A BILLION DOLLAR MESS

In the prior issue of the WIRE and on the Roosevelt Islander Blog, my letter suggested
as much as a $400 million liability for RIOC. I was wrong. I've looked into the
supporting paperwork and it appears that almost a BILLION dollars are due to UDC
(Urban Development Corporation, now named Empire State Development Corporation ESDC). According to the Revenue Allocation Agreement of August 3, 1988:
... WHEREAS, in order to develop the Premises [Roosevelt Island] in according
with such lease, UDC borrowed funds to finance construction of public facilities
including without limitation, roads, sidewalks, sewer system, AVAC, water lines,
schools, promenades, recreational facilities, a tram, parking garages, other
parking facilities and other public facilities;
WHEREAS, in addition, other funds have been advanced to cover deficits arising
from the operation and maintenance of the Premises;
WHEREAS, under chapter 899 of the New York Laws of 1984 (the "RIOC Act")
UDC is required to assign the Master Lease to RIOC;
WHEREAS, the RIOC Act provides, in pertinent part, among other things, that all
revenues derived from the contracts, leases, agreements or instruments
assigned to or assumed by RIOC pursuant to Section 6 Subdivision 2 of the
RIOC Act be applied first to the payment of obligations assigned to or assumed
by RIOC, as more fully provided herein;
WHEREAS, the RIOC Act further provides the UDC and RIOC shall enter into
such agreements and take such actions to permit UDC to recover the investment
it has made in the Premises; ...
As of March 31, 1987 the Accrued Operating Deficit was $54,894,528 and the Public
Facilities Debt was $117,462,448 (see PDF page 18 of the August 3, 1988 Revenue
Allocation Agreement). In addition, another approximately $50 million operating deficit
has accrued since the agreement. With an agreed upon interest rate of 5.74% per
annum, the total due this fiscal year is $857 million. The annual interest is about $50
million (over $4 million a month), which dwarfs RIOC's $20 million in annual revenues.
RIOC Board members frame this in wishful thinking (I Hope The State Doesn't Ask For
Its Money), but this is a BILLION dollar Oops!, and it is off RIOC's balance sheet.
I'm sure we'd wish for ESDC to forgive the debt, but our billion dollar liability is their
billion dollar asset and I'm not hopeful that ESDC (the State's flagship entity for
economic development) is willing to take a couple black eyes when it might affect their
ability to issue bonds (read: in ESDC vs. RIOC, I'm guessing RIOC loses).
As a former RIRA President, I complained loudly about the inadequacy of RIOC's 5-year
budget and RIOC started providing 15-year projections, which had revealed significant
risks and liabilities. Again, I ask RIOC Board members to disclose the true finances of
RIOC and to explain their financial plans.

[Attached documents: #1 August 3, 1988 Revenue Allocation Agreement, which

references the other three documents of July 21, 1988: #2 Assignment and Assumption
Agreement, #3 Phase I Subleases and Revenue, #4 Other Agreements. Important Note:
There are other records, I am awaiting a response from RIOC.]