Gotham Gazette

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Could Wall Street's Woes Be Good for New York?


Even though stock indices may have rebounded from their late November lows, the market remains volatile, and the economic outlook has taken a decided turn for the worse. A credit crunch has emerged on Wall Street with the sudden aversion among banks to lend because of the uncertain value of collateral when almost everything is tainted by years of sub-prime mania. The Federal Reserve took unprecedented actions last week out of fear that the credit squeeze will lead to a serious slowdown, possibly a recession over next few months. Leading economic forecasters polled by the Wall Street Journal recently put the chances of a recession at 38 percent. In the financial press, “toxic” has become the adjective of choice in describing many of the once-revered “creative” financial instruments linked in one fashion or another to sub-prime mortgages, the high-interest loans financial institutions gave to those who could not qualify for more conventional mortgages.

Wall Street’s implosion justifiably has produced much hand-wringing among budget makers in City Hall and Albany regarding tax revenues. It seems clear by now that the dot-com bubble was no fluke. The Wall Street resurgence and boom since 2003 was largely inflated by real estate and sub-prime lending and spending. Can Wall Street do well only by doing things imprudently -- and on a gigantic scale at that?

Wall Street’s booms are certainly good for the city and state’s tax revenues (the busts certainly aren’t), but are the booms good for the broader economy? Might there be a silver lining in Wall Street’s comeuppance?

The Boom and New York

In many respects, the Wall Street boom of this decade was not that good for the New York economy or for the nation.

Wall Street is often referred to, aptly, as the main engine of the New York City economy. When it revs up, it becomes turbo-charged, generating high incomes and tax revenues. Yet it also belches out the urban equivalent of diesel exhaust, affecting the quality of life for everyone else. Soaring Wall Street incomes helped fuel the demand for luxury housing, pushing up housing prices throughout the five boroughs and pushing out many middle-class people in the process.

Wall Street’s aggressive lending and marketing practices were as responsible as anything for the sub-prime debacle. The reverberations of collapse have been felt in New York City neighborhoods far from the financial district. Thousands of Residents moderate-income New Yorkers, many of them once worthy of more conventional credit, have suffered from the implosion of the sub-prime bubble.

Steering the Economy – But Where?

Wall Street has taken center stage on the national economic scene. The trajectories for the last two economic cycles have been determined largely by Wall Street’s bubble machine. First it was the dot.com and telecommunications bubble, then the real estate and sub-prime bubble. While the Federal Reserve and government “regulators” deserve a big helping of responsibility for not minding the money store, Wall Street’s financial innovations helped pave the way for a debt-induced spending spree since 2001 with mortgage debt increasing four times as fast as wage and salary income. Easy money and mountains of unsustainable debt won out over a real policy debate about how to revitalize the productive economy in a more sustainable manner.

A dynamic financial sector is vital to a competitive, world-class economy. The ability to raise capital and move it across sectors in response to ever-shifting market conditions is essential to robust economic growth. New York City-based Wall Street investment banks have taken over many of the functions historically performed by commercial banks. Mergers, like the one between J.P. Morgan and Chase, have created gigantic financial institutions that amass large pools of capital and provide a wide range of loans, equity investments and other means for corporate finance to grease the wheels of commerce in the nuts and bolts economy producing goods and services.

The financial clout of New York-based Wall Street investment banks over the national economy today rivals the situation in the late 19th and early 20th centuries, before the advent of the Federal Reserve Bank and national regulatory bodies like the Securities and Exchange Commission.

In a well-functioning economic system, the financial sector helps facilitate business activity in the nuts and bolts economy. Wall Street’s role is to help make the economic pie larger. What has happened, however, is that New York investment banks have become the tail wagging the dog. Wall Street’s focus has been on financial innovation in the service of more and more short-term fees, regardless of their economic value or consequence. This has bred an undue tendency toward speculation, with the prices of stocks and other securities pushed higher and higher, drawing in unsuspecting investors.

In analyzing the financial market ills leading up to the 1929 stock market crash, economics great John Maynard Keynes wrote: “Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation.”

More recently, John Bogle, founder and former chief executive of Vanguard mutual funds, laments the rising share of the economic pie going to the finance sector. Bogle notes that 25 years ago the finance sector accounted for 6 percent of the profits of the Standard & Poor’s 500 large corporations. Prior to the recent market meltdown, the finance sector took about one-third of corporate profits. Bogle estimates that hedge funds, mutual funds, investment banks and the like “siphoned about $500 billion from shareholder returns” in 2006.

Readjusting the Economy and Wall Street’s Role in It

It is not at all clear how long it will take for Wall Street to right itself. Barely a year ago, Mayor Michael Bloomberg, Senator Charles Schumer and some other prominent New Yorkers worried that Wall Street was somehow losing competitive ground to London, Shanghai and other global financial centers. They blamed government securities regulations enacted in the wake of the Enron collapse. Now, it is more likely that there will be calls to effectively regulate Wall Street so that the bubble-making machine is de-activated in favor of a return to making money the old-fashioned way. The problem was not that Wall Street was regulated too much but that it was not regulated in the right way. Financial “innovation” run amok turned out to be the real threat, not London or Shanghai. Those market centers also are plagued by bubble tendencies and are in similar need of effective oversight.

As Wall Street regroups from its current woes, city economic policy-makers might want to consider a different set of priorities. In City Hall, the focus could be on really diversifying the city’s economy and using mega-development projects to make the city more livable and more likely to produce good, middle-income paying jobs. For the past few years, City Hall’s main real estate development goal has been ever more space for huge financial trading floors – a fixation that is no more sustainable than the latest financial bubble. The big challenge is to make sure that the jobs created in developments induced by city actions pay decent wages and offer career opportunities that lead to the middle class. New York will not have a middle class if it doesn’t have middle-class jobs.

In Albany, the state is still groping for an economic strategy responsive to the needs of New Yorkers. While some observers are eager to write it off, manufacturing still employs over a half-million workers in New York and remains the economic backbone of many upstate communities. Several manufacturing industries, including but not limited to ones deemed “high tech,” are highly productive upstate. It is myopic to think that high value-added manufacturing – microelectronics, optics, ceramics, biotechnology, instrumentation -- will entirely desert the U.S. or New York, with its world-class technical universities, advanced technology research base and highly skilled manufacturing workforce. The state should identify the strong performers among manufacturing firms, work to make them even more competitive and ensure that they can retain and develop more highly skilled manufacturing workers.

The state desperately needs to overhaul its economic programs across the board, from Empire Zones to Industrial Development Agencies, to transform them from giveaways and cronyism to strategic interventions addressing the failure of markets to invest sufficiently in further advancing New York’s human capital assets through skill training and research and development.

Both City Hall and Albany should also seriously pursue the many opportunities now unfolding to develop green jobs promoting energy conservation and the production of green building materials and other environmentally friendly manufactured products.

Economic sustainability is as desirable a goal as environmental sustainability. Our current economy is anything but that. In the long run, the state and city tax base will be more sustainable with an economy geared to providing ample opportunities for more good-paying jobs as opposed to our current highly polarized, Wall Street-dominated economic structure. With a strengthened and expanded middle class, New York will have stronger and more vibrant communities. James Parrott is deputy director and chief economist of the Fiscal Policy Institute (www.fiscalpolicy.org). He has been studying and writing about the New York economy since he landed in New York City a quarter century ago. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Top Stories of 2007


Calm is a word rarely associated with New York City. And certainly with half the city a construction site, tourists packing sidewalks and roads and subways jammed, the city in 2007 was hardly peaceful. But, as far as news goes, it was a relatively quiet year in the five boroughs as the mayor and City Council continued their era of good feeling, and some of the biggest stories involved debates over "sustainability."

News junkies looking for a little excitement could always go to Albany. There the year began with the inauguration of Gov. Eliot Spitzer and continued with battles between Spitzer and sundry legislators, including a particularly nasty feud between the governor and Senate Majority Leader Joseph Bruno

These are the top New York stories of 2007. (A lot of things did not happen in 2007 as well. For a look at them, click here.)

Spitzer Becomes Governor but the Steamroller Sputters:

Following a landslide election victory in 2006, Eliot Spitzer became governor on Jan. 1. “Like Rip Van Winkle, the legendary character created by the New York author Washington Irving, New York has slept through much of the past decade while the rest of the world has passed us by," Spitzer declared. Now, he said, “Day One of our time for change has arrived."

But the lofty ambition soon floundered. State Assembly Democrats defied Spitzer when they ignored the recommendation of a panel appointed by the governor and named one of their own, Thomas DiNapoli, state comptroller. Although the governor, Bruno and Assembly Speaker Sheldon Silver managed to hash out a state budget before the April 1 deadline, some observers viewed the final agreement as a setback for the governor, who had to back down on proposed health care cuts and his pledge to make the process more transparent.

Then came Troopergate. A report by state Attorney General Andrew Cuomo, released in July, found that aides to Spitzer had improperly used state police to gather possibly damaging information on Bruno. Although neither Spitzer nor his aides have been charged with any crime, the report prompted the resignation of a top Spitzer aide along with several investigations. The controversy sparked a virtual blood feud between the state's top Democrat and its top Republican, further snarling Albany's already notorious gridlock and derailing some key state business, such as campaign finance reform.

At year's end, with investigations continuing and the acrimony showing no signs of abatement, numerous articles examined whether Spitzer could recover from his rocky start. “Spitzer lunges. He seems not to be a person of strategy. He slipped on a banana peel, or six, and once down has thrashed around," one Albany observer told the New Yorker's Nick Paumgarten. In 2008, a key issue will be whether he can get up.

Two New Yorkers Run for President:

No New Yorker has occupied the White House since Franklin D. Roosevelt but two New Yorkers spent much of 2007 on the campaign trail trying to change that. On the Democratic side, Hillary Clinton (an Illinois native and former Arkansas first lady who represents New York in the U.S. Senate) announced her long anticipated candidacy in January. "I'm in it and I'm in it to win," she said.

And in the Republican Party former Mayor Rudolph Giuliani formally entered the race – again to few people's surprise – in February. While debate about Clinton has centered on her decisions in the Senate, her role as U.S. first lady and her stands (or lack thereof) on issues, Giuliani's run has focused attention on his record as mayor – the only elective office he ever held. For months, this seemed to work to Giuliani's advantage as he touted his calmness and steadfastness in the wake of the Sept. 11, 2001 attacks.

Recently, though, the former mayor's time in City Hall has emerged as more of a mixed blessing. Critics have targeted his combative personality. His relationship with his now indicted police commissioner, Bernard Kerik, has come under scrutiny. Opponents have contrasted stands he took in New York with his current position on issues such as immigration and gun control. And tabloids have thrived on accounts of how New York City police protected his then girlfriend now wife, Judith Nathan when Giuliani served as mayor.

Both Clinton and Giuliani held strong positions in the polls during much of 2007 but seemed to falter as the year drew to a close – and the early primaries drew ever closer.

Bloomberg Presents PlaNYC including Congestion Pricing:

To mark Earth Day in 2007, Mayor Michael Bloomberg unveiled a sweeping plan for New York to accommodate 1 million additional residents by 2030 and become a more “environmentally sustainable" city. It set out 127 specific proposals on land use, water supply and quality, transportation, energy, air quality and reducing the greenhouse gases that cause global warming. The ideas ranged from the specific -- planting more trees, for one -- to vaguer and possibly grander notions such as using "creative financing" to boost use of solar power in the city.

By and large, the plan won praise from an array of experts. And the administration set to work implementing some of them, opening more school playgrounds for use after hours, for example.

But one aspect of the plan -- the proposal to charge an $8 fee for motorists driving into part of Manhattan on weekdays -- garnered most of the attention and opposition. Although the mayor lined up support from many environmental groups, Spitzer, some key city politicians and business leaders, he failed to win the backing of Assembly Speaker Sheldon Silver and the State Assembly. Instead a compromise was forged, calling for a panel to consider “traffic mitigation" proposals, including congestion pricing, and submit a plan for approval first to the City Council and then the state legislature before it would take effect. The panel's report is expected early in 2008.

Department of Education Issues Report Cards for City Schools:

After New York's 1.1 million public school students returned this fall, the education department released its first ever report cards for almost every school in the system. While the report cards rated schools in several areas, the evaluators at the Department of Education's headquarters in the Tweed Courthouse boiled everything down to a single letter grade.

The grade would have consequences. The department said it would shut some failing schools starting at year's end.

While Bloomberg said the report cards would hold schools accountable for their performance, some parents and educators criticized the ratings for being confusing, too tied to standardized tests and penalizing schools with a long history of high student achievement.

Controversial Plan to Give Licenses to Undocumented Immigrants Fails:

Perhaps Spitzer's biggest single defeat in a year studded with adversity came on his plan, announced in September, to grant driver's licenses to undocumented immigrants in New York State. Spitzer said the idea, was a "common sense" move that would increase public safety.

Many disagreed, including Bloomberg and some county clerks upstate who vowed they would not give driver's license to people who could not prove they were here legally. After holding adamantly to his position for several weeks, Spitzer abruptly changed course announcing a compromise plan that would create three types of driver's license: one for people here legally; one for New Yorkers who frequently cross the border into Canada; and one for people here illegally. Michael Chertoff, the U.S. secretary of homeland security gave the plan an endorsement that was tepid at best -- but virtually no one else liked it. Advocates for immigrants were surprised -- and angry, with City Councilmember John Liu calling the three-tier licenses "a new segregation." Bloomberg still didn't like the idea, and the county clerks said they would continue to press their lawsuit to stop it.

Perhaps most grievously for Spitzer's scheme, his proposal reared its head on the national political stage. Asked about it at a Democratic candidate's debate, Hillary Clinton floundered, prompting one of her opponents, former Senator John Edwards, to remark, "Unless I missed something, Senator Clinton said two different things in the course of two minutes."

With Democratic officeholders in the state complaining the license issue could be used against them , Spitzer dropped the idea completely -- before the next debate when Clinton, who Spitzer has endorsed, was sure to face more questions about it.

But the fight over identification will almost certainly rear its head again in 2008. That's when Spitzer has to decide whether New York will issue another kind of license -- a federally recognized license known as the Real ID, which can be used for boarding planes and entering federal facilities. The Bush administration is pushing the Real I.D., but complying with federal requirements for the Real I.D. would make it even more difficult for undocumented immigrants to get licenses.

A Fire at the Deutsche Bank Building Kills Two Firefighters:

As rebuilding continued around Ground Zero in Lower Manhattan, the former Deutsche Bank building stood as a grim reminder to the events of Sept. 11, 2001. Efforts to raze the building, seriously damaged in the attacks, had been hampered by high levels of toxic substances. But in August, workers were well along in their efforts to dismantle the structure floor by floor.

Then on August 18, a fire broke out in the building. Two firefighters, responding to the call, died. In the weeks, that followed it emerged that a string of failures by contractors, individual construction workers, and government agencies contributed to the tragedy. Three top fire department officials lost their jobs because the department had allegedly failed to inspect the building or devised proper emergency plans. A number of lawsuits and investigations are still pending.

Meanwhile part of the building still looms near Ground Zero -- and officials remain unable to say when it finally will be demolished.

Crime Continues to Fall with Murder at Record Low:

If present trends continue, New York City will record fewer than 500 murders this year -- the lowest number since such records began in 1963. Perhaps even more noteworthy, some experts said, was that fewer than 100 of those victims were killed by people they did not know. This, the New York Times observed, "belies the common imagery that New Yorkers are vulnerable to arbitrary attacks on the streets, or die in robberies that turn fatal."

The drop was part of a continuing decline in crime in New York City that began under the Dinkins administration and has continued even since -- even while crime rates in many other cities have increased.

Despite Economic Jitters, Development Continues:

With Wall Street going through what is at best a period of "volatility" and low-income New Yorkers losing their homes because of mortgage foreclosures, development continues in New York. As the year drew to an end, the Bloomberg administration announced its latest plan to develop Coney Island, the Atlantic Yards project wound its way through the courts and Columbia's plans to dramatically expand its campus into West Harlem moved along the approval process. The City Council in September approved the largest rezoning effort in the city's history, laying the groundwork for a massive redevelopment in Jamaica, Queens, aimed at creating a transit hub tied to John F. Kennedy International Airport and revitalizing the area's commercial district. The Metropolitan Transportation Authority sought public reaction to five plans for the Hudson Yards on Manhattans' West Side, all featuring commercial and residential skyscrapers, opens space and links to the planned park on the High Line.

With The City's Poverty Rate High, Bloomberg Begins Paying People for Good Behavior

Despite the economic boom in the city, almost one in five New Yorkers have incomes below the poverty level ($20,650 for a family of four), according to recent data from the U.S. Census. The New York City area had the greatest difference between rich and poor of any major metropolitan area in the country, with the gap a yawning chasm in Manhattan where the wealthiest 20 percent of residents made nearly 40 times more than the poorest 20 percent. While about half of all New York City children are born into poverty, an analysis found the average household income for white families with young children in Manhattan had reached $284,208 a year in 2005.

The persistence of poverty came despite a generally good economic picture in the city and a national decline in the poverty rate.

Faced with persistent poverty, Mayor Michael Bloomberg, who largely ignored the issue during his first term, began taking some steps to implement part of a poverty plan announced in 2006. In particular, the city embarked on a controversial effort -- now funded with private money -- to begin paying poor families to do such things as make sure their children go to school or go for regular medical checkups. Bloomberg who modeled the plan on one in Mexico, said it would give poor families, who have a lot of stress in their lives, "a financial incentive to look ahead and to make decisions that will improve their prospects for the future." Others criticized it for paying poor people to do what they should do anyway, while some experts said such an incentive program seemed to blame the poor for being poor.

At the same time the Bloomberg administration began to pay some students for going to class, getting good grades and passing the state standardized Regents exams for high school students. In a particularly odd twist, the administration is considering rewarding good students with cell phones, a device it has banned in the very schools those students attend.

Schools Reorganized – Again:

Catching many observers by surprise the Bloomberg administration announced in January that it was reorganizing its reorganization of the nation's largest public school system. The rather arcane plan seeks to give more power to principals and hold them more accountable for what happens in their buildings. The department devised a new school funding formula aimed at removing some of the complexity and arbitrariness of the old system. It also features school repot cards (see above) and, as with previous plans hatched by Bloomberg and his Schools Chancellor Joel Klein, even more standardized tests.

Klein said he would tighten standards for teachers to get tenure and followed that up later in the year with a drive to remove teachers the department considers unsatisfactory. And perhaps most surprising to many, Klein eliminated the 10 educational regions he had established in Bloomberg's first term when the city decided to strip community school districts of most of their power. Klein said the districts were being eliminated because they had largely accomplished their goals, but no observers could recall that Bloomberg had ever indicated the regions were intended to be temporary.

The effects of all this at the classroom level, less than four months into the new school year, remain unclear. But the reorganization raised the issue again of just how successful the Bloomberg education initiatives, the centerpiece of his administration have been. While city students do better than they did previously on most state standardized tests, their scores on a national exam have barely changed since the advent of mayoral control. And while Bloomberg basks in national acclaim for his efforts -- most recently from Republican presidential contender John McCain -- at home he has plenty of critics along with fans.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Big Stories of 2007 that Did Not Happen


Along with the big events that occurred in 2007, many things that people expected to happen, wanted to happen or feared would happen never took place.

Here are some of the big ones.

Bloomberg Did Not Declare His Candidacy for President

Speculation about the popular but term-limited Mayor Michael Bloomberg making a run for the White House gained ground in June when he announced he would quit the Republican Party -- the party he joined in 2001 in order to run for mayor and whose convention he welcomed to the city in 2004.

Bloomberg denied he had presidential ambitions, but many remained skeptical. For the rest of the year, political aficionados examined Bloomberg's every move, like tea leaves, trying to define what it said about his plans for the future. Bloomberg clearly enjoyed the attention, spurring it with his own moves -- such as the launching of a web site -- or when, during his recent trip to Bali, he criticized both U.S. politcal parties for not doing more about climate change.

Throughout it all, he continued to insist he would not run and instead planned to devote his post City Hall days to philanthropy. But Bloomberg fans, do not despair. Pundits say that the billionaire mayor would not really have to make his final decision until February or March 2008.

Gridlock Does Not End in Albany

New Gov. Eliot Spitzer was supposed to air out the figurative "room" where three men hold sway and end the dysfunction that he said put New York in a prolonged sleep (maybe stupor would be more like it).

Whoever you blame, it didn't happen. The year ended with the two houses of the state legislature unable to agree even on when to meet, let alone on what to do if they did manage to coordinate schedules. Major issues -- campaign finance, salaries for legislators and judges, and much more remained in limbo. "The gridlock here now is worse than I've seen it in decades," Barbara Bartoletti, legislative director for the League of Women Voters told the Daily News. "It's all because of the toxic atmosphere these people are functioning in."

Quinn Lets Term Limits Stand, Paving Way for 2009 Election Free For All

Two years ago Christine Quinn, then a candidate for City Council speaker, said she opposed term limits in their current form and would work with her council colleagues to alter them. After becoming speaker, Quinn said she and the council had had an on again off again conversation on the issue.

In December, that discussion ended. Quinn, considered an almost certain mayoral candidate in 2009, said term limits would remain as is. "I don't agree with term limits, but they are the will of the voters," who expressed their support for them in two separate elections, she said.

Whatever the reason behind her move, the decision paves the way for a wild game of political musical chars in 2009 as three dozen council members, to say nothing of the mayor, public advocate, comptroller and four borough presidents, all have to leave office.

Driving in Manhattan Remains Free

That is, of course, if you don't count the gas, wear and tear on car and psyche, and the pollution. Despite support from environmentalists, Quinn and some business leaders, among others, the Bloomberg administration saw its effort to institute an $8 fee to drive into Manhattan during the work week stall in Albany. With a special session of the legislature about to close and the plan declared all but dead, a compromise emerged that could still save the plan -- assuming a special panel, the City Council and the state government all sign off on some variant of it next year. So stay tuned -- as you listen to your car radio trapped in traffic on Canal Street.

No Moynihan Station or Governors Island -- And No Doctoroff

Lots of major development projects moved forward in 2007, but some cannot seem to get off the ground -- for better or worse. After years of talk about creating a new train station and other facilities in the West 30s, the notoriously inefficient and unpleasant Penn Station remains and a new Moynihan Station, incorporating the Farley post office has not budged much beyond the realm of fantasy.

Four years after the federal government sold New York Governors Island for $1, the city and state still have not come up with a plan for the island off the tip of Manhattan. Mayor Michael Bloomberg has reportedly toyed with the idea of having his foundation create a public health institute there. Other visions have included casinos, hotels, dormitories and a major campus for the City University. But so far, the island remain closed to the public for most of the year, offering New Yorkers a peek at its dazzling views and historic buildings during summer weekends only.

But if Moynihan Station and Governors Island (or your own favorite project) remain in limbo, you won’t have Deputy Mayor Daniel Doctoroff to blame. He will be leaving city government to become president of Bloomberg's communication company. And he'll be taking some other stories that did not happen -- the 2012 Olympics, to name one -- with him.

The New York City Housing Market Does Not Collapse

While the housing market reeled from a nationwide mortgage crisis in much of the country, the real estate boom in Manhattan continued strongly with more than 10,000 apartments changing hands -- all for an average price in the borough of more than $1.3 million.

In general, the real estate industry remained in better shape in New York City than elsewhere. The average sales price for a place to live throughout the city reached about $782,000 in the third quarter of 2007, up 20 percent over the same period a year earlier. "We've never been able to produce a great deal of new housing here in New York, and we have great demand," Michael Slattery, a senior vice president at the Real Estate Board, told the Associated Press.

There were signs of weakness outside Manhattan. While luxury condos rose throughout Brooklyn, the borough saw a slight drop in sale prices for condominiums and co-ops. Lower income home-owners, who pay a higher percentage of their incomes for housing than more affluent people, stood to lose badly from any weakening in the market. In Queens, for example, the number of mortgage foreclosures more than doubled between July 2006 and July 2007.

And some experts feared the worst could still come if Wall Street brokers, bankers and others no longer receive the enormous bonuses and salaries that have fueled the huge price rise in real estate in Manhattan and parts of Brooklyn -- and in turn produced lots of tax revenue for the city and an impossible housing situation for most of the rest of us.

Starrett City Was Not Sold

The sale of Stuyvesant Town and Peter Cooper Village -- touted as the "world's biggest real estate deal -- was one of 2006's top stories. As that purchase was announced, Starrett City, the 140-acre development on Jamaica Bay with many low and moderate-income residents, went on the auction block. The anticipated sale of the relatively remote complex for as much as $1 billion seemed likely to be a big story this year.

Except it did not happen. Borough Park developer David Bistricer put in a whopping $1.3 billion bid for Starrett City, leaving many people there to fear for their future. Federal and state officials then blocked the sale on the grounds that Bistricer's proposal to spend all that money for the complex and still keep the apartments affordable was not "financially feasible."

But the residents of the 6,000 apartments still face uneasy days ahead. In August, the current owners announced they were considering steps to charge market rents for the apartments and leave the government programs that enable many of Starrett City's residents to live there.

Renters Still Don’t Get a Tax Break

The approximately two thirds of New Yorkers who rent their homes have seen a steady rise in their rent for years while they have not reaped the tax breaks, rebates and increase in values that homeowners have. With this in mind, many renters cheered when Council Speaker Christine Quinn proposed a renter's tax break, a $300 tax credit for people who don't own homes.

"A home is a home, whether you rent it or you own it," Quinn said.

Here's hoping they didn't spend the $300. Quinn's proposal vanished with barely a trace. The mayor never took a stand on it. Although it required approval in Albany, no record exists of Quinn or her council colleagues having done much to press the issue apparently because the mayor was not willing to push for it. Instead, the city budget approved in June cut property tax rates and provided a rebate to homeowners. Renters, who tend to earn less than homeowners, got nothing.

No NYC Team Won a Sports Championship

With Boston emerging as sports powerhouse, New York City teams came up empty handed again in 2007. The New York Knicks led city teams in futility, once again failing to make the playoffs for the 2006-2007 and starting the 2007-2008 season on an even more abysmal note, managing to lose 104-59 to the Boston Celtics in one particularly grim contest.

In baseball, in one of the the worst end of season collapses in baseball history, the Mets squandered the lead they held for much of the season, failing to get into the playoffs. The Yankees managed to make it to the post-season, but in their standard pattern, failed in the first round, putting an end to Joe Torre's years as team manager.

The Rangers, Jets and Giants all also stumbled along the way.

But New York teams still made headlines. A former Knicks front office employee, Anucha Browne Sanders, successfully sued coach Isaiah Thomas and Madison Square Garden, the team's owner, for sexual harassment, winning a settlement of $11.5 million. As anger against the Knicks in general and Thomas in particular mounted, the team tried to keep Madison Square Garden fans from booing. And then former Senator George Mitchell released hs report on the use of steroids in baseball. The Mets and particularly the Yankees may not almost stand out on the field but they did play a starring role in that document, which singled out Yankees pitching aces Roger Clemens and Andy Pettite, among others, for using the substances.

Correction: This story originally stated the gridlock in Albany stalled legislation extending the program to provide tax breaks for construction of affordable housing in the city. That is incorrect. A revision and extension of the so-called 421-a program passed the legislature and was signed by Spitzer in August.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stated Meeting: Savoring the Brooklyn Sugar Plant


The sign is iconic, rising above the East River reminding passersby that 3 million pounds of sugar were once produced there on a single day.

To ensure part of the Domino Sugar Refinery's legacy is preserved, the City Council at its meeting Tuesday approved a landmark designation for three of its buildings, dating back to 1884. The sign, which many associate with the sugar refinery, and the building it is attached to are not part of the designation.

The City Council also approved legislation that provides prisoners who were born in New York City with a free birth certificate when released from incarceration as well as a bill that sets standards for the cleanup of crime scenes.

Domino Preserved

The Domino Sugar Refinery, one of five refineries scattered along Brooklyn's waterfront, once comprised 11 acres and thousands of employees. The thriving refinery, where tons of raw sugar were mixed with water and filtered, helped establish sugar manufacturing as the most important industry in Brooklyn from the late 1800s to the early 1900s, said city officials.

When the plant closed in 2004 and was bought by CPC Resources, the nonprofit developer of the Community Preservation Corporation, community organizations recommended that it be designated a landmark. The Landmarks Preservation Commission approved the status for three of the buildings, which together make up "The Refinery," in September.

The council unanimously approved the designation by a vote of 46 to 0.

The whole site, which comprises about 11.2 acres, is slated for mixed-use development with 30 percent affordable housing. The landmarked buildings are slated for residences, commercial and community facility use, and the whole project will comprise 2,400 residential units and approximately 220,000 square feet of retail, commercial and cultural facility space.

The buildings will vary in size, from "The Refinery's" height, at about 13 stories, to larger residential buildings reaching up to 40 stories. The developer intends on incorporating the Domino's iconic sign into the project.

" These important buildings are what helped make Brooklyn so sweet," said Council Speaker Christine Quinn.

Describing New York as "a place where residential buildings abut what have been manufacturing and where manufacturing buildings can transform into new residential buildings in our city," Quinn said preserving the sugar refinery would contribute to sustaining the city's intricate and novel urban landscape.

As Williamsburg continues to change, the face of Domino Sugar will be a constant reminder of where Brooklyn and the borough’s industries came from, council members said.

" This building is a landmark building in the technical sense," said Councilmember David Yassky, who represents the neighborhood. "But also in the colloquial sense in the neighborhood. Everyone in Williamsburg knows the building, probably outside of Williamsburg as well."

Birth Certificates

The City Council approved legislation that would allow a prisoner to request his or her birth certificate upon release within the five boroughs. The council approved the bill (Intro 574-A) by a vote of 39 to 6, with the body’s three Republican members dissenting along with council members Peter Vallone, Domenic Recchia and Vincent Gentile.

Birth certificates are already provided for prisoners in New York State facilities.

The bill will allow former inmates to reintegrate into society, said the bill’s sponsor, Councilmember Annabel Palma. Often times, prisoners are released without the proper identification needed to obtain employment.

Vallone said he voted against the legislation, because no one, whether a prisoner or not, should be able to receive a city service for free, when the majority of New Yorkers have to pay for it.

" It bothered me to give away something for free that the rest of us have to pay for," he said. "It helps them get a job, but so does a new suit."

Inmates who are born in New York City and were incarcerated for more than 90 days will be eligible for the free birth certificates. Because inmates are already provided with a birth certificate, albeit one stamped "not for government use," there should be minimal cost attached to the legislation, said Quinn.

Normally a birth certificate would cost a New Yorker $15 – a fee some advocacy groups called an impediment to reintegration into society.

A representative from the Department of Health and Mental Hygiene testified against the bill this summer, stating the cost would be a burden on the department, which oversees birth certificates

About 2,500 city residents who leave city jails and 9,000 city residents who leave state prisons will fall under the bill. The certificates will be made available upon request.

Crime Scenes

When Councilmember Michael Nelson stumbled upon a crime scene in his district, he realized that once an investigation was complete there was no requirement that the city clean up the area.

Under a bill (Intro 123) approved by a vote of 45 to 1, with Councilmember Simcha Felder dissenting, the Department of Health and Mental Hygiene will be required to draft regulations of crime scene cleanup on city property.

Guidelines for private properties owners will be posted on a Web site and available through 311, but they will be merely advisory. Members said it is important that private citizens, including biohazard contractors, have access to this information.

Felder voted against the bill to ensure that the cleanup and care of remains left at the crime scene would take the victims’ religion into account. Nelson said any religious requirements would be included in the guidelines.

City officials said any additional cost for this cleanup would likely be covered by insurance.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After the Theater Strike


When Ruby Hsu planned her trip to New York City during Thanksgiving week, she, like many tourists, also planned to see a Broadway show.

"I was very excited to finally get to see 'Wicked.'" Hsu said. "I was hoping that the strike would be over by the time I got there."

Instead, the San Francisco resident arrived on November 17, at the height of the 19-day strike on Broadway. Contract negotiations between The League of American Theatres and Producers and the stagehands union had shut down most Broadway shows, including "Wicked."

"It ruined my whole week," Hsu said. "And I hate New York."

An overreaction? Perhaps. But Hsu was not alone. Travelers on Jetblue Airlines reportedly began canceling their trips to the city after learning the lights had gone dark on the Great White Way. "We've seen a slight increase in cancellation [of flights to New York] over the last week," the airline spokeswoman Alison Eshelman told the Daily News.

A few days after the walkout, the league said the strike would cost the city $17 million per day and would wipe out Thanksgiving week revenue, the second highest grossing period after Christmas.

"While this is a private labor matter, the economic impact is very public and will be felt far beyond the theatres closed today," Mayor Michael Bloomberg said in his statement.

Now that Broadway is back, skeptics question whether the estimates of the strike's economic impact was overblown. Did the walkout really hurt the city? Is Broadway, for that matter, crucial to the city's economy?

THE THANKSGIVING STRIKE

Months before visiting New York City, Bryan Vavra decided not to go see the touring production of "Avenue Q" that finally made its way to his hometown, Houston, Texas.

"I wanted to see the show on Broadway. This is where the best of the best perform," he said of his plan during Thanksgiving week. "It was just unforntunate that they were on strike the few days I was in New York City."

After arriving in the city, Vavra changed his plan and went to see "The Ritz," one of a few Broadway shows that remained open during the strike.

Vavra's story is an example of what some analysts had argued - that ticket holders would spend their money on other forms of entertainment and so help lessen the economic blow to the city.

The league's estimated cost of the strike has since been challenged. The Partnership for New York City, a business group, said that the strike cost the city $5 million a day, $12 million less than producers league projected. New York City Comptroller William Thompson Jr. put the final number at $2 million a day, based on survey data including total spending on tickets, dining and shopping.

"The average theater ticket is about $76," Frank Braconi, chief economist for the city's comptroller, told Bloomberg News." We assume that that $76 is spent elsewhere in the city, on other entertainments or shopping or whatever."

Rodney Tan of Astoria, Queens, an avid fan of opera, said that he was surprised to find a full house on November 16 at a so-so production of "Cendrillon,' a French version of Cinderella, at The New York City Opera.

"The opera was so bad," he said. "The only reason it's packed here is because Broadway is closed."

During the last days of the strike, public officials started changing their tune and were, by then, convinced that the overall impact on the rest of the economy was relatively minor.

"This is not like Las Vegas where, if the gambling industry shut down, there would be nothing to do here," George Fertitta, chief executive of NYC & Company, the city's tourism agency, told Newsday.

THE ECONOMIC STAGE

In the end, aside from Broadway producers who lost an estimated $40 million in box-office revenue, the strike affected fewer people than expected. The strike was "an unfortunate blip in a very successful time in the City of New York," Fertitta said.

But some argue that Broadway is still crucial to the city's economy.

Last year alone Broadway brought in $5.3 billion to the New York City economy, according to the league spokesperson. At least 45,000 full-time jobs depend on Broadway - 13,000 employed directly by theaters and 32,000 people in related local businesses.

"Broadway is our number one tourist magnet," Kathryn Wylde, president of the Partnership for New York City told the Daily News. Of the $11.53 million in tickets sold during the 2004-2005 season, the most recent year for which statistics are available, 82 percent were purchased by out-of-towners.

For a Broadway fan such as Vavra, nothing can come between him and the show he wants to see. He hasn't ruled out another trip to the city or catching a touring production of "Avenue Q" in the future.

"I will see the show elsewhere," he said. "It's not often I go to New York."

 

 

 

 

Committee Assignments and Stipends


Member
Stipend
Committee Chair or
Leadership position
Joseph P. Addabbo, Jr. $10,000 Civil Service and Labor
Maria del Carmen Arroyo $10,000 Aging
Tony Avella* $8,000 Zoning and Franchises
Maria Baez $10,000 State and Federal Leg.
Charles Barron $10,000 Higher Education
Gale A. Brewer $10,000 Technology in Govern.
Leroy G. Comrie, Jr. $20,000 Dep. Majority Leader, Consumer Affairs
Bill de Blasio $15,000 Asst. Majority Leader, General Welfare
Inez E. Dickens $11,000 Majority Whip, Standards and Ethics
Erik Martin Dilan $10,000 Housing and buildings
Mathieu Eugene none none
Simcha Felder $10,000 Government Operation
Lewis A. Fidler $15,000 Asst. Majority Leader, Youth Services
Helen D. Foster $10,000 Parks and Recreat.
Dennis P. Gallagher* $5,000 Minority Whip
Daniel R. Garodnick $4,000 Planning Dispositions
James F. Gennaro $10,000 Enviro. Protection
Vincent J. Gentile $4,000 Libraries
Alan J. Gerson $10,000 Lower Man. Redevel.
Eric N. Gioia $10,000 Oversight and Investig
Sara M. Gonzalez $10,000 Juvenile Justice
Vincent Ignizio none none
Robert Jackson $10,000 Education
Letitia James $10,000 James
Melinda R. Katz $18,000 Land Use
G. Oliver Koppell $10,000 Mental Health
Jessica S. Lappin $4,000 Landmarks
John C. Liu $10,000 Transportation
Melissa Mark Viverito none none
Miguel Martinez $10,000 Fire and Criminal Just.
Michael E. McMahon $10,000 Sanitation
Darlene Mealy none none
Rosie Mendez $4,000 Public Housing
Hiram Monserrate $10,000 Veterans
Michael C. Nelson $10,000 Waterfronts
James S. Oddo $18,000 Minority Leader
Annabel Palma $4,000 Drug Abuse
Christine C. Quinn $28,500 Speaker
Domenic M. Recchia, Jr. $10,000 Cultural Affairs
Diana Reyna $10,000 Rules
Joel Rivera $23,000 Majority Leader, Health
James Sanders, Jr. none none
Larry B. Seabrook $10,000 Civil Rights
Helen Sears $10,000 Women's Issues
Kendall Stewart $10,000 Immigration
James Vacca $4,000 Senior Centers
Peter F. Vallone, Jr. $10,000 Public Safety
Albert Vann $4,000 Community Devel.
David I. Weprin $18,000 Finance
Thomas White, Jr. $10,000 Econom. Develop.
David Yassky $10,000 Small Business


* Members do not receive their stipend. Avella declined his, while Gallagher voluntarily, and temporarily, stepped down from his position after being indicted on rape charges.

Blurring the Line Between Government and Charity


'Tis the season for eggnog overflowing in silver ladles, candle wax dripping onto menorahs and rich, sweet deserts - and lots of them. Beyond overindulgence, though, many New Yorkers see the holiday season as a time to give back.
Sending money to charities and nonprofits has become a holiday custom.

We give involuntarily to the government all the time - every paycheck, actually - so few of us would think of government agenices as likely beneficiaries of our year-end largesse. But along with our favorite private cause, another group of nonprofits - spin-offs of city agencies - would appreciate your help. (To find out how to evaluate charities, including the government funds, see related story.)

These quasi-government entities are, in fact, nonprofits aimed at closing the gap between government and private enterprise. Agency commissioners sit as members of their boards. The groups collect donations from the general public and foundations and then funnel the money back into specific citywide projects, most of which were left behind in the budget process or are seen as experimental enterprises, such as rewarding families financially for seeing a doctor. While such supplementary funding for government goes back to the 1980s, private fundraising has become more successful and more apparent during Mayor Michael Bloomberg's tenure - the city's major fund, for example, saw its donations increase by 50 percent from 2004 to 2006.

This type of philanthropy could be the latest installment of the blurring between the private sector and city government. It also represents another development in the increasingly complex relationship between the government and charity. Government already contracts with charities to perform work formerly done by government, such as managing social service programs, making charities more like government. Now, as it turns to private donors for voluntary contributions, government is becoming more like charity.

Leaders argue nonprofit funds allow the city to spend money on neglected or experimental programs, but others question whether giving to the government is the most effective charitable cause. Is it donating to the needy or fueling a slick budgetary practice?

A Trend to Fund Privately

Private funding of government service has been gaining momentum. The largest city agency spin-off, the Fund for Public Schools, brought in more than $39 million in direct public support last year - more than twice the amount raised by the mayor's fund and far more than the $3 million it boasted in 2000. The funding, officials said, has gone to a wide array of programming, from leadership training to libraries.

While private funding for public schools flourishes, the mayor's overall fund, or specifically the Mayor's Fund to Advance New York City established in 1994, has also seen an increase in contributions. Between 2004 and 2005 the Mayor's Fund, which disseminates funding to multiple city agencies, saw contributions increase from about $10.7 million to about $16 million, according to tax documents, and in 2006 it brought in another $16 million.

These contributions, according to the mayor's ofice, come in varying amounts, from $5 to the rare, but occasional, $5 million.

Using private funds to support public programming, though, is nothing new. For instance, American Express raised approximately $1.7 million for the preservation of the Statue of Liberty and Ellis Island in 1983. Many of these funds have been around since then, initially as fundraising subsidiaries of their respective agencies.

The purpose of the funds has shifted over the years. What first started as a subsidiary to the Department of Parks and Recreation in 1989, the City Parks Foundation has now become its own full-functioning nonprofit, said Executive Director David Rivel. While the department handles maintaining the physical spaces of parks, the foundation organizes how New Yorkers use parks. The entire project, he added, is a joint venture.

"It is exactly analogous to a kid who grows up in our house," said Rivel of the organization's evolution. "It doesn't mean that the kid and the parent never talk again."

Some of the city's funds are still very much at an adolescent stage, so to speak. The Fund for Public Health in New York was launched by the Department of Health and Mental Hygiene in 2002, said Executive Director Rachael Pine.

So far they have funneled about $10 million to the department for experimental programming, including testing for sexually transmitted diseases in the city's public schools. Their goal for now is to solicit funding for innovative pilot projects that may find their way into the city budget later on, she added.

Risky Business?

Since many of these funds were kicked off in the early 1980s, they have been seen as a launching pad for experimental policy programs in city government. For example, Opportunity NYC, a pilot program launched in September, offers low-income families financial incentives for getting a job or an annual checkup and is funded from private donations made to the mayor's fund. Because the program could be considered controversial, using private funds instead of taxpayer dollars allows the city to test it out with far less political consequences, City Hall observers said.

"I think the original intention and the continued intention is that we develop new models and new programs and test them out," said Ali Hodin-Baier, executive director of the Aging in New York Fund, which was launched by the Department for the Aging. "We are a pilot testing ground."

The funds also provide a means for people who want to aid a certain public service. Officials at multiple funds said donors, foundations and even private citizens feel more comfortable donating to a nonprofit rather than to a city agency - where, some officials said, there is no guarantee your contribution will fund the necessary renovations to your neighborhood park or rather a new desktop computer for a press secretary.

Government as Charity

While the funds provide government with some clear benefits -- money, for one -- they also raise questions. For one, is government a legitimate charity? Certainly many would argue that the causes they support are in fact charitable. The mayor's fund, for example, aids a program within the Department of Cultural Affairs called Materials for the Arts, which collects unwanted supplies from companies and individuals and then gives them to community organizations and public schools that need them. The Fund for Public Schools administers scholarship programs and also awards grants to schools that show a commitment to the arts, among other initiatives.

Some, however, see these fundraising entities as entirely offshoots of city agencies. "They are kind of special purpose funds," said Howard Husock, vice president of programs and the director of the Manhattan Institute's Social Entrepreneurship Initiative. "They are not charitable institutions."

One way of looking at it is as a "voluntary tax payment," said Husock of those that choose to individually contribute to these experimental programs.

The privately financed programs require no budget appropriations and thus no approval from the City Council. Because they are privately funded, the experimental initiatives may bypass a certain level of scrutiny other city services are subject to. If a nonprofit, quasi-government agency is collecting your donations, is a political leader held accountable if something goes awry?

When Government Goes Prviate

Ultimately, these funds point to the shifting and transitory relationship between a nonprofit, charity and government.

"We are taking a lot of what has traditionally been within the public purview and pushing it out to private organizations," said David Birdsell, the dean of the School of Public Affairs at Baruch College. "What it does raise is a number of important questions for public administration."

Though some programs have been successful and subsequently absorbed into the city's budget allocations, many of them have had their critics.

One of the largest initiatives within the Fund for Public Schools is the Leadership Academy - a controversial and expensive institution meant to train principals. Since its inception in 2003, critics have claimed the academy was not worth the cost - which was nearly $75 million for the first three years - even though it was funded by private donors.

Elsewhere, some have questioned whether private funding will inevitably cause inequality. A citizen who has not contributed could have less say over how privately funded programs are run than another citizen who has written a check. When private donors direct funds to their neighborhood park for instance, other areas of the city may be left out.

"The criticism that some would make is that it would allow higher quality services that benefit themselves," said Husock.

A Philanthropist Behind the Wheel

Private fundraising and government may have met their perfect match with the current mayor. Some estimate that Bloomberg himself has donated hundreds of millions of dollars to local causes throughout the city. Beyond his own wealth, Bloomberg also has connections and a knowledge of private fundraising.

"It's different perhaps in scale in this administration, but not in kind," said Birdsell. "It speaks to the ability of this mayor, given his unparalleled personal resources, to sustain his activities without the armature of government."

Beyond where this funding is headed - whether a New Yorker agrees with the experimental project or not - many argue innovative and possibly successful programs are being tested across the city to New Yorkers' benefit. Since its not coming out of the pocket of taxpayers, the work, officials said, merely supplements city services and doesn't replace them.

"Bloomberg came to town with the mission that private fundraising was a good way to augment what government can do," said Rivel. "A nonprofit could actually be more responsive over a long period of time and make sure certain services were delivered even when administrations change."

 

 

 

Stated Meeting: Capping Carbon


Watch out exhaust-spilling sports utility vehicles. Move over inefficient light bulbs. The New York City Council wants to replace you with more energy efficient technology.

At its Stated Meeting Wednesday, the council approved legislation that would reduce New York City's greenhouse gas emissions by 30 percent by 2030. The measure echoes a call by Mayor Michael Bloomberg earlier this year in his PlaNYC 2030.

The council also passed a bill to make block-by-block parking regulations available online as well as a measure creating "greener" design standards for the city's parking lots.

Clogging Smokestacks

New York City produces approximately 1 percent of greenhouse gas emissions - the pollutants that cause global warming - in the United States and about as much as Ireland or Switzerland, according to PlaNYC. Nearly 80 percent of the emissions in New York City are attributed to pollution from buildings, while about 20 percent come from transportation.

The bill, titled the Climate Protection Act (Intro 20), would first take aim at emissions spilling from government buildings, cutting that by 30 percent by 2017. It then mandates citywide emissions be slashed by 30 percent by 2030, including toxic fumes from private institutions and corporations. The bill was approved by a vote of 48 to 0.

James Gennaro, chairman of the council's Environmental Protection Committee, initially introduced the bill in early 2006 calling for a 30 percent reduction of emissions from government buildings by 2020. He said the council worked with the administration to include non-governmental organizations and businesses in the emission reduction plan. A private business or organization will not be fined if they do not comply with the new regulations. It will be up to the city to reduce emissions, said Gennaro.

Corporations, businesses and residents, though, will have a financial benefit from using green technology and reducing their carbon footprint, said Gennaro. By using green technology, they will be less reliant on fossil fuels, and their energy cost will decrease.

" If you don’t get on board, you'll be paying higher fuel costs and left outside the mainstream," said Gennaro.

The 30 percent reduction will be based on 2005 figures. To comply with the legislation, businesses and residents could consider using energy efficient light bulbs, furnaces and boilers, city officials said. Council Speaker Christine Quinn could not estimate the cost to an individual business, but other officials said a initial investment in green technology can pay off far more in the long term.

When asked what incentive businesses would have to reduce emissions and whether the city could meet its goal without penalties for noncompliance, Quinn said, "We believe the track record of business today as it relates to environmental issues will get us to that goal."

To ensure the city is meeting its goal, annual reports will be submitted to the administration, other agencies and posted on the web that measure emissions from both public and private entities.

Green Parking Standards

The council also unanimously approved new design standards (Res 1179) for parking lots, which include the addition of trees and vegetation for lots with more than 18 spaces.

If a lot has more than 18 spaces a tree will be required every 25 feet. According to Land Use Committee Chairwoman Melinda Katz, parking lots with more than 36 spaces would also need to include interior landscaping.

The vegetation will not only improve the aesthetics of the lots, but also will prevent storm water runoff, officials said.

The regulation will apply only to new lots and those that have expanded by more than 20 percent.

Parking Regulations

For New Yorkers who are perplexed by the contradictory street signs strewn throughout their block, a so-called solution is here. The council approved a bill (Intro 537-A) requiring the Department of Transportation to create a searchable Web site that details parking regulations for every block in the city.

Transportation Committee Chairman John Liu said the regulation would not burden the city with an additional cost. The Department of Transportation already collects the information, and the bill merely requires that that information be accessible and readily available to the public.

" Almost every single block in the city of New York has some sort of parking restriction," said Liu. "There are not only confusing parking signs on these blocks, but in fact contradictory signs."

The bill takes effect in September 2009.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Will Technology Kill Privacy?


Privacy advocates —“ really, anyone who uses a phone or the Internet in the United States —“ won an important victory before Thanksgiving when the Senate Judiciary Committee approved national intelligence legislation that did not provide retroactive immunity for the telephone companies that aided the Bush administration's illegal spying efforts. But the debate in the committee represented only one skirmish in the ongoing war over privacy in the digital age.

There is growing public awareness of the amount of data private corporations collect using tools like interactive Web sites, mobile wireless connections and global positioning systems, as well as remote computing through services like Google Docs and .Mac. Everywhere you look, the privacy issue rears its head: Some object to Mayor Michael Bloomberg's congestion pricing plan because it would allow the government to track who drives where and when.

At the heart of the issue is the question of whether our constitutional right to privacy will persist in an age of email and voicemail, or if it will fade along with personal letters and answering machines. Along with Congress, the courts are grappling with this question, deciding what standards the government must meet to gather information through different technologies. Their decisions have the potential to transform longstanding assumptions about privacy and limits on government.

The Legislative Battle

The legislation approved by the Judiciary Committee amends the Foreign Intelligence Surveillance Act to permit U.S. government wiretapping of all communications that cross or occur outside U.S. borders -- without a warrant. But President George W. Bush has threatened a veto unless the bill also grants immunity for the illegal wiretapping he already ordered of domestic communications. Any version of the bill, the president said, "must grant liability protection to companies who are facing multibillion-dollar lawsuits only because they are believed to have assisted in the efforts to defend our nation following the 9/11 attacks."

The Senate Intelligence Committee passed a version of the legislation that includes the immunity along with many other concessions to the Executive Branch. The House of Representative, though, already passed legislation without the immunity provision.

The Senate returns to the Capitol in early December to take up the Foreign Intelligence Surveillance Act. Senate Majority Leader Harry Reid has to choose which version of the bill to send to the Senate floor. Some observers say he is likely to choose the Intelligence Committee version, since it has bipartisan support. Opponents of immunity will try to make amendments to the bill on the floor or, failing that, promote the House version in the conference committee to reconcile the different versions. If that fails, some senators have vowed to try to block the legislation.

With or without immunity, the resulting bill will allow for spying without warrants on people in the United States in some circumstances, eroding the privacy of our electronic communications.

The Legal Contest

The privacy issue is also being fought over in the courts. In a case currently before the 6th U.S. Circuit Court of Appeals, Warshak v. USA, the government asserts that anyone who stores their e-mail with a company like Yahoo! or Verizon -- which means the vast majority of us -- has given up any expectation that those e-mails will be private. The very fact that the host company can see the emails, the administration's reasoning goes, means the government should be able to search the messages without a warrant.

The case tests the constitutionality of the Stored Communications Act. Originally passed in 1986, it allows law enforcement to obtain e-mails, voicemails, and other information stored with a third party using a much weaker standard than the one protecting our paper letters and phone calls. Warshak is the first case asserting that people have a reasonable expectation of privacy when using e-mail.

On the one hand, it seems obvious that e-mails are private. As a group of Internet professors wrote in a friend of the court brief, a simple survey of the contents of e-mail communication shows that "we rely on the privacy of the medium. Society does not make us rely at our peril but rather accepts as reasonable our expectations of privacy in e-mail." And yet the widely reported government monitoring of e-mails itself erodes that expectation.

The court is getting set to hear the government’s appeal of the lower court ruling that the Stored Communications Act violates the 4th Amendment. While the debate in Congress could tell us whether anyone will be held accountable for past unwarranted invasions of our private communications, Warshak v. USA could set the bar for privacy on the Internet going forward.

Patriotism or Profit?

The phone companies and their supporters argue that they should have immunity for the illegal wiretapping because company executives are patriots who acted in good faith to help law enforcement respond to the traumatic September 11 attacks. But recent revelations suggest the businesses were responding to the more base motivation of profit.

Joseph Nacchio, the former head of Qwest Communications, has asserted that the National Security Agency requested customer data as far back as February 27, 2001, almost nine months before September 11. When the agency admitted it had no legal order for the request, he refused to comply. He claims the National Security Agency then retaliated by reneging on lucrative contracts. Nacchio was convicted of insider trading in April 2007; the loss of NSA revenue was part of his defense – he claims they were the basis for the rosy forecasts he made while selling off some of his shares – and he is appealing the conviction.

Comcast offers its employees a handbook to describe how to cooperate with requests from law enforcement. It includes a specific menu of fees to charge government: $1,000 to start an intercept, then $750 a month to maintain it. Call records are $150 for one batch per week, plus $50 for each additional delivery.

Many telephone companies have gone further, taking funding from the federal government to collect, store and analyze data on their customers, even sorting them into "communities of interest" profiles. The government could not collect such information without a subpoena, but the FBI argues that it is fine to outsource this surveillance to private companies to do it in anticipation of a subpoena.

The companies can feed any information or queries from law enforcement back into the system, mapping the social networks of anyone the government has under suspicion. They have regularly supplied information to law enforcement, not just in response to legitimate subpoenas but even to letters falsely claiming that subpoenas were on the way.

This is perhaps the biggest danger with data mining: Far from being a tool to collect information on known suspects, the collected information itself creates the suspects. So, if people create certain kinds of information about themselves – legal, constitutionally protected information about who they associate with or where they travel – that alone can make them suspicious in the eyes of their Internet service provider, their phone company and law enforcement.

An International Issue and a Local Issue

This debate is not limited to the United States. It is taking place wherever the Internet has taken root. The most well-known controversy might be the one involving Yahoo in China, where the Internet giant has helped the government track down dissident bloggers.

In England, law enforcement is trying for the first time to apply a section of the Regulation of Investigatory Powers Act, which forces people to participate in their own prosecution by handing over passwords to encrypted files on their own computer. The Crown Protective Service is apparently trying to use the act's mere existence to intimidate an animal rights activist into handing over her encryption key. In this scenario, simply possessing private, encrypted files becomes a crime or a cause for suspicion from law enforcement. (For more on the European Union's new data collection measures and the uproar they have caused, especially in Germany, see this previous column).

In London, Bloomberg's inspiration for his congestion pricing plan, the system tracks the license plates of all cars entering and exiting the congestion zone. This has provided a foundation for a proposed "24-7 vehicle movement database" that would enable police to track all vehicle movement throughout the country – 50 million trip a day, reportedly – and store the records for two years. In response to these concerns, some have suggested ways to charge congestion pricing fees without tracking specific movements.

The recent strike by some New York City taxi drivers was over a related issue. The Taxi and Limousine Commission wants all cabs to install tracking devices in cabs that would tell the commission where the cars are at all times, regardless of whether the driver has a fare or is on personal time.

Whether it's the city government checking to see where a taxi driver is or the federal government reading your e-mail, the debate in both cases highlights the importance of preserving basic rights and protections in the face of potentially invasive technology. As we take advantage of new technologies and move more of our private documents and communications online, we need to strengthen our privacy protections, not weaken them.

Joshua Breitbart is policy director for People's Production House.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Opening the GOP Primary


With presidential primary season set to begin in about six weeks, candidates are busy securing their place on primary ballots across the country. In New York, getting on the ballot in primary elections or as a so-called minor party candidate in general elections has long been notoriously difficult.

The rules were particularly daunting for prospective candidates in the Republican presidential primary. But following an uproar in 2000, things seem to have changed. With new requirements designed to make getting on the Republican ballot in New York easier, one wonders whether Stephen Colbert could have made it onto the ballot if he had chosen to run in New York rather than South Carolina.

State political parties set the rules for how a candidate can get his or her name on the primary election ballot, meaning candidates must be sure to fulfill the ballot requirements of each state. In one state a candidate may only have to garner national media attention to be listed on the ballot, while others may require candidates to collect signatures of voters from their party. This means a candidate may be on the ballot in California but missing from it in New York. Not only does access to the ballot vary across the country, but it also differs between the different political parties within any given state.

The Democratic and Republican parties in New York set the requirements for presidential candidates and party delegates. Democratic candidates have to collect 5,000 signatures statewide to secure a place on the New York Democratic ballot. That requirement has changed little over the years. However, the Republican Party instituted some dramatic changes to its rules resulting in what some advocates hope will be a more open ballot in the future.

The GOP Labyrinth

During the last Republican primary in New York, in 2000 (President George W. Bush did not face a primary challenge in 2004), presidential candidates technically did not appear on the ballot themselves. Republicans voted for three delegates and alternates in each of the 31 congressional districts. Each delegate’s name on the ballot was placed next to the name of the presidential candidate to whom they were committed. The meant candidates seeking the Republican nomination in New York had to ensure that at least one of the party delegates on the primary ballot in each district in the state was committed to his campaign. In order to get a delegate on the ballot, each “delegate-candidate” had to collect the signatures of either 1,000 Republicans or 0.5 percent of registered Republicans in that district, whichever was less. The candidate also was required to collect 5,000 Republican signatures statewide.

New York drew national attention when in 2000 it appeared that presidential candidate John McCain might not get on the Republican ballot. A campaigner for McCain mistakenly wrote the wrong house numbers for the addresses of two signers. Because of the mistake, their signatures were deemed invalid and McCain fell one signature short of the required minimum to remain on the ballot. Eventually a judge ordered that McCain delegates appear on the ballot. But, since voters chose delegates, not their preferred presidential candidate, Bush was able to capitalize on having prominent Republicans as his delegates and won handily.

Coordinating a campaign centered on securing ballot space for delegates in each district rather than the individual candidate statewide can be daunting for challengers without the resources the party can provide to its selected candidate. In districts with a small number of Republican voters, it can be nearly impossible to obtain the necessary number of signatures because the rules prohibit people from signing more than one petition.

Opening the Ballot

After the 2000 elections, New York Republicans changed the ballot access laws to make the process more open. Today, Republican presidential candidates have three different ways to obtain a place on the ballot for the February 5 primary. They can appear on the ballot if they qualify to receive public matching campaign funds, collect 5,000 signatures statewide or if the State Board of Elections Commissioners determines that they are a nationally recognized candidate in the media. In addition, on primary day, Republicans will vote for the presidential candidate himself, not the delegates they represent.

Advocates of more open ballots hope that relieving candidates of the burden of securing delegates space on the ballot, along with providing three different avenues to get on the ballot, will provide more choices for voters on primary day. “States often use high petition signature and filing fee requirements to limit ballot access and thus constrain the choices of voters. Signature and fee requirements for all candidates must be reasonable to ensure that voters have a real choice and are not simply rubber stamping the picks of party leaders,” said Chris Dreibelbis, communication director of The Reform Institute, a public policy group that evaluates state ballot access laws. “The post-2000 changes instituted by the New York Republican Party are a marked improvement from the previous highly restrictive rules.”

The Reform Institute gave New York an “F” rating in 2004 for the state’s ballot access requirements and is set to release an updated evaluation of all 50 states’ ballot access laws by the end of the year

However, candidates are not ensured a smooth ride. Easier ballot access also aims at cutting down on cases where small margins of invalid signatures decide the fate of a candidate. Despite this, candidates will probably mount challenges in an effort to force some opponents off the ballot. As election lawyers from all sides review petition signatures with a fine-tooth comb in attempts to purge invalid signatures, minor challenges are likely. Procedural changes may reduce the number of needless challenges, but in the race for the presidency no rock goes unturned.

The results of the changes in the Republican primary rules will be more apparent after county hearings on ballot challenges are held in December. So far, though, it appears that New York Republicans are looking at the most democratic procedure to select a presidential candidate in decades.

Does this mean any Tom, Dick and Harry can get on the ballot? No. Would Colbert have made it on the ballot? Who knows?  

 

 

 

 

 

 

 

 

 

 

 

 



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