Comment: Whose Money, Anyway?

The Authorities Budget Office (ABO) has deemed RIOC’s Public Purpose Fund grants “inappropriate,” essentially saying that a public entity should not be making such expenditures.

But I wonder why the ABO has not opined on the following two RIOC financial transactions that have taken place this past year. One benefits a special interest – Cornell. The other, which is significantly greater in value, benefits RIOC employees, including top management.

Cornell Ground Rent – In order to get RIOC Board approval for the Cornell ground rent, an 11th-hour backroom deal was struck during a RIOC Board meeting. Of the $1.4 million annual ground rent to be received by RIOC, Cornell was to pay $400,000, and the State $1 million. Furthermore, the escalation rate for the $400,000 portion is a below-market rate of just 2% every 10 years. In essence, the present value of the $400K actually decreases over time.

In addition, I believe that the State’s commitment of $1 million per year may not be formalized in a contract. If it were, I would expect RIOC’s audited financials (2014-2015) to show an accrued $1 million from the State, with a fully disclosed note detailing the transaction. As of the 11 months ending 2-28-15, RIOC has not booked a dime from the State. We will see. Where is the ABO on this?

Post Retirement Benefits Other Than Pension (GASB 45) – In 2000, the State, with flush coffers at the time, and probably without understanding the full extent of the future liability, agreed to pay State employees lifetime retirement health benefits with 100% vesting after only five years of employment.

During my time at RIOC, it was common knowledge within the State government that this benefit is not sustainable. Most State agencies and municipalities would become insolvent if they were to fully fund this liability. (It may be revised to require 10 years for vesting, but nothing has been done yet, to my knowledge.) This is a benefit that is not available anywhere in the private sector. As of February 28, 2015, RIOC had booked $3.8 million to pay for this liability for 52 current and retired employees as of March 31, 2014.

(This health insurance plan is in addition to the State’s defined-benefit pension system, in which even RIOC’s non-union employees participate; a defined-benefit pension is hard to find in the private sector.)

Moreover, the RIOC employees’ health insurance plan is unusually generous. While many State and City agencies require employees to co-pay for health insurance, RIOC does not; RIOC pays 100% -- and for family coverage. This means that, after only five years of employment, a RIOC employee will have health benefits paid, after retirement, for life. How did this come about? Where is the ABO on this one?

My intention is not to pick on Cornell or RIOC, but to illustrate the difference in how the State looks at Public Purpose Funds as compared to funds that benefit “special interests” and State employees.

It is not the State’s or RIOC’s money that we are talking about, but New York State residents’. [RIOC’s funds come entirely from the Island’s residents and businesses.] The State and RIOC are merely caretakers.

The question that should be asked is, “Whom are they taking care of?”


Steve Chironis is a former Chief Financial Officer of the Roosevelt Island Operating Corporation. He is now employed in the private sector.


Tags: RIOC budget public purpose fund

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