Up two steps and through a discreet side door of an apartment building in Washington Heights, is a small, now-controversial non-profit group with a handful of employees and desks scattered with bilingual brochures.

The Upper Manhattan Council Assisting Neighbors, which claims to be one of a small number of groups in the area devoted to community service and economic revitalization, essentially is squeezed into three rooms, including one bathroom. The space is occupied by eight full-time employees and eight part-time workers -- some of whom were huddled around a chair readying a mail campaign on a recent morning.

But now, the council, otherwise known as UCAN, is looking not only to expand its programs, but also its digs. And they are doing it, in part, with tax dollars.

UCAN received a $2 million appropriation from the City Council last year to purchase and renovate a larger space that will host its offices, the area's only art gallery and a small theater, said the group's executive director, Hector Santana. While the group's relationship with Councilmember Miguel Martinez and the councilmember's sister, who recently resigned from the organization's board, has drawn extensive criticism, they claim their commitment to the community is a public service and worthy of public funding.

"The project will fulfill an unmet need," said Santana. "The city does what it has to do to ensure that dollars are spent appropriately."

Similar causes touted by other nonprofit groups have also caught the attention of the City Council.

Last year alone, the City Council appropriated nearly $160 million -- almost a third of its capital dollars -- to nonprofit or private groups that are looking to renovate, purchase or acquire not public property, but private. These line items, which were directed to more than 200 nonprofit groups in 2007, were allocated as the Bloomberg administration and the City Council committed to freezing capital funding for new projects. During that same time period, the administration and the City Council revisited rules outlining what groups could be eligible and what groups were ineligible for such funds.

While an extensive backlog and review by the Bloomberg administration and the City Council may mean that a lot of those projects may never come to fruition, the capital budget allocations represent a trend by the council to dole out taxpayer dollars to community organizations, just like it does with its expense budget. And like the council's discretionary funds, which members hand out for programs and initiatives and are the subject of two ongoing investigations, conflicts of interest and questionable connections between legislators and these groups continue to prevail -- especially because its capital budget is complicated and clandestine.

Needed Funding

Santana's Range Rover rumbled down Broadway in the Heights, making a straight shot to the group's prospective new location. Across from the lush Fort Tyron Park, a large, vacant building owned by Acadia Realty Trust, will house a New York Police Department precinct, offices for the city's Department of Housing, Preservation and Development, UCAN and more all in one building, Santana said.

The building curves around the intersection of Broadway and Sherman Avenue, and Santana points to a small storefront surrounded by bits of graffiti, which the group hopes to call home.

UCAN's project, which will include interior renovations to transform the area into a bustling community center, will cost about $5 million, which includes $2 million from the City Council and another $2 million from the administration, said Santana. If the project’s approval moves forward, the city will end up covering the majority of the project's cost.

Unlike the council's discretionary funds, which until recently received little scrutiny from the council, capital funding, both city officials and non-profit leaders say, gets a much closer examination. Even though UCAN's connections with Martinez have been questioned -- the group started receiving city money once the councilmember's sister joined the board in 2005 -- Santana argues receiving capital funding is a far more intense and arduous process. This, some say, would make it practically immune from the type of impropriety or corruption that recently mired the council's discretionary expense funds.

But that doesn’t mean capital dollars do not raise questions.

For years, the city has doled out dollars to non-profit groups for public facilities that are not public. The more than 200 projects earmarked in the council's fiscal year 2008 capital budget were labeled as "construction or acquisition of a non-city owned public betterment." Appropriations ranged from $22,000 for camera equipment to $3 million for new construction or building acquisition. (Capital funding is allocated specifically for property or equipment, and is not given out for programs or initiatives.)

While the council's estimated $500 million capital budget primarily goes to public housing, education or recreation facilities, approximately 30 percent of it was slated for buildings the city did not own, according to a review by Gotham Gazette.

Because the city froze funding for new non-profit projects in 2007 while it reviewed guidelines for this type of funding, there could have been even more of such projects in previous years when members faced fewer restrictions on how they could allocate the money .

Questions of Politics and Access

For years the council's member items -- expenses doled out for specific programs at a member's discretion -- have been released in a large document called Schedule C. While the council's capital budget is printed and given out the day the budget is passed, it is far more confusing and far less transparent. For example, you cannot receive an electronic copy of this inch-thick, 212-page document. Apparently, no one has one.

In last year’s council capital budget, informally known as ResoA, appropriations are unclear. For instance, one line item labeled “Education, Misc.” is not earmarked for any group. A council spokesperson said that $2.5 million there is for members to cover education projects’ shortfalls throughout the year. This appears similar to "holding codes" found in the council's expense budget, which included funding given to programs in the middle of the fiscal year . That practice came under question during the council's budget scandal earlier this year and has since been discontinued.

Other projects do not have descriptions at all, such as a $1 million earmark for the SAFE Foundation, a drug treatment and counseling center in Brooklyn. That allocation, an inquiry to the organization found, is for a building renovation.

Some of these projects have already been rescinded and found not eligible for funding, like $500,000 for Mosquito Spraying -- which was both the group name and description of an allocation.

Like the council’s expense budget, the capital budget also offers opportunities to curry favor with members’ communities – or dole out favors to friends, family or former staff.

Several organizations in the capital budget, including UCAN, have been targeted as groups with close ties to particular members.

In last year’s capital budget, LIBRE, a group run by Councilmember Hiram Monserrate’s former staff, was allocated $500,000 for a community center building. Allegations have linked LIBRE to the council member's campaign for State Senate. Elsewhere, the Northeast Bronx Redevelopment Corp., which has ties to Councilmember Larry Seabrook, was allocated $1.25 million for a “intergenerational center.” The Village Voice has reported that city officials froze funding for the group in 2006 because they couldn't figure out where the money was going. For years, the group operated at the same address where the councilman has his district office, according to the paper.

Beyond ties to the groups themselves, some council members said the city’s capital funding, like its expense funding, can be given out more generously to certain members who are in leadership positions, have seniority or are close to the City Council speaker.

Councilmember Vincent Gentile, who joined the body in 2003, received $4.15 million in capital funding for groups in his Bay Ridge district, compared to Councilmember John Liu, who is chairman of the Transportation Committee and received $6 million. Liu said he was always “competing” for more as well.

Some members refused to disclose how much funding they received last year for fear it would be less than what others may have received -- a so-called indication of their success or failure at bringing home the bacon for their districts. Several members said even they are not informed about the overall budget. Schedule C -- the tally of member items -- lists which council member requested what item. ResoA does not. Members know what projects are theirs, but have no clue what projects were funded by their colleagues, borough delegations or the speaker.

This year, though, that will change. Come June 30 – the deadline for a budget approval – names will appear next to individual projects in the capital budget, revealing who got what. A similar initiative was rolled out last year for the council’s discretionary expense items, and Councilmember David Weprin, chairman of the Finance Committee, was dubbed the "King of Pork".

Blocking the Funding

Before 2007, there were relatively few criteria for the distribution of capital funding to city nonprofits -- despite the large amount of money. As a result, just because a group received an appropriation in the council capital budget, did not guarantee it funding. In fact, groups, including UCAN, never see a dime until the project is done, the paperwork is signed and they receive a certificate of occupancy to move in.

That process, according to city officials, was, and may continue to be, arduous and complicated. Because few standards existed in the council, problems often arose when a city agency took over the contracting and approval of a project. According to a 2007 memorandum of understanding between the administration and the City Council, "significant legal questions" had emerged over the funding of such projects -- from religious affiliations to the feasibility of the proposal.

With all of this confusion and backlog, in May 2007 the city called it quits -- sort of. It froze the funding for new projects and drafted guidelines that would apply to any new capital funding allocation for a building not owned by the city. But that didn't stop the council from giving almost a third of its capital budget to these projects last year. The agreement between the administration and the council included exemptions for projects already in the works and for housing preservation, cultural institutions and projects for which there was a significant public need .

The Bloomberg administration and council staff created a task force to review the criteria for the funding of capital projects on private property, and it announced guidelines in March. The guidelines will take effect in the coming fiscal year.

The guidelines will try to weed out some of the legal issues cited by the Law Department, like questions of religious affiliation or the funding of private schools. Non-profits now will have to privately fund at least 50 percent of a project if the total cost exceeds $2 million, and they must already have a record of service with the city. Under the new agreement, City Council members, the city’s Office of Management and Budget, and the Law Department will all review projects to ensure their legitimacy.

The Backlog Begins

City officials say much of the scrutiny is justified.

"I think the paperwork involved is very onerous, but perhaps necessarily so to make sure that all the t’s are crossed and the I’s are dotted so that taxpayer money is going to the right purpose," said Liu.

Such oversight, some believe, can prevent the difficulties that have arisen over the member items. Corruption in the capital budget is "less likely because the agency looks in some detail at exactly what the public dollars are paying for," said Councilmember David Yassky. "I think part of the problem with the expense funding is the agencies that disperse the funds don’t look in any detail at the services that the funding is being used for."

Some nonprofits, though, have taken issue with the city's objections for their capital funding. Although they understand why oversight is necessary, they see the city as putting too many roadblocks in the way of worthy projects.

For example, a source said the Law Department has raised objections to funding organizations that house Alcoholics Anonymous meetings because the 12-step program includes giving oneself over to a higher being. This apparently raised the issue of city funds being used for religious purposes.

Some council members claim even small capital items, like a handicapped accessible van for a local senior center, get held up in the process, no matter how badly they are needed.

And sometimes, projects are just abandoned entirely. Councilmember Jimmy Vacca of the Bronx had requested and appropriated $1.5 million to the Northeast Bronx Senior Center last year for a new facility. Currently, Vacca said, the center is hosted in a church basement that is not handicap accessible. Now, Vacca said it is unlikely the project will ever go forward, because it would be on private property.

"Many times when council members seek to fund projects on non-city owned land it has become a bureaucratic situation that cannot be ironed out," said Vacca. "The roadblock is that the city is telling us they want capital money used on city owned land."

Every council member interviewed for this story said allocating capital funding for non-profit facilities was legitimate and served the city . Some, like Councilmember Simcha Felder, said they would like to see the city increase the funds. "It's about time the city woke up and smelled the coffee," Felder said. "It should be increased every year."

A Good Cause?

Small, poorly staffed institutions may have the most trouble navigating the bureaucratic system of capital funding.

At the other end of the specturm, the Kaufman Center, a music and arts oriented non-profit with two schools -- one public -- and a renowned theater has not run into roadblocks – at least yet.

As a dozen children circumnavigate hand-painted trees, singing and giggling as they prepare for a choral concert that evening, the Kaufman Center’s executive director, Lydia Kontos, wandered through its recently renovated space. She points to a piano and nearly floor to ceiling windows, where students, both public and private, practice their musical abilities.

The $15.5 million project received $1 million from the city for classroom and studio space. While it has not received the funding yet, the center is confident it will see the city’s contribution eventually.

"It would be foolish to say $1 million doesn’t matter,” said Kontos. “It’s not like our tongues are hanging out."

Smaller non-profits that received funding in the past, though, fear new regulations will hinder their abilities to acquire city help in the future. The East Williamsburg Valley Industrial Development Corp. received a $1.5 million appropriation last year to acquire industrial space and keep it for affordable manufacturing. In an area being taken over by luxury condominiums, the appropriation from Councilmembers Yassky and Diana Reyna would help keep jobs in the community, said executive director Leah Archibald.

Because the group is relatively small, Archibald said it is unlikely they will be able to repeat similar projects. They would not be able to finance 50 percent, she said.

The new criteria could, some nonprofit leaders say, detract from the initial purpose of funding these types of projects, which was to mobilize and energize smaller groups who needed public backing.

Under the new guidelines, the community center, theater and art gallery envisioned by UCAN would not meet city requirements for funding. The Kaufman's Center multi-million dollar renovation, though, still would.