JOHNSTOWN - City government will be handling funds from the Johnstown Economic Development Corp. differently once the agency is dissolved.
The Common Council on Dec. 16 voted to have the city receive the assets of the Johnstown EDC after it is dissolved. City officials are currently working to break up the corporation, but questions remain as to how the assets will be handled.
The resolution approved by the council stated the Johnstown EDC previously approved a plan of dissolution and intends to file a certificate of dissolution upon the consent of the state Attorney General's office and with the approval of state Supreme Court. The resolution indicated the Johnstown EDC will assign its assets to the city for administration in accordance with terms of a U.S. Department of Housing and Urban Development grant.
The Charities Bureau of the state Attorney General's Office had requested confirmation in writing that the city agrees to accept the assets, manage, and administer them in accordance with the grant.
City Treasurer Michael Gifford, chairman of the Johnstown EDC board, told the council that the agency's assets are in a bank account containing about $50,000 to $70,000. But Gifford said the "rules have changed substantially" regarding regulations and are stricter with such economic development agencies. He said the city now feels the small corporation should be dissolved.
"Certainly, I agree with dissolving the corporation," Gifford said. He said the corporation hasn't actually transacted any business for quite some time.
Following the council's action, Gifford told The Leader-Herald the plan is to have the assets of the Johnstown EDC be handled by the city.
"There will be a separate fund set up under city government," Gifford said. "The process would be the same."
He said the money will be placed in a city "economic development" sequestered fund.
Gifford said the small Johnstown EDC board was established many years ago as a conduit to disperse grant funding related to economic development. He said the board currently consists of himself, City Engineer Chandra Cotter, Deputy City Engineer Jason Scott and City Clerk Cathy VanAlstyne.
Post dissolution, cities seeking funding will go through city government instead of the Johnstown EDC. Instead of an application going before the EDC board, Gifford said the application would go before the Common Council.
"Generally speaking, most of it is for loans," Gifford said.
He said the Johnstown EDC assets over the years have also included funding for demolitions related to economic development projects in the city.
Gifford told the council that there will be "less compliance" required with the state, once the Johnstown EDC is dissolved. He said that is a positive feature of dissolution, something he reiterated following the council action.
"Sometimes these things that were done a long time ago have outlived their usefulness," Gifford said. "Sometimes, there's a better way to do things."
Cotter said she wasn't sure how the new city government fund for the EDC will be maintained.
"I actually don't know," she said. "We would like to put it [toward] economic development."
Gloversville attorney Jeremiah Wood is working with the city of Johnstown to dissolve its Johnstown EDC. He also has worked with the city on dissolution of the Fulton Railroad Properties Inc. - another not-for-profit connected with city government and formed in 1991.
"It's not a big loan pool," Wood said of the Johnstown EDC.
After the EDC dissolution, he said the corporation will propose the assets go to a "discreet separate fund" set up through city government. Wood said it would be up to the city to decide how to disburse the funds, perhaps through the appointment of a special committee.
Not-profit corporations handling public funds, such as the Johnstown EDC, were shocked a few years ago when a scandal hit the Fulton County Economic Development Corp. and the Crossroads Incubator Corp. Former local economic development executives Jeff Bray and Peter A. Sciocchetti were were accused by their own entities - the CIC and EDC, respectively - of taking millions of dollars in bonuses not approved by the agencies' boards of directors. Bonuses were uncovered in a May 2010 scandal.
The Fulton County Center for Regional Growth - parent company of both - had sued to recover over $3 million. But the CRG dropped its civil lawsuit against Bray and Sciochetti in October.
The Johnstown EDC was also the subject of criticism from a state Authorities Budget Office audit from 2011-12. ABO Director David Kidera wrote a March 2012 letter to then Johnstown EDC board Chairman Clayton Sitterly, telling the group it was out of compliance. In the letter, Kidera noted the Johnstown EDC's "persistent failure" to meet the reporting requirements of the state Public Authorities Law since it was advised to do in August 2011.
"As of March 5, 2012, the Johnstown Economic Development Corp. remains out of compliance with the public disclosure, reporting and corporate governance provisions of Public Authorities Law," Kidera wrote.
The state found the Johnstown EDC out of compliance because it hadn't filed annual and budget reports from 2010 to 2012.
New Mayor Michael Julius said he's not certain yet how the assets of the Johnstown EDC, which he said are about $75,000, will be handled by the city.
"The way I understand it was they dissolved it because of all those complicated issues around it," Julius said. "It's going to be more transparent."
Gifford said he believes the Johnstown EDC was formed in the early 1990s - about the same time the Johnstown Industrial Park was built and opened.
It has been operated with a revolving loan pool from funds the corporation received through a Urban Development Action Grant funds. It was established originally from grants, collecting principal and interest, he said.
In some ways, he said the funding purpose will remain the same after corporate dissolution.
"It was set up to do city of Johnstown projects," Gifford said.
Michael Anich covers Johnstown and Fulton County news. He can be reached at firstname.lastname@example.org.