation), while not being incorporated itself as
a local development corporation. And it will do so, in order to add a lobbying
capability that is prohibited to local development corporations. Such corporate
gymnastics deserve very close scrutiny.
In establishing N-PCL § 1411 to capture
entities engaged in economic development activities, the legislature
deliberately separated such entities from other Type C not-for-profit
corporations. A very significant distinction which the legislature deliberately
imposed, is that economic development entities incorporated pursuant to § 1411
are absolutely prohibited from engaging in any attempt to influence
legislation.
The fact that the legislature included
this restriction for local development corporations but not for other Type-C
corporations indicates that the legislature thought it important to separate
political and legislative activity from the kind of activities undertaken by
local development corporations. This conclusion is supported by the
quasi-governmental status of local development corporations. (Local development
corporations, unlike other Type-C corporations, are initiated by the
government.)
Given such a privileged quasi-governmental
status, it is plain that a restriction on lobbying is in the public interest.
The local development corporation occupies a privileged "insider"
status that gives it a political advantage. The legislature clearly intended
that this privileged insider status not
overwhelm alternative opinions regarding development initiatives; and so, the
legislature imposed the prohibition on lobbying as a reasonable counterweight
to the local development corporation's privileged insider status.
Now NYCEDC prefers to throw off that
counterweight, which was deliberately established by the legislature and
intended to apply to economic development entities such as NYCEDC. NYCEDC may
prefer to lobby, but doing so would be contrary to the intent of the
legislature. Arguments advanced by NYCEDC – that being able to lobby will
somehow increase the efficiency and effectiveness of NYCEDC as it pursues
development projects – discount the fact that the inability to lobby is
intended by the legislature as a deliberate counterweight to NYCEDC's
privileged insider status, and therefore serves the public interest.
Given that the activities and
purposes of the pre-merger NYCEDC and the post-merger NYCEDC are virtually
identical, it is clear that the public interest would be adversely affected and
the spirit of N-PCL § 1411 contravened, by enabling the post-merger NYCEDC to
conduct privileged activity while also engaging in lobbying.
It is unnecessary for NYCEDC to
lobby. Development projects and land deals are routinely approved under the
present structure, without NYCEDC lobbying. To the extent that any lobbying is
appropriate, it can be carried out by staff of the Mayor's Office without
contravening N-PCL § 1411 and without circumventing the intent of the
legislature.
Although the alleged purpose of the
restructuring is to "separate" the functions of the post-merger
NYCEDC from those to be performed by a local development corporation, there is no intention on the part of the people
responsible for the restructuring to actually implement any such
"separation". In fact, they intend to unify – not separate – the
functions of the post-merger NYCEDC and the newly formed NYCLDC.
NYCEDC is pretending to re-structure
in order to "separate" itself from activities of any local
development corporation (and therefore, be able to lobbying without violating
state law), but the contract between the two “new” entities makes clear that
there will be no actual "separation", and that the "separation"
is illusory – a charade, to justify circumventing the lobbying prohibition
To the contrary, the contract states
that the staff of the post-merger NYCEDC will interact with the staff, "if
any", of NYC Land Development Corporation– thus allowing for the
possibility that NYCLDC will have no staff of its own, and that the post-merger
NYCEDC will be the NYCLDC staff; and the contract states that the post-merger
NYCEDC and NYCLDC will jointly own all work product. Such terms shatter the
notion of any purported "separation" between the post-merger NYCEDC
and NYCLDC, as they essentially unify
the operations of the post-merger NYCEDC and NYCLDC.
What EDC proposes to do is to create a
shell corporation-fully beholden to the parent EDC. The proposed restructuring
of NYC EDC not only doesn’t serve any public purpose, it effectively does the
opposite: allowing the agency to obtain even greater power than was envisioned
under NYS law will subvert the public good and allow the agency to continue
unfettered in its seemingly endless effort to aggrandize the interests of the
most powerful real estate firms in NYC.
