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Elsewhere: Thompson, Clinton, Spitzer

Mon, 12 Mar 2007 17:00:00 -0400

Another group opposing Eliot Spitzer's health care plan is contacting voters in bulk.

Spitzer criticized the state Senate's spending plan for health care.

The IRS is looking into whether there was some "misinterpretation by some state legislators" on how to account for certain work-related expenses.

There are still seats left for a fund-raiser featuring Bill Clinton on March 18.

Mario Cuomo will give the opening remarks at a DMI conference about the middle class on April 2.

A writer on Urban Elephants wonders if Rudy Giuliani would grab more executive power than George W. Bush.

A committee in the Council Council voted to ban metal bats for high school sports.

The state legislature is missing some information about legislation introduced in 2005.

And above is a picture of City Comptroller Bill Thompson, who criticized the Department of Education at a conference today with Schools Chancellor Joel Klein looking on.

-- Azi Paybarah

Yankees, Mets Beat the IRS

Wed, 06 Dec 2006 16:25:17 -0400

Following up on The Politicker's tip that the Mets-Yankees bond issues won The Bond Buyer's deal of the year award at a black-tie gala on Tuesday night, we called up the editor-in-chief, Nicholas Chesla, to ask why.

There seemed to be a demonstrated degree of cooperation among different levels of government in these two transactions. We had a New York City agency, the [Industrial Development Agency] involved, New York City itself involved, New York State making contributions, and the teams themselves. It was a really major public-private partnership. These deals had been on the drawing board for a while. We also liked the fact that all the parties involved had been able to get these private letter rulings. They had been able to chart their way through all the issues, both legislative and political, to get these deals done.

The reason the private letter rulings--which are letters issued by the IRS telling an individual party whether what they plan to do is legal or not--were so important is that the tax code generally discourages municipalities from issuing tax-free bonds (which are significantly cheaper to pay back) to finance stadiums.

For the Mets and Yankees deals, however, the city successfully made the case (with the help of a lobbyist or two) that using payments made by the team in lieu of taxes would not be the same thing as having those teams funnel private money through the city.

The I.D.A., which received the Bond Buyer's award, had not nominated itself for deal of the year. That nomination came from the bond underwriters (including Citigroup and Goldman Sachs) and three or four bond insurers, Chesla said. The geniuses behind the bonds are said to be two lawyers, Joel Moser for the Mets and Bruce Serchuk of Nixon Peabody for the I.D.A.

This, of course, has everything to do with The Observer's story today about public subsidies for private entities.

- Matthew Schuerman

IRS Haunts Stadium Deals

Fri, 20 Oct 2006 14:09:17 -0400

The IRS is planning to revisit the financing scheme behind the new Yankees and Mets stadiums because, according to sources cited by The Bond Buyer, the arrangements looked "too much like a private loan." The feds approved those deals earlier this year, concluding that the payments in lieu of taxes that the sports teams would use to pay off the bonds resembled general taxes. Dan Steinberg, research analyst at Good Jobs New York, told us that it is unclear if the proposed regulations would have prohibited the stadium bonds had they been in place earlier (thay almost certainly won't affect them now, just other similar projects around the country), but that yesterday's action "is a reflection of the ambiguities in the IRS decision and how difficult it is for the IRS to make the case that PILOTS are the same thing as tax revenue."

What's the big deal? The new regulations will drive to the heart of the question about whether cities should be allowed to use their power to issue tax-exempt bonds for the benefit of privately owned sports franchises (which don't even make it into the World Series, to boot). And the new rules may imperil Forest City Ratner's deal to finance the Nets arena.

-Matthew Schuerman

Q&A with Marty Connor

Wed, 16 Aug 2006 17:00:00 -0400

[UPDATE: In the time since this interview was first posted, an Appellate Court has upheld the decision to allow Ken Diamondstone to remain on the ballot against Marty Connor.]

Now that his initial legal challenge to Ken Diamonstone's place on the ballot has been rejected, State Senator Marty Connor is waiting for an appeals court ruling before deciding what to do next.

Here, in question-and-answer format, is what he had to say about that -- and about his meager-looking campaign filings, which Connor blames on a flaw in the Board of Elections software.

What is the status of the case right now?

Still waiting for a decision from the appellate division.

Anything about the proceedings that is significant?

The best he can claim for contacts with the district is that he moved in last November first, that's his claim. Of course that's what's disappeared. I've lived in the district for 36 years so we uesd to call that carpetbagging. Not 36 years, but 9 months, and there's a lot of evidence, most of the evidence was after November 7 and you know, that's not election law technicality its state constitutional provision. It's kind of hard to look, you know, when you're trying to check where somebody's residence is when the person hasn't had a driver's license in thirteen years and they've been driving around.

What has happened so far in the appeal?

We filed briefs and argued the appeal yesterday. Theres two legal issues: one is the legal issue about the burden of proof as to a change in domicile; the other is the way the court have misapplied the facts. I mean, you know, this is lawyer stuff, it's in legal briefs.

What happens should you lose the appeal?

I don't know, I'll have to see what they say. I mean, Diamondstone's lawyer told me they're definitely going to Albany with it, if he loses. Just like they were definitely going to the appelate division, I mean they were definitely goign to appeal, before we got the decision. I think they expected to lose, but you know, I have to take it one step at a time. I'll see what the appelate division does. If I don't win there I'll see what their decision says and whether I think it's substantial or ought to be reviewed.

A question on your latest campaign filing...

Oh please! The more money you put in, the more the negative goes. It's their software, like I said, I've explained that before, its been doing this for three years. I'm not the only one I know lots of other people the same thing's happened to. Borough President Marty Markowitz, with his state campaign committee he's been trying to clear up for a couple of years, and my treasurer has been working three years on it. The State Board of Election keeps throwing up their hands. We did a whole audit about a year and a half ago to show that like theres no, you know, that everything's accounted for and they keep saying 'it's a software problem, it's a software problem.' Well, it's their software. I'm aware of somebody who filed for the first time like in July, brand new committee, and it showed a $30,000 negative balance. So, I mean, I'm rather annoyed, in fact, I was just talking to somebody about it. I'm really annoyed with the State Board of Elections. It's obvious to me that they have, and I don't know enough technology to know if its like flaws in the disk you happen to get, because they give you the software disk but I know it's hit a lot of people, there doesn't seem to be anything you can do about it.

What about the Paychecks, Inc. expentitures on your filing?

Its staff. It's the legal way your supposed to do a staff, not the way Ken Diamondstone does it. Paychecks takes out taxes, unemployment. That's what the law requires. You don't just pay kids $10 an hour and call them consultants. It's the legal way to pay staff, not the under the table, off the books way to pay staff. You should call up IRS and ask them how it should be done. Maybe they'll call Ken and tell him how he's not doing it right. Plus unemployment, the state requires you take out unemployment for full time employees.

So you have a full time campaign staffers?

I have a campaign staff member. We even pay his health insurance too. Because I'm a responsible employer, not a fly-by-night landlord.

—Nicole Brydson

Yankees’ New Roster

Mon, 12 Jun 2006 11:45:24 -0400

The Post reports that the Yankees have hired two Washington lobbyists to get the approvals they need from the IRS and the National Park Service before building a new ball park.

-Matthew Schuerman

BUILDing Blocks

Fri, 30 Sep 2005 18:33:00 -0400

The Real Estate got a copy of the instructions for the old form that BUILD filed with the IRS last year, and they read pretty much like the new ones. An applicant is only supposed to list grants it has received—or been pledged, if it is using the accrual method of accounting—in trying to prove that it has broad enough public support to qualify as a “public charity.”

“The organization’s public support component will be based on the support the organization has received to date,” the old instructions read.

The IRS gave BUILD a “pending” nonprofit status, according to the organization’s lawyer, Sharai Erima. The status is not unusual, according to tax specialists, as it takes years for an organization to attract broad enough support to convince the IRS that it deserves “public charity” as opposed to “private foundation” status. The latter organizations, which survive on an endowment or receive regular infusions of cash from a few donors, pay excise taxes on investment income.

BUILD and Forest City Ratner deny that any money has changed hands or pledges have been made. Erima told The Real Estate today that he included Forest City’s name and the $5 million figure because under the Los Angeles airport community benefits agreement, one of the few such agreements in existence, a single corporation—Los Angeles World Airports--is paying for the job training at the rate of $3 million a year.

During subsequent negotiations with Forest City Ratner on the Atlantic Yards CBA, Erima said, “We found out that they would not be willing to be the sole funder.”

Erima was admitted to the New York State bar in 1999. His registration, under his old name, Sharai Elegba, is currently delinquent, which means that he cannot legally practice law--although that does not mean he cannot fill out tax forms.

When asked about the registration status, which was confirmed with the court system’s Office of Court Administration as well as the Appellate Division, Erima said, “I have no further comment.”

--Matthew Schuerman

A Cool $5 Million

Thu, 29 Sep 2005 17:20:00 -0400

For a long time now, opponents of Forest City Ratner’s Atlantic Yards project said that a grassroots group supporting it, BUILD, was astroturf.

BUILD, which was formed for the express purpose of supporting Atlantic Yards, helped create a community benefits agreement, signed in June, that spelled out how many jobs and affordable apartments at the project's basketball arena and 16 office and apartment towers should go to low-income or neighborhood people. The agreement also stipulated that BUILD would be in charge of the job training program.

Which made skeptics wonder, was this a "community benefits agreement," or a "BUILD benefits agreement"?

Now comes word from Develop—Don’t Destroy Brooklyn that BUILD has been given $5 million by Forest City Ratner. Not just word, but rather persuasive evidence (digitized for your convenience), in the form of an application last year to the IRS, on which are scrawled the words “Forest City Ratner Companies - $5 M.”

When asked whether his organization had received any money from Forest City Ratner, BUILD President James Caldwell told The Real Estate, “Absolutely not.”

The $5 million, he said, was a reference to the amount BUILD expects to receive in the next two years. Not that BUILD actually expects to receive $5 million.

“At no time have they said they are going to give us $5 million,” he said. “They would never be in business if they just threw around $5 million.”

BUILD’s lawyer, Sharia Erima, said that the IRS form asks new organizations to project budgets two years in advance, and to list anyone who contributes more than 2 percent of that budget. Out of an excess of caution, he says he listed Forest City as the likely donor.

“It’s a best guess estimate.,” he said. “If you have ever dealt with the IRS, you know you have to be very careful.”

The application, dated Dec. 30, 2004, is an outdated IRS form that was revised in October 2004 and for which the IRS website no longer has instructions. Nor was the IRS press office able to supply any readily. However, the instructions (PDF) for the replacement form specify that in listing large gifts, an organization should consider “amounts from completed tax years only” (PDF) in calculating the budgets.

DDDB spokesman Daniel Goldstein said BUILD had an inherent conflict of interest whether it had received money or not. “If they weren’t paid, then they were promised to be paid,” he said.

The community benefits agreement states, “The Developers and BUILD will seek and secure adequate public and/or private funding for this initiative.” (PDF p. 7) Yet the IRS application lists no one else other than Forest City Ratner as a potential contributor. Does that mean that BUILD’s “best guess estimate” estimates that this job training program won't inspire a lot of contributors?

Again, Erima said he was being cautious in filling out the form. He said he met with the IRS and went over the application and the agency approved it.

We have a call into Joe DePlasco, but Juan Gonzalez, who had the scoop in today’s News, quotes the Forest City Ratner spokesman as saying that the company has given BUILD free office space but has promised no specific amount of cash in the future. Gonzalez also quotes City Councilmember Letitia James, who represents the neighborhood and who has fiercely opposed the project. She said it "raises questions of conflict of interest" because BUILD directors are also members of the Community Board that will potentially review decisions regarding the project.

Caldwell is listed on the application as receiving a salary of $125,000. But he said that amount was what he expected to receive and that nobody was getting paid now.

“We have volunteers,” he said. “We haven’t been paid for the last 20 months. People don’t think that black people volunteer—I don’t know why—but we do have some people in the community who saw this as a good thing for the future and they are volunteering to make it happen.

“I've been working 18, 20 hours a day on this thing. I just have good credit. Like anybody else in this country, when I need money, I borrow it.”

As for the public relations firm that is representing them, Caldwell said he didn’t know who was paying them.

“The Terrie Williams Agency just called us up one day and said they would be doing our p.r.,” he said.

--Matthew Schuerman

Eleventh-Hour Inspiration

Thu, 01 Sep 2005 17:28:00 -0400

In the rush to get things done, the Empire State Development Corporation gave "final authorization" to $1.65 billion in low interest Liberty Bonds for the Goldman Sachs headquarters near Ground Zero on Aug. 15. Now, in the enviable way that our state government works, it is time for the public hearing, scheduled for Sept. 7.

The IRS tax regulations which govern the Liberty Bonds (Title 26, Sect.147(f)2.B) say that a bond issue needs to be approved "after a public hearing following reasonable public notice"--in other words, one cannot put the cart before the horse.

An ESDC spokesperson told The Real Estate that the Aug. 15 "final authorization" was not the last step of the process because the panel still needed to "designate" the bonds. Presumably, the ESDC could still pull the plug on the project if enough people object Sept. 7. Of course, the ESDC is appointed by the Governor, and the Governor in the interim has trumpeted the importance of bringing Goldman back.

One watchdog group, Good Jobs New York, is mobilizing to stop what seems pretty inevitable.

Their bond-watcher-in-chief Bettina Damiani has written to our sister site, The Politicker:

"Despite the hearing notice (in six point font in the New York Post's classified) some Politicker readers may not know there's a public hearing for the proposed subsidy to Goldman Sachs for its new headquarters in Battery Park City."

In the year since the building was first announced, the cost has grown to $2.4 billion. In the week since the final deal was reached, expectations for jobs have become more modest, or at least more tentative.

The Aug. 23 press release asserted that Goldman "is committing to maintaining more than 9,000 employees" in Manhattan, and that the investment bank "anticipates creating approximately 4,000 new jobs by 2019."

The bond description released today states that the new building "will provide offices for approximately 7,400 employees and allow room for growth of up to 3,600 additional employees over the course of 20 years. It is anticipated that Goldman employees will be located in other Lower Manhattan locations as well."

- Matthew Schuerman