The city Economic Development Corp. owes the city more than $125 million in funds it failed to properly return to city coffers from transactions like the sale of the Queens Family Courthouse, according to an audit started in 2008 and completed last week by city Comptroller John Liu.
The EDC, a city agency tasked with supporting and creating economic growth, collected funds on behalf of the city from a number of projects and sales of city assets. But it failed to return that money to the city, according to the audit, instead holding onto the money for its own purposes while circumventing the city’s budgeting and appropriations process.
“The EDC was charged with collecting this money for the city. They are not entitled to keep it,” Liu said in a statement. “Anything short of the EDC repaying the amount in full to the city is unacceptable and indefensible, especially as subways, firehouses and hospitals are threatened with closures due to deep budget deficits.”
But EDC spokesman Dave Lombino said the agency took issue with the comptroller’s findings, and the agency has written up a point-by-point rebuttal of the points Liu makes in his audit.
“We strongly disagree with the findings of the audit, and we got a finding from the city Law Department affirming that it is our right to retain certain funds up to a certain level,” Lombino said.
A major part of the EDC’s argument, according to its written rebuttal, is that long-standing contracts between the agency and the city or other actors take precedence in questions of funds remittance and related issues, and that as such the agency was within its rights, or even bound, to act as it did. But Liu said the whole situation is an indicator of the laxity with which the agency is treated and a symptom of the “enormous control” it has accumulated over city assets and funds in recent years.
“There are plenty of questions and even concern about what exactly the EDC does, as it deals with substantial amounts of city funds and publicly subsidized economic development,” he said. “This episode only accentuates the need to rein in the EDC.”
The EDC has had dealings throughout the five boroughs which have contributed to the $125 million quote in the report, including its sale in 2007 of the Queens Family Courthouse in Jamaica, according to the audit.
The agency kept and did not return $7.87 million after selling the courthouse, located at 151-20 Jamaica Ave., “even though its quarterly financial plans classified the transaction as a special sale of a city asset and indicated that the proceeds would be transferred to the city,” according to the audit.
The EDC’s written rebuttal on the courthouse sale contends the agency was following the terms of a contract properly in holding onto the funds.
“With respect to the three land sales cited, it is NYCEDC’s legal right to retain the funds under the plain terms of the master contract that the Comptroller’s Office has registered in each of the last 17 years,” the rebuttal reads.
In the end, Liu’s office recommended the EDC remit the retained funds, which total $125.5 million, to the city.
Reach reporter Connor Adams Sheets by e-mail at csheets@cn
©2010 Community News Group
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