“They are bleeding cash,” our expert said, describing a shaky financial picture after reviewing RIOC’s first quarter balance sheet. A fuller picture isn’t possible because the Hochul/Haynes administration hides so much. But even so, there are several glaring areas of concern, including the Tram, which loses money in buckets.
by David Stone
I come from a family of accountants and almost went that way myself. But although far from being an expert, I saw enough concern in the details released by RIOC ahead of its April Board Meeting that I sought help.
I asked a senior-level accountant with some insight into RIOC’s operations to take a look. Here’s what he found.
The Shakey Financial Picture at RIOC
“The financials look weak,” he said. “The annual profit is down year over year, before depreciation by $1 million. They are bleeding cash.”
But concern over that summary was soon eclipsed by something worse – severe management malpractice.
That is, RIOC is currently uninsured.
Their insurance binders expired on Friday without a renewal. A review of the proposed renewal, due for board approval later today, shows a presumption of approval in advance. While that risky assumption limits exposure to a few days, RIOC is on precarious, unethical grounds and has been since Friday.
Previous administrations presented terms for renewing insurance coverage in February, allowing time for consideration. But Governor Hochul and President/CEO Seldom Seen Shelton Haynes canceled or postponed every board meeting this year.
But there’s even worse news behind the insurance expiration.
Skyrocketing Costs for Covering RIOC
In 2019, the first full year before the pandemic, RIOC paid out under $2 million in insurance premiums. For this year, Hochul/Haynes needs over $4.5 million.
In a scrambled eggs rationale for the board, increased ridership for the Tram gets the blame. But ridership remains far below 2019 levels, and even so, this lays more financial pain on the Tram which is currently losing about $1 million per year before insurance costs.
A more likely source for the giant increases arose last year when RIOC’s carrier was so alarmed by all the lawsuits hitting Haynes and company, it refused to renew at any cost.
CFO John O’Reilly went on record at a board meeting held on Zoom, explaining that in detail. But he added, the risks were exaggerated because he had confidence that the lawsuits could be defended. He expressed confidence in securing lower rates.
But since, at least three more major lawsuits have hit RIOC, most of which point fingers at Haynes and his circle of support: Chief Counsel Gretchen Robinson and Human Resources AVP Tijuana Sharpe. They are charged with racial discrimination in a suit filed by former staff attorney Arthur Eliav as well as whistleblower retaliation. A suit by former managers Erica Spencer-EL, Amy Smith and Jessica Cerone also charge whistleblower retaliation.
Understanding those charges exposes multiple investigations into RIOC under Haynes, some initiated by staff that were later fired.
A third significant lawsuit accuses RIOC of extreme negligence in the drowning of a young man in Sportspark.
In addition to the potential losses from all the lawsuits, add in hundreds of thousands in legal fees because RIOC hires outside help in defending Haynes and company in lawsuits as well as a dozen or so investigations.
The Roosevelt Island Tram in Trouble
We’ve reported on the financial losses suffered by Roosevelt Island because of RIOC’s contract with the MTA not being renewed in over a decade. But there’s another side to that aggravating the pain.
When RIOC signed off on a revenue-sharing deal with the MTA, it froze rates at $2.00 per ride. Because it included no escalation clause, all fares collected above that stay with the MTA. The MTA understandably refuses discussions on a renewal while raking in an unearned $1 million+ every year.
That’s the major reason why the Tram is still without OMNY readers, relying exclusively on MetroCards.
But it goes beyond that because RIOC outsources Tram management to Leitner POMA, and that cost has grown. Currently, RIOC pays over $5 million annually against ridership earnings of around $4 million.
That instant $1 million loss is exacerbated by over a million in insurance costs.
That shaky financial picture gets a big red brushstroke of bleeding cash from poor planning and management of Tram costs.
Swimming in Red Ink
While sufficient details are not available for an extended review, the corporate balance sheet shrunk by $5 million in cash over roughly the last six months.
A rudderless ship stirs a shaky financial picture in which the state agency cannot easily finance needed work on “…renovating Blackwell Park, the broken steam tunnels or Lighthouse Park at this pace,” our expert worries. “The cash just isn’t there.”
Nor is any sign or signal that the Hochul/Haynes administration bunkered on the second floor of Blackwell House has any plans for fixing the mess.
Another consideration that should be raising eyebrows is RIOC’s outstanding debt. As activist Frank Farance has pointed out before a stone-faced board in public, RIOC carries a burden from the original build out of the new Roosevelt Island community.
New York State’s investment through RIOC’s predecessor, the Urban Development Corporation, must be accounted for. If the shaky financial picture is not cleared up, there is only one resource for many millions of debt.
Prepare to open up your wallets, Roosevelt Islanders.