Advocacy:
Self-Governance or Not?
What Are the Real Risks?
by Lee Edelman of The Maple Tree Group
After reviewing the most recent changes in the proposed legislation being considered by the State
Senate and consulting with several people, some residents have become concerned that the
Governor is setting us up to fail at self-governance, that  the legislation as it is drawn is
unacceptable, and that we must start anew. Unquestionably, before we embark on such a
project it is very important to evaluate judiciously exactly where we are.
First, we should certainly examine each change in the legislation and consider carefully what it
actually will mean for the Island. We should also look very carefully at other concerns
that could impact on the viability of self-governance - in particular, financial
viability, given what we know about existing cash flow, and insurance costs.
Without a doubt, such an analysis will not produce an absolute guarantee of success, but rather
some degree of confidence in success. We cannot avoid risk completely. There are two
questions: How great is the risk? And will an elected RIOC Board of Directors, composed
of residents, and the professional management that Board will hire, have the funds and the
tools to deal with the risk effectively?
Second, we have to consider the consequences of hesitation. How will a delay affect the chances
of obtaining self-governance in six months, in a year, or ever? What consequences might
this bring in unwanted development and other commitments we would be forced to live with -
things that would forever change the nature of our community?
Third, we have to compare the risks of accepting and moving with the present legislation to the
risks of what we might be saddled with as a result of leaving the current governance
structure in place for six months or more.
It is only after such analysis that a considered and rational decision can be made. To do
otherwise is to abrogate our responsibility to the mandate we were given by residents with
a 92% vote for self-governance, and repeated endorsements by the Roosevelt Island
Residents Association.
The Concerns
As I see it, the first step is to examine the concerns, point by point, that recent examination
of the legislation have brought forth. These include:
- How does the elimination of indemnification of officers and directors affect us?
- How will the removal of section 12, which would have authorized the State Division of Housing
and Community Renewal (DHCR) to provide the new Island governance apparatus with technical
assistance in return for payment affect that apparatus?
- There is a question whether the general insurance coverage carried by RIOC is sufficient, and
in particular whether insurance coverage for the Tram is secure.
- There is concern that income may be insufficient to cover expenses - concern, for example,
that during the tenure of Dr. Jerome Blue as RIOC President, the budget may have been
balanced by using previously accumulated reserves and dollars derived from a insurance
settlement from the recent tram accident.
- There is concern about a change of language that pushes back the effective date of a section
designed to restrain the present RIOC from entering into long-term contracts. The concern
is that it presents an excessively large window of opportunity for the outgoing Board and
President to push through a great deal of development without considering resident views.
There are surely additional concerns I have not listed here, and I welcome additions to the list
so that The Maple Tree Group can examine and evaluate each.
Point By Point
I would like to respond to each of the points with the facts that I have at my disposal at this
point.
Indemnification
Elimination of State-backed "officers and directors" indemnification should pose little
problem. Both my business insurance agent and Ron Vass's have assured us that the cost of
such independent insurance is minimal. It's understandable that the State would want to
eliminate this clause. Given that the State government will no longer have any control
over the officers and directors, the State cannot be expected to indemnify them. Would
you be willing to indemnify an organization or individual over which you had no oversight?
DHCR Connection
As to the elimination of section 12 - keep in mind that the section required that Island
management pay for DHCR services, and it does not require DHCR to provide the services. It
merely "authorized" DHCR "to perform such services and render such technical assistance as
may be agreed upon between the division [DHCR] and the corporation [RIOC]." Even without the
formalized connection originally present in section 12, there is nothing that forbids DHCR
from entering into such agreements with Island management. In fact, Section 4, paragraph 13
makes it clear that the connection - and the possibility of State as well as City assistance
and aid - remains an option: RIOC may "enter into such agreements with the state, the urban
development corporation [UDC] and the City as the parties deem appropriate."
Further, elimination of this formalized connection with DHCR may be a blessing in disguise. It
should widen the vision of the new Island management; whereas with section 12, there could
be a tendency to turn immediaely to DHCR instead of considering competing services that may
be better.
In any case, I challenge those who still feel this is such an important section to list for me
what consulting or technical assistance of any substance DHCR has actually provided for the
Island.
Insurance
The insurance question is an important one. RIOC is required by the Master Lease with the City
to carry insurance coverage of "at least $5,000,000 for any one accident, $1,000,000 for
injury or death to any one individual and $500,000 damage to property." As of the March 31,
1998 audited financial statement (the last available), RIOC paid $435,509 in insurance
premiums.
That total premium amount provided the Island's insurances. About $200,000 of the total premiums
bought $125 million in coverage for the Tramway, presumably enough to handle claims arising
from the most catastrophic accident. Still, premiums can increase, and there has always been
a lurking fear that the State might close the Tramway for reasons of insurance cost or other
considerations purely financial. But it seems truly clear that if the residents are in
control through an elected Board, there is a much better chance of protecting the Tramway and
those who use it than if the State has non-residents setting the community's priorities.
A resident-controlled Board might consider truly creative solutions to Tramway financial
concerns, should they arise. The notion of a corporate sponsor - "The Sony Tramway" - might
suggest a formula, an idea that might be combined with use of a Southpoint Park area for
concerts. With the community's passion and commitment, and the creativity available here,
Roosevelt Islanders are likely to find a way to preserve the things we all treasure,
including the Tram.
Budget
The concern over sufficient financing is a serious one. If we look at the March 31, 1998
financial statement carefully, it reveals a flow of income over expenses that is in excess
of a million dollars. Many feel that is fictitious - that Dr. Blue may have "cooked" the
books. But let's discard any conjecture based on feelings about Blue's management style, and
pay attention to the facts. Quite simply, the Island's income streams have come almost
entirely from ongoing sources that remain relatively reliable from year to year, such as
Motorgate fees, Tram and bus fares, ground rents, commercial rents, and reimbursements from
housing companies. Income from these sources was sufficient to cover expenses and still
leave a surplus of $1,130,577. These funds are apparently the basis of the now-current
investment portfolio of about two million dollars. Keep in mind that these figures (not
including the reported investment portfolio) are from a certified financial statement by an
independent firm that followed all the generally accepted accounting procedures for verifying
all these figures.
Stockpiles
A concern has also been expressed that, despite the scrutiny of auditors, Dr. Blue as living off
previously accumulated surpluses and special one-time injections of funds, e.g., the
settlement from the Tramway accident. As far as I can determine, this claim of a large cash
accident settlement is only a rumor. I am working on the question, and expect to have the
facts within a couple of days.
As for surpluses accumulated under previous administrations, they are speculative, and it boggles
the mind to think there has been a million or two dollars worth of z bricks, salt or paper -
or whatever - used during the last three years.
In short, subject to confirmation in the March 31, 1999 financial statement due within a few
days, I see no credible challenge to the high probability that cash flow is not only
sufficient to maintain the operations of the Island, but actually robust enough to afford
residents of the Island the unique and splendid opportunity to take the time to contemplate
the future development of the Island. Of course, this becomes possible only if residents
gain control of the governance of the Island.
Effective Date
I must admit when I first discovered the expanded "window of opportunity," I thought someone was
trying to deceive us. As it turned out, I believe I was letting emotions and skepticism -
perhaps even the paranoia that our three-year experience with Blue produced - get the best
of me. It turns out that this change was made by The Legislative Drafting Bureau, an
independent bipartisan governmental agency. Using the language "after it becomes law" while
there is a separate reference to an "effective date" is not permissible under bill-writing
etiquette. Senator Olga Mendez's office has suggested simply changing the effective date to
"immediate," so we can close this expanded period for possible mischief quite easily.
Conclusion
After a close examination of all the objections raised to the current bill, as proposed, unless other
fact-based arguments are made, or substantially new information is found, it seems clear that
there is little that could affect us negatively, and the risk of moving ahead with this bill
as it is (with the change of effective date to coincide with the bill becoming law) is
minimal.
Risks of Present System
On the other hand, what are the risks of putting off enactment of this legislation?
The biggest risk is the strong possibility that much, if not all, of the ill-conceived development
now before the RIOC Board of Directors will be pushed through, and residents will have to
live with it whether or not we eventually gain self-governance.
Also, we may never again get the support and sponsorship in the State Senate that has
been so crucial in moving this bill to the brink of passage. We have the Governor's support
now - to the point where he issued a Certificate of Necessity to circumvent the normal
three-day waiting period for passage. Is there anyone who wants to guarantee we will have
that in the future? Is there any guarantee that the State will not again try to cut back on
Tramway hours, or even close the Tram entirely? Without self-governance, residents will have
no real power against such a move.
After a careful weighing of the risks in the current bill against the risks of standing still, it
seems to me highly probable that we stand only to gain from moving forward. It also seems
highly likely that if we stand still, we are never again likely to see the confluence of
circumstances that has given Island residents the opportunity to seize the day, and with it,
seize and secure the future of this unique and wonderful place we live.
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July 4, 1999