“There was a concerted effort to cut out all comment on this,” Aidan Corish, a Sag Harbor Village trustee, said of a barely averted vote to create a local development corporation at the June village board meeting. “It’s disturbing. We were one vote away from basically giving over financial borrowing authority to an unelected board in perpetuity.”
What is a local development corporation? Not many people know, and neither did Mr. Corish, which is why he said he was surprised to see the 31-page action item attached to the agenda for the June 11 meeting. In short, a local development corporation is subsidiary to the local elected government but can issue debt for that government to use.
Ed Haye, the deputy mayor, described such a corporation is “a not-for-profit affiliate of the village.”
“There is no such thing as a simplistic definition,” said Bob Plumb, a village trustee, “and that’s part of the problem. They’ve been used for many different reasons. There are some good things about them, but also some dangerous things. If we’re going to have one, it needs to be specifically tailored to a project and to this village. The worst part for me is that it takes the future out of the hands of the voters and the board of trustees. They can
select their own projects, these seven people. I was dumbfounded.”
The seven members of the proposed local development corporation, named the Sag Harbor Local Improvement Corporation, would be the same as the members of a capital planning advisory committee created by Mr. Haye in April: Mayor Thomas Gardella, Charles Bruschi, the village treasurer, Grainne Coen, a planning board member, Nathiel Egosi, owner of the Sag Harbor Inn, Gregory Ferraris, a former mayor, and Mr. Haye, along with Susan Mead, co-president of the nonprofit Sag Harbor Partnership, who is not part of the capital planning committee.
While both Mr. Haye and Mayor Gardella took responsibility for what they said was an error of process, by placing the local development corporation on the agenda, both men defended the concept and said an upcoming workshop, scheduled for Monday afternoon at 2 in the Municipal Building, would address the criticisms of Mr. Corish and Mr. Plumb, and introduce the method of funding village projects to the public. Mayor Gardella scheduled the workshop after he heard from Mr. Corish that he was uncomfortable with having to vote on the funding mechanism before he knew enough about it.
The split in the board clearly frustrated Mayor Gardella. “This is turning into a political football and that’s not what I wanted. I see my main job responsibility as bringing people together to solve problems. People want to see the people they elected work together and solve problems.”
A 2011 report by Thomas DiNapoli, the New York State Comptroller, said local development corporations increase “the risk of waste, fraud or abuse of taxpayer dollars or assets.” They do not get audited by the state as the village government does, and the board of the local development corporation is not elected by the public. The comptroller found that they were a tool used to avoid the restrictions of the state constitution and local laws on incurring debt. There is no voter approval on the actions of local development corporations, no competitive bidding, and no limit to the amount of debt they may raise. A paper by Kenneth Bond, a professor of state and local government finance law at Albany Law School, called them “an alter ego of the local government” but one that acts without the restrictions of the government.
Mr. Haye pushed back on the idea that the local development corporation would have unfettered control over village properties. “The L.D.C. doesn’t own anything, it can’t do anything with village assets without village authority,” he said. “It will give us flexibility to look at alternative ways to do things for village residents and the village.” He cited two village assets he said were in disrepair: the Sag Harbor Fire Department Museum, and the Municipal Building. The local development corporation would allow the village to finance improvements to either property, which could then be used in part for commercial purposes, providing an income stream to the village. A regular tax-exempt bond would not allow for that use, he said, as it can only be secured based on tax revenues, not future profits of a business.
Whether or not Sag Harbor residents want to see a portion of either building commercialized is an open question, which will surely be part of the debate on the need for creating a local development corporation.
“The problem is people are afraid. So, what happens is, nothing gets done,” said Mayor Gardella. “It’s okay to vet an idea and ask questions and try to expose pitfalls, but I’m not going to sit in this office on my hands because of fear. I get it, people have concerns. The L.D.C. has to be in lock step with the village government. If it’s not, it won’t work. I’m not going to set it up unless it is.”
The path to the local development corporation vote was short. The village, seeing big engineering projects on the horizon that it couldn’t finance with its cash flow, started talking about capital planning this past winter. Mr. Haye created the capital planning advisory committee to advise the village board with an April resolution. In May, Mr. Haye asked to employ Harris Beach, a law firm, at $650 an hour, to help advise the committee. By June, a week ahead of the trustee election, there was an action item to create the local development corporation, but it was not written by Liz Vail, the village attorney. Mr. Corish said neither Harris Beach nor the capital planning committee succeeded in their advisory missions.
“I reached out to the office of the state comptroller. He is very against L.D.C.s and sees them as a vehicle to get around local finance law,” he said. “There could be advantages to a very limited L.D.C. for a single project, but this L.D.C., as described, can do just about anything forever.” When Mr. Corish asked if the bond counsel for the village, Hawkins Delafield & Wood, L.L.P., could come answer questions about the development corporation at the work session, he said Mr. Haye “didn’t think it was a good idea, and that Harris Beach would answer all of our questions. That I found equally disturbing.”
