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Negotiations to Extend Important Affordable Housing Tax Break Said to Reach Impasse


Cuomo empty lot

(photo via The Governor's Office on flickr)


It appears that labor leaders and real estate developers are at an impasse in their negotiations of an extension for a controversial tax abatement program meant to encourage affordable housing. Known as 421-a, the program gives real estate developers significant property tax breaks for building affordable housing as part of otherwise market-rate buildings. State lawmakers decided in June to leave the future of the expiring program contingent upon an agreement between labor and business.

Sources close to negotiations characterized discussions as "dead," adding that the Real Estate Board of New York was "unhappy" with the direction of negotiations with the construction workers union. Others told Gotham Gazette that there hasn't been any movement for some time, while other key stakeholders appeared not to have thought or heard anything about the status of negotiations in weeks.

However, spokespeople for John Banks, head of the Real Estate Board of New York, and Gary LaBarbera, head of the Building and Construction Trades Council of Greater New York, told Gotham Gazette that negotiations continue.

"These are ongoing, good faith, negotiations and we are not going to discuss them publicly," said Jamie McShane, of REBNY, by email. "The negotiations mark a great opportunity to engage in frank and honest discussions about how we can build much more affordable housing, ensure construction workers are treated fairly and create job opportunities for residents of the city."

LaBarbera, issued a similar statement: "We continue to meet with REBNY representatives and are hopeful we will reach an agreement on an extension of the 421-a program in the weeks ahead which provides workers with good wages and benefits and needed affordable housing across New York City."

Both groups say they are working toward a deal by the January 15 deadline. It is unclear whether Gov. Andrew Cuomo's office is involved in mediating negotiations - Cuomo helped spearhead the deal that left extension of 421-a, a government tax and housing policy, up to private parties. The Cuomo administration did not return request for comment.

The 421-a exemption is a favorite of the development industry that has been applied liberally but enforced loosely. It is also seen as essential to building affordable housing in New York City, especially in most desirable neighborhoods.

When 421-a was expiring in June, Cuomo and legislative leaders agreed on a compromise. The deal temporarily extended the program, to the end of the year, while setting up tighter requirements for the affordability component but leaving the future more precarious. Seemingly spurred by concerns that federal prosecutors were watching closely, legislators left it up to labor unions and real estate representatives to negotiate the final, crucial aspect of the deal: the prevailing wage component. Allowing labor unions and the real estate industry to decide legislative policy has been questioned by a number of tenant and good government groups, as well as people in government.

In announcing the major aspects of an end-of-session deal on June 25, Cuomo's office outlined the 421-a extension: "The legislation extends the 421-a program for six months, with a provision that allows representatives of labor and industry groups to reach a memorandum of understanding regarding wage protections for construction workers. If such an agreement is reached, the program will automatically be extended for four years."

Sen Liz Krueger, Democratic member of the Senate Committee on Housing, Construction and Community Development, told Gotham Gazette that she has been informed that negotiations are on the rocks. Krueger has been against putting 421-a negotiations in the hands of real estate and labor. "I've heard through the grapevine that negotiations aren't going well and, OK, that says to me that the program comes to an end," said Krueger. "I believe that it is inappropriate for groups that benefit from a tax break to be in charge of negotiating it."

Having control over the tax breaks, which can be worth millions of dollars, and the jobs created by construction is a major motivator for real estate and labor but many speculate that developers would be more willing to walk away from the negotiating table if labor demands for worker pay eats too far into their bottom line. There are also questions about how easily LaBarbera is able to negotiate with one voice on behalf of the various unions within his larger organization.

Though an agreement may be on the verge of alluding stakeholders, there is more time till the deadline, and deals do tend to get reached at the eleventh hour.

One party certainly paying close attention, if not working to influence negotiations, is the administration of Mayor Bill de Blasio, whose affordable housing goals rest, in part, on 421-a-related development.

"We fought hard to secure a program that eliminated tax breaks for luxury condos, doubled affordable housing production, and slashed subsidies per apartment by a third," said Wiley Norvell, a spokesperson for the mayor. "Against some strong political headwinds, we got these reforms passed. The rest is in the hands of the parties that officials in Albany chose to hammer out final program details."

In Fiscal Year 2015, 421-a accounted for more than $1.1 billion in government tax expenditures.

Yet, a recent ProPublica investigation of 421-a found "The failure of city and state regulators to effectively police the tax break at the heart of such deals and hold developers to their word."

This discrepancy is something de Blasio and his team have vowed to change and are working with state partners to correct. It is also part of the impetus for changes in the policy that Norvell alluded to.

When developers apply for and receive the tax abatement, they do not have to pay property taxes for three years during construction, after which their exemption lasts decades in exchange for keeping some units in their new buildings under rental affordability caps. It is part of the state tax code, but applies to New York City development and is overseen by the city Department of Housing Preservation and Development.

Though he has decried how it has been applied and enforced in the past, Mayor Bill de Blasio wants to see 421-a extended, and his ambitious affordable housing plans include units accrued through the program. In the spring, de Blasio offered his own 421-a reform plan, which he got real estate buy-in for, but was rejected by Cuomo, who insisted in more protections for labor. The deal reached by Cuomo and legislative leaders was actually very similar to de Blasio's proposal, but was indeed more favorable for the construction unions - if they could reach a compromise with real estate leaders, of course.

"The story of 421-a has been told," said Krueger. "We don't get the bang for our buck; It has been abused; the real estate industry has learned how to avoid delivering affordable housing and it drives up land prices, which is not helpful in New York City."

Vicki Been, head of de Blasio's housing department, said in November that the administration hoped a deal on 421-a would be reached, but that the city and the administration's affordable housing plans would survive even without one.

"Life will go on," Been said during an event at New York Law School. "There was life before 421-a, and there will be life if 421-a fails. We will survive and still deliver our 200,000 units," Been said, referring to the administration's ten-year goal of preserving or building 200,000 affordable units. Still, Been indicated she would like to see 421-a extended and that, in a newly strengthened form, it would be helpful in achieving the administration's goals.

Cuomo has indicated that he is confident in whatever negotiations might yield. "Organized labor is part of the process and that's what this legislation stipulated," Cuomo said in July, according to State of Politics. "The legislation speaks for itself and it sets up the process and whatever the process yields, that's what the process yields."

If no deal is reached, there may be several fingers pointing at Cuomo for abdicating responsibility. Meanwhile, enough 421-a funded affordable housing is in the pipeline already that an expired program later renewed sometime in 2016 may not cause too many problems for affordable housing development in the city. Some have expressed concern, though, about the ability of nonprofit affordable housing builders to survive without 421-a; and those builders are not necessarily well-represented by REBNY.

Krueger said that she would be happy to negotiate an all new affordable housing program that takes into account the lessons learned from 421-a. She'd like to have a public debate with all the stakeholders involved. However, she fears if a deal with REBNY and labor fails to materialize, a replacement might be negotiated behind closed doors at the last minute in the state budget--specifically the funding bill that is usually presented to legislators and voted on after all the other budget bills.

"I believe now is the right time to negotiate a bill with all the facts on the table," said Krueger. 

***
by David King, Albany editor, Gotham Gazette
@DavidHowardKing

Assemblymember Blake Decides Against New Consulting Job


 

blake nypd

Assembly Member Michael Blake, center (photo via @youngblackkings)


Two days after announcing that he would be joining a consulting firm as a partner while retaining his seat in the New York State Assembly, Michael Blake has changed his mind.

"I've decided that the clear priority is and always has been the constituents of my district, and I'm not going to allow anything to distract from that. I'm not going to be a partner at Hilltop," Blake told Gotham Gazette Sunday evening, meaning Hilltop Public Solutions, the consulting firm.

"I'm not going to let the noise that's been out there continue," he added, referring to the immediate negative response that the announcement garnered from good government advocates and in the media. "I'm not going to let this be a distraction for the people. I want to be focused on the work and focused on my family."

The change of mind comes after the Friday uproar when, on the same day that former Senate Majority Leader Dean Skelos was convicted of using his public office for private gain, Hilltop announced that Blake was joining the firm. Blake and Hilltop both said he would only be handling national and international clients - none with business before New York State - and Blake explained that the move had been cleared by an Albany ethics commission. But, the timing and the cynicism around Albany lawmakers and their real and perceived conflicts of interest led to a powerful backlash against the move.

Blake, a Democrat elected in 2014, is upset about how the announcement was portrayed, but acknowledged the bad timing and that the atmosphere around New York elected officials is toxic. The reaction to Blake's announcement came not just the same day as Skelos' conviction, but soon after that of former Assembly Speaker Sheldon Silver, also found guilty of abusing his government power for private gain.

"There is an environment and climate that we're in right now, that it is believed that anything that we do outside the legislature is wrong," Blake said during a Sunday interview. "While it's not a fair assessment in my eyes, we have to be sensitive that that's the reality. I did above and beyond being transparent and communicating what I would be doing, but even with that, you have people who have conveyed a narrative that there would be a conflict. Perception is reality, I did not want this to continue to be a distraction."

Dick Dadey, executive director of good government group Citizens Union, was one of Blake's toughest critics when the news broke on Friday. Told of Blake's decision on Sunday, Dadey said, "Michael Blake's bold decision to give up the Hilltop job is what true leadership is about. His taking the job was perfectly legal, but it did give the perception that there was a conflict of interest that could affect his ability to represent his constituents. He's gone from appearing to be 'more of the same' on Friday to being the kind of legislator that we need to send to Albany more often."

While saying that he will continue to push for transparency in state government as well as increased democratization of the Assembly, Blake argued that not all legislators should be painted with the corruption brush because of those who have abused their positions, such as Silver and Skelos.

"It is not accurate that there is a culture of corruption in Albany," he said, directly refuting claims by critics including good government groups and U.S. District Attorney Preet Bharara, who brought the cases against both Silver and Skelos. "There are 213 of us" in the legislature, Blake said. The bad actors "are the minority. The supermajority is doing everything above board and appropriate."

Blake has worked closely with Silver's replacement, Carl Heastie, who also represents part of the Bronx. He said that reforms were happening under Heastie, "Progress has already begun," Blake said Sunday. "Heastie was pretty phenomenal right out of the gate," getting newer Assembly members involved and opening up the decision-making processes.

"I've been one of the more public and ardent advocates for reform the entire year," Blake said, noting his push for Assembly members to be more involved in the budget process. "Just because you're providing for your family doesn't mean you can't also advocate for reform," he said.

Explaining that he is the primary income earner for his family, that his is the home at which family members gather during the holidays, Blake explained his need for earning beyond his $79,500 annual salary as an Assembly member. He also stressed that he is both against banning outside income and very careful about disclosure - Blake already runs his own small consulting firm.

"I'm not in agreement with banning outside income. I think we are ignoring race and class issues when we do that. You have no idea of the dynamics for someone who is serving," Blake said. "If you ban all outside income, you create a scenario where only the rich and wealthy can serve."

While running for office in 2014, Blake made money giving speeches and providing consultation for several clients. He disclosed the firm he founded, Atlas Strategy Group, his clients, and his income on a form submitted to the Legislative Ethics Commission, which is available on the JCOPE website. While he sought a vacant Assembly seat in 2014, Blake earned at least $80,000.

Blake, a former aide to President Obama and veteran of both of Obama's presidential campaigns, continued to perform paid speaking engagements and consulting in 2015, he said on Sunday. He will disclose all of his 2015 income as necessitated and he will handle clients in 2016, he said, while also explaining that he would be working with fewer clients through his own small firm than he would have if he had joined Hilltop.

"We know this decision hits Assemblymember Blake's family pocketbook hard," Dadey of Citizens Union said. "We look forward to working with him and his colleagues as we try to address the issue of state lawmakers' outside income and salary."

Blake said he will indeed bring in some income in addition to his base salary. "I'll still work in the same way I've been preaching and public speaking, I'll still consult from time to time," he said. "In the same way [legislators] can be a professor or a lawyer, and as I've done in the past, I'll disclose in the future."

Blake said he had informed those at Hilltop of his decision. "They have a great track record of electing progressives," he said of the firm. "I was going to help them with that national work. But they are understanding of the bigger picture. They are understanding of the work we could have done to help push progressive values across the country, it has to be secondary for me to the primary point of not doing anything that is perceived to be not helping folks at home."

"I understand the environment we're in," Blake repeated. "I don't want us to be talking about trials...I want us to be talking about these kids."

***
by Ben Max, Gotham Gazette
@TweetBenMax

Note: Gotham Gazette is an independent publication of Citizens Union Foundation, sister organization of Citizens Union.

Vetoing FOIL Bills, Cuomo Points Finger at Legislature, Issues Executive Order


Cuomo awards stage

Gov. Cuomo (photo via The Governor's Office on flickr)


In response to the conviction of former Senate Majority Leader Dean Skelos on multiple federal corruption charges, Gov. Andrew Cuomo declared on Friday that the legislature "must stop standing in the way of needed reforms." Only a few hours later he vetoed two bills designed to speed and reform Freedom of Information Law response and require the state to pay court costs incurred by FOIL users whose requests a judge finds have been improperly denied.

Facing searing backlash from good government groups and accusations of hypocrisy, the governor partially reversed himself the next morning by issuing an executive order "to expedite the freedom of information law appeals process," requiring agencies to handle FOIL appeals within 90 days.

In a statement accompanying announcement of the executive order, Cuomo said, "My administration is proud to lead by example in making government more open and transparent." Pointing to the essence of his approach to the bills he vetoed, the executive order, and controversy around FOIL, Cuomo added, "and we will introduce a bill early next year to bring the same, necessary high standards of transparency to the legislature."

The legislature is currently exempt from FOIL.

The governor's weekend moves, appearing somewhat contradictory, garnered mixed reactions, including much criticism Friday evening, then some support on Saturday.

"The governor was given a clear choice between being part of the problem in Albany or part of the solution," wrote a coalition of good government groups in a statement released in response to the vetoes. "These vetoes call into question the governor's commitment to transparency and Freedom of Information."

Cuomo framed his vetoes as part of a concerted effort to make the legislature subject to the stricter FOIL rules. He called the reimbursement bill, sponsored by Assembly Member Amy Paulin, "myopic" and said he was concerned for "judicial discretion in FOIL cases."

On Saturday, a Cuomo spokesperson, Rich Azzopardi, continued pressing the idea that the veto was designed to force the legislature into action, telling various outlets: "The governor will not let the legislature off the hook for not being subject to FOIL."

Some advocates are pleased with the temporary compromise while others say Cuomo is not "leading by example" and is instead deflecting attention to the legislature to prevent the executive from having to comply with measures that will ensure greater transparency.

John Kaehny, executive director of Reinvent Albany and New York representative of the National Freedom of Information Coalition, pointed out that the FOIL bills were written by the state's own director of open government, Robert Freeman of the Committee on Open Government. Kaehny characterized Cuomo's executive order as "so weak it is close to meaningless."

"It takes Incredible chutzpah for a governor who just vetoed two important FOIL bills to say he 'won't the legislature off the hook,'" Kaehny told Gotham Gazette. "The governor's 'comprehensive FOIL reform' is another way of saying that the governor has no intention of strengthening FOIL. Skelos and Silver just got convicted, and it's the same old games in Albany."

Dick Dadey, executive director of Citizens Union, characterized Cuomo's vetoes as "unfortunate" but welcomed the executive order and said he believes the governor plans to move forward with FOIL reform in good faith.

"What the executive order represents is common ground between the governor and the legislature," said Dadey. "The governor had concerns about judicial discretion and putting an unfair burden on executive agencies over others. I take the governor's concerns as legitimate and not a smoke screen because otherwise he wouldn't have issued an executive order."

Cuomo is due to give his State of the State address in combination with his budget presentation on January 13 in Albany. At that time, or near it, the governor is expected to unveil his FOIL reform proposals, including to make the legislature subject to FOIL.

Assembly Member David Buchwald, sponsor of the bill designed to speed state agencies' FOIL appeals, told the New York Times the executive order was "A step in the right direction."

***
by David King, Albany editor, Gotham Gazette
@DavidHowardKing

Note: Gotham Gazette is an independent publication of Citizens Union Foundation, sister organization of Citizens Union.



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