A real estate executive with experience on Roosevelt Island, made an observation about poor budgeting. “Have you ever heard of ‘spending like a drunken sailor?'” He was looking at RIOC’s budget. There are consequences.
by Davie Stone
The Roosevelt Island Daily News
With RIOC, bad budgeting is not all in fun. Really, none of it’s in fun. It’s so out of whack that RIOC uses Interest Income to pay for a large chunk its spending. After all the rents and user fees are collected, RIOC can’t come close to matching it’s spending.
Cash that should go to countless infrastructure needs goes to outside attorneys, bad contracts and bloated employee costs.
Poor Budgeting
Interest Income isn’t a bad thing, but how it gets spent can be. In the last fiscal year, RIOC’s whimsical board approved a budget including it for a little under 25% of its operating income of $39,155,275. But in reality it came in much higher. This year’s budget projects it covering more than 27%.
This borrows from Peter to pay Paul. In this case, Peter is the reserve needed for infrastructure needs. And Paul is outside legal council, Leitner-POMA, insurance premiums and salaries set to leapfrog by nearly 30%.
That’s not just bad budgeting, it’s unsustainable. RIOC’s cash balance, needed for projects, will be in the red within five years – using their own figures.
A deeply troubling aspect of this is that the state’s Budget Director occupies a seat on RIOC’s board. His office has approved the increasingly bad budgets for years as they got worse, year after year.
The Bigger Issues
- Not counting subcontractors covering various departments, RIOC salary costs project leapfrogging to $13,061,181 from $10,524,126. No rationale is offered, and no outside auditor has looked into real needs.
- RIOC projects only $6,114,035 income from Ground Rents – the money paid by housing developers. That’s a nearly $1.5 million drop off from last year. This, in theory, was supposed to be RIOC’s sustaining revenue source. (Didn’t we just see two new buildings go up?)
- The biggest single revenue source after Interest Income is Tramway Revenue at $6,664,473. But that’s a drop off of well over $400,000 from last year’s rosy forecast. It matches this years actual experience, but not so fast. RIOC radically reduced passenger loads by slowing the Tram down. That was because contractor Leitner-POMA cannot fix braking and swinging incidents. One result is obvious: fewer passengers and reduced revenue from fares. Which leads us to…
- Poor budgeting expenses for Management Fees totals $6,796,574. Most of that is goes to Leitner-POMA. Kick in ballooning insurance costs RIOC must pay for repairs, and you’ve got a Tram operation deep in red ink. Tram operations are unusable by many residents – who are taxed for the shortfall – and uncomfortable for almost everyone else.
- Insurance costs continue skyrocketing, reaching $5,465,252 in the proposed budget. They eats up 14% of the total budget. Much of it is attributable to coverage for the Tram.
How It Affects Daily Life
Poor budgeting isn’t just a corporate failure, it translates into daily life on Roosevelt Island. The terrible bus service, all the breakdowns, happened because there wasn’t enough money to keep the fleet up to date. Even with the purchase of two new buses – at least four are needed – the fleet will remain in jeopardy for years.
Also consequential is the impact on the Tram. During one hair-raising episode in 2021, RIOC decided that marking the Tram a tourist attraction was a good idea. Amateurs, it never sufficiently considered the future. Today, that results in a an inescapable spiral draining money away from other needs. RIOC does not reveal actual expenses, but indications are that the Tram loses around $2 million every year. And its deal with the MTA bars any price increase.
RIOC can’t stop it because the tourists keep coming, and it needs those fares. And it has a bad contract with Leitner-POMA where a sole-source operator has control over the owner: RIOC. Leitner-POMA objects even to Public Safety Offices assisting passengers on the platforms. RIOC, seeming helpless, just rolls over and keeps paying.
Because RIOC is funded by residents, this means the money comes out of the community.
Less visible are the infrastructure needs that go unaddressed because the money drains elsewhere. The East Seawall, for example, was deemed in danger of “catastrophic collapse” ten years ago. And what’s the point of even discussing Main Street? After the primary crosswalk was described as unusable for people in wheelchairs, RIOC did nothing.
Possible Solutions
Knowing there are easy ways RIOC could use to fill some of the budget gap makes the appallingly poor budgeting even more appalling.
- Motorgate Parking Rates: Even after last year’s increase, RIOC charges will under 50% of what nearby garages charge. Its partner in the business, Manhattan Park, wants increases, but RIOC, with all its budget woes, refuses getting anywhere near market rates.
- Sportspark Fees: After proposing outrageously high fees before re-opening, RIOC ricocheted down to budget-busting lows. None of the rates made any sense, and they are not enough to cover operating costs. Increased rates are coming, but they will not be sufficient.
In addition, much of RIOC’s budget gap could be addressed simply by dealing with over-staffing and bloated salaries. For example, in the past year RIOC has functioned normally without an active CEO or Chief Counsel. Those two positions alone account for over a half-million in expenses. So, who needs them?
RIOC’s over-staffed Public Safety Department sports four employees with six-figure incomes. As a “peace officer” force, its activities are limited. These are not cops, closer to security guards as they were originally described. There never was any rationale for a staff of 50, and guess what…? In next year’s budget, it’s jumping up to 53. PSD already soaks up well over 10% of the budget. And for what?
The saving are there if the state wants them. Suspicions are, though, that the state wants the patronage even more.
Before I Find the Eggs
Trader Joe’s has its own choreography.
