Mayor de Blasio (photo: Rob Bennett, Mayor's Office)
As plans to spur new development in areas around New York City proceed, mostly silence surrounds the experience of homeowners who are being pressured by investors to sell. Prior to the City Council’s approval of rezoning East New York, Brooklyn last week, there had been little public discussion of how or whether to ameliorate real estate speculation on small homes. At least in East New York, some homeowner protections have been introduced to the plan, but investor-backed speculation, to some extent, still seems to be part of the city-wide housing agenda.
Facing a shortage of housing attainable for moderate- and low-income residents, Mayor Bill de Blasio has stressed the importance of creating a comprehensive affordable housing plan, part of his larger agenda to combat inequality. De Blasio is attempting to harness the sweep of gentrification that continues to displace residents – both renters and small home owners - who are being priced and bought out, especially in the “next” neighborhoods where prices are rising rapidly.
“We know right now that we can do a lot to stop evictions from rental apartments,” de Blasio said in a March interview with WNYC. “We don’t have as good a model to protect homeowners that might be the subject of speculation.”
The mayor is working with the City Council on much of his housing plan, including tenant protections, new affordable housing requirements, and the rezoning of as many as 15 neighborhoods across the city. East New York’s is the first such rezoning plan to be approved by a Council vote.
The Council itself has been especially focused on protecting tenants from eviction. When asked, though, about protections for financially-strapped homeowners who will have trouble resisting aggressive speculation, Council Speaker Melissa Mark-Viverito also indicated, like the mayor, that the subject has not been thoroughly discussed. Acknowledging pressure on homeowners as a challenge in a “very hot” market, she said, “Those are things we can talk about as we think about initiatives and existing legal services and getting to more targeted populations.”
In the revised East New York rezoning plan, the city has committed to establishing a “Homeowner Helpdesk,” which will be a community-based support service with financial and legal counselors offering advice to homeowners facing overbearing speculators who are drawn in by low prices and the potential for high price growth that comes with the ability to build higher. The city will also provide low-income homeowners with loans and small grants for critical repairs through the Home Improvement Program and Senior Citizen Assistance Program, among others.
The Department of Housing Preservation and Development (HPD), which subsidizes the construction of affordable housing, also says it will work with the Department of Environmental Protection to implement water rate relief programs, and is also looking into the possibility of establishing a “Cease and Desist Zone,” where homeowners would be protected from unwanted solicitation. Buying, however, is still a principal tenet of the agenda to have real estate developers build much of the city’s new affordable housing stock.
Part of Mark-Viverito’s East Harlem district is also on the list to be rezoned, as well as neighborhoods including Flushing West, Long Island City, a Jerome Avenue corridor in the Bronx, and a Bay Street Corridor on Staten Island.
The rise in sales prices and the interest investors are showing in one-to-four unit houses in areas eyed for rezoning indicate that homeowners may increasingly become the targets of forceful, even predatory, buyers.
Mark-Viverito mentioned the calls she herself receives to sell her East Harlem home, while “keys for cash” flyers proliferate in the neighborhoods on the shifting lines of gentrification. Often, even more aggressive tactics are taken by those looking to invest early when a neighborhood appears to be considered for improvement.
Stakeholders and Stakes
All homeowners stand to gain from increasing property values in neighborhoods slated for rezoning. Those with moderate incomes and unburdened by mortgages are in particularly good position, whether they decide to take the money and run or stay vested. But many, often most, of the homeowners in areas pending rezoning have relatively low incomes and face significant pressures like mortgage obligations and the cost of maintaining old housing. As investors see greater opportunity in neighborhoods the city plans to upzone, this latter group of homeowners becomes more vulnerable to buyout offers that don’t reflect the value of their assets.
For small home owners, the ability of government intervention to prevent displacement and promote affordable housing options falls into a grey area. “Obviously, the first thing we would say to anybody is to encourage nobody to respond to anything unless they get some sort of guidance,” Mark-Viverito said in March of homeowners being approached to sell. “These are challenges that we face in a market that is very hot, you know, that is putting a lot of pressures.”
While Mark-Viverito may offer a tip to fellow homeowners - some of whom speak limited English and many of whom are seniors - and the city provides some advice and loan services, homeowners appear to be largely on their own as the city encourages investment in underdeveloped communities. As part of the plan to rezone East New York, the city aims to subsidize the construction of new deeply affordable housing on private land, but in many cases, developers must first buy land from existing homeowners.
“Gentrification, rezoning it all trickles and impacts,” said Darma Diaz, a homeowner in Cypress Hills, which is partially included in the East New York rezoning plan. “We definitely know that rents in New York City are high and apartments are hard to find, but it makes [living in the city] that much more challenging when you have the pressure of investors wanting and pursuing and making it really financially lucrative to sell your home.”
Diaz has been living in Cypress Hills, Brooklyn since the late 1970s and has owned a home there since 2007. She is worried that small home owners have not received enough attention throughout the city-wide discussion of rezoning as part of the mayor’s affordable housing agenda. “We knew that building more units was necessary for our community, but I think what [the mayor and City Council] did not take into account was the impact that the speculators were gonna have on small home owners.”
Mayor de Blasio’s affordable housing plan, in part using legislative tools passed through the City Council in March, includes leveraging property value growth that will come with changing land use regulations to allow greater housing density, encourage construction, and require developers to build tens of thousands of new units of affordable housing. De Blasio’s overall plan is to build and preserve a total of 200,000 units of affordable housing over ten years with varying rent regulations affordable to low-, moderate-, and middle-income New Yorkers. Another 160,000 market-rate units are part of the plan.
Benjamin Dulchin, executive director of the Association for Neighborhood and Housing Development (ANHD), told Gotham Gazette that the areas pending rezoning are typically regions of the city with high concentrations of low-rise buildings. Now with low housing density, developers will soon be allowed to build higher in these neighborhoods, creating additional market-rate apartments along with mandated affordable units.
The buildings that would need to be torn down to make room for the higher, denser housing necessary to achieve the mayor’s goal of 80,000 newly built affordable units are also often the kinds of buildings - one-to-four family houses - that are occupied by the owner.
In East New York, a majority of all housing is in buildings with fewer than six units. According to the Coalition for Community Advancement, a group of neighborhood organizations independently monitoring the planning process and pushing for deeper affordability levels, roughly three-quarters of the buildings on sale in East New York are one-to-four family houses.
The Department of City Planning’s East New York Community Plan, the revised version of which was passed just by the City Council, proposed to change land use rules to allow six- to 14-story buildings to be constructed, which could more than double the area’s population density. In the next two years, HPD plans to build 1,200 new affordable housing units in East New York and, by 2024, seeks to make affordable half of all new units developed in that community.
Even before rezoning proposals are approved through the Uniform Land Use Review Procedure (ULURP), which is the public process involving many city actors that any major land use change must go through, the increase in property value that comes with rezoning has potential to make waves among buyers and investors - and thus, existing homeowners.
While the steady sales price growth of New York City real estate over the past five years (20 if you allow for some dips) is cooling, annual price growth in East Brooklyn, which includes Bedford-Stuyvesant, Brownsville, Bushwick, Crown Heights, and East New York, increased to a high 20.5 percent in February, exceeding the Brooklyn-wide growth rate by about 300 percent, according to a StreetEasy report.
Alan Lightfeldt, a data scientist at StreetEasy, said that it is impossible to tell what impact the new affordable housing legislation will have on home sales because of the complexity of factors that affect prices, such as the “endemic demand” for homes - the built-in demand that a large city with a population of aspiring homeowners, like New York, almost always has today.
That demand is part of the general trend of gentrification, radiating outward as the population continues to grow, business centers expand, and the city becomes safer. The latest hot neighborhoods are those where prices are still affordable to moderate- and middle-income residents, and that have public transportation infrastructure connecting them to the rest of the city.
Paula Crespo, a senior planner at the Pratt Center for Community Development, who works with the Coalition for Community Advancement, provided Gotham Gazette with data that the sales prices of one-to-four family homes has increased by 13 percent in East New York since the rezoning was announced in 2014. Yet, they are still relatively low compared to the city- and borough-wide median sales prices.
The combination of low prices and high price growth makes places like East New York incredibly appetizing to real estate speculators who seek to turn a profit. When speculation is rampant, homeowners - both current and prospective - feel the effects.
From a market perspective, other considerations aside, “when an area sees widespread value change, especially through external factors like rezoning,” Lightfeldt said, “homeowners usually benefit.” Being able to choose when to sell gives homeowners, like investors, the ability to capitalize on the increase in their property’s value.
Hardships of the Small Home Owner
For homeowners who are in debt and facing financial hardship, however, the agency to choose whether and when to sell is not always theirs. Up against wealthy buyers attracted by favorable prices and even more favorable price growth, homeowners in areas under rezoning consideration face the weighty task of holding out against offers to buy. Giving in may satisfy immediate financial needs, but, for the lowest-income earners, it almost certainly means displacement from the community as speculation ratchets-up prices.
“I think it’s dollars and cents,” said Diaz, who works with the Coalition for Community Advancement in Cypress Hills. “They’re capitalizing on people who may be financially strapped, and that’s a way to harass them, and makes them think…they can pay off their debt and go buy something else. OK, and where are they going to buy something else in Cypress Hills or New York City as a whole?”
According to the Coalition for Community Advancement, the median income of homeowners living in one-to-four family houses in East New York is nearly $19,000 below the city-wide median, making it difficult to meet housing and maintenance expenses, including mortgage and loan payments, property tax payments, utilities, and repairs. Because of their effect on taxes and everyday neighborhood expenses, rising property values can actually hurt a homeowner who wants to stay in their house and in their community.
In the zip codes that comprise East New York, census data from 2010 show that, of the 15,157 owner-occupied housing units, 12,286 were owned with a mortgage or loan. Less than one-fifth of homeowners were free and clear. For many of these homeowners, the risk of foreclosure is high and buy-out offers, even relatively low ones, may be hard to resist. (It should be noted that the East New York rezoning does not include the entirety of the neighborhood, but a significant portion of it.)
Some of the homes in East New York have already changed hands as a result of foreclosure. The 2008 housing collapse resulted in millions of foreclosures nationwide, and in New York City a second wave of foreclosures early this decade further destabilized homeowners. Census surveys in 2010 and 2014 show that the number of owner-occupied units in one East New York zip code fell by 217, or about three percent, in the intervening years.
Last year, East New York reported the fourth highest foreclosure rate in the city, according to data from the Coalition for Community Advancement.
The foreclosure crisis has not been lost on unscrupulous opportunists, who have inundated New York City homeowners with unlicensed and often illegal mortgage refinancing offers. According to a 2014 report by the Center for NYC Neighborhoods in conjunction with the Lawyers’ Committee for Civil Rights Under Law, “New York homeowners report larger losses to scammers than in the rest of the country.”
Because such foreclosure rescue scams are so costly to their victims – they often involve the redirection of mortgage payments towards fraudulent restructuring services – and in many cases lead to more urgent mortgage trouble, they compound the risk of displacement of homeowners who are, by definition, already in distress, and incentivize buy-outs below the potential market prices of the near-future.
The areas hit hardest by these scams – Southeast Brooklyn, Southeast Queens, and the Northwest Bronx – are also places where rezoning is being discussed.
In addition to the financial stresses that accompany onerous mortgage obligations, the Coalition for Community Advancement reports that a majority of homes in East New York – 64 percent – have a water or sewer lien, demonstrating the level of economic distress faced by homeowners to pay for essentials. Adding to the cost of staying, most of the small housing stock there was built prior to 1950 and, according to several sources, many homes need serious repairs. Increasing property value also means that property taxes will rise, an additional burden to homeowners who do not wish to sell.
Diaz, who does not intend to sell her home despite regular solicitation from buyers, says its assessed value has gone up $8,000 in the past year, and that her property tax payments have increased by about $116 a month.
The homeowners in areas to be rezoned represent more vulnerable and historically disadvantaged groups that face greater barriers to keeping their homes and greater challenges if they lose them. According to Coalition data, nearly half of all small homeowners in East New York are senior citizens and 89 percent are either black or Hispanic.
Many senior citizens in East New York depend on retirement benefits, and some have experienced a significant reduction in income upon retiring. Discussing the challenges faced by seniors in her neighborhood, Diaz said, “I was speaking to a senior just on Sunday, and her income basically decreased by $32,000 when retiring. So that’s a big indicator.”
Ring of Investors
A mark of community fracture, homebuyers seeking to take advantage of favorable conditions in the market are less and less first-time buyers and end-users. Increasingly, they are investors and big firms using their buying power to flip real estate quickly. The Center for NYC Neighborhoods, which works with the city and state to facilitate home ownership and prevent foreclosure, recently reported that house flipping in New York City is at a five-year high, with more than 1,800 one-to-four unit homes flipped last year.
Speculators, often using public records to identify which doors to knock on, are seeing gross return 29 percent higher than the country-wide rate. It is a practice highlighted by the There Goes The Neighborhood podcast from WNYC radio and The Nation, which investigates themes of housing, race, and gentrification in New York City.
Cypress Hills had the highest median gross return on flipped one-to-four unit houses in the city in 2015, and East New York as a whole experienced the highest volume of flips. The house next to Diaz’s in Cypress Hills, she said, has been bought and resold three times since she bought her home in 2007.
Investor-backed buyers have the capital to buy houses that many first-time buyers do not. As a result, they can make cash purchases on houses in foreclosure directly from the bank, renovate them quickly, and sell them or rent out rooms in a significantly higher price tier than many of the current residents of East New York and other neighborhoods can afford. According to the Center’s data, most homes that were originally affordable to families making 95 percent of the area median income (AMI) last year - about $75,000 annually for a family of three - were resold at prices affordable to families making 163 percent of AMI, sometimes only months later.
At times, as in the case of Dixon Advisory, the Australian firm that has bought up large swaths in Bushwick, Bedford-Stuyvesant, and Crown Heights, investors are buying houses with the intent of converting them into market-rate rental units, rather than making them affordable or building more units, a portion of which would have to be made affordable under MIH. Turning units in one-to-four family houses, currently among the more affordable rental options in the area according to Dulchin of ANHD, into market-rate housing would restrict the number of affordable housing units available for preservation in rezoned areas, as well as the potential number of new affordable units that could be built if the land were to be redeveloped.
The decrease in affordability of ownership means that many longtime renters will not be able to own property in their neighborhood following rezoning. “For me owning a home was one of life’s plans,” said Diaz. “I know what it is to have two-point-five jobs and say that’s what you are gonna do.” For families who have lived in Cypress Hills all their lives, she said, “it would take some sacrifices to be able to do that.”
HPD offers a down payment assistance program for low-income, first-time buyers who can receive up to $15,000 toward a down payment, as well as some low-interest loans for repairs and energy efficiency improvements. Even with assistance funding, though, most homes in East New York will not be affordable to residents there when they are being flipped.
A Challenge to Affordable Housing Options
Home speculation has the potential to impact Mayor de Blasio’s affordable housing goals. In addition to feeling pressure from speculators in the areas targeted for rezoning, homeowners also house a significant portion of renters in these communities, people who risk displacement if market prices rise ahead of the development of new affordable housing.
According to Humberto Martinez, an urban planner at Cypress Hills Local Development Corporation, part of the Coalition for Community Advancement, over 34,000 people live in owner-occupied homes, roughly 40 percent of East New York residents.
If homeowners sell their homes en masse to speculators seeking to flip houses into higher price brackets or to create market-rate rental units, many of these renters will be displaced from their homes. According to the Center for NYC Neighborhoods, “The rents required to sustain the resale prices of flipped properties...far exceed the median rents in their boroughs.” Before the mayor’s affordable housing agenda even rolls out in East New York, both renters and former area homeowners may have to leave the community.
Unregulated one-to-four unit, owner-occupied buildings are a “hidden supply of affordable housing,” said Dulchin. Because landlords live next to their tenants and often have personal relationships with them, these rental units tend to lag behind the market, providing housing options for some of the lowest-income earners.
“One of my cohorts who is also a small home owner, he rents to working Section 8 families,” said Diaz. “With the increase of the taxes it’s made it difficult for the rents to be at the level that they are now. When the homeowner’s expenses exceed those subsidies that they’re getting, they’re gonna have to go outside the box and will no longer be able to rent to those that [depend on public assistance] programs.”
David Shichman, director of homelessness prevention at New Alternatives for Children Inc., says that if rents in unregulated buildings are too far below market rates it is a sign of inadequate housing. Often there is doubling- and tripling-up, which is considered a form of homelessness.
East New York, in addition to being an area with the potential to greatly increase housing density, was also put forward for rezoning, according to Shichman, because it is “a top catchment area” of eviction and homelessness. As rental prices rise, it is becoming increasingly common for single-resident occupancy units (SROs) to house more than one tenant, which increases burdensome water and sewer charges and compounds the need for repairs.
While there was some effort to incorporate homeowner protections into the East New York plan, it seems that the sale of one-to-four unit houses from homeowners to developers is key for enough land to be made available to construct new housing in these low-rise areas. Small homes - under six units - contain 60 percent of all current housing units in East New York. All the same, HPD plans to build three-quarters of the 1,200 new units of affordable housing on privately-owned land over the next two years. Without high-volume buying of small homes by developers, there might not be enough available land for HPD’s development plan to unfold.
A senior HPD official said that land speculation simply cannot be stopped, but it can be dampened by Mandatory Inclusionary Housing (MIH), which places affordability requirements on developers that could deter those seeking to exploit the market. In an interview last year with New York Magazine, Deputy Mayor for Housing and Economic Development Alicia Glen said, “I’m not here to be punitive. We want these guys to build.”
Whether aggressive speculation at the level experienced by current East New York homeowners is inevitable is under dispute. Paula Crespo, in an email, stated, “The mere announcement [that] the plan [to rezone East New York] would happen has fueled speculation.”
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by Ethan Geringer-Sameth, reporter, Gotham Gazette
@GeringerSameth @GothamGazette
De Blasio (photo: Demetrius Freeman/Mayoral Photography Office)
The revelation that it was Gov. Andrew Cuomo’s chosen enforcement counsel at the Board of Elections who sparked an investigation into Mayor BIll de Blasio’s fundraising activities, in the mayor’s 2014 effort to flip control of the state Senate, has raised a number of questions about motivation and independence.
De Blasio has asserted his innocence, saying that he and his associates followed the letter of the law. He and his lawyer have used Risa Sugarman, the BOE enforcement counsel who used to work for Cuomo, and the leak of her referral to investigators to discredit allegations that the fundraising he spearheaded broke election laws. Analysts say these arguments, in which de Blasio has repeatedly questioned Sugarman’s “motivations,” are at least somewhat effective because the governor has a long history of stacking state watchdog organizations, boards, and agencies with his friends, long-time employees, and political donors.
“There is pervasive conflict of interest under Governor Cuomo, including in the areas of ethics enforcement he has a hand in,” said John Kaehny, executive director of Reinvent Albany. “Risa Sugarman should not be the enforcement counsel at BOE, just as Seth Agata should not be executive director of JCOPE. They are seen by many as Cuomo loyalists, not independent actors. Their relationship to Cuomo colors everything they do, including investigating the governor's political foes.”
Headlines featuring Cuomo and de Blasio’s ongoing political feud have dominated newspapers for nearly two years now. Cuomo has come to routinely undermine de Blasio through the many levers he controls as the head of state government. He has stymied de Blasio at many turns, holding back funding for affordable housing, homelessness prevention, the MTA, and more, while holding hostage issues of rent regulations, the 421-a tax abatement, and extension of mayoral control of schools.
If there is one thing Cuomo is famous for in Albany, beside his precise and prodigious understanding of the mechanics of governing, it is his taste for political vengeance and Machiavellian political vendettas. De Blasio’s very public pointing out of the latter in June took their feud to another level.
By many accounts Sugarman’s report on de Blasio’s fundraising highlights major and valid questions about the state’s campaign finance system and the legality of de Blasio’s methods. Jennifer Rodgers, former assistant U.S. Attorney and current executive director of the Center For The Advancement of Public Integrity at Columbia University, told Gotham Gazette that after reviewing the state statutes and Sugarman’s report, she thinks there is good reason to believe the law was violated, but admitted there is enough discretion that a district attorney may decide there is not enough hard proof of intent.
On Wednesday evening, de Blasio’s administration said that “City Hall” had been subpoenaed by the offices of District Attorney Cy Vance - who the BOE referral went to three months ago - and U.S. Attorney Preet Bharara. “The Mayor has not been personally served,” the statement from de Blasio counsel Maya Wiley reads.
There are multiple investigations of de Blasio and his associations occurring at once - another has to do with donations to a non-profit established by the mayor’s allies and whether city action was offered or given in return. The Wall Street Journal has reported that mayoral aides and consultants have been subpoenaed.
The questions raised by Sugarman’s connections to Cuomo and the leak of her referral to Vance have been key to de Blasio’s defense of himself, along with saying that he broke no laws and that others have used similar tactics that he and his team used in moving money to state Senate candidates.
Asked about the BOE-referred investigation on Monday, de Blasio relied on a letter from Laurence Laufer, a lawyer who represents the mayor and a number of de Blasio’s fundraisers. Laufer raised questions about Sugarman’s “motivations” and said that the fact that the memo was leaked to the press increases the impression the investigation was politically motivated. De Blasio said similarly.
"I am quite certain that all of you will get to the truth about that,” de Blasio said to reporters of the leak on Monday. “I am quite certain that you will be able to uncover whatever motivations may have existed. But we can say this: a government officer is supposed to honor their responsibilities, and first of all that should never have been put into the public domain, and second of all, when you look at how inconsistent it is with state law, it begs the question 'what was the underlying motivation,' but I have confidence that all of you will get to the bottom of it."
De Blasio has said that he believes his fundraising tactics were legal and that all of his plans were “vetted” by lawyers. The leak and Sugarman’s connections to Cuomo have offered him a public defense to what many say is a fairly damning report.
Sugarman detailed how de Blasio and his allies planned and executed a program to subvert campaign finance limits by funneling major donations through county political committees and having the cash sent directly to candidates in heated races. The donation limits to county committees are far higher than to candidate committees and there are no limits on donations from the former to the latter.
The referral spurred by Sugarman, and voted onward by the four-member Board of Elections, is now in the hands of District Attorney Vance, a Democrat like Cuomo and de Blasio.
Other concerns about Sugarman’s actions include that her report appears to ignore not only the past use of similar tactics by former Mayor Michael Bloomberg and both major political parties, but also the fact that members of the governor’s office were kept informed of the de Blasio-led plan to flip the Senate, including the ways in which money was being moved, if not involved in it outright.
These question marks add to the skepticism of some observers who think that Sugarman was acting in Cuomo’s interest. Cuomo administration officials stress that Sugarman was nominated by Cuomo, but had to be approved by the Legislature and acts independently.
The Daily News and the New York Times reported that Sugarman took up her investigation after complaints were filed by Republican voters in Senate districts targeted by de Blasio’s efforts. Sugarman then carried out an investigation, presented her findings to the four Board of Elections commissioners, two of whom are Republicans and two of whom are Democrats. They approved her referral to the Manhattan DA.
Cuomo’s office has denied it was aware of Sugarman’s investigation.
The impression that Albany’s ethics watchdogs are not actually independent has been festering for years as Cuomo has seen to it that three of his former longtime employees have headed the Joint Commission on Public Ethics (JCOPE). Cuomo nominated Sugarman to the BOE after the position was created in a 2014 deal with the Legislature that killed the Moreland Commission on Public Corruption, another entity with many questions around independence from the governor. Cuomo has said conflicting things about whether Moreland was his commission or independent.
Sugarman came to the BOE counsel position from the Department of Taxation of Finance, where she was a deputy commissioner. Before that she worked as a deputy commissioner of The Division of Criminal Justice Services and for four years at the Attorney General’s office under Cuomo.
Members of the Board of Elections, who are political appointees, have complained since Sugarman took charge that they are kept in the dark about enforcement actions and are concerned Sugarman is free to act out of political expediency. Doug Kellner, a Democratic BOE commissioner since 2005, said that any attempt to ascertain Sugarman’s method of enforcement has been rebuffed. “She has made it clear she won't answer those questions because she feels she is independent,” Kellner told Gotham Gazette.
Kellner agreed with concerns raised by Laurence Laufer, a lawyer who represents some of the fundraisers involved in the case, including de Blasio, that the leaking of the memo could be politically motivated. "In any event, the leak is certainly a highly prejudicial and perhaps politically-motivated act, which is contrary to both your non-partisan, independent function and to the bi-partisan charge of the agency by which you are employed – that is, if you or your office was responsible, directly or indirectly," Laufer wrote to Sugarman in a letter made public.
Republican BOE commissioner Gregory Peterson told Gotham Gazette that he was concerned about “selective enforcement” and thought that it was possible that it occurred with this referral. “This case may have been selective enforcement, but I think she was right on,” Peterson said.
Rodgers said that “independence” is key for any oversight board. “It is concerning that she has this history, it's also concerning that she isn’t being transparent with her commissioners. If you are doing everything by the facts, independently and following the law then you should have no problem explaining how you pursue enforcement.”
She noted that there are checks on Sugarman - she has to present her referral to the commissioners for approval, which they provided in the de Blasio case, though she can break a tie, and then the District Attorney has decide whether to investigate and whether criminal charges are warranted. Sugarman is also bound to investigate complaints but cannot investigate when none is made.
Blair Horner of the New York Public Interest Research Group, who has repeatedly criticized what he sees as a lack of independence for JCOPE, said that Sugarman’s BOE work will inevitably be judged by her connections to the governor, whether those connections motivate her or not. “The fact that she is connected to the governor is trouble for her even if she’s on the up-and-up.”
Cuomo has addressed the importance of rooting out the appearance of bias and conflict of interest when speaking on the topic of criminal justice reform. In 2015, during his State of the State address, Cuomo spoke about a crisis in faith in the criminal justice system. “And that’s not just New York, it’s a problem all across the country and it’s a problem in reality and it’s a problem in perception and if it’s a problem only in perception, it is still a real problem because people have to trust the justice system and the trust has to go both ways,” Cuomo said, speaking about police and community, but also referring to the oft-cited conflict of interest around police and prosecutors who regularly work together but can then be at odds when an officer is suspected of a crime.
Sugarman did not return requests for comment, but she did defend her independence in an interview with the New York Times this week. “The work that I do here has nothing to do with where I came from,” Sugarman said, adding, “It just makes me chuckle when people say those kinds of things.” She refused to answer any questions about her investigation into de Blasio’s fundraising, which includes several de Blasio aides and groups that either donated large sums or helped run the operation.
JCOPE, another Albany ethics agency created by Cuomo and the Legislature, has been headed by someone from the Cuomo camp since its inception. Seth Agata, a former Cuomo counsel, was recently named JCOPE executive director, to criticism for his ties to the governor. The commission met with Agata as its chair for the first time this week. Less than ten minutes of the proceedings took place in public. JCOPE is not subject to public meeting laws and most of what it does is done in secret - a necessity, some say, due to its sensitive business. It’s members have complained in the past that Cuomo has too much influence over the agency and pushed for a national search for its leadership. That search resulted in Agata’s hiring.
Previous JCOPE heads include Letizia Tagliafierro, who worked for Cuomo during his time as attorney general and later as his director of governmental operations. She left JCOPE and took a position as deputy commissioner of the state's Department of Taxation and Finance in 2015. Her appointment in 2013 drew the ire of legislative members of JCOPE, including one who quit in protest.
Tagliafierro replaced Ellen Biben, who worked as the governor's inspector general and in the attorney general's office when Cuomo held that position. Biben now is now a Court of Claims Judge - she was nominated for the position by Cuomo.
“Notwithstanding the unique and extensive qualifications of these nominees, all three were approved by a bipartisan group of commissioners and to suggest otherwise ignores not only the facts but the process,” said Cuomo spokesperson Dani Lever.
“It’s a real closed game with Andrew,” said Doug Muzzio, professor of political science at Baruch College. “It’s striking that he talks reform but he plays this real insider game with friends and immediate associates.”
Sugarman’s statements haven’t been reassuring for watchdogs, who say they’ve seen little real independent action from JCOPE or Sugarman; they find it worrying that the first major criminal referral to come out of Sugarman’s office targets an individual, de Blasio, that Cuomo has been warring with.
“Mayor de Blasio's team has raised legitimate questions about Sugarman being biased and whether her criminal complaint amounts to selective, politically-motivated enforcement,” said Kaehny. “By appointing these loyalists, the governor has badly undermined whatever credibility JCOPE and the state BOE have as fair and impartial ethics enforcers. Maybe that is his goal, or maybe he is so immersed in conflict of interest that he can't see what the problem is. Either way, it's another setback for clean government.”
Whether de Blasio’s coordinated fundraising warrants criminal prosecution is now up to Vance. A number of observers say they think it would be hard not to take into account who appointed Sugarman, the fact that coordinated fundraising through party committees has been commonplace for years, and that the leak may have tainted public perception.
“The leak raises some pretty serious concerns,” said Richard Briffault, a professor at Columbia Law School. “No serious law enforcement agency should be leaking findings. It can lead to a trial by the public. I don’t know if the leak was illegal, but it sure should be.”
Rodgers says she doubts the leak will be a major influence on Vance, but notes that it could taint his view of it as being politically motivated.
Kaehny said it would be concerning if de Blasio were suddenly to be held to different standards after this particular fundraising technique has gone unchecked for decades.
“It sure seems wrong and unfair, but it may be legally valid,” said Kaehny of Sugarman's referral. “Prosecutors have lots of discretion, and it will be up to them to weigh this. I do not have the expertise to judge the legal case, but as a prosecutor, I would probably not indict if I learned this was a customary practice of the previous mayor. If I was enforcement counsel, I would have sent a letter to the mayor and written a public advisory notice that said, going forward, we are interpreting the law like this. The idea is to change overall behavior, not selectively persecute.”
Others see the tactics used by de Blasio’s team as a more egregious coordinated effort than has been used before - with an understanding of specific amounts on specific dates that candidates’ committees were expecting to see moved through county committees.
Rodgers said she will be extremely interested to see how Vance decides to proceed. “He may look at this and say ‘We are going to pursue this case but we don’t want to be selective, we don’t want to get involved in a political hit, so we are going to open up investigations into everybody who uses this technique.’ This isn’t a matter of public safety, if he looks at it and decides this is a political hit job and an example of selective prosecution, he could just drop it.”
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by David King, Albany editor, Gotham Gazette
@DavidHowardKing @GothamGazette
photo: Demetrius Freeman/Mayoral Photography Office
Mayor Bill de Blasio released his $82.2 billion Executive Budget for Fiscal Year 2017 on Tuesday, increasing spending by about $100 million from his proposed preliminary budget while expressing concern about a possible economic slowdown and the effects of consistent underinvestment by the state and federal governments.
The executive budget “continues a trajectory of progressive, responsible and honest budgeting,” the mayor said at the release at City Hall. “We believe that disciplined spending is the basis for everything we need to do,” he added. De Blasio outlined several hundred million dollars in new spending offset by similar amounts of new savings, while stressing “targeted investments” and focusing a good deal on a major infusion of funds to help rescue the troubled city public hospital system.
The mayor emphasized the city’s strong current economic situation with jobs at an all-time high of 4.3 million, of which 249,000 were added in just the last two years. But he cautioned that the growth of tax revenue, which was an average of 7 percent for the last five years, was slowing down. For fiscal 2016, the growth rate was projected at 3.6 percent and is expected to fall to 1.9 percent in fiscal 2017.
He also spoke of the decreasing support for the city from the state and federal government, repeatedly stressing the state’s failure to keep commitments. Since 2010, he said, the state alone had withheld about $2 billion in funding from the city under the Aid and Incentives for Municipalities program. When asked by Gotham Gazette during a question-and-answer session after his presentation whether he agreed with Gov. Andrew Cuomo’s assertion that the state could pull back on funding toward the city since the city is experiencing such good economic times, de Blasio said absolutely not.
Funding at the federal level is an even bigger uncertainty, the mayor said, considering there will be a new face in the White House come January. De Blasio’s biggest concerns were federal infrastructure investments and funds for counter-terrorism.
Despite these concerns and apprehensions about the effects of global financial instability on New York City’s economy, the executive budget added a number of new initiatives. All these, the mayor stressed, would be paid for through $1.25 billion in new savings through fiscal 2017, along with the $1 billion already identified in the preliminary budget, under the Citywide Savings Program. This is the city’s largest spending reduction program in five years, garnered through debt savings, spending re-estimates, and agency efficiencies. The mayor also said he would push city agencies to find hundreds of millions more in savings in time for the budget modification in November.
To insulate the city against negative pressures from international markets and the widely foreseen economic slowdown, the mayor added more funds to existing city reserves. While the preliminary budget had already laid out $1 billion for the General Reserve and $500 million for the Capital Stabilization Reserve, the mayor added another $250 million to the Retiree Health Benefits Trust fund, bringing it to a total of $3.7 billion.
Earlier on Tuesday, the administration highlighted a number of new spending initiatives included in the executive budget, coinciding with details that were released to different media outlets ahead of time.
There is added funding to triple the number of intensive care mental health units at the Rikers Island prison complex and enhance health services at city jails. About $8.7 would go to setting up eight new PACE (Program to Accelerate Clinical Effectiveness) units. That funding will increase to $24.2 million in fiscal 2020. An additional $2.7 million was added to expand pre-arraignment screenings in Manhattan, and $2.5 million to expand Hepatitis-C treatment in city jails. The budget also makes another $1.9 million in capital investments to improve patient care through telehealth and to add 12 new mini-clinics. Another $170 million will be invested to create an alternative housing facility for adolescents incarcerated at Rikers Island.
The executive budget also added a $160 million investment in Fiscal 2016 for the ailing municipal health system, New York City Health + Hospitals (H+H), which will increase to $180 million for fiscal 2017. In the preliminary budget, the mayor made a one-time investment of $337 million to keep the system afloat and the new funding stems from a comprehensive report, One New York: Health Care for Our Neighborhoods, which lays out a plan for overhauling the system. “We have to intervene aggressively here,” de Blasio said at the Tuesday release, citing a projected shortfall of $1.8 billion by fiscal 2020 if the city did not step in to reform H+H operations. The shortfall will be met through $700 million in expense reductions and $1.1 billion in new revenue.
About $66 million in additional money will pay for the city’s homeless services plan, of which $38 million would be offset by the recent merger of the Human Resources Administration and the Department of Homeless Services.
The city will also make more investments in public safety, starting with $70 million to create a new police precinct in Southeast Queens, satisfying a decades old demand, the mayor said. The budget also added $5 million for 50 new ambulance tours in fiscal 2017 (increasing to $10 million the following year) and $5.5 million to prevent and treat opioid addiction.
On Monday, at a press conference in Bay Ridge, the mayor announced a $183 credit for 664,000 homeowners across the city for paying water and sewer bills. This is included in the executive budget along with a $250 credit for eligible multi-family properties. Together, these will cost $122 million.
Another announcement made on Monday was “incentive funding” for the Board of Elections. The mayor set aside $1.5 million in the executive budget to study systemic issues with the BOE and said another $18.5 million would be included in the adopted budget if the board agrees to make significant reforms.
The executive budget also increased school spending with $161 million for raising the Fair Student Funding level for all schools to an average of 91 percent (at least 87 percent at each school) in fiscal 2017. This is expected to grow to $310 million in the next fiscal year with state support. The budget also includes $17 million for the Mayor’s Equity & Excellence plan, to improve college access, and $9 million to ensure elementary schools comply with state physical education mandates.
There was a massive bump in capital spending in the executive budget. A total of $685 million will be dedicated in the current budget and the upcoming Ten Year Capital Strategy to accelerate completion of the shafts for the Brooklyn/Queens section of Water Tunnel No. 3., speeding up the timeline for activation of the tunnel and building a new connection to Staten Island.
Nearly $280 million will go towards reconstruction of crucial city bridges: the Ed Koch Queensboro Bridge, the Brooklyn Bridge, and the Manhattan Bridge. Four new ferries will be purchased and the ferry pier at Brooklyn Navy Yard will be reconstructed for a total of $42 million in capital funds.
The budget also puts $21 million in capital funds towards new snow removal equipment for neighborhoods with narrow streets. The need was highlighted in the wake of Snowstorm Jonas this winter and identified in an After Action Report by the Department of Sanitation. The city will also spend $10 million in capital funds for two new animal shelters in the Bronx and Queens and $50 million for an indoor pool on Staten Island. An additional $186 million will go to repaving 1,300 lane miles of roads in fiscal 2018.
The executive budget also increases investment in climate resiliency, including $170 million for stormwater management infrastructure. It adds funds for after-school and community programs and an increase in seasonal employees at the Parks Department.
Maria Doulis, vice-president of the Citizens Budget Commission, a nonpartisan, nonprofit budget watchdog, sounded two big notes of caution in the executive budget. “There’s an incredible amount of new spending here,” she said, stressing that the savings that would offset this spending were not coming from productivity. “It relies on debt service savings, re-estimates and on Medicaid revenues, and not on agency efficiency initiatives.”
Although she acknowledged the mayor’s ongoing efforts to find agency efficiencies through the November budget modification, Doulis pointed out that these did not constitute a bulk of savings.
The other “big item” for Doulis is the city’s support for NYC Health + Hospitals. “That plan has many risks,” Doulis said. “It’s relying on H+H to achieve expense reductions that it’s not been able to do previously, on MetroPlus reimbursements and on federal waivers for Medicaid money, which are highly uncertain.”
Doulis also expressed concern with the massive capital plan, which totals $67.1 billion through fiscal 2020. “That’s bigger than some ten year plans I’ve seen,” she said. “The debt service is already very high. There needs to be some scrutiny over the capital plan.”
In a statement on Tuesday, City Council Speaker Melissa Mark-Viverito and Council Member Julissa Ferreras-Copeland, chair of the finance committee, also expressed reservations over the administration’s proposal to close the operating gap for Health + Hospitals, which they said was “contingent on substantial State and Federal cooperation which has not yet been assured.”
They also faulted the executive budget for failing to adequately invest in the city’s youth and immigrants. “As the Council begins our Executive Budget hearings on May 6th, we will continue to strongly push for critical investments that will greatly expand employment opportunities for our young people by increasing the number of year round and summer youth jobs, advocating for vital legal services and workforce development skills to support our growing immigrant population and fighting to combat food insecurity in our City,” they said.
Along with those hearings, de Blasio's team and the Council will negotiate over the next two months to achieve a budget deal before the July 1 start of the fiscal year. At this point, changes are likely to be minimal.
City Comptroller Scott Stringer, in a statement, commended the mayor’s executive budget for “enhancing our ability to weather unforeseen future challenges,” through new agency savings and boosted city reserves. He praised the increased funding for security at homeless shelters, reforms at the Board of Elections and expanded access to physical education in public schools.
On Health and Hospitals, however, he reserved judgement. “As an analysis released by my office last year made clear, setting New York City Health + Hospitals on a more sustainable financial path forward is a critical priority for our City,” he stated. “However, more information is needed to fully assess the proposed plan to ensure that all New Yorkers can access quality healthcare.”
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by Samar Khurshid, senior reporter, Gotham Gazette
@samarkhurshid @GothamGazette