Lawmakers Tackle Local Corruption: Noteworthy or Nothingburger?

NYS Senate fails to rein in bodies you’ve never heard of that give away your money in backroom deals you wouldn’t like

“Without law, liberty also loses its nature and its name, and becomes licentiousness.” – James Wilson

Ed. Note: America is up in arms about a recent ProPublica exposé showing billionaires pay virtually no tax. Yet in Kingston and Ulster County, the local Democrat government is doing all it can to help multi-millionaire developers do likewise — and they’re asking the people of Kingston and Ulster County to foot the bill. Not content with the tens of millions in tax breaks and cash grants awarded to the developers, tomorrow, June 17, at 8 a.m., the Kingston Local Development Corporation continues its quest to gift valuable real estate to the Kingstonian, a luxury housing boondoggle that will be built almost if not entirely on the public dime and that has been riddled with conflict of interest since its inception.  

June 16, 2021

Kingston, NY – The New York State Senate has passed a package of bills designed to crack down on local, unelected bodies that pilfer tax dollars under the guise of economic incentives. But the measures appear to have more bark than bite.

Giveaways by Industrial Development Agencies (IDAs) and Local Development Corporations (LDCs) are granted at the discretion of local power-wielders with whom the average resident may be unfamiliar. With the decline in local journalism, their meetings may fly under the radar altogether.

In Ulster County, the IDA is already running rings around the proposed restrictions on grifting.

In Kingston, one major raid on the public purse currently underway would be affected by a new requirement that buyers of government property be publicly identified. But other proposed measures contain loopholes that render the new legislation toothless, and none addresses a glaring exception that allows for giveaways as long as they’re in one of the 82 parts of New York State that were once deemed Empire Zones in need of economic assistance.

Gigantic loophole escapes attention

The Empire loophole comes at the end of a lengthy decision tree that allows county executives to game the law by decreeing projects as “commercial” if they take place in so-called “distressed” areas. But under the law, even thriving boomtowns can be considered “distressed” as long as they were once designated an Empire Development Zone, a program started 35 years ago for parts of the state that were struggling at the time. By 2008, watchdog groups were calling for the program’s dismantling because savvy insiders were treating it like a personal piggy bank.

In Kingston, developers relied in part on the “distressed” Empire Zone loophole to justify a $30 million tax break for a luxury housing project. The $58 Kingstonian will be funded almost if not entirely on the public dime, is likely to net investors at least $100 million in profit, and stands in sharp contrast to a scourge of homelessness and displacement in Kingston, which now leads the nation in skyrocketing housing price increases. The Washington Post recently ran an article about the plight of long-time Kingston residents, including the handicapped, forced to leave their homes to make way for wealthy buyers.

What’s truly “distressing” about this absurd giveaway is the burden it will impose on Kingston and Ulster County via higher property tax bills or reduced public services and perhaps continued upward pressure on nearby housing prices — all of which will attract more coverage of the unfolding humanitarian crisis, complete with tent encampments, rising crime and images of disabled veterans in wheelchairs with nowhere to call home.

One bill from the desk of Senator Leroy Comrie, a Democrat from Queens, would require certain sales of government-owned property to be priced at fair market value, while another would require that buyers’ names be made public.

The FMV initiative ought to interest the people of Kingston, where someone who sits on the Kingston Local Development Corporation can be seen in this video clip of the May 20 meeting bemoaning the possibility that his pal might have to pay market price for a City-owned parking lot that is set to become part of the Kingstonian. At issue is whether the parcel would be appraised at today’s values rather than those that obtained four years ago, when the project started the approval process. The KLDC member, Paul Casciaro, is rooting for the developer’s pocketbook, not that of We the People of Kingston.

Sadly, this legislation contains an escape clause by purporting to ensure that “when land is transferred for less than fair market value, it is in the public interest to do so and the legislature retains oversight.” Given that the only oversight from the Ulster County Legislature and Kingston’s Common Council is to bend over backwards to accommodate real estate royalty, this escape clause renders the bill meaningless, at least in Ulster County.

Wouldn’t ethics training prevent this misbehavior?

Amanda Bruck, Executive Director of the KLDC, replied to a FOIL request that all members except one had undergone the ethics training required by law. But the ethics training apparently has little effect, because here is another clip with a KLDC member questioning why a firm agreement with the developers must be in place before the KLDC acts as transfer agent for the City-owned portion of the future Kingstonian. Such an agreement might prevent the developers from taking shortcuts, altering the project to benefit themselves, or even transferring it to someone else altogether.

Both Casciaro and the second KLDC member, Hayes Clement, are Kingston insiders. Casciaro, who runs an insurance agency, at one time serviced a large portion of the health insurance of City employees and still does some business with the City. Hayes Clement is a real estate agent who also sits on various Kingston commissions, is a former mayoral candidate, and is prominent in local Democratic politics.

The question of KLDC ethics seemed to bother contractor Joe McDole, who praised the ethics training he received and yet resigned from the board in part because he didn’t like “murky waters.” In this section of the March 18 KLDC meeting, you can hear him talk about an article in The Vindicator raising potential conflict of interest due to his business with the City, but he also complains about KLDC lack of clarity. Watch as Mayor Steve Noble cuts him off, apparently to prevent listeners from hearing further, ahem, clarity about his reasons for resigning. Earlier, in the same meeting, several members ask about potential individual liability, a concern that could be warranted given that the by-laws withdraw indemnification in the event of bad faith.

No loopholes evident at first blush: buyers of gov’t property to be named

Another bill from Sen. Comrie’s office, S4611, requires the identification of all beneficial owners — which means no more hiding behind the anonymity shield of an LLC. According to the press release, “there are still a myriad number of loopholes that Public Authorities, IDAs and the like use to keep the public in the dark… This type of opaque process only encourages corruption, self-dealing and sweetheart deals. Ensuring that all beneficial owners identities are disclosed should shine some necessary light on the process.”

The Kingstonian’s developers have insisted that investor identities be kept under wraps on grounds they are a “trade secret.” At the City Council vote on Aug. 3, 2020, City Assessor Dan Baker equated the privacy rights of a taxpayer claiming a STAR exemption with the investors’ right to privacy. But STAR exemptions are for middle- and lower-income homeowners, whereas the Kingstonian is a commercial project whose wealthy investors hope to make a killing on the public dime.

The Vindicator sent an email to Sen. Comrie’s office asking for clarification on whether a “beneficial owner” means real human beings, or whether an LLC would also qualify.

One hand pretendeth to take away, the other affirmeth business as usual

James Skoufis, a Democrat from Orange County, is arguably the loudest voice in Albany against IDA corruption. Why, then, does he offer an escape hatch that renders his bill meaningless?

Senate Bill S1656A would bar IDA aid for a company relocating within New York State, according to the press release, because “simply moving jobs from one part of New York to another creates no net benefit for state residents.” Sounds good, right? But then the bill defangs itself by adding that restrictions won’t count if the IDA determines the move would “preserve the competitive position of the project occupant in its respective industry due to physical, zoning, or logistical constraints at such project occupant’s existing site within the state.”

The Ulster County IDA recently gave the Romeo Kia dealership a $1M tax break to move from one side of town to the other — in this case from the City of Kingston to the Town of Ulster. It needed more space, said the owners.

In their application, the owners of Romeo Kia wrote that when their Chevrolet dealership moved to a larger site on Ulster Ave, sales and service business more than doubled. If sales and service business doubled, won’t the same happen with the Kia dealership? It’s obvious the owners would have moved the Kia dealership to the new site anyway, because it’s opposite their Chevrolet dealership and sales and service business are likely to double. And given the Ulster County IDA’s profligate nature, does anyone doubt it would ever pass up the chance to jump on the “competitive position” loophole?

One major criticism of so-called inducements is that the businesses would have moved there anyway, as George Mason University economist Matt Mitchell explains in this podcast with the Vindicator. The best proof there concerns the tax break for Amazon in Long Island City that local politicians and activists managed to block. Since then, Amazon has quietly bought up real estate in New York City, proving that the tax break made no difference.

Another reason for Kia’s move might be plans to clean up the ‘hood in advance of the Kingstonian’s well-heeled tenants. No doubt the wealth management offices will stay, but a car dealership clearly won’t do. With Jordan in firm control of the levers at the IDA’s cash-for-cronies vending machine, is it any surprise Romeo Kia got its “inducement” to move away from the “distressed” Opportunity Zone of wealthy, gentrified Uptown Kingston, with its Revolutionary-era stone houses and its Federal-era row architecture, to the commercial center that is Ulster Avenue?

The tourism loophole that isn’t closed

The press release accompanying Senator Kaminsky’s S2728 spells out the problem: “Developers of retail businesses such as car dealerships and self-storage facilities are receiving tax breaks through a “tourism loophole” that exists in the statute. The resulting tax benefits do not stimulate sufficient local economic growth or net economic benefit to warrant the disbursement of public dollars.” Then it spells out the non-solution: “This bill closes the tourism loophole by requiring both the local Chief Executive Officer and the agency board where the project is located to determine that the project is likely to attract a significant number of visitors from outside the economic development region and that the project will preserve or increase permanent, private sector jobs within the state..”

Run that by me again, please. You mean you’re going to insist that the same boards and county executives that give away the house determine that it’s okay to give away the house? Sigh…

The Kingstonian developers threw everything up against the wall to see what would stick, and in their application they spilled much digital ink praising the tourism value of their proposed moveable kiosks containing brochures on local attractions. I don’t know about you, but I don’t recall traveling outside any region to visit a shelf of brochures.

Third party, neutral analysis

The bill also requires a third party, supposedly neutral, cost benefit analysis.

The problem here is that a neutral third-party cost benefit analysis will say whatever the person signing the check wants it to say. In the case of the Kingstonian, an economic development company called NDC produced a so-called neutral third party cost benefit analysis that found the luxury housing project would cause a loss to the community of $3.4 million. That’s right, a $3.4 million loss. But that report was buried, and the only reason it can be found here is that someone leaked it. The report’s unwelcome findings led to a hurried meeting among the developers, the NDC, the IDA and county economic development officials, and by the end of the week the NDC released a new and improved analysis finding a benefit of $256,000.

IDA chair James Malcolm said later that his only concern was to find “common ground” and craft something “that everybody could live with.”

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