Proposal to change Q&E requirements leads to heated debate
A proposal to waive the section of Riverhead Town’s “qualified and eligible sponsor” law requiring an applicant to prove it has the finances to complete a proposed project led to a heated argument among officials at Wednesday’s Town Board work session.
Town Board members must decide whether Calverton Aviation & Technology is qualified and eligible to purchase 1,640 acres of town land in Calverton for $40 million.
Supervisor Laura Jens-Smith and Councilwoman Catherine Kent, both Democrats, supported the proposal, while Councilmen Tim Hubbard, Jim Wooten and Councilwoman Jodi Gilgio, all Republicans, did not. They argued it was unnecessary.
At a May 24 work session, town finance administrator Bill Rothaar told the board that CAT hadn’t submitted any of the financial information the town requested. He said that in the prior applications, the town has granted Q&E status to some applicants seeking to buy town land without requiring financial information.
Ms. Jens-Smith and Ms. Kent said they think the board should have to formally vote to change the laws to allow Q&E designation without proof of finances.
“This is the process, and actually, I’m concerned that we didn’t receive all the financial documents on this,” Ms. Kent said.
“This is just another tactic to delay, as far as I see it,” Mr. Hubbard said. “We have been told time and time again from our town attorneys that how we have it set up is proper. So we don’t need to muck it up further and delay things again. I do not support this.”
“It’s not a matter of waiving it,” Ms. Giglio said to Ms. Jens-Smith. “You’ve asked our outside counsel in every single way that you can possibly ask to get the answer that you’re looking for. And it’s come back every single time that this resolution is not needed.”
The outside counsel said it could go either way, according to Ms. Jens-Smith, and it’s up to the board’s discretion whether it requires financial documents.
“You’re changing the rules in the middle of the game and subjecting the town to litigation by doing so,” Ms. Giglio said. Ms. Jens-Smith said the proposed change has to do with the town’s rules on Q&E and not on the specific contract with CAT.
Asked by Ms. Jens-Smith if he agreed that the change might subject the town to litigation, Town Attorney Bob Kozakiewicz declined to comment in open session, but said that he could address the question in executive session with the board. He did say he doesn’t see any harm in voting for or not voting for the proposal.
The board has hired two outside attorneys to deal with the CAT application.
Ms. Jens-Smith said the Town Board already changed its Q&E rules on June 6, 2017 when it removed a requirement that proposals be vetted by the Riverhead Development Corps. That board no longer exists.
The section of the Q&E law dealing with finances states that an applicant have “demonstrated ability to finance the acquisition and development of specific project proposed” including, among other things, the inclusion of pro forma financial statements, personal and corporate financial statements, and sources and uses of the funds.
The proposed change that Ms. Jens-Smith added states that the documentation “may but does not have to include” those items.
CAT, as well as Triple Five Group, its majority owner, is a privately-owned company and, as such, is not required to submit public Securities and Exchange financial statements like a publicly traded company would, according to Martin Walrath, Triple Five’s executive vice president of corporate finance, who spoke at the Feb. 27 Q&E hearing. He made it clear at that hearing Triple Five would not make that information public.
Triple Five has submitted a letter from accounting firm Grant Thornton saying the company has “in excess of $40 million for use in connection with the purchase” of EPCAL.”
Stuart Bienenstock of Triple Five said said recently that $40 million in cash “can finance a lot.”
Ms. Jens-Smith plans to put the resolution up for vote at the July 3 Town Board meeting.
