Gotham Gazette

The Place for New York Policy and politics


The Mayor’s Nonprofit Experiment and His Reelection Bid

BdB speech arm reaching

De Blasio (photo: Michael Appleton/Mayoral Photography Office)

News recently broke of a long-running federal corruption investigation involving two businesspeople with ties to Mayor Bill de Blasio, including to a much-criticized nonprofit group established to push the mayor’s agenda. The wide-ranging investigation, which also involves high-ranking NYPD officials, has again placed a spotlight on the mayor’s fund-raising and his relationships with donors, especially those with business before the city, as allegations of a pay-to-play culture swirl.

These relationships, with labor unions, real estate developers, lobbyists, businesspeople of various types, and other interest groups, are often key to getting things done in government. At the same time, they will play a significant role in de Blasio’s 2017 re-election effort.

There are actually three nonprofits established by de Blasio and his allies - all able to take and spend unlimited funds - though two are being shut down amid increasing criticism. The organizations, their fundraising and advocacy efforts, indicate where much of the mayor’s 2017 campaign money will come from, involve people likely to be key players in that effort, and preview potential sources of independent expenditures on the mayor’s behalf.

The FBI probe into the two businesspeople, Jona Rechnitz and Jeremy Reichberg, is reported to include alleged bribery of NYPD officials, their fund-raising for the mayor, and more. Combined, the two are responsible for many tens of thousands of dollars in donations to the mayor’s 2013 campaign, his efforts to flip the state Senate to Democrats, and his Campaign for One New York -- one of the two nonprofit groups tied to de Blasio that recently began to wind down operations coinciding with heightened negative attention from good government groups and others.

These two nonprofits, besides helping the mayor achieve defining victories of his term - the establishment of universal pre-kindergarten and City Council approval of key pieces of his affordable housing plan - give a snapshot of the support de Blasio has built among labor unions, real estate developers, and advocacy groups, many of which were big independent spenders in the 2013 elections. As 2017 approaches, de Blasio has had a choppy first two-plus years, but remains fairly popular, especially with his base, and the power of incumbency with crime low and the economy strong is attractive to many donors eager to curry favor.

The Campaign for One New York, originally UPKNYC, and United for Affordable NYC were created by de Blasio allies to move and promote his top agenda items. The way the law is written, these issue advocacy nonprofits are allowed to raise and spend unlimited money, a far cry from regular candidate election campaigns that participate in the city’s landmark public-matching campaign finance system.

In 2014, UPKNYC successfully lobbied for universal pre-kindergarten, which is now two years in and widely seen as a rousing success. Affordable NYC is fairly new and recently aided in achieving victory pushing for two changes to city land use rules, Mandatory Inclusionary Housing and Zoning for Quality and Affordability, which are crucial to the mayor’s plan to build and preserve 200,000 units of affordable housing across the city over ten years.

Still, as the organizations divulged their donors - in an effort at transparency not required by law and highlighted repeatedly by the mayor - de Blasio was the focus of snowballing criticism and the mayor acknowledged the pending shutdown of the two groups. While de Blasio has said they are being closed because their work is done, it was clear that their general existence, their work as aligned yet extra-governmental actors, and their openness to major donations from entities doing business with the city made them too much of a liability.

Whether federal investigators find any related behavior to have been illegal is to be seen. No one has been charged with a crime and de Blasio said he knows of no investigation into his fundraising. He also said that he had his 2013 campaign legal counsel contact the office of U.S. Attorney Preet Bharara to offer help. De Blasio has repeatedly insisted publicly that he and his team operate by the highest ethical standards.

Many of the individuals involved with The Campaign for One New York and United for Affordable NYC are longtime de Blasio allies, several of whom are sure to be part of his politics moving forward, including his 2017 campaign.

A third nonprofit group, the Progressive Agenda Committee, was set up with de Blasio at the forefront in May of last year, and organized to push a de Blasio-led inequality-fighting agenda at the national level. The mayor and people close to him brought together liberals from across the country who then released a national progressive platform to influence the 2016 elections. Recently, Politico New York reported that the group has a small footprint, that key de Blasio allies who worked for it have left, and that it will carry on with limited involvement from the mayor. Emailed inquiries from Gotham Gazette to the Progressive Agenda Committee went unanswered.

All three groups were set up as 501(c)(4)s, the IRS category of tax-exempt social welfare groups that can raise and spend unlimited funds. When asked about their status as something of a shadow campaign apparatus, de Blasio has said that they’ve existed to promote an agenda, not a candidate for office, and that they have operated legally.

At a news conference on Monday, April 11, de Blasio seemed to justify that his two nonprofit groups were a means of fighting fire with fire in a post-Citizens United world. “They were supporting progressive change,” he said of the two groups, in response to a question from Gotham Gazette about the Campaign for One New York’s fundraising. “There’s a lot of money out there that’s trying to hold back progressive change. I have been the recipient of negative advertising of over $10 million directed at me by moneyed interests, very moneyed interests, attacking my administration. We felt from the beginning that when we were trying to achieve a progressive policy initiative, to have resources that would fight for this vision were important and were fair.”

The two locally-focused groups were led by individuals who played key roles in de Blasio’s 2013 election campaign and may occupy similar roles in 2017, although the groups themselves will have none. “The only organization that coordinates with the Mayor and supports his campaign will be his official campaign itself,” said a spokesperson for Campaign for One New York.  “Campaign for One New York is not coming back to do that.”

Campaign for One New York was run by de Blasio’s former campaign manager, Bill Hyers, a partner at Hilltop Public Solutions, the PR firm that handled the mayor’s campaign and then brought Hyers on. Other members of de Blasio’s campaign team followed a path from the campaign to City Hall to Hilltop, including former senior advisor Rebecca Katz and the campaign’s High Dollar Finance Director Hayley Prim. Sam Nagourney, another Hilltop employee, was the finance manager for the campaign.

Campaign for One New York’s officers also included Dan Levitan, a spokesperson for the mayor’s 2013 campaign who is a consultant at BerlinRosen; Ross Offinger, a political aide who served as Campaign for One New York treasurer after having raised money for de Blasio’s election; and Stephanie Yazgi, a former Hilltop employee who was a de Blasio campaign consultant and went on to serve in the Mayor’s Office of Immigrant Affairs. Yazgi’s appointment to MOIA, in a position created for her with a salary of $150,000, had to first be cleared by the Conflicts of Interest Board since her longtime partner, Emma Wolfe, serves as a key aide to the mayor and was his deputy campaign manager. In January, Yazgi was made a senior advisor in the Office of the Chief of Staff. COIB gave its approval in both instances.

Dan Levitan continues as a spokesperson for the mayor, including handling recent press inquiries around the federal investigation into Rechnitz and Reichberg. Rechnitz donated $50,000 to the Campaign for One New York, and also donated the maximum allowable $4,950 to the mayor’s 2013 campaign, an amount matched by his wife. Reichberg raised $35,000 at a fundraiser for Campaign for One New York at his home. Both men were on the mayor’s inauguration committee, though de Blasio has said he does not know either well.

United for Affordable NYC was headed by Neal Kwatra, founder and CEO of political consulting firm Metropolitan Public Strategies and former chief of staff to New York Attorney General Eric Schneiderman (2011-2013). Kwatra also served from 2008 and 2011 as director of political and strategic affairs at the New York Hotel Trades Council, which was later part of the United for Affordable NYC coalition, and before that as deputy director of strategic affairs for UNITE HERE!, which was headed by de Blasio’s first cousin and gave $200,000 to the Campaign for One New York in November 2015.

A United for Affordable NYC spokesperson said, “This campaign was formed with the explicit purpose of supporting the Mayor’s affordable housing plan,” adding that it would “cease to exist” after the Council’s vote on the two zoning changes, MIH and ZQA, which will aid in affordable housing development. Most of its funds have been spent on advocacy efforts, the spokesperson said, and the group will comply with all federal, state, and city disclosure requirements in the next reporting period. 

Through these two nonprofits, key stakeholders, including labor unions and real estate developers, backed the mayor’s policies with significant financial support. The seemingly transactional relationship between de Blasio and people who donated to the Campaign for One New York has been a particular point of controversy. In September, Politico NY published an article listing several instances wherein city business closely coincided with large donations to the Campaign for One New York. There was also a $350,000 donation from a teachers union just a few weeks before the union’s local chapter, the UFT, inked a new contract with the city. Scrutiny of such coinciding events appears to have created enough heat that the mayor wants the distraction to go away.

Of several, one thing not totally clear is how past monetary support will play out when de Blasio is up for reelection.

“It’s not unlike a SuperPAC,” said David Birdsell, dean of the Baruch College School of Public Affairs, about the Campaign for One New York. “The big difference is the activities are coordinated.” Birdsell said that SuperPACs, large committees that make independent expenditures and are required to operate separate from candidates, haven’t been much of a factor in local campaigns. But, he said, it doesn’t preclude them from coming into play in 2017.

“Are the mechanisms similar and could they be set up that way? Absolutely they could,” he said, comparing 501(c)(4)s with political action committees. As de Blasio has said, the nonprofits must be issue-oriented, not candidate-focused. One sticking point for critics, of course is that the money behind the issue agenda is clearly to the mayor’s political benefit. Some of the money has also helped fund de Blasio’s travel on non-governmental business.

“Even though the official mechanisms are winding down, that doesn’t preclude other mechanisms, existing mechanisms from being used or new mechanisms being initiated,” said Jeffrey Smith, professor of policy and advocacy at The Milano School of International Affairs, Management and Urban Policy at the New School. “There’s unlimited possibilities that could pop up. Any incumbent mayor of NYC that has halfway decent approval ratings is not going to have a problem in fundraising.”

Mayor de Blasio has raised more than $1.1 million for his reelection, with much of it coming from big money donors, the New York Daily News recently reported. De Blasio didn’t raise any money for reelection during most of his first two years in office, but was able to quickly jumpstart the effort. He has a close cohort of political consultants and advisors who he relies on, some of whom are also lobbyists for entities that do business with the city. The confluence has raised many eyebrows and left the mayor on the defensive. He insists that these advisors do not lobby him when he seeks their advice.

Many of the unions and real estate groups who contributed money and effort to the mayor’s nonprofits spent heavily in the 2013 elections through political action committees. In the crowded Democratic primary that de Blasio won, he did not receive much support from such groups. Now, especially if a tough opponent emerges, it’s likely the machinery will go to work behind de Blasio. Most labor unions are a sure thing for the mayor, while real estate interests could be persuaded to stay more neutral or back an opponent if the right challenger were to emerge. But, de Blasio has kept real estate executives close during his term, even as he has rewritten some of the rules for development to insist on more public benefit. He is also opening up new areas of the city for building.

“I think that if the race gets competitive, independent expenditures will probably pop-up,” said Smith. “Given the limit for participating in the system, there’s clearly a whole class of donors who want to give more. And some who want to do it in a way that’s recognized, others in a way that’s obscured,” Smith added, referring to the city’s campaign finance system.

New York City has strong campaign finance regulations and a public matching system that many hold up as a national model. But the Supreme Court’s 2012 decision in the Citizens United case -- which recognized unions and corporations as entities with the right to make political expenditures as a form of free speech -- affords political action committees the leeway to raise and spend unlimited money independently as long as they do not coordinate with candidates. An analysis by Common Cause NY of independent expenditures from the 2013 election found that the Democratic mayoral primary saw the highest amount of such spending in raw dollars, at nearly $5.6 million (18% of total candidate spending) out of 62 races where there were independent expenditures.

De Blasio was far from leading the pack and much of the expenditures went for his rivals. The United Federation of Teachers’ “United for the Future” spent $2.8 million in support of former Comptroller Bill Thompson. Then City Council Speaker Christine Quinn received more than $830,000 in supportive spending, mostly from the Empire State 32BJ SEIU PAC, “Hotel Workers for a Stronger Middle Class,” (which includes New York Hotel Trades Council) and “Unidos para Communidades Trabajadoras.” The DC37 PAC spent about $161,000, a lot of which went to then-Comptroller John Liu.

The only union PAC that heavily backed de Blasio in the primary was the 1199/SEIU United Healthcare Workers East, which spent about $200,000 on his behalf. (De Blasio certainly also benefited from independent expenditures attacking Quinn.) Most of the unions that originally backed other candidates have since come around - after the primary, most large labor unions coalesced around de Blasio. The Hotel Trades Council, United Federation of Teachers, and 32BJ SEIU together formed the “New York Progress” PAC and spent $1 million against Republican Joe Lhota. AFCME and affiliated unions spent about $150,000 on pro-de Blasio internet ads through the “People for a Better New York” PAC.

“Considering that the general election for mayor was constantly polling at a 40 point margin,” the Common Cause report notes, “it appears that the spending by labor unions who had endorsed De Blasio’s [sic] opponents in the primary may have been made more with the intent to curry favor than to ensure victory.”

Upon entering office, de Blasio began to settle long-expired city labor contracts with municipal unions. While largely praised for their balance by outside analysts, the deals were significant progress for the unions, who had years of failed or no negotiations with the Bloomberg administration.

It would not be surprising to see independent expenditures next year, more so in a competitive race. UFT, 32BJ SEIU, the Hotel Trades Council, and DC37 all made large independent expenditures in 2013 and all of them were supporters of the United for Affordable NYC coalition - the nonprofit offshoot of Campaign for One New York that worked to back de Blasio’s affordable housing plans.

(A controversial batch of independent expenditures to emerge from the last cycle was the nearly $1 million in total attack spending by the PACs “New York City Not For Sale” and “NYCLASS” against Quinn for her refusal to support a ban against horse-carriages in the city. NYCLASS was largely backed by UNITE HERE! NYCLASS spending reportedly came under federal scrutiny when links emerged between donations made to the group by people close to de Blasio.) The group was also fined later by the New York City Campaign Finance Board for independent expenditures for two City Council members’ campaigns that were coordinated through a consulting firm. The horse-carriage issue has dogged de Blasio through his term thus far, with no resolution other than the status quo in sight.)

“Certainly what we expect, unfortunately, in this post-Citizens United world is for independent expenditures to rise,” said Susan Lerner, executive director of Common Cause NY. Lerner did not make judgements about specific groups or interests that might donate to or spend in favor of de Blasio but insisted that “There needs to be increasing information provided to the public about ever-increasing expenditures.” She added that New York City’s strong anti-coordination measures and the means to enforce them will play a major role in the elections.

How much of a role independent expenditures will play will also depend on who might oppose de Blasio next year. No strong contender has yet emerged or made clear intentions to run against the incumbent mayor.

“It’s way too early to tell what the election landscape looks like,” said Helen Schaub, New York State policy and legislative director for 1199 SEIU, the healthcare workers union with strong ties to de Blasio. She said the union’s level of support and spending in the election hinges on who de Blasio’s opponent(s) will be and the resources they might have at their disposal.

Among Democrats, a few names are making the rounds as possible contenders -- Congressional Rep. Hakeem Jeffries; City Comptroller Scott Stringer; and Bronx Borough President Ruben Diaz Jr. are seen as the most viable primary challengers, though each has indicated he does not plan to run. Brooklyn Borough President Eric Adams and Public Advocate Letitia James have also been floated, but appear even less likely. (Many thought that Eva Moskowitz, a former City Council member, founder of the Success Academy charter school network, and frequent de Blasio sparring partner, might run on either major party line, but she has formally announced that she will not run in 2017.)

On the Republican side, the field looks sparse not far from the time by which serious contenders would want to establish campaigns. Michel Faulkner, a Harlem pastor and former New York Jet, has already launched his campaign. City Council Member Eric Ulrich, of Queens, has shown interest when his name appeared in a news report. Some have speculated that former Deputy Mayor Dan Doctoroff or former NYPD Commissioner Ray Kelly could run. Wealthy real estate developer Paul Massey indicated that he is exploring a race. According to a report by New York Magazine, “A source familiar with Massey’s thinking said that he was willing to spend heavily to fund a race, but was also preparing to seek donations from real-estate and financial-industry types who have been looking for a successor to Michael Bloomberg to carry a pro-business mantle to City Hall.”

It’s hard to tell how much cache a pro-business candidate could hold against a mayor with a fairly broad support base and a particularly populist message. The business community has appeared to warm to de Blasio, but there are still quite a few prominent and wealthy New Yorkers who do not approve of his platform or style.

As de Blasio mentioned at the April 11 news conference, he has been the target of multiple negative ad campaigns over the last two years, and these are likely to continue, at least sporadically, through the 2017 election. The Rent Stabilization Association, which represents property owners and landlords, bought 1,000 television ads and 225 radio ads through June, the New York Daily News reported, to oppose the mayor’s housing policies. The group did an anti-de Blasio ad blitz last year as well. Ride-sharing company Uber employed similar tactics, as did charter-school advocacy group Families for Excellent Schools, in 2014.

“If there is a competitive primary or general election, I fear that independent expenditures would be a significant part of the campaign,” said Dick Dadey, executive director of Citizens Union, a government reform group, “because the mayor would want to defend himself and there would be others who want to challenge him on his record.”

The mayor’s recent comments indicate he feels like such an arms race is ongoing.

The New School’s Smith contends that de Blasio had somewhat reconciled with the business community and that “no private sector interests who rely in any way on government decisions or funding wants to get crossways with the Mayor of New York City.” But, Smith concedes the possibility that a credible well-funded opponent running on certain proposals, such as a pro-charter school plank, would instantly be able to raise millions to oppose de Blasio. He also believes that political consultants will look for commissions regardless. “I would suspect that you’re going to see an independent expenditure,” Smith said.

Regardless of support and the size of his warchest, de Blasio’s reelection will involve an entirely different campaign than 2013, when he was playing primary catch up in the running for an open seat against relatively stronger opponents. It’s tough, also, to compare de Blasio’s reelection bid with the those of former Mayor Michael Bloomberg, the self-funded billionaire, who didn’t need to rely on donations or outside spending for two reelections.

“There are independent expenditure campaigns that are run to either boost a challenger or to defeat an incumbent,” said Citizens Union’s Dadey. “But where there is a strong incumbent, there are also independent expenditure campaigns as a way of people showing their strong support, in this case for the mayor and possibly currying favor with him to ensure that their second term agenda issues are addressed.”

Christina Greer, professor of political science at Fordham University, said, “In some ways, no matter the strategy [de Blasio] employs, it’s going to be brand new. It’ll be fascinating to see what wells he can tap beyond what many people argue he taps possibly too much, that is the real estate industry.”

Greer affirmed that de Blasio has strong support among varied constituents, unions, and business interests, but she believes he can’t rest on his laurels. Only if his messaging through 2017 is congruent with their interests, she said, would he receive the funding he may need. “I would be very surprised if he just expected that money,” she said. “He’s going to have to work hard for it.”

by Samar Khurshid, senior reporter, Gotham Gazette

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