If the community meeting in Greenpoint a couple of months ago to discuss the 50-acre underground oil spill in the neighborhood looked like a scene out of the movie, “Erin Brockovich,” it didn’t hurt that Erin Brockovich was addressing the crowd -- not Julia Roberts, but Brockovich herself, the actual fighter against corporate pollution.
"I'm here to get people motivated," she reportedly told the 60 or so residents at the Swinging Sixties Senior Center. "Absence of information means lack of choice."
It is new information about the oil spill that has motivated local activists to make new choices in the long-time struggle over the oil spill -- including a new Brockovich-like class action lawsuit.
Residents of Greenpoint do not need a reminder from the president about our nation’s costly oil addiction. Greenpoint is to oil trafficking what the Bowery is to drugs and alcohol -- a neighborhood still recovering from its wild past one day at a time.
Oil had been unloaded onto, and stored in, this Brooklyn neighborhood since the days of John D. Rockefeller and the Standard Oil monopoly. Most of the oil terminals and refineries that filled the southern banks of Newtown Creek are long gone. But the hangover remains.
In 1978, during an aerial survey of the creek, a Coast Guard helicopter detected a floating oil plume that eventually led to the discovery of a 17 million gallon underground oil spill. Traced back to storage tanks at an old Mobil Oil terminal just below Greenpoint Boulevard, the spill, composed largely of crude oil along with some refined product, had worked its way down to the water table, creating an oil-covered lake roughly 40 feet below street level that spread out over more than 50 acres beneath industrial and residential properties.
“We’re talking about an oil spill larger than the Exxon Valdez,” says Basil Seggos, chief investigator for the environmental watchdog Riverkeeper, Inc., alluding to the 1989 oil tanker that dumped 11 million gallons of crude oil into Alaska’s Prince William Sound.
So far, that recovery process has barely reached the half-way point. Although cleanup efforts started in the early 1990s, they didn’t really take off until 1995 when Mobil engineers completed construction of a underground pump and pipeline system along Meeker Avenue. Since then, ExxonMobil, inheritor of the Mobil system, British Petroleum, owner of an adjacent terminal site, and ChevronTexaco, former owner of an 11 acre terminal site that has since been converted into a warehouse facility, have extracted a combined 8.7 million gallons according to a state Department of Environmental Conservation Web page devoted to the cleanup effort.
Recovering the remaining eight million gallons could take another 20 years, at least, according to a January 25th town hall meeting featuring representatives from ExxonMobil, ChevronTexaco and the New York State Department of Environmental Conservation.
Beyond that, there is the question of secondary contamination. After Department of Environmental Conservation tests failed to detect dangerous levels of gaseous methane in soil samples taken around the site, Riverkeeper commissioned its own tests last summer. Seggos says the samples turned up not only high levels of methane but also toxic levels of benzene, a carcinogen.
That discovery has cleared the way for an entirely new development. Girardi and Keese, a Los Angeles law firm best known for its association with the 1996 class action lawsuit that became the basis for the 2000 film “Erin Brockovich,” signed on as legal representative for a group of Greenpoint residents who have sued ExxonMobil. It was in a bid to recruit additional plaintiffs that the firm flew in Brockovich, a consultant on the case, to address Greenpoint residents at the December community meeting.
Stan Alpert, principal of the Alpert Firm and a local consultant to Girardi and Keese, says the case will follow the lines of recent “toxic tort” cases in that the spill, in the process of crossing property lines, constitutes a form of chemical trespass for which local residents who can prove a decline in health or property value may soon be able to gain restitution.
Pioneered by Brockovich and Girardi in their successful $333 million lawsuit against Pacific Gas & Electric, a suit alleging that the California utility knowingly released a deadly form of chromium into the environment, toxic torts have matured quickly over the last decade, thanks to two major trends: weak government regulation of polluting industries, and corporate consolidation.
In the case of Greenpoint, weak government regulation has created a situation in which ExxonMobil and other companies have been allowed to drag out the clean-up process, thus magnifying the number of people affected by the spill. Currently, ExxonMobil and British Petroleum are performing their share of the clean up based on a series of consent orders negotiated with the Department of Environmental Conservation. According to the consent orders, each company has accepted responsibility for violating state laws forbidding the discharge of oil into groundwater and local waterways. They have also accepted the total cost for remediation. What they have not accepted, however, is the liability for damages caused, a concession that, if forced, might have led to brisker clean up and reduced exposure.
Corporate consolidation, meanwhile, has created a situation in which determining ownership of the land, refineries and storage tanks -- a process that in 1979 might have meant going through the records of a few dozen major corporations -- now boils down to going through the records of three major corporations: ExxonMobil, British Petroleum, and ChevronTexaco. Call it Rockefeller’s revenge: Ninety-five years after the breakup of the Standard Oil monopoly, the subsidiaries formed by that breakup have rejoined to the point that plaintiffs can pin liability on a manageable set of corporations.
Whether or not attorneys do succeed in pinning liability on ExxonMobil depends on whether a local jury is willing to associate local cancer rates in Greenpoint with oil-based carcinogens. The neighborhood’s two-century history as a center of heavy industry all but insures that ExxonMobil attorneys will have plenty of other causal factors to cite.
In the meantime, the company sticks by its pledge to clean up the mess.
“We’ve been here since 1979,” says ExxonMobil spokesman Brian Dunphy. “I think it shows we’re committed to mitigating the site.”
For Alpert, however, the 27 year stretch between detection and 50 percent cleanup merely confirms that neither ExxonMobil nor the state are in much of a hurry to see a tough job through. Alpert credits Riverkeeper and last summer’s soil sampling as the true impetus for both the civil lawsuit and the town hall meeting held by the Department of Environmental Conservation.
The department “dragged its feet from 1978 to 1990, and from 1990 to 2006,” says Alpert. “Only in 2005 when Riverkeeper comes along and does these tests and finds explosive vapors in the soil and toxic levels of benzene, do they wake up. Even when they wake up, they put a lawyer up in the meeting who sounds like he’s speaking on behalf of the oil companies. Something is wrong with that set of facts.”
Maureen Wren, a spokeswoman for the Department of Environmental Conservation, says her organization isn’t in the business of defending oil companies. It is in the business of informing citizens on the state of the cleanup process. “The purpose of the meeting was to enable individuals to ask questions and learn more about the cleanup activities,” Wren responded via email. “DEC representatives explained at the outset of the meeting, and several times during it, that no questions related to company responsibility or other litigation-related issues would be entertained because of time restrictions and ongoing negotiations and lawsuits with the parties.”
Wren says her agency will continue to hold meetings on the topic in future months in an effort to give Greenpoint residents additional chances to learn more about the clean-up process.
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Things are going well for Mayor Michael Bloomberg. The city has a surplus of more than three billion dollars, an amount that could grow much larger before the current fiscal year ends on June 30th. And then, when the mayor declared that he will use the surplus in what he calls a financially responsible manner in his proposed new budget for the coming fiscal year, he was praised by both fiscal experts and editorial writers.
Let mine, then, be a voice of dissent. Bloomberg’s financial plan for the coming year is underwhelming, with only one big budget idea, a baffling one at best -- the transfer of $2 billion of the surplus into a “Retiree Health Benefits Trust Fund.”
Yes, the mayor does deserve credit for raising the possibility of a new policy for surpluses. From 1997 through 2001, Mayor Rudy Giuliani surpluses averaged $2.3 billion, but they simply became “one-shot” revenues for the next year, hiding the underlying budget imbalances. The 2001 “one-shot” in fact created a huge problem for Mayor Bloomberg when 9/11 and a recession exposed the risks in this roll-over strategy.
But Bloomberg’s surplus last year was about $3.5 billion. Why didn’t he pursue this new policy then? Why now? And why is he promoting this new idea when there are better ones that have been proposed by members of his own administration?
Bloomberg has said that he has two reasons for creating a new reserve health fund for city retirees. One is long-term budget stability, the other is in order to comply with a recent rule change of the obscure Government Accounting Standards Board. But that seems far from the whole story.
For one, the accounting rule does not take effect for two years and even then only requires the city to account for its long-term benefit liability – in other words, to show what the city will owe its retirees in the future, not to create a fund, nor in fact to take any other specific budget action.
As for helping long-term budget stability, there are more obvious ways to achieve this – establishing a more stable and progressive tax code is one. But the health fund idea could very well short-circuit a broader discussion of such other ways.
That, cynics could suggest, might be the point of it. Education advocates might see the health fund as a way for the city to be able to cry poverty when the Campaign for Fiscal Equity case is finally settled, and the plan to improve city public schools requires not just funding from the state, but from city coffers as well. City labor unions may see this reserve fund as a way of parking funds so that they are out of reach, part of a “politics of scarcity,” providing leverage for the city in the next round of labor negotiations.
It is puzzling that the mayor does not suggest a “rainy day fund,” the usual way of transferring surpluses. The mayor’s own charter revision commission heard a lot of testimony about such a fund. The commission’s August 2005 final reportnoted , “A rainy day fund can provide a source of funds to mitigate negative budget impacts created by changes in the economic cycle. Further, a rainy day fund can provide an accepted mechanism to spread repayment, over a period of time, of a deficit in a particular year.”
But the commission decided it would be legally difficult right now to create such a fund and deferred the idea to another time and another commission, even though it acknowledged “there may be, among the fiscal experts external to the city, a consensus that a rainy day fund is generally a good financial tool for fiscal stability.”
If a rainy day fund is not possible under current state law, then how does a retiree health fund, with arguably the same purpose as a rainy day fund, pass muster? And what is the city council role? One would assume the council would have to sign off on the plan.
A health fund is not the only area where the preliminary budget does not address the full implications of mayoral policy. The mayor promises another round of $400 rebates to residential property owners (a loss of over $250 million), but he doesn’t mention what looks like a big change in the structure of the property tax.
The latest preliminary assessments of city properties have quietly created, in the interests of equity, yet another population of specially-treated owners, according to a recent article in the New York Times. ("Even as Homes Soar in Value, Some Will See Tax Bill Slashed" by Josh Barbanel.) The owners of rental buildings, co-ops and condos with 10 or fewer units have seen their assessments lowered. The estimated cost to city coffers is $90 million.
The intent sounds admirable: equity among, in this case, owners of small rental buildings and units in small co-op and condo buildings. But there are many questions. Does this require new legislation? Does this promote equity across classes? Does it create new inequities? Does it in fact create yet another new class of property in a system that is already Byzantine?
Moreover (as I wrote earlier about property tax reform) , co-op and condo abatements introduced in the 1997 (on a temporary basis, but still in place), were also sold in the interests of equity, but also created a big loss in revenues. Why must equity be equated with a net loss of revenue? As with the proposed health fund, from a public interest point of view there should be a wider public discussion about alternative policies. Why not, for instance, a revenue-neutral property tax reform? And why not a simpler property tax system that has only two classes – residential and commercial?
One other general problem with the preliminary budget is the lack of detail about its few budget initiatives. In the beleaguered Administration for Children’s Services, for instance, some $16.5 million of new spending is cited for 2007 (less than one percent in a $2.2 billion agency). But the program areas where the money goes are only vaguely identified, such as $5 million “to expand oversight” in the “intensive family services unit.”
Contrast this with the information available on that same agency from the Independent Budget Office. The Administration for Children's Services is one of 16 city agencies that the budget office has analyzed in an effort to connect dollars spent with results achieved, in its newly-released Programmatic Budget Reviews. Its 32-page presentation of budgeting data for the Administration for Children's Services breaks down that agency's $2.2 billion in spending into 26 program areas. So, we learn that the family preservation program has 211 employees, and the program is spending $9.3 million this year. Not only that, the Independent Budget Office shows five performance measures for the program that measure such results as average caseworker caseload (2.4 in 2004) over four years.
None of this information is available either in the mayor's preliminary budget, nor in the annual mayor's management report. Interestingly, again, the mayor's charter revision commission studied the inclusion of such information, in order to make the connection between budget dollars and agency performance more clear.
Nothing came of this, but the mayor could take the framework from the Independent Budget Office and build on it, in order to inform the public better about its government’s spending and performance.
Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.Â
When Mayor Michael Bloomberg delivered his State of the City address to the crowd crammed into the Snug Harbor Cultural Center on January 26, he laid out some ambitious ideas. He wanted to slash poverty, cut down on illegal guns flooding into the city from elsewhere, and launch development projects throughout the five boroughs to create 250,000 new private sector jobs in the next five years. And that was just the start.
“During the last campaign, I promised more than 100 initiatives that will keep New York moving forward,” he said. “Have I forgotten those promises? Not one. Will I honor them? You better believe it!”
When Bloomberg stood at City Hall last week to present his proposed budget for the 2007 fiscal year, which starts in five months, it was hard to find any of those initiatives amid all the columns of numbers. This was true despite one number in particular that stood out -- a surplus of more than three billion dollars.
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With such a giant surplus and so many promised initiatives, the most remarkable thing about Bloomberg’s budget is what isn’t in it. It does not call for hiring hundreds of new city employees. It also does not ask for new tax cuts.
Instead, the proposed $52.2 billion budget that Bloomberg laid out last week (in video, and slide show, with accompanying budget publications) is long on what he called fiscally prudent measures. "These are the steps that we need to take to produce a budget that is realistic and responsible," the mayor said during his presentation, "one that keeps New York on firm fiscal ground now, and in the years to come."
When blessed with budget surpluses during the 1990s, former Mayor Rudolph Giuliani hired new employees and instituted tax cuts. Eventually, this led to something close to economic disaster, when the economic engine slowed dramatically toward the end of his second term, and this was made far worse by the terrorist attacks of September 11, 2001. Having spent the surplus, there was nothing to fall back on.
Thus, when Michael Bloomberg succeeded Giuliani, the new mayor had to scramble to balance the budget by both cutting spending on city services and raising taxes. Three years later, with an improved economy and higher than expected revenues, the city had a surplus once again -- which, occurring during an election year, Bloomberg proposed spending on various goodies and a large tax cut.
This made fiscal experts unhappy. "Taking a $3.3 billion surplus and spending it all next year is pretty short-sighted," said Charles Brecher of the Citizens Budget Commission, a non-partisan budget watchdog group.
The election is over now, and for fiscal year 2007, which begins on July 1, 2006, the mayor says he wants to use "today's good fortune to address some of tomorrow's most troubling problems." He has allocated $1 billion of the current surplus to go to reducing debt over five years and another $500 million for deficit reduction. He wants to earmark $2 billion of the surplus toward a trust fund for retiree health benefits. (Currently, unlike for pensions, there is no money in reserve to pay for future health benefits. A new accounting standard requires that municipalities eventually create such a reserve, and Bloomberg calls the $2 billion a "downpayment" on it.)
Now, some fiscal experts are happy. “The mayor did an extraordinary thing,” said Diana Fortuna of the Citizens Budget Commission. “He’s getting out ahead of the curve here by proposing to allocate $2 billion to defray those costs. It’s a very prudent move. This defines why this is a good budget.”
(Not everybody agrees. See The Mayor’s Underwhelming Budget For 2007, by Glenn Pasanen.)
Continued Tax Rebate
The mayor’s budget contains one conspicuous perk for taxpayers: the continuation of the $400 property tax rebate for the next three years.
Children
The fine print includes some initiatives Bloomberg had previously touted. During his State of the City address, he said the Administration for Children’s Services would get “$16 million in new initiatives that will improve oversight, ease caseloads and ensure coordination among all city agencies.” And indeed, there it was in his preliminary budget.
Diabetes
Bloomberg said he wanted to help address the city’s diabetes crisis by creating a diabetes registry. In his budget, Bloomberg set aside money for 14 staffers to begin this project.
Housing
Bloomberg also put $2 billion toward the $7.5 billion affordable housing program he discussed in his State of the City address. Presumably, that could go a long way toward his promise of building 15,000 new units over the next year.
Capital Budget
The capital budget, which is separate from the operating budget (and is funded largely by loans to the city), also contains money for some new projects beyond maintaining streets and bridges. Bloomberg earmarked:
-$265 million for parks and infrastructure at the new stadiums for the Yankees and Mets;
-$133 million to help turn the General Post Office on Eighth Avenue into Moynihan Station;
-$23 million for development of Governors Island;
-$16 million toward creation of electronic medical records for community clinics. In his State of the City address he asked for state, federal and private money to bring the total up to $100 million.
New Fees
The budget contained some ways to increase revenue, including:
Albany and Washington
As usual, the city’s budget relies on money from state and federal governments. And the mayor argues that neither Washington nor Albany gives the city as much as it deserves, given all the taxes we send them. “New York City pays $11 billion more in state taxes than it gets back in funding despite being the economic engine of the state,” according to the mayor, and about $13 billion more to the federal government than it gets back. Bloomberg wants the state to give New York City an additional $250 million and the feds to contribute an additional $100 million.
Missing: Education Settlement
One thing is conspicuously absent from the budget: money for city schools from the Campaign for Fiscal Equity lawsuit, which would fund school construction and operating expenses. The courts have ruled New York City schools need billions of dollars more a year than they now receive, but the state has appealed the ruling.
But Bloomberg’s explanation for not relying on money from the Campaign for Fiscal Equity suit was simple: We do not have it yet and probably won’t get it this year because the case will remain tied up in court. “CFE has nothing to do with this budget,” he responded to a question from a reporter.
"Hidden Cuts"
There are other missing items,according to members of the City Council members -- $320 million in “hidden cuts" (reductions from current appropriations) to various city programs:
-about $40 million from city libraries;
-more than $20 million from senior programs;
-more than $20 million from cultural programs like art, theater and dance;
-$26 million from city educational programs like computer training;
-$53 million from the City University of New York;
-more than $45 million from youth programs;
-$45 million from the healthand mental health programs.
According to Domenic Recchia Jr., chair of the council committee on Cultural Affairs, Libraries and International Intergroup Relations, the Natural History Museum has already volunteered to take the brunt of a $1.8 million arts cut. He said the Metropolitan Museum of Art did the same thing last year.
“We will continue to fight to restore the services that are a priority for all New Yorkers,” said Finance Committee Chair David Weprin. This is an annual ritual in New York: The mayor proposes cutting some popular programs, with the apparent assumption that the council will negotiate a restoration of the cuts by the time the budget must be passed five months later. The strategy is evidently intended to keep the council from fighting for greater increases. Weprin and Speaker Christine Quinn have vowed to change this yearly “budget dance.” (See related article, The Last Dance?by David Weprin)
When Bloomberg proposed his 2006 budget about nine months before Election Day, his political opponents were quick to attack it. Representative Anthony Weiner assailed the property tax rebate as an “election year gimmick,” while other Democrats called for more money for housing, schools and youth services.
But this year –- with Bloomberg still reaping the benefits of his re-election victory -– reaction was muted and largely favorable. “The reaction from the city's business community and those who follow the city's long-term fiscal health was nearly unanimous: He may not be political, but Bloomberg is certainly prudent,” David Saltonstall wrote in the Daily News.
Although expressing concern about future fiscal problems, City Comptroller (and probable future mayoral candidate) William Thompson issued a mostly favorable, if brief, statement: “The mayor has identified enhanced revenue sources and not sacrificed essential services,” he said.
However, Nicole Gelinas of the Manhattan Institute called on Bloomberg to reduce employee pension and health care costs – not just save money to cover them. “To get the budget on a sustainable path, the mayor must first acknowledge that there's lots of dirty work that must be done in Albany and in negotiations with (or against) municipal unions,” she wrote in the Post.
More controversy could emerge between now and the end of June, when the council must approve the budget. But for now it looks as if this year’s budget season will be unusually calm.
Though the city is flush with money now, the mayor warns not to expect big surpluses in the future.
For one, the real estate market boom that has contributed so much tax revenue to the city is already starting to taper off. Prices for single-family homes are expected to fall by 10 percent over the next few years, and sales themselves are expected to drop by 14 percent. Revenues from real estate transfer taxes are also expected to level off.
What’s more, the city is notoriously over-reliant on profits and tax revenues from Wall Street. While bonuses were up again last year, profits are expected to decline for the third year in a row once interest rates are factored in.
Bloomberg warns that the city’s “non-controllable” or “non-discretionary” expenses -– costs the mayor says the city has little or no ability to control –- will become increasingly burdensome in years to come. Chief among these costs are “alarming” and “worrisome” Medicaid and pension obligations, and the money the city owes on funds it has borrowed. “Making a down payment on these costs now is the fiscally responsible thing to do,” he said.
These costs are the biggest contributor to a budget deficit that dogs the city year after year. Despite the good news this year, the mayor warns that a gap –- roughly $3.5 billion in 2008 and again in 2009 -– will loom over city finances in years to come.
As people live longer and health care gets more expensive, the rising costs pose a national problem. “Those are things that not only is New York City wrestling with, every municipality across the country is wrestling with and every company in the private sector is wrestling with,” Bloomberg said. “Nobody has enough money to pay everything.”
But the mayor was optimistic -- more or less: "I don't think people should be depressed; quite the contrary. We've shown we know how to get through tough times. We've shown that we are responsible. We are taking steps to make sure that we are preparing for the future. But the city still spends more than it takes in, in the billions of dollars each year."
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