May 30, 2007 Martha E. Conway Uncategorized
Christopher Gates sent a brief note of resignation to the president of the Canastota Development Corporation board of directors May 24:
“I am resigning as a member of the board of the Canastota Development Corporation,” Gates wrote. “I will not be a member of the Canastota Development Corporation Board so long as Jim Gustafson or Joel Arsenault are on the same board. They have conflicting commercial interest at stake.”
Gates said Gustafson, an accountant, and Arsenault, a realtor, have worked for more than a year now to undermine the progress of what he considers to be a successful incubator program.
According to Gates, Gustafson and Arsenault cost the incubator a new tenant last year when they voted against the installation of three-phase electrical service to the CDC’s business incubator on Madison Boulevard in the Canastota Business Park. He said when they voted against the move, others followed suit, defeating the proposition.
“We had the money to do this, and we had tenants requesting the service,” Gates said. “These were production-type people who wanted it. That’s who you want.”
The upgraded electrical service is more conducive to manufacturing-types of businesses with typically heavier power service needs.
“Renting office space is nice, but those types of businesses don’t produce anything,” Gates said, explaining that the incubator is a stepping stone for growing businesses that will bring jobs to the community.
Gates said this year, the three-phase power installation was approved, but with contingencies attached.
“In March, [Gustafson and Arsenault] said, ‘OK, we’ll vote for three-phase power, but we want credit checks on people coming in,'” Gates said. “What do credit checks do? It’s only got to do with money. But if they can’t pay, we ask them to leave.”
Gustafson said Gates’ business development philosophies differ from some of the other board members.
“He would like to run the incubator as his own little fiefdom,” Gustafson said. “It wasn’t just me; it was unanimous with other board members. He wanted to improve the building with three-phase power for a possible tenant who may not exist. If the tenant came through with a credit report, an application, a signed lease, we would have some indication they existed.”
Gustafson said those rules applied to any prospective tenant.
“I have been a member of the Northern Madison County Industrial Development Corporation for [approximately a decade],” Arsenault said. “When the building was first constructed, there was minimal cash flow for a number of years. The NMCIDC had no reserves to speak of, and at times the Board members were contemplating pulling money from our respective pockets to pay for the utility bills on the building. Thus I am sure our approach to spending money may be conservative.”
Arsenault said the extension of three-phase electricity within the building has been talked about by two or three prospective tenants since the building was opened.
“A few years ago, one tenant that was prepared to sign a lease and needed the three-phase,” Arsenault said.
He said the board agreed to do the work at a cost of approximately $7,500.
“Three-phase extension to a single unit has been proposed in the recent past, with estimates of $15,000,” Arsenault said. “The board agreed to extend same if a viable tenant was willing to sign a lease and met minimal review of finances and had a couple of references. The full lease payment over a three-year period would have paid for approximately 67 percent of the cost to extend the three-phase. Not a great investment return; however, if it helped a business to get started, the board was willing to invest the money. To date, one possible tenant has come forward but has not provided any financial information.
“I believe that the board’s decision not to invest the money unless there was the demand is a responsible approach. Although it may be deemed conservative, it is certainly appropriate when there are limited funds available.”
Only one business he recruited since coming aboard in 2001 was unable to pay and had to leave, Gates said.
They tried, but the couldn’t get their cash flow up,” Gates said. “They didn’t get one product established that they could consistently crank out, so they had to leave.”
Gates said the board also threw out a measure to remove from the board any member who failed to make three of the six annual meetings each year.
“That would have eliminated Joel [Arsenault],” Gates said. “So we have this inability to get rid of ineffective board members.”
He said the board also moved to change lease requirements from one-year to three-year periods.
“Our contracts have been for one year, and it’s never been a problem,” Gates said. “If someone wanted to leave early, we’ve never pursued it. We’ve never had a problem turning over the space.”
Gates said the CDC should be trying to encourage business development, not to guarantee rent payments.
“These people are taking a risk already,” Gates said. “We don’t want them to be scared off. I don’t feel Joel and Jim understand the philosophy of the incubator.”
Gates’ final complaint was the lack of disclosure regarding board members who have clients in the incubator and among other members of the board.
“They seem to have numerous clients in the [incubator] building and on the board,” Gates said. “A number of board members are making a profit by being on the board.”
“We are [certified public accountants],” Gustafson said. “The board voted to hire us as its independent accountants to prepare [the IRS non-profit tax return].”
Gates, who also serves as the assistant director of the Madison County Industrial Development Agency, said the CDC has no employees, so in addition to serving as the CDC board’s corporate secretary, he serves as the property manager for the non-profit through his employment at the IDA.
“The CDC needs somebody to take care of the building, so the IDA gets free rent in exchange for managing the building,” Gates said. “We’re a two-man office, and the business incubator and the IDA share the same theme: Make business, support business and stay in touch with [the business community]. It’s a nice marriage of ideas.”
IDA officials said there will be no backlash by the agency for Gates’ resigning from his CDC position.
“We’re an independent public benefit corporation,” said IDA Executive Director John A. Reinhardt. “The relationship between the CDC and the IDA is that we are in this space rent-free because Chris acts as property manager for them. It is up to the CDC to remove that connection if they are upset, but Chris can do what he does from another location.”
“I’m all for that,” Gustafson said. “I don’t want tenants calling me at the office when they need a light bulb replaced.”
The IDA is in the process of purchasing the former Bailey, Haskell & LaLonde building nearby its existing space in the Canastota Business Park.
“Chris had his own ideas of what would make the space desirable for new tenants as space became available,” Gustafson said. “This is the difficulty with working within a small town. The board has always tried to have people active in the community, insurance agents, attorneys, all of us deal with members of the public here and I am certainly sorry he feels either Joel or I were trying to feather our own nests from a tiny, little incubator program.”
“Regarding my conflict of interest, the only thing that my office has done is referred prospective tenants to the building management,” Arsenault said. “I have personally shown some prospects the space at the incubator, and over the years referred 10 to 12 prospects. Four or five parties that I have referred have rented space at the center, I have never received any compensation from either the NMCIDC or the tenants that ultimately leased space at the building.”
CDC Board President Russell Rielle was not able to be reached for comment.
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