The New York City Economic Development Corp. has proposed a way around a legislative deadlock in Albany that has shut down tax-exempt bonding by industrial development agencies for civic facilities.
The board of the New York City Capital Resource Corp. at its monthly meeting Wednesday will consider an amendment to its incorporating documents that would allow it to issue bonds that the New York City Industrial Development Authority is unable to at this time. It also would exempt the corporation from future legislative actions concerning IDAs.
"With this change, CRC would no longer be subject to the vicissitudes of the political process in Albany regarding IDA civic facility sunsets and renewals," CRC executive director Kyle Kimball said in a letter to the board.
In 2005, the EDC created an alternative to the IDA, the CRC, a local development corporation that could issue bonds in excess of a $20 million cap on IDA new-money bonds for civic facilities. The CRC was permitted to use pre-negotiated documents which reduced the cost of borrowing.
When the CRC was set up, its incorporating documents stated that it could only take on the type of financings that the IDA could do, though without the $20 million cap. The law allowing IDAs to sell tax-exempt bonds for civic facilities on behalf of nonprofits expired on Jan. 31 when the New York Senate and Assembly were unable to come up with compromise over a prevailing wage requirement in the Assembly's version of the bill. The CRC and IDA haven't been able to issue bonds for civic facilities ever since.
"The goal of setting up the CRC and tying to IDA was not to say, 'Well, if IDA authority expires, well, CRC authority expires,' " said EDC president Seth Pinsky. "It was just a shorthand way of saying that whatever the IDA could do today, the CRC should be able to do as well, and nobody at that time envisioned that IDA would not be able to issue for not-for-profits."
Pinsky said that although the corporation can sell bonds on behalf of nonprofits, the goal is not to replace the IDA. Amending the incorporation documents would just restore the corporation's ability to get back to where it was before the law expired, he said. If the amendment is passed, at least five organizations could utilize CRC bonds right away, he said.
The exemption from future IDA legislation raised criticism from Bettina Damiani, project director at Good Jobs New York, a labor-oriented watchdog organization, who urged the board in testimony yesterday to vote against the amendments. She said the CRC should only focus on nonprofit organizations and ensure that they "would still have to abide by any IDA reporting or transparency requirements."
"The proposed legislation in Albany right now, if it goes through, would instill strong reporting requirements and possibly wage standards," Damiani said. "We wouldn't want firms that are subsidized under CRC to not have to abide by those rules and regulations."
New York City Comptroller William Thompson, who has a vote on the CRC board, expressed reservations about the amendment through his spokeswoman Laura Rivera.
"We are very concerned about the potential negative impact this change could have on transparency and accountability at the CRC," Rivera said in an e-mail.
Although the CRC has only sold bonds on behalf on nonprofits to date, its certificate of incorporation allows it to sell bonds on behalf of for-profits as well. Since its creation, the CRC has sold $137 million of bonds in five deals, according to Thomson Reuters. Three of those deals were in excess of the $20 million IDA cap.
The only product the CRC offers right now is a program called the loan enhanced assistance program, under which nonprofits have accessed cheaper financing by using pre-negotiated documentation so that they don't have to structure financing with their own bond counsel, underwriter, and letter of credit bank, as is required under existing IDA programs. Banc of America Securities LLC underwrites the deals and Bank of America NA provides a letter of credit bank for the projects.
If the CRC board approves the amendment, the corporation will have to give 10 days notice to the state attorney general and then get approval from a New York Supreme Court judge in order for the amendment to take effect.