The State’s Empire State Development agency (ESD) has not been meeting statutory requirements to provide accurate, annual reports of its real estate holdings, and has sold several for as little as $1 with insufficient information about the economic benefits of the transfer compared to the fair market value of the property, a new audit from State Comptroller Thomas P. DiNapoli found.
“ESD has to be more transparent about the real estate transactions it makes,” DiNapoli said. “That should start with an accurate accounting of its real estate portfolio and better disclosure explaining the economic benefits to New York’s taxpayers for sales of properties below their fair market value.”
ESD is a state public authority empowered to promote economic development, business investment and job creation in New York. The Public Authorities Law (PAL) requires it to publish, at least annually, a report listing all real property it holds and full descriptions of properties that were disposed of. PAL also requires public authorities to dispose of properties for fair market value, with exceptions. When proposing below-market transfers, authorities must provide the following information to their boards and the public: a description of the property; an appraisal of the fair market value of the property; a description of the purpose of the transfer; and a reasonable statement of the kind and amount of the benefit to the public resulting from the transfer.
DiNapoli’s audit found that ESD did not meet PAL requirements and only published a detailed report on its real estate portfolio in December 2022 after the current audit began. Before that report was published, ESD had provided auditors with five inaccurate or incomplete versions of its property portfolio. Those repeated inaccuracies raise concerns that the published report may still not correctly account for ESD’s holdings or their disposal.
ESD reported that as of June 2023, it owned 130 properties and that 71 (55%) are vacant. Three of the vacant properties are former correctional facilities in the New York City area (Downstate, Bayview, and Lincoln). ESD identified those properties as having potential for conversion to housing (including affordable housing) and issued requests for proposals for them. Another 28 vacant properties are in and around Niagara Falls and are owned by ESD’s subsidiary, the USA Niagara Development Corporation (USAN). Only one of these is reported by ESD to have definitive development plans.
USAN purchased properties as part of a strategic land acquisition program funded through the second phase of the state’s Buffalo Billion initiative, including 31 properties acquired for the fair market value of $14.7 million in Niagara Falls. USAN created a plan to develop them into new mixed-use properties.
Auditors found that from April 2019 to May 2023, ESD disposed of 14 properties, including four that were sold at or above their market value and 10 that were sold or transferred below their market value. While these 10 property transactions were generally in compliance with PAL requirements, the seven that were disposed of by USAN did not include detailed information as to the anticipated economic benefits of the projects compared to the value received and the fair market value. As of June 2023, USAN had disposed of seven properties for a total of only $3 after purchasing them for $1.36 million.
For each of these disposals, USAN presented information that complied with the minimum PAL requirements to its board for approval. However, the information lacked any detail, beyond broad generalizations about new developments, to allow for an effective evaluation of the transactions by the board prior to their approval. For example, the expected benefits of the projects included job creation, but failed to provide any specific information on the number or type of jobs that would result from the projects. The information also included vague statements, such as “new development” and “continuation of tourism-related economic and recreational activity,” with limited or no details.
DiNapoli’s audit recommended that ESD take steps to ensure the accuracy of its reports on its real estate portfolio and its disposal of properties, and that it provide sufficiently detailed information for proposed transfers of properties, especially those below fair market value.
In response to the audit’s preliminary findings, ESD officials stated they established new management of its real estate holdings and said it initiated quarterly meetings regarding the properties and their disposition.
No comments:
Post a Comment