The result was unanimous, but board members were split on why.
Supervisor Laura Jens-Smith’s proposal to change the rules governing the approval of an applicant to buy or lease of land in an urban renewal zone went down in a 5-0 vote last week.
Jens-Smith and fellow Democrat, Councilwoman Catherine Kent, forced the vote on an amendment to the rules and procedures for designating a purchaser “qualified and eligible” to buy/lease and develop land in an urban renewal zone. The designation is required by state law.
They forced the vote not because they wanted the rules to change — and that’s why they voted against the amendment — but because they believe the three-person Republican majority is willing to sidestep existing rules to accommodate a buyer that refuses to comply with them.
The move to amend the rules sparked an argument at the June 28 work session the continued on the dais during the board’s regular meeting last Tuesday, with Republican board members arguing that the existing rules allow the board wide latitude to decide what documentation is sufficient to make a decision on the application of Triple Five Group affiliate Calverton Aviation and Technology.
The town has requested financial statements from Triple Five Group as well as a document called a “pro forma” financial statement, which sets forth a financial blueprint for completing the development plan called out in the proposed $40 million purchase agreement between Calverton Aviation Technology and the Riverhead Community Development Agency, the town agency that owns the property. The Riverhead Town Board sits as the governing body of the CDA.
Triple Five, a privately held company owned by the Ghermezian family and based in Edmonton, Canada, has declined to submit the financial and pro forma statements requested by the town. As a privately held company, its financial statements are not public documents and the company wants to keep it that way, according to its representatives.
The company has offered to allow a financial consultant hired by the town to review “documentation” to “verify the accuracy of Triple Five Group’s representations as to its financial resources and condition,” according to its attorney James Catterson of the NYC law firm Arnold and Porter. The town would first have to sign a confidentiality agreement, Catterson wrote in a March 16 letter to Riverhead counsel Frank Isler. Town officials say Triple Five will not agree to bear the cost of that examination, which Councilwoman Jodi Giglio has said would run into tens of thousands of dollars.
Triple Five has instead submitted a report prepared for the company and the town by Grant Thornton, one of the largest public accounting firms in the world — it was ranked sixth globally in 2017 — certifying that “Triple Five Group of Companies’ available cash balance at March 9, 2018 is in excess of $40,000,000 for use in connection with the purchase of the property in question.”
“We’ve given enough information to qualify us based on the fact that we are a private company,” Triple Five representative Stuart Bienenstock said in a phone interview Friday.
Company officials are “not comfortable” sharing their financial statements “with anyone at this point,” Bienenstock said.
“We believe that the financial information we provided demonstrates our capacity and our ability to close [the deal] and develop the site,” Bienenstock said.
Three members of the town board believe that what Triple Five has provided is enough to make their decision — and they say the current rules allow them the discretion to make the decision without the financial statements the town first sought.
What are the rules?
The existing rules and procedures for making the “qualified and eligible” determination were first adopted in 2004. They were modified in June 2017 to remove references to the long-defunct Riverhead Development Corp. — dissolved in 2007 — which the town board created in 1996 to review proposals for the Calverton Enterprise Park and vett all prospective purchasers and tenants.
The current rules require the town to “ascertain” whether an applicant is “qualified and eligible” in accordance with four “criteria,” which are spelled out in the rules adopted on June 6, 2017. The second criterion is the applicant’s “demonstrated ability to finance the acquisition and development of specific project proposed project, including the review by the CDA of pro forma financial statements for the proposed project, including sources and uses of funds, certified personal and corporate financial statements of the applicant sponsor, financial commitments of participating lenders, proposed security for the project, business plans and economic analysis of the project and past compliance with municipal laws, rules and regulations.”
Jens-Smith and Kent argue that this paragraph sets forth requirements the CDA can’t simply waive.
“It says the CDA ‘shall ascertain’ in accordance with the criteria set forth,” Jens-Smith said in an interview Thursday. “It says ‘shall’ not ‘may,’ and if the board wants to change that it should change the rule,” Jens-Smith said.
The proposed amendment shot down last week would have accomplished that, she argues. It would have allowed the board to accept “such documentation as it deems appropriate under the particular circumstances of the application before it” and specifically made the review of financial statements and backup documentation optional at the board’s discretion.
The board members’ refusal to adopt the amendment, the supervisor said, is an agreement “that financial documents are required,” Jens-Smith said.
But the Republican majority doesn’t see it that way.
“The town board acting as the CDA has broad measures, as has been done in the past, for determining qualifications,” Deputy Supervisor Tim Hubbard said in an interview Thursday. “So to me, there’s no need to adopt.”
What Triple Five has already submitted is “all I’m going to get from them,” Hubbard said. “So my decision is going to be based on whether it’s enough to determine Q&E. They say it’s enough and our attorneys don’t disagree.”
Hubbard said the town’s outside counsel has advised them that other applicants were found to be qualified and eligible without making “financial disclosures,” but he said he could not disclose which applicants were not required to share their financials with the town. The attorneys communicated that in a letter to the board that’s “classified as confidential and privileged,” Hubbard said.
But a search of town records shows that every applicant determined by the town to be “qualified and eligible” to purchase property at EPCAL from the Riverhead CDA was required to make at least some financial disclosure to the town. They include the two entities that have thus far actually purchased property from the CDA, Jan Burman/Calverton Camelot, which bought the 492-acre “industrial core” in 2001 and Island Water Park, which purchased 42 acres in 2003. Others found “qualified and eligible” who submitted to examination of financial documents were Ken Wilpon (2005), the Rechler organization (2007 and 2009) and Riverhead Resorts (2008).
Less clear is whether every applicant seeking to lease land at EPCAL submitted to a comprehensive financial review. Skydive Long Island and Luminati Aerospace, which won agreements to use the 10,000-foot runway on the site, both submitted financial statements, according to town records. The board in 2012 approved YMCA of Long Island and in 2014 approved North Fork Animal Welfare League to lease land from the town at EPCAL, but the record is unclear as to the extent of financial disclosure required of those organizations. Similarly unclear is the record regarding the application of a company called Northeast Holdings, which was granted a runway use agreement in 2002.
It is also unclear whether every applicant seeking to buy property from the town in the downtown urban renewal zone was required to undergo a thorough financial review. The companies that were deemed “qualified and eligible” that purchased property from the town in the downtown urban renewal zone were Atlantis Holdings/aquarium site (1999), Pike Realty/Suffolk Theater (2005) and Culinary Arts/Parr Organization (2005). Another company called Vintage Group was declared “qualified and eligible” in 2008, but no deal with the town land was ever struck.
Jens-Smith argues that, even if applicants in the past were allowed to proceed without submitting financial statements, the rules as of June 2017 require it.
Councilwoman Jodi Giglio said, “it’s not wise to change the rules in the middle of the game.”
If a majority of the board decides that Triple Five’s disclosure is insufficient to support a finding that the company is “qualified and eligible,” Giglio said, it can do so in a resolution rejecting the company’s application. Changing the rules that apply to every sale would be a mistake, she said.
Councilman James Wooten reiterated his objection to the resolution being submitted to a vote. While the board is required to act on a resolution if one board member moves it and another seconds the motion, Wooten said he believes “resolutions should have some sort of consensus on the board before being introduced.” Without a third vote to pass, a resolution is “a moot point,” he said. “I’m a little bothered that it’s even in the packet.”
Councilwoman Catherine Kent chastised the board majority who have said they are satisfied with Triple Five’s disclosure so far. “I think that you guys know that it’s the right thing,” she said. “I can’t imagine that on a deal of this magnitude that we would move forward without seeing all of the financial documents.”
The “qualified and eligible” determination is required for the sale or lease of town-owned property in a designated urban renewal zone, where the town can choose to transfer assets without an appraisal and without a public bidding process.
The board has delayed a vote on whether Calverton Aviation and Technology is “qualified and eligible” until after the Riverhead Board of Ethics renders an opinion on whether Giglio should recuse herself from the vote. The ethics board is reviewing a citizen complaint seeking recusal after Giglio, accompanied by former CDA administrator Chris Kempner, met with Triple Five in NYC on March 12, while a public hearing on the Q&E application was ongoing. (The hearing had been opened on Feb. 27 and adjourned to March 13.) After the private meeting, Giglio said she was reconsidering her previous opposition to the sale. The ethics board’s next regularly scheduled meeting is today, July 10, officials said.
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