Ramapo, N.Y., pulled a competitive sale of $39.2 million in general obligation bonds that had been planned for Thursday, eight days after a Federal Bureau of Investigation raid on its town hall, and replaced it with a short-term financing.
In response to the raid, Moody’s Investors Service last Friday put Ramapo’s A1 GO and MIG-1 bond anticipation note ratings on review for a downgrade. The $39.2 million bonds were to pay off BANs due on May 29, according to Moody’s. Instead, the town will sell BANs on Thursday, said Rick McCarthy, president of Environmental Capital, the town’s financial advisor.
Ramapo government officials did not respond to a call about the sale.
Ramapo, a town of 127,000 in Rockland County located about 25 miles northwest of New York City, has $156 million in debt outstanding, according to Moody’s. Of this, $129 million is long-term debt.
On May 15, dozens of FBI agents entered the Ramapo town hall to gather physical and electronic evidence. The FBI declined to comment.
Michael Castelluccio, the editor of the web site for the group Preserve Ramapo, who has been providing the FBI with evidence, said that the authorities may be looking at whether Ramapo’s Local Development Corporation falsely claimed assets to back the refinancing of bonds. These bonds include a $25 million bond for the Provident Bank Park.
In New York, local development corporations are private, not-for-profit corporations often created by a local government for economic development or other public purposes.
FBI agents and Justice Department prosecutors are also probably examining the corporation’s financing of Ramapo Commons, a 24-unit affordable housing project, Castelluccio said. Many of these condominiums were sold to real estate investors rather than low-income people, Castelluccio said.
Ramapo set up the corporation four or five years ago, Castelluccio said. In February 2012, New York Comptroller Thomas DiNapoli criticized Ramapo’s use of the corporation for financing the baseball stadium. The town’s taxpayers may end up being liable for up to $60 million because of the unwise decision to build the park, DiNapoli said.
In February the town refinanced the two-year old stadium’s $25 million in bonds from five-year maturities to 30-year maturities.
Hasidic Jews have been a rapidly growing sector of Ramapo’s population for at least 25 years. While they make up perhaps a third of the population, they make a much larger portion of the electorate, Castelluccio said. They have been decisive in electing pro-development members of the town council, Castelluccio said.
About the raid, Suzanne Mitchell, director of Ramapo Organized for Sustainability and a Safe Aquifer, said, “I don’t think anyone in the town of Ramapo was surprised. With so many inconsistencies in the way things are run, it seemed inevitable that the authorities would seek to find the truth.”
Some town council members have taken efforts to hide meetings where bonds were voted on, Castelluccio said. One time the local newspapers were notified 53 minutes before the bond hearing took place, he said. Council members could not be reached for comment.
After completing the BAN sale, the town will put a placement memorandum providing disclosure to the town’s investors on the Municipal Securities Rulemaking Board’s EMMA website, the town’s attorney told The Bond Buyer.