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Smith's campaign raised more than $200,000, which went to provide parks, jobs for young people and to train the new parent coordinators for the Department of Education.
With the city budget tight but demand for services high, the Bloomberg administration hopes individuals, organizations and corporations will, like Smith and her readers, write checks to New York City. Leading the donors -– and urging others to follow his example -- is Mayor Michael Bloomberg. The billionaire "anonymously" gave $10 million to city cultural institutions suffering the effects of budget cuts and $5 million to help restore Gracie Mansion, the official mayoral home where he decided not to live.
But the mayor's efforts go beyond his personal largesse. He has put an unprecedented amount of effort into bringing private funds into city coffers, creating a revamped Mayor's Fund to Advance New York City, exploring corporate sponsorships and naming an official to market the city (see box). Earlier this month, he announced that the city had signed a five-year $166 million dollar deal with Snapple making its juices, ice teas, water and other drinks "official" beverages of New York City.
"Not in my lifetime has there been this level of concentrated expectation that the private sector will help basic city services," Kathryn Wylde, president of the Partnership for New York, a network of business leaders, told the New York Times.
Despite the obvious appeal of having millionaire corporate magnates pick up the tab for services that we all would otherwise have to pay for through higher taxes, some see pitfalls. Private money can come with strings attached and can vanish when the donor moves on to other interests. Further, since corporations and individuals tend to fund projects where they are located, private money may not be evenly distributed throughout the city.
In light of all this, warns Bonnie Brower, executive director of the City Project, a liberal public policy group, the move to private funding is "very, very much a two-edged sword, if not a dagger to our heart."
As big government has fallen increasingly out of favor since the 1970s, politicians, policy experts and officials have sought alternative ways to deliver services. Many have turned previously public enterprises over to private corporations or non-profit organizations. So, for example, many homeless shelters in the city are run by private organizations, and the city contracts with private agencies to care for foster children. Former Schools Chancellor Harold Levy sought -- unsuccessfully - to have a private for-profit company take over some of the city's most troubled public schools, and former Mayor Rudolph Giuliani failed in his efforts to transfer some public hospitals and the Off Track Betting to private hands.
While Giuliani pursued such efforts, known as "privatization," Bloomberg has focused on the reverse: He wants private individuals and businesses to give money to public enterprises.
This is not a new phenomenon. One only has to look at name plaques on many facilities in city parks and at the City University to recognize that private philanthropy has long played a role in shaping public New York. The city sponsors Business Improvement Districts, in which money from businesses supplement city services such as cleaning streets. And libraries and parks actively seek contributions.
"New Yorkers have a great sense of philanthropy," says Rowena Daly of New Yorkers for Parks. In fact, many New Yorkers who grumble about paying taxes are then more than willing to pay an equal or greater amount in voluntary contributions to a city parks group or their local school parents association.
But Bloomberg has sought to take this to a new level, reflecting a combination of his own conviction, his personal record of giving, and the city's economic slump.
Encouraging private donation is "a big thing" for the mayor, says Mark Davies, executive director of the city Conflict of Interest Board. "It's something he is very interested in."
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In line with this, Bloomberg has renamed Public Private Initiatives, a city controlled nonprofit started by former Mayor Rudolph Giuliani. It is now the Mayor's Fund to Advance New York. Between January 2002, when Bloomberg took office, and this April, the fund raised $14 million; in the seven years between 1994 and 2001 it had brought in only $11 million, not counting contributions for World Trade Center victims. Liz Smith's money was channeled through the fund.
The most touted city fundraising effort has come in the public schools. Last year, Schools Chancellor Joel Klein named Caroline Kennedy Schlossberg to head the Fund for Public Schools, part of the Department of Education's new Office of Strategic Partnerships. Kennedy is supposed to drum up financial support and other help for the public school system and work to make sure private resources are used wisely. Shortly after her appointment, Klein said that the school system needed to harness the energy of the business and philanthropic communities and to make sure their contributions were put to good use. "Who can better accomplish this than Caroline Kennedy by her willingness to say, 'Yes I am behind this effort, I believe we can get an education for every child in New York, not just for some children'?" Klein said.
Since its highly publicized debut, the office has kept a low profile, but it played a role in organizing the September 24 Dave Matthews Band Concert in Central Park, which is expected to raise at least $2 million for city schools, including $1 million from America Online. And the office developed a partnership with The History Channel, in which, according to the New York Times, the cable channel will donate $1 million in scholarships, materials and staff hours. According to the New York Post, Kennedy has also "helped reel in" commitments totaling $49 million to fund a training academy for school principals.
Last week, Bill Gates announced the Bill and Melinda Gates Foundationwould donate $51.2 million to open 67 new small public high schools in the city. That money, however, will go not directly to the school system but to non-profit groups that will help create the schools.
(See related article on grassroots efforts to raise money for public schools.)
City Council has also taken up the private money cause.
In August, the council passed a bill to create an Adopt-A-Park program. Picking up on the success of private groups in raising money for Central Park, Prospect Park and other prominent parks, the measure would allow companies, organizations and individuals to adopt all or part of more modest neighborhood parks and playgrounds. Taking cognizance of a controversial proposal to allow corporations to get naming rights to a facility in exchange for supporting it (see box), the bill notes that "the program is not intended to rename any park property or structure, but to provide another mechanism whereby individuals, community groups, businesses and corporations can help the city preserve its precious land and recreational programs."
Parks advocates say they must resort to private funding because parks have been particularly vulnerable to budget cutters. "Over the past two decades, parks have been repeatedly cut in good times and bad," says Daly of New Yorkers for Parks. And certainly in this climate, she says, "we're not going to get more tax dollars for parks."
Some critics worry that parks in affluent areas will be quickly adopted, while those in poorer neighborhoods will be neglected. City Councilmember Joseph Addabbo, Jr., chair of the parks committee and a sponsor of the bill, says he hopes this can be avoided. "The real focus is to help outer borough parks," says Addabbo, who is from Queens. He hopes city officials will approach corporations and organizations to urge them to help parks in less affluent communities. And, a provision that allows groups to provide labor to help their park -- a kind of "sweat equity program -- could also help parks in these areas. Finally, Addabbo says, if a disproportionate amount of contributions reach parks in rich areas, it could free up city funds for those in poorer places.
Like parks, libraries have proved particularly vulnerable to budget cutters and so have long sought private money. But this year, the libraries have stepped up their efforts, launching an Emergency Campaign for the Library that will try to raise $18 million over the next three years, including $4 million a year for the branch libraries in all five boroughs.
The fund drive will include what the library is calling a "take out, give back" campaign. As part of that, the New York Library will begin offering addressed envelopes at branch libraries for people to mail in contributions.
Even services almost all New Yorkers consider essential seek voluntary contributions. The New York City Police Foundation is soliciting money to improve police department technology.
But apparently there are limits. When the city announced plans to close firehouses last winter, efforts were launched to raise private funds to keep the companies operating. The mayor rejected the idea, and the fund-raising effort was abandoned.
Many proponents of private funding do not claim it is an ideal solution, although some do see benefits in it. Getting funds from the police foundation is "just an easier, quicker way for us to fund things that we need," Police Commissioner Ray Kelly has said.
And others see private funding as a way to build community, to give New Yorkers a stake in the services they use -- whether it is the local park or the neighborhood school.
But generally, fund-raising campaigns for libraries, parks and schools argue that city money simply is not available, begging the question of whether, in a better world, it would be.
"It's a sign of the times," says Addabbo, noting that virtually every state in the country is suffering a budget crunch. When there is a sluggish national economy, he says, "these ideas...come about."
People are already highly taxed -– New Yorkers have seen sales, property and income taxes rise in the past 10 months -- but still want services: clean safe parks, art and music programs in schools, museums that are open and affordable, the latest best seller on the branch library shelf.
By paying for some of these things, private fund-raising, says Brower of the City Project, provides a "mechanism to avoid raising the most fundamental question, which is what does it cost to run the city of New York the way we want and need to have it run."
Brower sees a number of problems with increased reliance on private money. "It raises questions of distributing resources not by need but by salability or sexiness." And, she adds, "These gifts always have strings attached." In funding city services, corporations are buying access, if not outright control.
In an effort to make sure private fund-raising does not produce an ethnical quagmire, the Conflict of Interest Board has written an advisory opinion on solicitation of private funds by the city and by city affiliated not-for-profit organizations such as the Central Park Conservancy. This opinion, says executive director Mark Davies, attempts to strike a balance between not discouraging private contributions, while making sure that public access is not restricted and that public officials are not somehow coerced by the private sector. For example, it says that when officials solicit contributions, they must "make clear that the donor will receive no special access to city officials or preferential treatment as a result of a donation."
Another issue is whether the drive for private money will work. Ken Sherrill, a professor of political science at Hunter College, thinks that in the long run, it will not. "Private contributions are not going to provide adequate levels of these things" such as higher education, he said. "At some point, enough voters will become dissatisfied with the level of public services" to demand change.
And it is not just proponents of bigger government who see problems with private funding. By simply contributing to the current system, Sol Stern wrote in City Journal in 1999, business people and others help perpetuate a failing system. "Businessmen shouldn't be embarrassed to judge the schools by the same standards that make them successful in their own companies," Stern wrote. "If they don't, if they continue to insist that they are not 'in the business of reform,' they will become increasingly irrelevant to the 1.1 million children who presently have no choice but to rely on the public schools as they are."
For now, few in city government seem to be heeding such arguments from either the left or the right. They simply want the money. The New York Post recently reported that city officials had reached an agreement with corporate sponsors to pay the $75,000 bill for illuminating the decorative lights on the East River crossings. The city had flipped the off switch this summer, extinguishing the necklace lights that had twinkled on the city skyline since the 1970s. Getting them turned back on, one official told the Post, was "something City Hall worked very hard to do."
Additional reporting by Anne Sachs.
 What a difference being in the private sector makes, at least for transportation providers in New York City.
Before last November’s election, Governor George Pataki and his appointees on the Board of the Metropolitan Transportation Authority (MTA) said that no fare increase was under contemplation. As every straphanger knows, the base fare increased by 33 percent, from $1.50 to $2.00, just six months later.
By contrast, taxicab owners, who represent the city’s largest privately operated transportation sector, formally petitioned the Taxi and Limousine Commission (TLC) for a 23.3 percent fare increase in November 2001. The commission held a hearing at the end of December 2001 but took no further action, even though soon after his inauguration Mayor Michael Bloomberg endorsed a taxi fare increase. The taxi industry resubmitted the petition this summer. To date, however, no hearing has been scheduled nor has Taxi and Limousine Commission announced a timeline for consideration of the industry’s request.
Thus, while the MTA was able to raise fares in a mere six months, the city has taken two years without deciding yea or nay on a taxi fare increase and the clock continues to tick.
Although the transit fare increase was controversial, the MTA’s reasoning was not particularly complex. MTA officials based the fare increase on the need to balance the authority’s budget and avoid major service cuts. There was a simplicity to the authority’s logic – higher costs mean higher fares.
The Taxi and Limousine Commission, on the other hand, is instructed by the City Charter to consider “all facts which in its judgment have a bearing on a proper determination” of whether to grant a fare increase. These range from fare revenues to “the return upon capital actually expended.” Thus, the commission has looked into a range of issues including changes in taxi operating costs, changes in ridership, the availability of drivers and fares in other cities. Unlike the Metropolitan Transportation Authority, the Taxi and Limousine Commission lacks a clear focus for deciding whether to adopt or reject a fare increase.
It is particularly ironic that the commission itself was behind much of the increase in taxi operating expenses in recent years. The commission mandated that only new vehicles can be put into service as taxicabs, required the more-expensive stretch version of the Ford Crown Victoria, and insisted on expanded insurance coverage for the vehicles. These actions were long overdue and benefited the riding public. Yet when it comes time to underwrite the costs, the Taxi and Limousine Commission hesitates.
Not so at the Metropolitan Transportation Authority. The MTA has also increased service (largely in response to rising ridership) and bought fleets of new rail cars and new buses. The MTA invested billions of dollars in the process, much of it paid for through fare-backed borrowing. No one questioned whether this spending needs to be paid for, either through fares or government subsidies.
One area where the private and public sectors both experience problems is with tracking of expenses and revenues. The MTA came under blistering criticism for hiding the true state of its finances, first painting an overly rosy pre-election picture of its finances and then drawing what auditors viewed as an artificially gloomy picture after the 2002 election.
The finances of taxi owners have often been fairly opaque, the picture complicated by the diversity of operations within the industry. But at least the MTA keeps records, however open to criticism. The Taxi and Limousine Commission, on the other hand, has not conducted its own analysis of taxi expenses or the need for a fare increase in nearly a decade. Until recently, TLC pointed to the city charter’s provision that the burden of proof for showing that current rates are “unreasonable” lies with the taxi industry. That is fair enough and industry figures submitted financial information to justify their fare request. But recently, the city decided to use a consulting firm to conduct an independent analysis of taxi industry finances. That step may be long overdue but it will further stretch out the process.
This sort of contrast between public and private transportation providers is evident not only with the fare issue but also with another big issue affecting both taxicabs and transit: the supply of service. The MTA has a well-developed methodology for assessing whether more buses or trains are needed on each route. MTA staff regularly observe levels of crowding on trains and buses; this information is feed into periodic reviews of service levels. Thus, when fare incentives, service improvements and other forces produced record-fast growth in subway and bus patronage, the MTA expanded service. Not enough, said critics, and not quickly enough, but at least someone was keeping track and taking some action.
Not so with taxicabs. The only recent systematic studies of taxicab availability were one sponsored by a taxi industry group two years ago and another conducted by yours truly in 2000. Both of these studies showed a need for more cabs. (Both studies are on my website.) The city lacks a methodology for determining whether more cabs are needed, not to mention a regular process for considering the issue. As a result, over the past 60 years only 400 new licenses have been issued (in the mid-1990s) despite rapid growth in the demand for cab service.
Mayor Michael Bloomberg has proposed issuance of up to 900 new taxi medallion licenses. The mayor wasn’t motivated by a sudden realization that the city needs more cabs, however. He was motivated by the city’s desperate need for new revenues. The new medallions would be auctioned to the highest bidder, which would bring a total of $220 million to city coffers at current medallion prices.
Despite the riding public’s need for more cabs and the city’s need for revenues, the process to issue additional licenses has moved at about the same pace as the fare increase.
Bloomberg proposed the 900 new cabs in the spring of 2002. The city is just now conducting the required environmental reviews. Any additional licenses will be issued in stages over three years, probably starting sometime in 2004. Meanwhile, would-be taxicab passengers are left to respond to the friendly honk of the car service or black car illegally picking up street hails.
Taxicab fares and service levels are important because cabs are an important transportation provider in New York City. According to the NYC Taxicab Fact Book, cabs carried 11 percent of riders using taxis, subways, buses, car services or black cars in 2002, and 25 percent of passengers using these modes within Manhattan. Looking at fares paid instead of ridership raises the profile of cabs even further. Taxi fares (including tips) totaled $1.4 billion in 2002. As a comparison, this is two-thirds the total of $2.1 billion that riders paid in MTA subway and bus fares in 2002.
Whether taxi fares should be increased and whether additional medallion licenses are needed are issues that can be discussed and debated. Even though the MTA’s method of addressing its fare and service issues has been subject to criticism, the contrast between taxicabs and transit shows that the city could do a much better job addressing taxi fare and supply issues. The city’s shortcomings in these areas demonstrate the perils of being a private sector transportation provider, even in Mayor Bloomberg’s business-friendly New York.
Bruce Schaller is Principal of Schaller Consulting, which provides research and analysis to government, business and non-profit groups seeking to identify and meet customer needs in the transportation sector. He is also a Visiting Scholar at the Center for Transportation Policy and Management at New York University.
If anyone needed reminding that cities are creatures of the state, Governor George Pataki has done the job. In a series of late-summer actions and inactions, the governor has added problems to the city’s financial plan adopted in June. First, by going to state court to stop Mayor Michael Bloomberg from refinancing $2.5 billion in city debt, the governor has, at least temporarily, taken $500 million a year in revenues out of the city budget over five years. Second, by delaying or misdirecting action in several public authorities that he controls, Governor Pataki threatens the loss or misuse of additional billions of city tax-revenue and economic dollars. And lastly, his new 16-member school-finance commission is so full of Pataki supporters that even the mild-mannered mayor was outraged, calling it “a cruel hoax,” presumably because its makeup makes the prospect of substantial new state education funding more difficult.
Of course one governor is not necessarily the state. The governor’s court challenge to the city’s bond issue may lose — or lead to some kind of compromise. And the governor’s school finance commission will hardly be the last word in designing a more equitable and sound educational financing system. But the pattern of blocking — or ignoring — city policy decisions is an unsettling pattern as the city continues to experience economic and budget uncertainty. In addition, the tools the governor is using — court challenges, state public authorities, and an insular advisory group – make it hard for the general public to understand or participate in decisions that will affect them.
The Immediate Problem
The New York State Legislature’s budget for the state’s current fiscal year (the legislature overrode the governor’s veto) authorized a state takeover of the $2.5 billion remaining city debt service owed the Municipal Assistance Corporation. The city would refinance the $2.5 billion debt now and stretch out the re-payment schedule. This would save the city $500 million a year, for five years. The state would pay approximately $170 million a year for 30 years to pay off this debt. One explanation for the deal was that it was the legislature’s way of making up (at least for five years) for the elimination of the city’s $500 million-a-year commuter tax a few years ago.
Of course there are excellent fiscal-policy arguments against this deal. For instance, the Democratic State Comptroller, Alan Hevesi, opposes the refinancing, pointing out that it extends for another 30 years debt that was prompted by the city’s 1970s’ fiscal crisis. It will cost state (including New York City) residents $5.1 billion over 30 years. And this is long-term borrowing for one-shot, operational budget purposes, generally a fiscal sin.
But these are peculiar times. The governor himself proposed borrowing $4.2 billion to help balance the state budget (an idea accepted in the legislature’s state budget for this year), using tobacco-settlement revenues to pay off the debt over a similar long term. And the governor and state legislature two years ago authorized $2.5 billion of borrowing by the city as an emergency resource after September 11. (The city used $2 billion of that authorization for budget-balancing in fiscal years 2002 and 2003, but Mayor Bloomberg decided not to use the remaining $500 million authorization.)
The governor’s court challenge is based on arguments that the legislature’s 2003 authorization was constitutionally and legally flawed. Supporters say the authorization, while perhaps technically flawed because of a rushed drafting process, was done in a conventional fashion. The governor’s timing – several weeks after the city budget was adopted – is another odd element. City budget direct Mark Page has said the city has already lost $25 million, because of higher interest rates since the court challenge.
This Pataki challenge is apparently an extension, in part, of issues in two other court cases currently before two state appellate division courts, in which the budget powers of the governor and state legislature are in question. One, Pataki v. Assembly and Senate, stems from the 2001 state budget fight, and the other, Silver v. Pataki, challenges the governor’s use of his line item veto on non-appropriation bills in 1998. (John Caher’s article in the September 2 New York Law Journal explains both cases.)
The Governor and Public Authorities
The governor already had a dubious role in another substantial piece of the new city budget – revenues anticipated over four years from new and retroactive rent payments from the Port Authority for use of the city’s two airports. The state comptroller’s July report (in pdf format) on the adopted budget, for instance, says $978 million of that anticipated revenue is at risk, because negotiations over such payments have gone on for years with no resolution. Since Governor Pataki single-handedly controls all New York State issues on the bi-state Port Authority, he bears substantial responsibility for the near-billion dollar risk in the city’s current financial plan.
Two new studies -- the Independent Budget Office’s “World Trade Center Assistance: Aid Received, Aid to Come,” and the New York City Comptroller’s September study, “9/11: Two Years Later, An Analysis of Federal Aid” (in pdf format) -- also illustrate the governor’s many roles through other public authorities in the downtown federal assistance program.
The Independent Budget Office study notes that the Lower Manhattan Development Corporation – largely controlled by the governor – currently has no plans for $1.16 billion in available Community Development Block Grant disaster-related funding. (The Labor Community Advocacy Network to Rebuild New York – LCAN -- is actively promoting a billion-dollar job-creation and job-development plan using this money.) And among existing Lower Manhattan Development Corporation proposals for Community Development Block Grant funding is capital money for another of the governor ’ s public authorities, the Hudson River Park Trust.
Then there is the federal authorization of $8 billion in tax-exempt Liberty Bonds, for commercial and residential development. The state and city have approved only $1.2 billion in bonds thus far, according to the city comptroller. Good Jobs New York, among other advocacy organizations, has highlighted the failure of the governor to produce affordable units of housing thus far with the Liberty Bonds – and attacked the closed-door fashion in which spending decisions are made by the state finance authorities.
The city comptroller, William Thompson, concludes that “the remaining $1.2 billion of the total $3.5 billion [Community Development Block Grant] allocation still lacks well developed action plans, and are therefore considered at risk.” Since these federal dollars would have a substantial economic impact, the risk is a further loss of city tax revenues as well as unrealized jobs. The comptroller anticipates full use of the $1.6 billion in Liberty Bonds set aside for housing development in the downtown area, but sees as much as $4 billion of the $4.4 billion allocated for commercial development downtown going unused.
The Governor and School Financing
In this financial and economic context, the governor’s 16-member school finance commission serves as a kind of metaphor for his insular and anti-city political style over the past several months. While there are several well-known members of the commission, including its designated chairman, Frank Zarb, Floyd Flake, and city teachers’ head, Randi Weingarten, the commission reflects little political outreach. As the New York Times’ September 4 story indicated, “not one member of the group that brought the suit [against the state], the Campaign for Fiscal Equity, was named to the panel, nor was anyone from the Bloomberg administration, the state or city education departments, the State Legislature or the New York State Board of Regents, which oversees educational standards.”
The governor lost the suit to the Campaign for Fiscal Equity and therefore must come up with a financing plan that satisfies the court. Everybody assumes the state will have to contribute substantially more money to the city schools than it does now. But the governor’s finance commission thus far (nine additional seats are anticipated) looks like yet another heavy-handed Pataki tool that promises only more roadblocks for the city’s long-term financial plans.
Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.