Volume 21, Number 38 | The Newspaper of Lower Manhattan | January 30 - February 5, 2009
Gov makes grab for B.P.C. money
By Julie Shapiro
Gov. David Paterson is playing tug of war with the city over money generated by the Battery Park City Authority.
In these tight budget times, the city and the state both want to draw on the Battery Park City Authority’s revenue stream — which has always gone only to the city.
Now, though, Paterson wants to take up to $270 million of B.P.C. money and use it to plug holes in the state budget. That move is raising ire among city officials and housing advocates, who want the money to go to the city to build affordable housing, as it has in the recent past.
“It’s very troubling,” said Patrick Markee, a senior policy analyst with Coalition for the Homeless. “The affordable housing needs in the city are greater than ever…. I can’t really understand why the state would take the money away at this critical time.”
Battles over the Battery Park City Authority’s money have gone on for decades, but this is the first time in recent memory that the governor has joined the fray. In the past, the governor has let the city decide what to do with the money, and, often, the city put the money into the general fund, rather than putting it toward affordable housing, as was originally intended.
That changed in 2005, when Comptroller Bill Thompson put pressure on Mayor Michael Bloomberg, and Bloomberg agreed to put $130 million from the Battery Park City Authority toward building and preserving affordable housing. Housing advocates hailed the commitment, and the money has been used most recently to buy, rehabilitate and sell foreclosed homes.
Now, the question is not whether the city wants to put the money toward affordable housing — in fact, Bloomberg, Thompson and the City Council are working on an agreement to put another $400 million in B.P.C.A. money toward affordable housing, according to Thompson’s office, the authority and City Councilmember Alan Gerson.
The question now is whether the governor’s interest in the money will prevent the city from using it.
The apparent Bloomberg-Thompson agreement is particularly noteworthy now since both are candidates for mayor this year.
The governor wants $270 million from the authority, of which $250 million would go to capital costs and $20 million would go to the general fund. A document accompanying the budget calls the money “necessary to implement the 2009-10 executive budget.”
Some city elected officials are speaking out against the governor’s plan.
“While I recognize the need in these tough fiscal times to identify all available revenue sources, state and city budget challenges should be met without sacrificing this much-needed commitment to affordable housing,” Comptroller Thompson said in a statement to Downtown Express.
The City Council agrees.
“These funds should be used for the purpose they were intended: to address the continued urgent need for affordable housing,” Finance Committee chairperson David Weprin said in testimony to the State Legislature last week on behalf of the Council.
Councilmember Gerson, whose district includes Battery Park City, said the governor’s plan “should be an absolute last resort.”
Spokespersons for the governor and mayor did not return calls for comment.
Assembly Speaker Sheldon Silver will not stand in the way of the governor’s use of the B.P.C. money.
“On an emergency basis, it’s not a matter of supporting it,” Silver told Downtown Express. “There is no choice. There’s no choice.”
The state’s financial straits mean Albany will have to make many difficult decisions, including putting some education money for the city on hold, Silver said.
“We’re going to have to do things in this budget that we never dreamed were possible,” he said.
As far as affordable housing goes, Silver hopes President Obama will launch a federal housing program, which Silver said has been needed for 20 years.
The Battery Park City Authority currently has $215.4 million in the fund that both the city and state are eyeing. The fate of the money is decided by a group of three — the mayor, the comptroller and the authority — and any one party can veto a spending plan.
The mayor and comptroller are both pushing for the money to go toward affordable housing, but the authority is following the governor’s lead. The governor appoints all of the authority’s board members to six-year terms. All but one of the seven members of the board were originally appointed by former Gov. George Pataki, who preceded Paterson’s predecessor, Eliot Spitzer.
“The state faces an enormous budget deficit, and the governor has made a constructive proposal to help close that deficit,” said James Cavanaugh, president of the authority. “I’m sure the board will be very supportive of it.”
It is up to the governor, mayor and comptroller to negotiate an agreement, Cavanaugh said.
Albany-City Hall relations regarding the Battery Park City Authority can be awkward because of the odd governing structure. The authority’s board is selected by the governor and the state has tended to have more influence, but the neighborhood is on city-owned land and the city has always received the authority’s surplus revenue.
James Gill, chairperson of the authority’s board, wants money to go to both the state and the city.
“Everybody’s got a dog in the race, and they’re all good causes,” Gill said. “Nobody is wrong…. You can’t let one go eat the whole meal.”
Gill said his first responsibility is to protect Battery Park City, and then, “To the extent that we can be helpful [to the city and the state], we would like to do that,” he said.
Paterson now has the power to remove Gill, whose term expired at the end of last year.
The Battery Park City Authority gets its money from the fees it levies against residents, businesses and property owners, including ground rents, civic facilities charges and charges equal to the city’s property tax, called payments in lieu of taxes (PILOTs). The authority uses this money to pay off its debt and maintain the neighborhood, but despite these expenditures, the authority ends each year with a surplus.
The part of the surplus generated by the PILOTs goes directly into the city’s general fund. Last year, the general fund got $92.7 million from the PILOTs.
The rest of the authority’s surplus goes into a holding account controlled by the authority, comptroller and mayor. Last year, the authority put $98.7 million into the holding account, bringing its total to $215.4 million. That is the pot Paterson is hoping to tap for $20 million. The authority’s Cavanagh said in the past that money has always gone to the city.
Paterson also wants to get an additional $250 million by having the authority issue bonds, creating a debt that the authority would later repay. The repayment of the debt would result in less money going to the city over time, so it would also affect the amount of money the city would have for affordable housing.
The bonds would go in the authority’s capital plan, which would require the comptroller and mayor to sign off, Cavanaugh said. A spokesperson for Comptroller Thompson said the legal office was examining whether Paterson could trump that requirement by signing new legislation.
Housing advocates say the governor should not be able to touch the authority’s money.
“There’s really no excuse for it,” said Jon Kest, head organizer with ACORN, one of the groups that pressed Thompson and Bloomberg to redirect the money five years ago. “This money has been pledged to affordable housing.”
With dozens of people a day losing their homes in New York City, affordable housing is particularly important, Kest said. Rather than pulling money from affordable housing, Paterson ought to increase taxes for the wealthiest New Yorkers, Kest said.
The affordable housing money from the B.P.C.A. is particularly significant because the governor’s executive budget cuts the state’s housing program by $111 million, said David Muchnick, coordinator for Housing First!, a statewide advocacy group.
“It’s devastating,” Muchnick said. “It’s devastating in terms of housing units and even more so in terms of the number jobs those units would create.”
At the beginning of the New Deal, economist John Maynard Keynes advised F.D.R. that building housing was by far the best economic stimulus, Muchnick said. For every new unit of housing built, 1.5 new jobs are added to the economy, he said.
Jeff Galloway, who lives in Battery Park City and co-chairs Community Board 1’s B.P.C. Committee, said he is reluctant to see the state get money that should go to the city, regardless of whether the city would spend it on affordable housing. The city has its own budget shortfalls to deal with, recently resulting in unpopular cuts like closing F.D.N.Y. companies, including Engine 4 on South St. and the Governors Island firehouse.
“I would be concerned [about] exacerbating an already-existing problem,” Galloway said. “The city is already not getting enough from the state for services such as education.”
Councilmember Gerson said even if Paterson backs off, the $400 million of the authority’s money the city is looking to commit to affordable housing isn’t enough.
“We actually need more than $400 million, and a big chunk of that needs to go to preserve Gateway Plaza as affordable,” Gerson said, referring to the Battery Park City apartment complex where rent protections are set to expire in June.
While the city uses the B.P.C.A. money throughout the five boroughs, Gerson thinks it should be concentrated in his Lower Manhattan district.
“The need here is greater than in most areas,” Gerson said, because of the many Mitchell-Lama and Section 8 units turning into market-rate housing.
Keeping the bulk of the B.P.C.A. money in the city’s hands “is absolutely critical,” Gerson said.