City Rejects Greer Companies’ Tax-Credit Bid

The Elicker Administration has now said no to steering more government-backed money to companies controlled by imprisoned sex predator Daniel Greer — after receiving clarifying guidance, and biting legal criticism, from the state agency that oversees an annual neighborhood-boosting state tax credit program.

That Greer-company-subsidy rejection came in the form of a 2022 Neighborhood Assistance Act (NAA) Community Program Proposal list that the city’s Livable City Initiative (LCI) submitted to the Board of Alders in April.

The list comes before the Board of Alders Monday night for a final vote, an annual process of endorsing community nonprofits seeking state tax credits to provide low-income housing and retrofit buildings for energy efficiency, among other neighborhood-boosting initiatives.

LCI Deputy Director Cathy Schroeter and city Assistant Corporation Counsel Michael Pinto then presented that list to the Board of Alders Health and Human Services Committee on May 26 during a public hearing held in the Aldermanic Chamber on the second floor of City Hall.

For the first time in years, the city left off of that NAA program-eligibility list six nonprofits controlled by Greer — Edgewood Corners Inc, Edgewood Elm Housing Inc, Edgewood Village Inc, F.O.H. Inc, Yedidei Hagan Inc, and Yeshiva of New Haven Inc.

It did so after receiving a letter from state Department of Revenue Services (DRS) Commissioner Mark Boughton that clearly states that the city has sole discretion over which local nonprofit-led programs it believes should benefit from the NAA state tax credit program. Any legal argument that local government has no say over such matters — like the one that the Elicker Administration put forward last year — ​“defies logic,” Boughton wrote. (See below for more on Boughton’s letter, and on the state’s guidance.) 

The city’s snubbing of Greer’s companies also comes at the same time that those same companies have been newly accused by Greer’s former yeshiva student and rape victim of violating a court order in an ongoing federal court case of allegedly spending money meant for housing on lawyers instead. (Click here and here to read the latest legal filings in that case.)

LCI’s decision to leave Greer’s companies’ off of this year’s NAA list means that those companies — which own roughly 50 affordable multifamily rental properties in the Edgewood neighborhood, as well as the historic yeshiva school building at Elm and Norton Streets — likely won’t be allowed to try to solicit up to $900,000 in state-tax-credit-backed private donations through an annual program administered by the state Department of Revenue Services (DRS).

Local nonprofits looking to participate in that annual program must first win municipal-level approvals before the state makes a final determination as to whether or not they can solicit tax break-eligible donations. 

The first step of that local approval process involves LCI putting together a list of eligible local nonprofit-led programs. The Board of Alders must then hold a hearing on the matter, as it did on May 26, and then take a final vote on the list, as it plans to do this upcoming Monday. 

Whatever final list the alders vote to approve is then sent to DRS, which makes a final determination in September as to which programs across the state can benefit from this year’s NAA tax credit program.

Why did the city leave Greer’s companies’ off of this year’s NAA program list?

Schroeter laid out the city’s rationale in a May 13 letter sent to Greer’s companies’ representative, Jean Ledbury.

“Please accept this letter as Notice that the following Program Proposals were received but are not contained on the Program Proposal List set before the Board of Alders,” Schroeter wrote. ​“These programs did not meet the eligibility requirement under CGS Sec 12 – 632 because of litigation surrounding the assets of these organizations which could jeopardize the organizations’ ability to implement and complete the community programs in accordance with the NAA statutory requirements.”

Schroeter then listed five programs, each affiliated with Greer’s five local housing nonprofits, and each asking to be allowed to solicit up to $150,000 each in state tax-credit-eligible donations.

The ​“litigation” Scroeter referred to in her letter is a years-long ​“reverse veil piercing” federal court case, in which Greer’s former yeshiva student and rape victim is suing Greer’s five local housing nonprofits to try to collect on part of a largely unpaid $22 million civil judgment he won in 2017 against Greer and the Yeshiva of New Haven.

In that federal court case, Greer’s victim has accused the housing nonprofits of funneling money to Greer and of helping subsidize endless appeals and legal fees while protecting him from paying out that civil judgment. In August 2020, a federal judge found that argument compelling enough to put a temporary restraining order on Greer’s five housing nonprofits, barring them from buying or selling properties and from spending money on just about anything, other than building maintenance and to pay their employees, with the exception of Greer himself.

Greer, meanwhile, remains behind bars, where he is currently serving a 20-year prison sentence for raping that same former yeshiva student. He has appealed the criminal case.

(Schroeter’s letter does not reference the sixth Greer-controlled nonprofit that typically participates in the NAA program, the Yeshiva of New Haven. While the Yeshiva is not a defendant in the federal ​“reverse veil piercing” court case, it is a judgment debtor alongside Greer in the 2017 civil case. It’s also wrapped up in its own parallel legal fracas involving a yearslong foreclosure case in state court. The Yeshiva, just like Greer’s five local housing nonprofits, are all not included on LCI’s recommended 2022 NAA program list, which can be read in full here.)

Wait a minute. 

Wasn’t all of this litigation active last year, too?

Then why did the Elicker Administration drop Greer’s companies’ from the state-tax-credit program list this year, if it signed off on them participating last year — even while these same companies were involved in this same federal court case then?

Last year, the mayor and the city’s top attorney repeatedly argued that the city’s role was ​“merely administrative” in putting together the NAA program list.

That is, based on their reading of state law, the city couldn’t exercise any discretion or any meaningful oversight over which local nonprofits got to participate in the state tax credit program, so long as those nonprofits filled out the right paperwork and claimed to be spending the state-subsidized funds the way they promised they would.

The Elicker Administration reportedly lobbied the state behind the scenes, with the mayor urging the commissioner and DRS to see if the state had authority to turn down Greer’s companies’ NAA applications. 

But when it came to local government’s actual, official roles in the annual NAA approval process last year, LCI put Greer’s companies’ applications on the city-sanctioned list, and the alders overwhelmingly approved that list. The state ultimately pulled those companies from participation, despite local government’s approvals.

City Corporation Counsel Patricia King told the Independent by email on Thursday that, thanks to the clear guidance that the city got from the state last September, the city now feels legally confident in its decision to leave Greer’s companies’ off of this year’s NAA program list. 

“As the City has previously indicated, no one wants to give a convicted sex offender the benefit of Neighborhood Assistance Act tax credits or contribute in any way to the hiding of assets of any individual or entity to avoid paying a civil monetary judgment,” King wrote. ​“We have a responsibility to our residents to make sure the organizations that are eligible for these NAA investments comply with the state’s statutory criteria and are able to fulfill the goals of the program, especially given the limited resources available in tax credits through the program.

“The state statute was not clear on the eligibility or criteria for these programs and it appeared, therefore, that the City had limited discretion to determine the eligibility of any program beyond what was explicitly specified in the state statute as having fulfilled the basic requirements of the application. This is particularly important in that the City is well aware that it only has the authority granted to it by the state, and therefore limited itself to the criteria in the statute. The City proceeded in good faith, and requested guidance from the state, which we eventually received. Consistent with that guidance, the City made a recommendation to the Health and Human Services Committee of the Board of Alders that the non-profits affiliated with Mr. Daniel Greer were not eligible due to the question of whether the pending litigation would render these organizations incapable of completing the program. The full Board of Alders will vote on the list on Monday, June 6 and we hope they will approve the recommended programs.”

The NAA program has been a critical state subsidy for Greer’s nonprofits for decades, helping to provide millions of dollars of tax-credit-eligible private donations as Greer’s companies rehabbed low-income housing stock across the Edgewood neighborhood. The Independent analysis at the end of this article found that Greer’s companies raised $3.9 million in NAA donations over the past 20 years. 

In recent years, Greer’s rape victim and his attorneys have accused those same Greer-controlled companies of trying to use money meant to maintain housing stock to instead subsidize Greer’s personal rape-case lawyers and endless appeals in a whole mess of related state and federal court cases.

Click here, here, here, here, here and here to read previous Independent stories about Greer’s companies and the NAA program.

Grudberg: "Tremendous Boon To That Neighborhood"

During the May 26 Board of Alders Health and Human Services Committee on the matter, Ledbury and local attorney David Grudberg spoke up during the public testimony section on behalf of Greer’s companies, and urged the alders to put Greer’s companies’ program applications on the 2022 NAA eligibility list. (Click here to watch a video recording of the full committee meeting.)

Grudberg referenced Schroeter’s May 13 letter to Ledbury that explained that the five housing nonprofits were not eligible to participate in the 2022 NAA program because of the litigation they’re currently involved in. 

“It’s our position that the denial, or the omission, of these entities from the program this year is both contrary to the law and, more importantly, a detriment to the City of New Haven based upon the track record of these entities over a 20-plus-year period,” he said.

Grudberg reviewed these housing nonprofits’ histories of buying up properties that suffered from ​“blight” and ​“degradation” in the Edgewood neighborhood, and then renovating them and turning them into ​“quality affordable low and middle-income housing.”

“They have been a tremendous boon to that neighborhood,” he said.

“I am not naive,” Grudberg added, as he recognized that ​“the guiding force behind these properties at the outset and for many, many years” was Daniel Greer. ​“I want to acknowledge the proverbial elephant in the room,” he said.

“I don’t think that should distract from the real question here: Are these appropriate entities to be submitted to the Department of Revenue Services as potential beneficiaries of the Neighborhood Assistance Act program, of the tax credit program, which has been used over the years to help fund this neighborhood transformation.”

He argued that they should be put back on the list. ​“These entities have had a tremendously positive impact on that neighborhood for a lengthy period of time,” he said, ​“and by not giving them the opportunity to receive credits this year, by omitting them from the list, it undermines their mission. It undermines the work that they have a long track record of pursuing.”

Grudberg said that this is the first year to his knowledge that these housing nonprofits have not been approved by the city for NAA participation.

He pointed out that the same legal issue that Schroeter referenced in her May 13 letter ​“existed a year ago. Notwithstanding that, the board (of alders) approved” their inclusion on the list.

“Any concerns about pending litigation I think can be addressed with contingency planning,” Grudberg said. ​“I think they should at least have a chance” of participating in this year’s state tax credit program.

Ledbury agreed. She said that the housing nonprofits use the NAA-eligible private donations for repairs like removing asbestos from furnaces, installing double-paned windows, and in general replacing older building appliances with newer energy-efficient ones.

Prospect Hill/Newhallville Alder Steve Winter asked Schroeter and Pinto if there is a cap on the amount of tax credits that the state can give out each year through the NAA program.

There is, Pinto replied. The program has a $5 million cap.

Winter then started asking Pinto a question about Grudberg’s contention that pending litigation shouldn’t impact the nonprofits’ eligibility to participate in the NAA program.

That’s when Westville Alder and Health and Human Services Committee Chair Darryl Brackeen interrupted, and said that he had advised the committee ​“not to offer any comments concerning pending litigation” on this matter.

Winter then rephrased his question, asking Pinto for additional context about local government’s role in the NAA approval process.

Pinto said that, when city lawyers looked into the same question of local discretion last year, ​“we read the [state] statute to find that the city and the Board of Alders had relatively narrow” control over what programs ended up on the NAA eligibility list. If their applications were complete, ​“if they are eligible,” then they are ​“legally required” to be included on the city’s list, Pinto said.

So, ​“we recommended that last year that, regardless of the litigation status, that they be” put on the list. ​“We read it that the state actually had the final say” over which programs could benefit from the NAA program.

Over the past year, the city has received clearer guidance from the state, he continued, ​“specifically saying that the city has the sole discretion” as to which programs are included on the NAA list.

And so, LCI and the city have now recommended that Greer’s nonprofits not be included on the NAA program list.

“We were concerned that the pending litigation would impact their ability to carry out the programs as proposed.”

Winter agreed with the city’s recommended. ​“I think staff has made clear that the state has delegated the Board of Alders the authority to determine which entities and their programs end up on the list,” he said. 

While the state law on NAA may not specifically say anything about pending litigation barring a company from participating in the tax credit program, ​“it really is up to our discretion. I think that the list before us is reasonable and that the concerns that staff have brought up are also reasonable.”

The aldermanic committee did not take a vote on the LCI’s proposed NAA program list, so as to expedite a final debate and vote by the full Board of Alders this coming Monday. Schroeter explained that the alders need to take up the matter for quicker action because the city has to submit the final recommended NAA program list to the state by July 1.

Boughton: City Has "Sole Authority" For Program Eligibility List

Schroeter’s and Pinto’s explanation that the city has sole discretion over putting together NAA program lists is bolstered by a letter that DRS Commissioner Boughton sent to Schroeter on Sept. 27, 2021.

The Independent obtained a copy of that letter earlier this week.

In that letter, Boughton makes clear what role the city must play in each year’s NAA program approval process. 

He also sharply criticizes the city’s prior legal argument that it had virtually no discretion over which programs ended up on the list. And he took aim at the untimely and inadequate postproject audit reports that the city submitted to the state for Greer’s companies’ previous years’ worth of participation in the NAA program.

In regards to the city’s role in the NAA approval process, Boughton wrote, ​“The City of New Haven has the sole authority to determine which programs will be eligible for investment under the NAA tax credit program in a given year.”

“The City of New Haven appears to be under the impression that it has no role in the identification, selection, and certification of the programs that are placed on the list as eligible for investment,” he wrote. ​“In support of its position, the City of New Haven places great weight on a 2010 legislative amendment. 

“As set forth below, the City of New Haven’s interpretation not only defies logic (under no circumstances would the Department be in any position to determine what programs would benefit the City of New Haven) but also is contrary to the plain language of Conn. Gen. Stat. § 12 – 632. Said statute makes it clear that the General Assembly has delegated to municipalities the sole authority to determine those programs that are eligible for investment under the NAA tax credit program. Moreover, the City of New Haven’s reliance on the 2010 legislative amendment is misplaced as said amendment pertains to the Department’s authority to review proposals by businesses to invest in said programs and has no impact on the eligibility of programs.”

Click here to read Boughton’s full review of the law and explanation for why the city has sole discretion over which programs end up on the NAA eligibility list.

Furthermore, Boughton wrote in that same letter, many of the state-required documents that the city has passed along to the state for Greer’s companies’ previous years worth of participation in the NAA program are wholly inadequate.

In particular, the commissioner singled out the so-called ​“postproject audits” that NAA participating nonprofits are supposed to provide to the city, which in turn the city has to provide to the state.

Boughton wrote that, per state law, because Greer’s companies’ programs received investments in excess of $25,000 in one or more years between 2015 and 2020, their post-project audits had to meet the following statutory and regulatory requirements: 

• Each post-project audit was required to have been submitted to the City of New Haven by the Program ​“within three months” of the due date of investment;

• Each post-project audit was required to have been ​“prepared by a certified public accountant”;

• Each post-project audit was required to contain, at minimum, sufficient information that the City of New Haven could verify and certify that ​“expenditures were made in accordance with the program as proposed by such organization”;

• Each post-project audit was required to have been submitted to the Department by the City of New Haven ​“within one month after its receipt of the post project audit”;

• Each submission of a post project audit was required to have been reviewed and certified by the City of New Haven prior to submission to the Department.

“The documents provided by the City of New Haven meet none of the above-listed requirements,” he wrote.

First of all, he said, many were submitted way too late, in some cases between a year and five years late. 

“Moreover, not a single one of the documents submitted by the City of New Haven contains any indicia that it was prepared by a certified public accounting firm as required by the plain language of Conn. Agencies Regs. § 12 – 638‑8 (“The post-project audit … shall be prepared by a certified public accounting firm…”),” he continued.

“Rather these documents simply contain a recitation of the total amount of investment. As set forth in Conn. Gen. Stat. § 12 – 637a, at minimum, the audit was required to include sufficient information that the City of New Haven could both verify and certify that ​“such expenditures were made in accordance with the program as proposed by such organization….” None of the documents even identify the expenditures made in connection with the Programs. Furthermore, the City of New Haven has not certified said documents as appropriate postproject audits including a ​“verif[ication] that such expenditures were made in accordance with the programs as proposed by such organization.”

“Consistent with the above, the documents provided to the Department as postproject audits of the Programs were not produced timely, said documents were not prepared by a certified public accounting firm, said documents do not contain the information the City of New Haven would need to verify that appropriate expenditures were made by the Programs, and the City of New Haven has not included the required certifications. Accordingly, given that the documents that the City of New Haven provided are both untimely and fall short of complying with the plain language of Conn. Gen. Stat. § 12 – 637a and Conn. Agencies Regs. § 12 – 638‑8 governing the post project audit requirements of the NAA program, the Department is precluded from accepting said documents.”

Click here to read a few examples of post-project audits provided by Greer’s companies to the city for previous years’ NAA programs.