This story was updated on Tuesday, April 15, to reflect recent developments. Other updates throughout the week can be found here.
A week after the story broke that the City Council had allocated funds to non-existent organizations, Council Speaker Christine Quinn declared that the council has "reformed" its decades long practice of hoarding extra funding for pet projects -- the so-called routine process that gave rise to the scandal.
Leaders of several of the city's good government groups flanked Quinn Friday as she announced the changes aimed at creating a more transparent process for the council's allocation of discretionary funding. The more than $20 million a year previously handed out solely at the speaker's discretion will now be distributed to the city's nonprofits via a merit-based proposal process.
But while some congratulated the speaker on her new initiatives, including the 10 council members who stood behind her as she announced them to reporters, the issue shows no sign of disappearing.
Two investigations -- one city, one federal -- into the council's finances are still ongoing as New Yorkers await a specific explanation on how millions of dollars were earmarked to fictitious organizations in the council's discretionary budget. There were reports of possible fraud charges against those -- whoever they might be -- who set up the phony groups. And Quinn reportedly has hired a criminal defense lawyer, although she has also said that she is not a target of any of the inquries into the secret funds.
On Friday, the speaker declined to describe how approximately $4.7 million could possibly have been allocated under her watch to groups that did not exist. Several city agencies, including those that are most associated with the council's discretionary funding, such as the Department of Youth and Community Development, refused to comment on the issue. These agencies also would not explain the funding process, claiming that too is part of the investigation.
Even so, City Hall observers, officials and citizens have not hesitated to point fingers at one another. Those involved include Quinn, the council's finance department, Finance Committee Chair David Weprin, City Comptroller William Thompson, the mayor's Office of Management and Budget and the respective city agencies that were slated to contract out the funding to the particular nonprofits.
All of these individuals or entities will be subject to questions at some point, if not now, certainly in 2009, when Quinn, Thompson and Weprin all may run for higher office.
Here's what we know.
Each year City Council members receive money to dole out to youth and senior programs and funding for discretionary programming -- termed the council's member items or in the eyes of some, pork barrel spending.
Last year, each council member received $340,464 in discretionary funds, of which $151,714 was devoted to youth programs, $108,750 to senior initiatives and $80,000 to allocate as he or she wanted. While the items are approved by the speaker's office, members often select their own programs with relatively little interference. The council's discretionary funding is outlined in a budget document called "Schedule C."
Schedule C is not released until the day the budget is adopted. Even council members do not know which initiatives or items are being funded before then. (One of Quinn's proposals announced last week would be to release this budget document at least 24 hours before the council approves the budget, which it must do by July.)
This funding is in addition to about $300 million given to the council for larger, citywide initiatives. Those programs are under the control of the speaker and are chosen with council members' input. The speaker also has had an additional pot to distribute solely as he or she saw fit. For the first time, Quinn announced the total amount. This year, she said, that funding is approximately $22 million, but that sum has risen to as much as $35 million under previous leaders.
Though the City Charter contains a chapter titled "Budget Process," nowhere does it cite the council's discretionary funding or the process by which it should be allocated. The City Council's rules also do not address this process. Some council members, even veterans who have served in city government for decades, do not know specifically how this process plays out.
Once it is determined which programs will receive discretionary funding -- from the speaker and or individual council members -- the city agency involved draws up a contract. Those contracts then go to the city's comptroller's office, which reviews them for economic efficiency and so-called legitimacy. The role of the mayor's Office of Management and Budget, which refused to comment because of the ongoing investigations, remains unclear. Though it oversees all agency spending, unlike the comptroller's office, it does not have an auditing responsibility.
To further complicate matters, the differences between the individual council member funding and the speaker's funding has remained unclear until now. Though Quinn spearheaded a policy to attach council members names to their particular initiatives last year, she has admitted that the speaker's funding in particular was not spelled out in budget documents.
Her announcements on Friday, especially her proposal to distribute the speaker's discretionary funding through the request for proposal process, are an attempt to create more transparency.
Although this discretionary funding process winds its way through City Hall and through most of the city's agencies, some of the city's elected officials contend, it is mostly under the control of the speaker's office, which includes the council's finance department.
Given that, some say the current controversy can entirely be attributed to Quinn and her predecessors. One of her colleagues, Councilmember Charles Barron, who has clashed with Quinn in the past, has called for her to step down.
On Friday, Quinn took responsibility for the scandal, though she has continued to reiterate her innocence in the matter. She argues she found out about the fictitious groups last year after she directed her staff to stop hoarding away funds for mid-year budget fixes. Her staff, she says, disregarded her directive.
"Obviously, I am the speaker," said Quinn. "I take full responsibility."
It is unclear whether the funding allocated to fictitious groups was from the member item funding or from the speaker's discretionary funding. The last budget document that contains the names of the fictitious groups was in fiscal year 2007, prior to the speaker's initiative to name council members next to certain programs.
Though more than a dozen fictitious groups have been allocated funding under Quinn, none of them ever received funding. The fictious groups were used to "park" funding, which was doled out to certain groups, such as Little Leagues or park associations, mid-way through the budget year. One report found that Quinn's district received about a quarter of all of the funding.
According to the council's Schedule C from fiscal year 2007, several of these phony groups were slated to get some of the council's largest appropriations. The American Association of Concerned Veterans, which we now know does not exist, was set to get $422,763 -- the fifth largest appropriation of any member item that year.
Since the Finance Committee holds budget hearings, some think Committee Chair David Weprin should also bear some responsibility. Weprin, who has remained relatively silent on the issue for the past week, claims he is not at fault. Though his committee is charged with holding budget hearings, he, like any other member, does not get the list of the council's discretionary funding until moments before the budget is passed. Also, Weprin said, his committee does not hold specific hearings on the council's discretionary funding.
Weprin, who is running for city comptroller, said because the city's budget is so large -- nearly $60 billion -- it would be impossible to weed out a minute number of fake groups out of the thousands the council funds. "There is no possible way that I can personally vet all of these organizations," he said. "That’s why we have staff… obviously there are a lot of other players in the process."
Individual council members may also be at fault, said some advocates. If members received funding, advocates wondered why they did not question where this money was coming from. "The only other massive suspect I would point to is council members who are massively brokering funding," said Maria Doulis of the Citizens Budget Commission.
More than a dozen council members got funding that was originally slated for the fake groups. One of them was Councilmember Gale Brewer. Brewer said, however, she was never notified that the group in her district had been funded mid-way through the budget year.
Brewer, who also sits on the council's finance committee and its budget negotiating committee, said she was unaware that the speaker's office, both under Quinn and her predecessor Speaker Gifford Miller, had extra funding stashed aside in "holding codes" -- or accounts to be used for mid-year budget fixes or mid-year discretionary funding.
"I don't feel responsible," said Brewer. "There was no way for us to know what this item is."
Councilmember Daniel Garodnick, who also was named in budget documents as having received funding, said his office assumed the additional funding was part of a larger City Council initiative, which had not allocated specific funding yet.
Then there is the comptroller's office. Last week, Thompson hand-delivered a letter to Quinn stating that his office would be reviewing any agency agreement or contract paid for with council member discretionary funds before funding is disbursed. Some chalked this up to politics, since both Thompson and Quinn are potential mayoral candidates in 2009.
Technically, some City Hall observers have argued, the comptroller's office should have been doing that already. According to the City Charter, the comptroller is responsible for auditing every city agency or entity at least once every four years. So far, since Thompson assumed office in 2002, he has audited the City Council once. That report was released last year and examined the council's expenses for fiscal year 2005. Though it uncovered the City Council had violated the charter when disbursing printing contracts, it said nothing about its discretionary spending.
The comptroller's press office did not return repeated calls for comment. Thompson has said elsewhere, though, that it would have been impossible for his office to uncover the practice because he only audits contracts, and the fake groups never got that far along in the funding process. The fictitious groups were designed to park extra funding, and therefore city contracts were never drawn up for them.
Elsewhere, the role of the city's agencies has raised some suspicions. Because agencies also play a part in disbursing discretionary funding, some have questioned what agencies knew what when. On Friday, Quinn partly exonerated them. She said agencies never received the names of these fictional groups.
Whether it's because of her mayoral ambitions or her purported interest in reform, Quinn is attempting to move on from the phantom group mess by putting forth several proposals to "restore confidence" in the council's budget process.
For one, beginning with the fiscal 2009 budget, which the council must approve by June 30, she will limit the speaker's power over discretionary funds by doling out money based on merit and a formal proposal process.
The speaker's office, with advice and recommendations from individual members, will draw up the requests for proposals, and the mayor's Office of Contract Services will award the contracts. Good government groups, including Citizens Union, the sister organization to Gotham Gazette's publisher, and the New York Public Interest Research Group, hailed the move.
Since Quinn released her proposal on Friday, a backlash has emerged in the council, starting with closed-door borough delegation meetings. Many members -- some elected officials have said a "vast majority" -- argue the proposal hands over even more power to the already influential mayor.
"If you get caught with your hands in the cookie jar, just let go of the cookies and remove your hand, and maybe give yourself a slap on the wrist," said Councilmember John Liu in a prepared statement last week. "But do not tie the hands of all the successors."
Councilmember Lewis Fidler said the Brooklyn borough delegation agreed on three parameters at its meeting over the weekend including the following: It would not export power to the executive branch, it wants to protect small groups from an exhaustive and confusing proposal process and, given that the budget needs to be passed by July, the reforms done for fiscal year 2009 cannot be too overwhelming.
Though the council's personal member item pots will not be affected by the request for proposal process that Quinn is proposing, Fidler said many small groups that individual members or borough delegations cannot fund often get funding from the speaker's pot. Thus they are concerned for small groups in their own districts.
"Let's be frank -- it's her money, but it's our money," said Fidler. "It's her decision, but it's not done without the input of members."
Members said the backlash is unlikely to derail Quinn's reforms, but merely modify them.
In response to this opposition, the speaker's Spokeswoman Maria Alvarado released the following statement: "The speaker is seeking input and ideas on the best way to implement the reforms she announced on Friday. We are at a point in the process where ideas need to be made more specific. As we do so, we are confident there is a way to meet both the goals that were laid out on Friday and the concerns that have been raised."
Some of the proposals released last week have also caused little to no controversy. The speaker intends on hiring an independent compliance officer to assure the council meets all of the charter's requirements and procurement rules. The speaker will also release Schedule C at least 24 hours in advance of its projected approval and create a searchable database that lists all organizations that apply for funding through the council, similar to Attorney General Andrew Cuomo's Project Sunlight.
After a rocky week, it seems Quinn may be back in the good graces of good government groups. Dick Dadey, executive director of Citizens Union, admitted that the group had wanted more from the speaker when she announced reform measures, like naming council members next to member items, last year. That, at least in part, is what they are seeing now and had discussed with her previously.
"Out of the public disclosure of this years long practice," said Dadey of the budget scandal, "has come a good thing."
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The week that City Council Speaker Christine Quinn released her third budget response she also admitted that previous budgets, going back to at least 2001, were riddled with allocations to fictitious organizations .
After the charges appeared, Quinn responded that she did not budget the money herself. She blamed the problem on her staff and said she was taking immediate steps to remedy the situation. Her staff chimed in that ultimately the funding always ended up supporting worthwhile causes -- groups like the American Performing Arts Collaborative or the City University of New York's project Bridge to Medicine.
Though the speaker's office has attempted to stay ahead of the story since it broke Thursday, there remains many more questions than answers. Among them are whether this was simply a way to give city officials some leeway over a small percentage of the multi-billion dollar budget, or whether it was a cover up for political favors and arm-twisting by a speaker who has made government reform a hallmark of her tenure.
Many have wondered how a practice of putting aside funds for unanticipated expenses turned into accounts labeled with nonexistent organizations. And some question how a speaker who is known to micromanage her staff could have let this "slip" by her.
This is not likely to fade away from the city's newspapers and channels anytime soon since two investigations -- one by the city's Department of Investigation another by the U.S. Attorney's office in Manhattan -- are underway and more are being called for.
The irony here is at least an inch thick.
A reform-minded speaker, whose agenda called for opening up the budget process and creating more transparency in the City Council, has been thrust into a scandal over that very same budget process and its secret fund.
City hall observers and council members, even Quinn's opponents, such as Councilmember Charles Barron, were shocked by the budgetary revelation first reported in the New York Post on Thursday.
"I guess we just assumed that the speaker had some money, had some discretion, to dole around," said Barron. "I don't think any of us had a clue."
Since she became speaker in January 2006, Quinn has attempted to open up the budget process. She required attaching council members' names to their individual member items, allowing the public to see which member was pushing for what in the council's expense budget. In her budget address on Tuesday, Quinn promised to create the same transparency with the council's capital budget -- attaching names to particular items.
Quinn denies that she personally created the phony organizations and directed funding toward them for political favors. The council's press office, however, has had no explanation as to when these groups were formed and who formed them.
They say since Quinn found out about the practice, now two senior Council Finance Department staffers have left the council. They also contend this practice has a long history in city government, going back to at least the beginning of the decade.
Officials contend it is not unusual to hoard money in the city budget for unexpected expenses or mid-year fixes. In a nearly $60 billion budget, items cannot always be exact.
The city calls the unallocated accounts "holding codes" -- or ambiguous line items to be doled out to certain projects after budget approval or as needed throughout the fiscal year.
Even in the fiscal year 2009 budget, the Department of Education, according to the council's budget response, has $1.12 billion in holding codes. The city's Law Department could not immediately say whether this practice violated the City Charter.
Former Speaker Peter Vallone Sr., who led the council from 1986 to 2001, said during his tenure the body would hold money under certain agency's holding codes then modify the budget and distribute the money at a later date. They would do this transparently, he said, holding public hearings.
"I don’t know why you would need a fake organization," said Vallone. Ultimately, though, he said, "The point is where was the money used?"
In the spring of 2007, the speaker's office contends, Quinn ordered her staff to halt the "holding code" practice. Several months later, she found out it had not stopped and instead was continuing through phantom organizations.
The council could not provide by our deadline the holding codes that were used before the speaker ordered them to halt the process.
The city's budget process is long and intricate. Nonprofits have to fill out mounds of paperwork, and the City Council is charged with meticulously reviewing it.
But that seems not to have been done here.
City Council officials could not say whether documents for these fictitious organizations existed, and our request for copies is pending.
The council has distributed documents showing where the $4.7 million initially earmarked to the fake groups ended up in fiscal year 2007 and fiscal year 2008. The largest allocation went to Friends of the Highline, a group converting an elevated rail track to a park in Quinn's district. Other groups that received funding resemble the council's usual budget line items, from little leagues to arts alliances.
A review of the allocations reveals that $3.74 million, or nearly 80 percent, is not attributed to a specific council member. Those projects, 66 in total, do not have a main sponsor, which is in direct contrast to Quinn's requirement that council members' names be listed with such items.
In the documents, 14 members are identified as receiving funds originally destined for the phantom accounts, including Finance Chair David Weprin, who did not return phone calls.
Some would say the lack of attribution raises concern about the intent of the funding. "Often times council members vote a certain way because they are promised certain things for their district," said Barron.
Some City Hall observers said the phantom groups could act as untapped accounts, which the speaker could dole out to reward members at her discretion.
Council members said some of the appropriations seem to be budget fixes. Barron has more than $50,000 in 12 items for fiscal year 2007, all of which were funded through cash initially earmarked in fake organizations. Barron said, and many would agree, there was no way he was getting political favors from the speaker.
"If they use any money for me and Tony (Avella), it was a mistake they were trying to correct," Barron said.
The City Council is about to embark on this fiscal year's budget negotiations. The mayor's executive budget is due out at the end of the month, and from there wheeling and dealing will begin. Quinn is slated to play a key role in the discussions over how to spend city money as the days of rising revenues and fat surpluses appear to be coming to an end.
Some question, however, whether Quinn can move on politically from this scandal and whether her mayoral hopes have now been dashed.
A statement from the Citizen Budgets Commission, a fiscal watchdog, reads: "All elected officials bear responsibility for the budgets that they adopt, and Speaker Quinn, in particular, should be held accountable for the City Council’s fiscal practices. She must now rebuild the public’s confidence in the truthfulness of the Council’s budget and its future integrity."
Others have called for investigations into the matter, including councilmember and mayoral candidate Tony Avella. Citizens Union, the sister organization of Gotham Gazette's publisher, has called for the speaker to release any and all information relevant to the scandal and is urging greater oversight of council member items to ensure their legitimacy.
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In a rare sign of confrontation with the Bloomberg administration, the City Council at its Stated Meeting Wednesday overrode a mayoral veto prohibiting income discrimination in housing and approved electronic waste legislation the mayor is known to oppose.
It also approved a rezoning plan for nine acres on the East Side between 35th Street and 41st Street, which are owned by Con Edison and are currently largely vacant.
The city's landlords will no longer be able to discriminate against potential tenants based on their source of income, under new legislation approved by the City Council in February. Mayor Michael Bloomberg vetoed the legislation earlier this month, and the council overrode the veto by a vote of 44 to 7.
The mayor opposed the legislation, arguing it threatened property owners and contradicted established case law. Council members who oppose the legislation have said the Section 8 housing voucher program is often riddled with bureaucratic red tape, making it nearly impossible for a small, independent landlord to navigate.
The legislation would apply to property owners with more than five homes and aim to secure housing for those with the federal housing vouchers. Under the bill, those who have been discriminated against could file a complaint with the Human Rights Commission.
The bill's main sponsor, Councilmember Bill de Blasio, said he had been shocked to find out the city's Human Rights Law did not already cover such discrimination.
"Anything that says, 'No blank allowed,' is problematic in our society," the councilmember said.
According to the council, more than 30,000 landlords rent to 85,313 households with Section 8 vouchers through the New York City Housing Authority. Even so, members argue, income discrimination persists.
Though the debate is not likely to end here, the City Council avoided a delay in enacting what is being called one of the most stringent electronic recycling laws in the country and the first approved in a major city.(For more on e-waste, play our Garbage Game.)
Earlier this month and following opposition within the Bloomberg administration, the City Council introduced two separate pieces of e-waste legislation. One (Intro 728) bans the disposal of electronic waste at curbside and requires manufacturers to devise recycling plans, while the other (Intro 729) sets benchmarks for manufacturers to meet within the next decade. The bills had initially been combined. Following the administration's opposition, the council split the proposal into two.
The council approved both bills by a vote of 47 to 4.
Residents who put electronics by the curb would face a $100 fine by 2010, while manufacturers who fail to recycle would face a $1,000 fine. The fines are included in the bill the mayor is expected to sign.
The administration opposes the legislation setting the benchmarks, stating manufacturers should not be held accountable for a consumer's failure to recycle. Under the legislation, which the mayor intends to veto, manufacturers would have to recycle 65 percent of their goods in weight by 2018.
The City Council has enough votes to override the mayor's potential veto. While City Council Speaker Christine Quinn has declined to say the City Council would sue the administration for not enforcing the bill, environmental groups have said they would do so.
After years of planning and debate, the City Council unanimously approved a rezoning plan for Con Edison's waterside plant in Councilmember Daniel Garodnick's district. The site will be developed by East River Realty and is slated to add 6.1 million square feet of commercial and residential space along the East River.
The plan includes seven towers and the developer has pledged to contribute $10 million for a pedestrian footbridge over the FDR Drive.
Community and local officials had raised concerns the development was out of character with the rest of the neighborhood and the proposed skyscrapers, which could be as high as 864 feet tall, would tower over the nearby United Nations Secretariat Building. Both the local community board and Manhattan Borough President recommended the plan be rejected.
The plan, which is estimated to cost $4 billion and covers the largest stretch of privately owned land in Manhattan, includes five acres of open space, which community and local officials had been pushing for for years. It also includes a new public school for approximately 600 students and sets aside 600 units for affordable housing.
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