February 1, 2012
DiNapoli: Actions of Ramapo Town Officials Highlight Need for LDC Reform
Taxpayers Could Be Liable for Up to $60 Million in Stadium Deal
Ramapo town officials took a risky approach to financing a minor league stadium through the Ramapo Local Development Corporation (RLDC), according to an audit released today by New York State Comptroller Thomas P. DiNapoli. As a result, taxpayers may be liable for up to $60 million.
"Local officials can and should nurture economic development opportunities in their communities, but they have an obligation to taxpayers to ensure that projects are realistic and financially viable," DiNapoli said. "Instead, Ramapo officials ignored red flags that the project numbers didn't add up which could adversely impact its finances for years to come. It is questionable deals like this that prompted my proposed reforms for the future use of LDCs by local governments."
Local development corporations, or LDCs, are private, not-for-profit corporations often created by a local government for economic development or other public purposes. LDCs are generally not subject to the same requirements and laws as local governments. The Comptroller's office has found several examples of local governments around the state improperly using LDCs to circumvent state laws or bypass oversight. DiNapoli has proposed legislation that would reform how LDCs can be used and give his office audit authority over LDCs.
DiNapoli's auditors found that the town transferred land worth $8.4 million to the RLDC after spending $27 million on improvements. The town then agreed to serve as a loan guarantor for bonds totaling another $25 million for the baseball stadium when it became apparent that the RLDC would be unable to obtain financing.
As a result, the town is potentially liable for $27.5 million in bond payments over the next five years, even though the stadium is estimated to generate just $7 million in revenues, leaving the chance of reimbursement doubtful.
Even though the RLDC has committed to reimbursing the town for debt payments – using profits from a separate RLDC affordable housing project – RLDC must first pay off nearly $30 million in the loans it took out to build those affordable housing units. The town based its actions in part on a faulty feasibility study which used outdated and incomplete data. Town board members failed to properly monitor the project, did not know the stadium cost or how it would be paid for.
In addition, DiNapoli's auditors found that Ramapo had operating deficits of more than $2.4 million in 2010 and has experienced cash flow problems.
DiNapoli's auditors called on the Ramapo Town Board to:
Town officials disagreed with the Comptroller's findings. Several issues related to the stadium's financing have been the subject of litigation. The town should submit a corrective action plan to the Comptroller's office within 90 days.
A copy of the complete audit can be found here.
A copy of DiNapoli's LDC report and proposed legislative reforms can be found at: http://www.osc.state.ny.us/press/releases/apr11/041411.htm