New York State Attorney General Eric Schneiderman reached an agreement with the New York City Economic Development Corp. and two other not-for-profit organizations that ends what Schneiderman called illegal lobbying in connection with development projects at Willets Point in Queens and Coney Island in Brooklyn.

According to an announcement by Schneiderman, an investigation found that though local development corporations are barred by statute from any lobbying, the EDC, Flushing-Willets Point-Corona Local Development Corp. and the Coney Island Development Corp. lobbied the New York City Council to win approval of their favored projects.

No fines or penalties were assessed.

Schneiderman said the three organizations lobbied the City Council on behalf of the two development projects, both of which Mayor Michael Bloomberg endorsed and the City Council passed.

Proposals call for a retail and entertainment district at Willets Point, now the site of the so-called Iron Triangle cluster of auto-body shops, and resort-style use at the Coney Island amusement district. The investigation also found that EDC, which serves as the city’s economic development arm, worked behind the scenes in the lobbying activities of the other local development corporations.

Schneiderman said the three organizations created the appearance of independent “grass-roots” support for the projects by concealing their participation in community organizing. These steps, he said, included ghost-writing letters and op-ed newspaper columns and preparing testimony for unaffiliated community members.

The EDC said in a statement that it “intends to undertake a restructuring, the primary effect of which will be to allow the company to remain a not-for-profit corporation, but to cease to be a local development corporation. This restructuring should be seamless from the perspective of third parties and should have little to no impact on the day-to-day operations of the company.

“It will, however, enable the company to operate freely and legally in areas that are necessary and appropriate for it to achieve its economic development mission.”

Under state law, LDCs have unique powers to receive real property from municipalities without appraisal or public bidding, to enhance local development projects. While many types of not-for-profit corporations are subject to some form of lobbying restrictions, LDCs are subject to a total ban on lobbying under Section 1411(c) of the Not-for-Profit Corporation Law.

The terms of Tuesday’s agreement include a ban on lobbying the City Council in connection with development projects; a ban on employing lobbyists or government relations consultants, participating in the development of third-party communications with the City Council, using other LDCs to lobby, or otherwise lobbying indirectly; mandatory compliance training for directors, officers and employees; and public disclosure by the EDC of any funding provided to other LDCs or personnel overlap with other LDCs.

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