City Lawyer Defends Subsidy For Greer’s Companies

City staff acted ​“appropriately” and in line with state statute by pleading helplessness when rubber-stamping another $900,000 in state tax breaks for six nonprofits that have been accused of fraud in federal court and that are controlled by an imprisoned sex predator.

So decreed the city’s top attorney, in a newly released five-page memo.

That memo, written by Corporation Counsel Patricia King and sent to Mayor Justin Elicker, is focused entirely on the role that local government plays in the annual Connecticut Neighborhood Assistance Act (NAA) Tax Credit Program.

It does so in the explicit context of whether or not the city made the right legal move by recently approving — without first conducting any independent audit or substantive review — another $900,000 in state tax break requests submitted by six local nonprofits controlled by Rabbi Daniel Greer.

King wrote that the city ​“has acted appropriately in this process and in compliance with its statutory obligations” by collecting those applications, making sure the paperwork was filled out appropriately, and then passing those applications along to the Board of Alders for approval.

Greer remains in prison for raping a former Yeshiva student. (Greer is appealing the criminal conviction.) His local companies have been accused by that same student of funneling money to their imprisoned owner to help him avoid paying a $21.7 million civil judgment.

Nevertheless, King’s memo states that the city was right to claim that its hands are tied in deeming those companies eligible to participate in the neighborhood-support program.

The NAA program is administered by the state Department of Revenue Services (DRS), and provides state tax credits to for-profit companies that make cash contributions to eligible nonprofits, which in turn must first be approved for eligibility by local legislatures like the Board of Alders. The Board of Alders, in turn, receives a list each year of eligible NAA applicants from the city’s Livable City Initiative (LCI). Greer’s local nonprofits own 53 affordable rental properties in the Edgewood neighborhood.

“While no one in the City administration in any way condones the sexual abuse of children or the hiding of assets from a judgment creditor, the statute as currently written constrains the City from taking either of these factors into consideration in the approval process,” King wrote.

“Further, the City has taken steps to bring these issues to DRS’ attention through the fall 2020 and April 2021 email and phone contact between [Livable City Initiative Deputy Cathy Schroeter] and DRS staff,” King continued. ​“The City now is confident that DRS as the decision maker is aware of the concerns raised by the participation of the Greer-affiliated Entities in the program and of the injunction issued by the federal court, and can make whatever use it wants of that information.”

Written After The Fact

King’s memo was written on Tuesday — two weeks after the Board of Alders overwhelmingly approved this year’s NAA list of local eligible participants, including Greer’s.

It was written three weeks after an aldermanic committee advanced those tax break requests after an oblique and bureaucratic debate about the city’s legal authority.

It was written roughly two months after the city’s Livable City Initiative (LCI) collected and passed along to the alders for approval this year’s NAA list, which included Greer’s companies.

And it was written roughly nine months after the Independent first reported that the city and state signed off on allowing Greer’s companies to solicit $900,000 in state tax break-eligible donations as part of last year’s NAA program—even though Greer’s local companies, then as now, face a federal lawsuit by Greer’s rape victim alleging that they’re hiding money on behalf of the imprisoned landlord.

A federal judge found those accusations of fraud credible enough last August to temporarily bar Greer’s companies from buying and selling property while the court continues to hear the case.

Why was the city legal memo written on Tuesday, and not earlier, given that this debate around local authority and the NAA program has played out for months?

King wrote that city staff met last October to discuss the authority local government has in the annual NAA program. She wrote that LCI Deputy Director Cathy Schroeter has sent multiple emails to DRS since last fall, attaching copies of the federal court injunction against Greer.

“At the time this issue was reviewed, no written legal opinion was issued as none was requested,” King wrote. ​“Since that time, the issue has received media attention because the Board of Alders recently held a public hearing as required by statute to approve a list of programs eligible for NAA submitted by the staff at Livable City Initiative (LCI). This list included applications from the corporations affiliated with Greer (the Entities).”

And so, with media attention and requests for comment to the city about formal legal guidance on this topic, King wrote up a memo and sent to Elicker on Tuesday.

Click here to read King’s memo in full.

King: ​“City Only Has The Authority Allocated To It By The State”

While King’s memo describes the role that local government must play in the annual NAA program as explicitly defined by state statute, the top city attorney does not weigh in on lingering questions like:

• Are city staff and the Board of Alders legally required to approve all NAA applications without independently reviewing whether or not those companies are spending the government-subsidized money the way they promise to?

• Is local government really prohibited by state law from removing an application from a local NAA list if that application has all of the appropriate forms filled out correctly by the applicant, without doing any independent assessment?

• Or is the city simply within its legal right to do such rubber-stamping, but is not necessarily required to?

The closest King gets to that issue comes to those questions is on the third page of the memo, where she writes: ​“Under the general principle that the City only has the authority allocated to it by the state, the role of the municipal legislative body in approving the list is limited to the extent of approving the applications as complete and consistent with state requirements.”

And what exactly are those state requirements?

“The statutes require the municipality to make a list which must include information about each program: the concept of the program, the neighborhood served, why the program is needed, the estimated amount required to be invested in the program, the suggested plan for implementing the program, the agency designated to oversee implementation of the program and other such information as may be required,” King writes.

“The list is submitted to the municipality’s legislative body, which is required to hold a hearing on the subject of which programs included on the list will be approved for submission to the commissioner. Conn. Gen. Stat. §12 – 636 clearly states that it is the Commissioner of DRS who makes the decision as to which applicants are approved for the benefit, that the Commissioner’s decision to be in writing and that it set out the maximum credit allowable to the approved applicant.”

King goes on to detail a 2010 amendment to the state law that removed all municipal oversight over applications submitted by businesses looking to receive state tax credits by donating to NAA- eligible, nonprofit-led programs. That amendment, however, did not touch the part of state that describes the initial application by nonprofits interested in participating in NAA in the first place. That part of the law still states that cities can submit NAA lists to DRS only ​“after approval by the legislative body of such municipality.”

And King writes that the city is required by §12 – 637a to ​“certify” an audit from each nonprofit participant that has received more than $25,000 in NAA-eligible contributions.

“Under the statute, the City has an equally limited role, which is to verify that the participant used the funds in accordance with its proposal. After the municipality certifies the audit, it sends it to the Commissioner, who has specific authority to review the audit for evidence of fraud or embezzlement. Again, the appropriate use of the funds is reserved as a subject for review by the Commissioner.”

Mednick: City Has Discretion

King’s memo also directly references another recent legal brief on the matter: one written up by local attorney Steve Mednick and sent to the Board of Alders in advance of the June 7 local legislative vote.

Mednick’s memo stated that the Board of Alders had discretion to review NAA applications based on criteria spelled out in state law.

Those criteria included:

• If the nonprofit has received $25,000 or more in the last reporting year, have they submitted a post-project audit prepared by a CPA?

• Have two or more neighborhood organizations, owned by the same entity, received investments which would otherwise qualify for a credit under this chapter, where only one such investment shall be eligible for such credit?

• Have organizations controlled by the same entity exceeded the funding cap of $150,000 per entity?

• Are the organizations/entities in good standing or authorized to conduct business in the State of Connecticut?

When the statute ​“requires approval by the legislative body of the municipality,” Mednick wrote in his memo, discussed in this article in greater detail, ​“the fair reading of the law is an expectation of the exercise of discretion.”

In King’s memo, the top city attorney wrote that she agrees with Mednick’s reading of the law.

“Attorney Steve Mednick concluded that the role of the Board of Alders in the approval process was limited to the areas as specified in the statute for eligibility,” she wrote. ​“This does not include the authority to fail to approve a program on any other grounds. This is consistent with the view of Corporation Counsel and the implementation of the program by LCI staff and the Board of Alders.”

Reached by phone on Wednesday, Mednick told the Independent that, based on the Independent’s description of King’s memo, ​“nothing in my review would lead me to a position different than Corporation Counsel’s.”

Mednick emphasized that his memo was directed to and focused on the role of the Board of Alders. King’s memo, meanwhile, was focused on the role of city staff.

Mednick added that confusion and debate around what role local governments can (and must) play in the annual NAA program is not unique to New Haven. And, ultimately, must be resolved by the state.

“The state needs to provide a lot more clarity to administrators and legislative bodies,” Mednick said. ​“As I was conducting my due diligence, I talked to people throughout the state, and everybody is confounded as to what their specific role and responsibility is. I think DRS really has a responsibility to provide more details as to what discretion local administrators have and what discretion local legislators have.”