JLDC Approves Federal ARPA Funding for Own Board Members, Likely Violates Bylaws

The JLDC Board of Directors during its most recent meeting in February. The JLDC is comprised of elected city officials and community stakeholders and is considered the economic development lending arm of the city.

JAMESTOWN – Last year the Jamestown Local Development Corporation (JLDC) became one of the most powerful government agencies in Chautauqua County when the city of Jamestown charged its board with appropriating nearly $9 million in federal American Rescue Plan Act (ARPA) moneys aimed at economic development, primarily to assist businesses and organizations impacted by the COVID-19 Pandemic. Another $2.9 million in ARPA funds was appropriated to JLDC to assist with residential property improvements and to also update city code.

• REVIEW ALL CITY ARPA SPENDING TO DATE

All that funding is also required to be spent in a relatively short period of time – just under four years and counting. As a result the JLDC is busier now compared to any other time in the 40+ years of its existence.

But in the haste of getting millions of dollars out the door the JLDC board appears to have run afoul of its own bylaws by awarding moneys to businesses directly connected to two of its members.

Jeffery Russell

One of those businesses is It’s Your Day wedding planning service which received a $64,000 grant from the JLDC Building Acquisition & Business Expansion program, funded by ARPA money. The owner of that business is the wife of JLDC Board Member Jeffrey Russell, who also serves on the Jamestown City Council. Russell joined the JLDC board at the start of 2022.

The other business is Jamestown Skate Products. That business is owned by JLDC Board Member Pete Schiera, who was appointed to the board as a city at-large representative in 2020. Jamestown Skate Products received a $15,000 grant through the JLDC Downtown Small Business Evolution program, also funded with city ARPA money.

In both instances, neither Russell or Scheira voted when it was time to award the money for their respective business interests. In fact, neither was in attendance for the respective voting session when the awarding of the money took place. However, JLDC bylaws – which govern how the corporation must function – prohibit the awarding of loans or grants for any business in which a sitting board member (or immediate family member) owns a material interest (Article VII, Section 5).

WRFA looked into the matter and spoke with Jamestown Mayor Eddie Sundquist, who serves as JLDC board president. He was joined by city development director Crystal Surdyk. The two explained that their interpretation of the law is that the JLDC bylaws only apply in situations when JLDC awards grants or loans from its own funding pool. But because JLDC is only serving as a pass-through agency to administer the city’s ARPA money, the bylaws do not apply. Instead, any business can qualify so long as any board member with a conflict of interest recuses himself or herself from the vote.

That explanation was verified by Russell, who informed WRFA via email that he was told that his wife’s business could still apply for funding, as long as he didn’t vote on the matter.

“Like so many other businesses during Covid my spouse’s was decimated by the mandatory shut downs for those deemed to be non essential,” Russell explained. “Upon submission of her application for ARPA funds I asked for an opinion on the matter. I was advised that the ARPA funds are NOT JLDC funds directly and JLDC is acting as a pass through in the allocation of the funds. I was advised she could apply, but I must recuse myself during the voting session.”

Schiera also explained to WRFA that he was unaware of the stipulation in the bylaws and that it didn’t come up during his application process. Again, he was informed that as long as he recused himself, there was no conflict of interest or impropriety.

While it is true that Jamestown City Council authorized JLDC to administer the ARPA money as a pass-through agency, the same can be said for other federal moneys administered by JLDC, including the federal Urban Development Action Grant, awarded to the city decades ago. In that case, the money was also presented to the city of Jamestown, which authorized JLDC to utilize it as part of its low-interest revolving loan fund for businesses. Whenever money from that fund is appropriated by the JLDC board, it’s required to follow the rules of its bylaws.

Also worth noting is that while the JLDC ignored the bylaws when it came to voting on funds for its own members, it followed the bylaws when it came time to appropriate ARPA funds over $100,000 – which require final city council review and approval.

WRFA did reach out to city attorney Elliot Raimondo via email and asked what the basis was for city’s interpretation that no bylaw violation took place, but he did not respond.

Beyond the likely violation its own bylaws, the JLDC board may have also violated Article 18 of the State General Municipal Law, which prohibits municipal officers from receiving public money they oversee and that “there are no exceptions for when an individual discloses his or her interest, recuses him or herself or abstains from the discussion or vote on a matter.”

There’s also the question of if the awards violated federal law, if the terms of the grant award includes language similar to what is in state law.

There was also a third award of ARPA funding that also created a conflict of interest with a board member. During its most recent meeting, the JLDC unanimously approved a $9,500 grant for a fundraising concert at St. Luke’s Episcopal Church. That funding came from the JLDC Downtown Programming & Events program. Luke Fodor is a JLDC board member and also an employee of the church. When it came time to vote on the project, Fodor recused himself. City officials again contend that was all that was required, especially since Fodor doesn’t own any material interest in the church. But city property owner Tom Andolora recently voiced his disapproval of the matter during this week’s council meeting, via a letter that was read out loud by the city clerk.

“How is it possible that a member of the board can sit there, while the rest of the members vote to benefit the organization he leads? Of course Luke recused himself from the vote. Do the rest of you who are on the JLDC board understand how this looks?”, Andalora asked. “How is it possible that a member of the board can be so brazen as to fill out and sign an application himself? This goes beyond ‘conflict of interest’.”

WRFA did speak with other JLDC board members and asked if they were aware of the bylaw provision that disqualified them from receiving public money they oversee. Council president Tony Dolce, who has a seat on the JLDC board, said he was told a recusal was all that was necessary to avoid conflict of interest. When asked if the bylaws were ever brought up, he said they had not.

WRFA also reached out to Councilwoman and 2023 mayoral candidate Kim Ecklund for this story but she was unavailable for comment. Ecklund also has a seat at the JLDC table because she is the council’s finance chair.

WRFA did seek out opinions on the matter from state agencies. The State Authorities Budget Office – which is responsible for making public authorities more accountable – said it could not issue a formal legal opinion on the matter, but did say they do accept complaints for public authorities like JLDC, and do review and investigate those complaints as they come in. The State Comptrollers Office indicated it was aware of the situation and was monitoring, but had no other comment at this time.