City Hall - January 17 2011 by City Hall News

Michael Mulgrew, right, defends his teachers in court (Page 6), tactics emerge in the Wal-Mart fight (Page 8)

Vol. 5, No. 8

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WEATHERING THE

STORM

After Three Months Of Hard Knocks, Bloomberg Plots His Comeback

January 17, 2011

and Bob Steel, left, details his development philosophy (Page 19).

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Research & Development

Despite lost jobs and slow growth, city moving forward with plans to spur growth in biotech industry BY ANDREW J. HAWKINS

www.cityhallnews.com President/CEO: Tom Allon CFO/COO: Joanne Harras Publisher/Executive Director: Darren Bloch

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ara Therapeutics moved to Connecticut. Emisphere moved to New Jersey. Helicon to San Diego. All three are life-sciences businesses that employ hundreds of scientists. And at one point, all three were in New York. The city has never been an attractive place for biotech firms to set up shop: too many taxes, too high rents, not enough lab space. Despite being the location for some of the nation’s top-flight research institutes—Columbia, NYU, Rockefeller and Cornell, among others—and the number-two recipient of funding from the National Institutes of Health in the nation, New York has lagged far behind other cities in terms of attracting a robust biotech sector. In recent weeks, Mayor Michael Bloomberg has taken steps to reverse that trend. In early December, he cut the ribbon on the new Alexandria Center for Life Sciences—formerly the East River Science Park—a $200 million tower complex that includes lab space, a conference center and a trendy restaurant and sandwich shop. Several weeks later, Deputy Mayor for Economic Development Bob Steel announced that the city would seek to create an “applied sciences research facility” in New York on par with MIT or Stanford University. The city is also partnering with business groups to better market New York as a destination for biotech companies, in the form of tax credits, science prizes and other efforts to pair academic minds with deep-pocketed investors. Slowly and incrementally, life sciences has become a linchpin in the city’s overall economic development strategy, a way to ease the dependence on Wall Street as a prime revenue and job creator and, in the administration’s view, steer New York toward a more economically stable future. “Our goal is to make New York a center of commercial bioscience on the same order of magnitude as centers like Boston and San Francisco,” said Seth Pinsky, president of the city’s Economic Development Corporation. “We want to be one of the great centers of the world.”

In early December, Michael Bloomberg cut the ribbon on the new Alexandria Center for Life Sciences, a key step in revitalizing the city’s stagnant biotech sector. Pinsky said that NYCEDC expects to release a comprehensive analysis on the state of the city’s life-sciences industry in the fall. So far, though, the process has been slow going. The city continues to shed jobs in key sectors like biotech and pharmaceutical development. And the process of filling the Alexandria Center—the second tower is currently under development, while investors are waiting for an anchor tenant before starting construction on a third—has been gradual. Meanwhile, BioBAT, a long-delayed, $60 million lab facility in Sunset Park, Brooklyn, is slated to open its doors later this year, though it so far has only one signed tenant, the International AIDS Vaccine Initiative. Bioscience advocates say that even with BioBAT’s 486,000 square feet and Alexandria Center’s proposed 1.1 million square feet, New York would still fall short of having enough affordable lab space to rival other booming biotech cities. “The key piece missing is not so much the science and research side, it’s the commercialization opportunity,” said Nathan Tinker, executive director of the New York Biotechnology Association. “As much as the Alexandria Center is a great space, it’s not an inexpensive place to build. You’re still paying Midtown prices.” Another challenge facing the city is changing the culture at New York’s re-

EDITORIAL Editor: Edward-Isaac Dovere eidovere@cityhallnews.com Managing Editor: Andrew J. Hawkins ahawkins@cityhallnews.com Reporters: Chris Bragg cbragg@cityhallnews.com Laura Nahmias lnahmias@cityhallnews.com Jon Lentz jlentz@cityhallnews.com Photography Editor: Andrew Schwartz Interns: Ismail Muhammed, Isha Mitra

search institutions. For decades, the city’s universities were viewed as ivory tower institutions, more interested in academic advancement than commercialization. Tech transfer programs at Columbia, NYU and Rockefeller University, designed to spin out research discoveries into the marketplace, were not as strong as similar programs in Boston-based colleges. But that has changed in recent years, with officials reporting that city universities are producing up to 20 new businesses a year. Unfortunately, many of those businesses end up leaving the city for friendlier climates. “Harvard and MIT have regional and local economic development as part of their tech-transfer strategy,” Tinker said. “New York has not gone in that particular direction.” Kathy Wylde, president and CEO of the Partnership for New York, said her organization is partnering with the city on the NYC Bioscience Initiative, an effort to better market the city’s assets to life-sciences companies around the world. She said that colleges and research institutions are slowly coming around to embrace local commercialization, recognizing the advantages of keeping good science in New York rather than letting businesses abscond to other cities. Wylde said her group did an analysis on what elements make for a vibrant

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bioscience industry, determining that a million square feet of lab space is a key ingredient. “At that point, history shows, the market takes over. Developers have enough confidence that they’re prepared to invest,” she said. “But we’re not there yet.” While the city argues that its investment—$60 million in city and state funds for BioBAT and $14 million for the Alexandria Center—has already begun to pay off in terms of private investment, state labor statistics show that biotech jobs continue to leave in droves. Between 2007 and 2009, Manhattan lost one-fifth of its private biotech jobs, according to the U.S. Bureau of Labor Statistics. And New York continues to shed pharmaceutical jobs. “Given the infrastructure that’s here, in terms of medical schools, teaching hospitals, research firms, pharmaceutical firms, you would have thought we’d be bigger in biotech than we are,” said James Brown, an analyst for the state Labor Department. “But we’re not.” A complete picture of the city’s current bioscience industry is hard to pin down, though Pinsky puts the figure at roughly 12,000 jobs. He acknowledged the effect of some of the challenges presented by the economic realities in the city. “Over the last few years, like a lot of large corporations, some pharmaceutical companies have downsized their presence. There’s been some decline in that,” Pinsky said. “We’re less focused on the year-to-year changes, and more focused on the long-term trends. And we think the long-term trend, with these investments, is a positive one.” Joel Marcus, CEO and founder of the Alexandria Center on the east side of Manhattan, agrees, but he also sees the cash crunch at the city level and the economy’s slow recovery as formidable obstacles to building out the city’s biotech industry. The Bloomberg administration’s continued commitment to growing this industry will be vital, he said. “It’s tougher today than it was precrash,” Marcus said. “The macro-environment is not super right. And those are things that will slow down the process.” ahawkins@cityhallnews.com

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JANUARY 17, 2011

End Of The Road

andrew schwartz

Echoes of the past and fears of the future in Stephen Goldsmith’s car maintenance privatization plan

Teamster President Greg Floyd is concerned Stephen Goldsmith’s privatization plan would put police officers at risk. By Laura Nahmias

ack in 1995, an Indianapolis business magazine dubbed thenMayor Stephen Goldsmith the “prince of privatization” for his efforts to transform that city’s workforce. When Mayor Michael Bloomberg named Goldsmith his new deputy mayor for operations in April 2010, New York union leaders braced for a similar push. As that push starts to take shape, unionized autoworkers and mechanics are worried that Goldsmith’s plan to outsource the maintenance of city vehicles to private companies will put them out of their jobs. By October, the city’s Office of Operations issued a request for proposals for outsourcing maintenance shop ownership of the city’s police cars to private businesses. Despite Goldsmith’s assurances that he would include labor leaders, the move came as a surprise to some officials. The city bills the plan as part of a larger effort to streamline back-office operations to help close the current year’s estimated $2.4 billion budget deficit. Goldsmith anticipates changes to fleet management will ultimately save the city $71 million, according to the RFP. The privatization plan is like history repeating itself, said Joey Colangelo, president of the Local 246 SEIU, the mechanics union that handles maintenance of fire trucks and other city-owned vehi-

january 17, 2011

cles. In the mid-’90s, then-Mayor Rudy Giuliani famously tried to sell off the city’s public hospitals, only to have his efforts blocked by the state’s Supreme Court. Colangelo predicts Goldsmith’s attempt would fail too. “If it was such a bonanza, why didn’t it get expanded? It’s because the city is never going to admit fault,” he said. “They’re never going to say, ‘We made a mistake, let’s go backwards.’” Colangelo’s 1,700-member union is the one that stands to lose the most from changes, and he has become the de facto leader of the opposition. The city’s existing system of vehicle maintenance is hardly the most efficient. Currently, city agencies like Sanitation, the Police Department and the Fire Department have their own cityowned garages and staff for in-house vehicle repair, with no broad standards for data entry about the status of each vehicle. Under state law, any repair under $500 can be green-lit without the permission of a supervisor, according to both union leaders and the city’s Office of Operations. But while they agree some changes could likely be made, union officials argue that Goldsmith is headed down the wrong road with his proposed solution. The new plan would contract out the right to service the city’s vehicles to a private entity, which could then subcontract work to any one of the city’s hundreds of

private auto repair shops. “If you look at this as a consumer, it doesn’t make sense that they think they’re going to save money by bringing the city’s cars to auto mechanics, which are probably the most notorious industry outside of Wall Street for ripping people off,” said Andrew Moesel, a consultant

private company owns the garages, a mechanic could show up to service vehicles in the snow, and find he has no garage to work in. The slow work aside, think about how many car dealerships were open the day of the storm. I’m willing to bet— none.” There is no clear consensus over whether privatization is a blanket strategy for creating cost savings in city government. Goldsmith’s legacy of privatization during his tenure as Indianapolis’ mayor earned him mixed reviews, said Elliot Sclar, a Columbia University professor who has studied privatization. Even as the city’s contracting system comes under fire in the wake of the CityTime scandal, Bloomberg has signaled a willingness to keep taking on public-employee unions by contracting out more city services to private companies. Unions expect Goldsmith’s RFP to be the first in a series of plans to privatize other city services. And the mayor’s office would not rule out that possibility. “What is correct is that the city is looking at where we can get more efficiency out of vehicle maintenance. Whether it’s appropriate to outsource parts of that operation—well, we don’t have a completed outline for this yet,” said Marc La Vorgna, a Bloomberg spokesperson. Greg Floyd, president of the Local 237 Teamsters Union, said the plan could undermine the safety of city vehicles. “We have security concerns about the way this plan is going to be implemented because we don’t have control over who is going to be hired by the private contractors,” Floyd said. “If police cars are sabotaged, then we are all at risk.” Of course, all privatization plans are not created equal. Doug Turetsky, communications director at the Independent Budget Office, noted that while Giuliani was trying to privatize hospitals, he was adamantly opposed to a plan proposed by then-Public Advocate Mark Green to outsource police fleet maintenance. “He argued that it was a safety hazard to have who-knowswho at Pep Boys’ working on the city’s police cars,” Turetsky said. Today, unions are using a similar argument to oppose Goldsmith’s plan. The unions are still in talks with the city about methods for achieving efficiency, but if tensions escalate, union leaders said they may argue the city is in violation of Local Law 35, which requires the city to perform a review of cost savings on any initiative that could result in the loss of union jobs. Colangelo said he hoped it would not come to that. “We think a better process is to work together, but it seems like they are intent on trying privatization first to see how it works, maybe seeing if we can match it or beat it,” he said. “We just want to be included in the conversation.” lnahmias@cityhallnews.com

While Giuliani was trying to privatize hospitals, he was adamantly opposed to a plan proposed by then-Public Advocate Mark Green to outsource police fleet maintenance. with Sheinkopf Communications, the lobbying firm that represents both the Local 237 Teamsters Union and 246 SEIU. The post-Christmas blizzard provided a snapshot of how repairs would work under private operations, Colangelo said. “Who do you think puts the chains on the plows? A city employee is required by law to show up to work,” he said. “If a

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the evaluations are needlessly complicated and often misrepresent a teacher’s true worth. Releasing them to the public would do more harm than good, he said. “The principals I’ve spoken to do not put too much value into these evaluations,” Levin said. “The repercussions will be bringing another level of intimida-

he teachers union lost round one in the fight over publicizing teacher scorecards. And while union officials gear up for round two—appealing the judge’s decision that would allow newspapers to publish those reports—plans are already in the works for a possible round three. Union officials say the United Federation of Teachers is prepared to assist teachers whose performance ratings are publicized in any legal action they may want to pursue against the city or the Department of Education. UFT opposes the release of the evaluations, also known as Teacher Progress Reports, arguing that they rely on a complex formula to rate a teacher on how well students per- UFT President Michael Mulgrew said the form on state tests. Union Department of Education’s decision to release leaders have cited a case in the reports contradicts an earlier pledge not to California where a teacher do so. committed suicide after the release of his tion into the classroom.” Levin said he would explore possible poor performance rating. In short, more lawsuits may be in the legislative fixes to this process, but did works if the UFT’s appeal is unsuccessful. not provide specifics of what that could “If lawyers decide it’s libelous or harm- entail. The Bloomberg administration, which ful, some teachers may want to take legal supports publicizing the reports, is holdaction,” one union source said. In a statement, Mulgrew said the De- ing off on giving the data to several news partment of Education’s decision to re- organizations before the appellate court lease the reports contradicts an earlier rules. A Law Department spokesperson declined comment on any hypothetical pledge not to do so. “The reports—which are largely based litigation that could come after the apon discredited state tests, have huge mar- peals process is concluded. “The court has affirmed the city’s begins of error and are filled with inaccuracies—will only serve to mislead parents lief that the public has a right to this inlooking for real information,” Mulgrew formation under New York’s Freedom of Information Law,” said senior counsel said in the statement. A UFT spokesperson declined com- Jesse Levine. A DOE spokesperson did not respond ment on possible future litigation, citing the ongoing appeals process, which is to a request for comment. Cara Cibener, a sixth grade humanities likely to be lengthy. Council Member Steve Levin, a Brook- teacher at M.S. 839 in Manhattan, said lyn Democrat, said he is unsure what legal that her own progress report contained routes teachers could take to keep their a number of inaccuracies, including data evaluations under wraps, but that he be- on students and classes that she never lieved it was a prudent move by the union. taught. She said releasing the reports “I think that individual teachers have was setting up a potentially damaging every right to file lawsuits to block their situation, but would not say whether she performance evaluations from being herself would sue to block her report’s made public,” Levin said. “When it comes release. “I would hope teachers come together down to individual teachers, though, I was kind of hoping that it wouldn’t come to at least get their voices out,” she said. “Legal action might be a part of that, but I to that.” Levin, who sits on the Education Com- don’t know.” mittee, said the formulas for determining ahawkins@cityhallnews.com

JANUARY 17, 2011

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LABOR

Reduced Wage Unions and business retrench over amendments to living-wage bill By Chris Bragg

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ast year, Council Speaker Christine Quinn shelved the paid-sick-leave bill, citing the potentially devastating effect on small businesses as her primary rationale. The very similar coalition of people behind the living-wage bill currently before the Council are taking proactive measures to blunt that argument—and to make the bill more appealing to Quinn— as they gear up for their next big fight. Last week, proponents including RWDSU and Bronx Borough President Ruben Diaz, Jr., agreed to put forward several amendments to the bill, including one that would exempt businesses that gross less than $1 million annually. As with the original legislation, the amendments were drafted with the help of Paul Sonn of the National Employment Law Project. “Some opponents of paid sick-leave brought up the effect on small business,” said Council Member Oliver Koppell, the bill’s prime sponsor, “and with these new amendments, small businesses would now not be affected by this legislation.” Notably, the change is intended to carve out only mom-and-pop businesses and not chain stores. The $1 million threshold to qualify as a small business includes not only a store’s own revenues, but revenues generated by its parent company or subsidiaries. To appeal to those who remain skeptics, supporters of the revised bill are also offering amendments that would exclude non-profits and some mid-sized businesses in affordable housing developments. And Koppell said he would also include a provision that would peg increases in living-wage levels to cost-of-living increases, despite the problems this could cause in attracting those who remain on the fence. As of now, the legislation would require all employers in developments that receive more than $100,000 in building incentive subsidies from the city to pay workers $10 per hour if the employer pays health care benefits, or $11.50 an hour if they do not. The bill now has 29 sponsors, with the recent addition of Dan Garodnick, who signed on before the amendments were

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added. Proponents of the bill have begun pushing strongly for the Council’s Contracts Committee to convene a hearing. Bloomberg is already on record opposing the bill, though the city’s Economic Development Corporation has also hired a Boston-based consultant to conduct a $1 million study on the likely impacts of a living-wage bill in New York, the results of which are expected in March. Spokespeople for both Quinn and Bloomberg declined comment on the new amendments. Meanwhile, critics are privately complaining of unintended consequences.

The new provisions do not address opponents’ central argument: that no developer would ever choose to accept city subsidies if future tenants were forced to pay employees the wages mandated in the bill. For example, they say, small businesses grossing close to $1 million a year might suddenly have an incentive to make less than that amount, creating a perverse economic incentive not to make money. Though the enforcement mechanism of the new provisions remains unclear, the law would likely add extra bureaucratic mandates for small businesses. Nor do the new provisions address opponents’ central argument: that no developer would ever choose to accept city subsidies if future tenants were forced to pay employees the wages mandated in the bill. Even supporters of the bill say the amendments may be more symbolic than substantive. Richard Lipsky, a lobbyist with the Neighborhood Retail Alliance, said he supported the living-wage bill both in its previous iteration and in its new form. Lipsky said the amendment carving out small businesses would have little actual effect on the mom-and-pop stores he represents. “Small businesses are rarely included in these mega-developments anyway,” Lipsky said. cbragg@cityhallnews.com

january 17, 2011

Retail Politics With Wal-Mart complaining of being singled out, unions press for land use strategy to squeeze potential developers BY CHRIS BRAGG

or all the City Council’s complaints and protests about WalMart’s plans to open a store within the five boroughs, Wal-Mart could break ground tomorrow as long as it finds a site that is properly zoned—hardly a problem in retail-friendly New York. That has not stopped anti-Wal-Mart union leaders from asking Council members to flex the shred of land use authority they do have, given the circumstances. The Council may not be able to block Wal-Mart, but, the union officials say, they want members to commit to making future deals more difficult for developers who allow the Arkansas-based discount chain into the city. “Related and Vornado do a lot of business in this city, and I’m not sure they want to be the ones to herald Wal-Mart in,” UFCW Local 1500 political director Pat Purcell said. “It’s not advisable to be the ambassador for a hostile party.” RWDSU president Stuart Appelbaum said that he was particularly concerned by Related. The developer has said it is exploring opportunities with Wal-Mart, though Appelbaum insists that Council Member Charles Barron was promised that Wal-Mart would not be a tenant at the Gateway II mall—one possible site that the retail giant is exploring—when Barron’s East New York district was rezoned for the development in 2009. “I think that people generally don’t trust people who have lied to them,” Appelbaum said. “And for anyone who facilitates bad players coming into New York City, we’ll be sure to notify the general public.” With the many technicalities written into city land use law, Council members could make life increasingly difficult for targeted developers. Those within the anti-Wal-Mart campaign say that they would ask more people to look at the example of Council Member Gale Brewer, who has often used the rules to stop or slow development she opposes from coming into her Upper West Side district. A spokeswoman for Related declined comment.

JANUARY 17, 2011

the unions most likely to support her if she runs for mayor in 2013 are precisely the ones likely to come out in favor of a Wal-Mart. For both the opposing unions and Quinn, the vilification of Wal-Mart represents something of a shift in policy from previous efforts by big-box stores in New York City. Both RWDSU and UFCW Local 1500 were largely silent, for instance, when Target, Marshalls and Costco opened locations this summer at the new East River Plaza in Harlem. Quinn even cut the ribbon at the complex’s grand opening. Community groups that opposed the project now say it has ruined the character of the neighborhood, killing small businesses and increasing traffic. Promises by the big-box stores to give 60 percent of all jobs to local residents Council Memin the first year have also ber Mark Weprin, not been met, according to head of the ZonMarina Ortiz, head of East ing & Franchises Harlem Preservation. Subcommittee, Wal-Mart complains said that while he that opponents have unshares concerns fairly singled out the about locating a company, citing the other Wal-Mart in New chains that have been alYork City, the lowed into New York deunion strategy spite employing non-union was too much for workers. And Target, they him. point out, also sells grocer“That doesn’t ies. seem appropriate But union officials say to me,” Weprin that even though Target, said. “I’m not sure like Wal-Mart, is not unionit would even be Wal-Mart is bypassing the City Council and appealing directly to ized, the labor practices constitutional to retargeted constituents between the two compastrain trade like that. nies do not compare. Projects should be ster Doug Schoen has done polling in 10 “Comparing the flaws in the labor judged on the merits, not based on some Council districts, showing popular supbad action in the past.” port for opening a store. Constituents are practices of Target and Wal-Mart is like Weprin is not the only one with being targeted with direct mail and radio comparing a jaywalker to a serial killer,” doubts. People involved in Wal-Mart’s spots touting Wal-Mart’s low prices and UFCW’s Purcell said. A spokesperson for Quinn said that efforts question whether the union strat- the jobs the company could bring to these the speaker was not generally opposed egy really has any teeth. Appelbaum took neighborhoods. a central role in the death of the KingsThe union strategy is not the only in- to big-box stores in New York City, but is bridge Armory project, and few expect side game that matters for Council mem- against Wal-Mart because of its abysmal the company would even talk to him or bers. Christine Quinn has been a clear labor record, citing lawsuits for almost RWDSU about future projects. The argu- and vocal opponent of the chain’s entry a billion dollars in unpaid wages and for gender discrimination, and ably more politically powerproblems with the company’s ful building and construction “Related and Vornado do a lot of business plan. trade unions may also prove business in this city, and I’m not Appelbaum also said that powerful allies, even possibly sure they want to be the ones to part of the reason RWDSU did taking a public role defending not get involved more heavily Wal-Mart once a site is picked herald Wal-Mart in,” UFCW Local in the fights against Target and and a project-labor agreement 1500 political director Pat Purcell other big-box stores was beis finalized. said. “It’s not advisable to be the cause he believes Wal-Mart has Steven Restivo, a Wal-Mart worse labor practices. spokesman who has been ambassador for a hostile party.” The company’s presence leading the company’s public relations drive in the city, said that there to New York City. Even Council members here, he said, would have a trickledown are as many potential sites and develop- facing intense pro-Wal-Mart pressure in effect on the labor practices of other big ers in the five boroughs as there are selec- their districts would likely steer clear of retailers in New York City. “Yes, absolutely,” said Appelbaum, tions in any of his company’s stores. support, for fear of crossing the speaker. “We are evaluating opportunities large People involved in the pro-Wal-Mart effort when asked if Wal-Mart represents someand small, and are in conversations with acknowledge that overcoming this factor thing of a symbolic line in the sand for the developers, but also with brokers and may prove the biggest challenge, and one labor movement here. “They’re the larglandlords,” Restivo said. tactic that is already being employed is est employer in the country and they’re While unions are playing an insider pushing the idea that the locally-grown the worst employer in the county. People game with the Council, Wal-Mart’s strat- produce sold at the stores would fit per- here would try to follow the Wal-Mart egy is to put pressure on Council mem- fectly with Quinn’s new food policy push. model.” bers by going to their constituents. Poll- Another tactic is pressing the idea that cbragg@cityhallnews.com

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By Edward-Isaac Dovere

“I think we’ve had enough.” Or a week earlier: “We had the same plan and the same team that we had every other time. And it worked every other time.” Or, as Stephen Colbert put it, “Mayor Bloomberg totally dropped the ball by not plowing the streets. Pandemonium erupted—and then he didn’t clear the pandemonium.” These are odd times for Mike Bloomberg. He has been turned into a Saturday Night Live parody. Indirectly, he helped make Tish James a temporary CNN sensation, and the search for his private jet’s Christmas Day flight plan has taken on the feeling of an Indiana Jones quest. Even before the flubbed blizzard response and all the John Lindsay comparisons it prompt-

january 17, 2011

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athering The

Storm

After three months of hard knocks, Bloomberg plots his comeback ed, Bloomberg was having a rough few months. For those who were paying attention, the CityTime scandal brought back images of third-term Ed Koch and Donald Manes plunging a knife into his own heart. And all this in the shadow of the Cathie Black appointment, when, suddenly, more people than ever before were willing to step forward and attack the mayor. For a mayor whose money, power, connections and personality have enabled him to keep control not just of the city’s political players, but also of editorial boards, cultural institutions and the financial establishments, this has been a markedly different chain of events. With each one, another wave of politicians and pundits declared Bloomberg finished, his mayoralty over and done. A political press corps that was only weeks ago obsessing over his purple ties was suddenly bashing him for every unplowed tertiary street. On Jan. 6, a NY1 poll put him at just over half where he was with his approval rating a year ago. The atmospheric change was inevitable, say the third-term-malaise-thumping critics. “Those three events just build on some sort of amorphous impression that people already had—there’s something left over from term limits, there’s something left over from the election,” said Stuart Appelbaum, the president of the Retail, Wholesale, Department Store Union, and probably the city’s most ready Bloomberg basher since he broke with the mayor in refusing to help deny Bill Thompson the Working Families Party ballot line in the 2009 campaign. Appelbaum has been partial to the lame-duck, third-term-malaise argument for some time, and he says the recent troubles have only increased the number of people who had already been coming around to his opinion. “They’re not willing to just accept what he says,” Appelbaum said. “At first people were thinking this is a billionaire, and they thought that some money was going to fall out of his pockets. Then he was running for the second term, and he

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was going to run for president. Then he was running for a third term. What’s next? He’s not going to be president.” Ed Koch, the last third-term mayor and three-time Bloomberg endorser, called this line of thinking ridiculous. True, the scandal that killed Manes helped kill Koch’s political prospects too, but his own third term was also defined by some of his biggest successes, including the national model-setting initiatives in housing rehabilitation, publicly financed elections and the first stage of a smoking ban. “I don’t believe that the third-term jinx exists. It’s exactly as fictitious as the curse of the Pharaoh Tuten-whateverhisnamewas,” Koch said. “You don’t die just because you were in his tomb.”

lost focus. Being under attack has sharpened them again, jolted them back from a mentality that was veering toward an odd combination of workaday and academic. Howard Wolfson, Bloomberg’s deputy mayor for governmental affairs, would not comment on that. But sitting in a room off of the bullpen the morning after the last big snow, he shrugged off most of the attacks. With a mannequin wearing the mayor’s chain mail costume from his 2007 Inner Circle spoof of Spamalot looming behind him, Wolfson said there was little reason to be on the defense.

of the Bloomberg mayoralty. “If you’re keeping crime low, and you’re improving the schools, and you are managing the city’s fiscal situation in a way that encourages job creation, that’s not nothing. That’s a whole lot of something,” Wolfson said. Thanks to two lighter-than-expected snowfalls—another example of the good luck that has marked the mayor’s political career—step one is complete. Step two is underway, with his latest initiative from the Mayors Against Illegal Guns coalition announced days after the Arizona shoot-

“I don’t believe that the third-term jinx exists. It’s exactly as fictitious as the curse of the Pharaoh Tuten-whateverhisnamewas,” Koch said. “You don’t die just because you were in his tomb.”

n the weeks leading up to the Black announcement, Bloomberg had settled into an increasingly familiar pattern, with the countdown of his days left in office back in nearly every speech and the behind-the-scenes churning of the presidential rumor mill kicking into full gear. Except for the iPad, just about any of his appearances could have easily been mistaken for those back in 2007 and into 2008. The two major initiatives of his third inaugural, the deputycommissioner exchange program and a national pro-immigration push, had both all but disappeared, the former a victim of apparently middling results and the latter of a national political climate that was even less interested in hearing from him on border control than it has been on gun control. Bloomberg has yet to replace a full third of his commissioners, as he said he would just before Election Day 2009, but with new deputy mayors coming now in the spots once occupied by his inner circle, turnover does not seem to have been the problem. For all the new blood and changes that came with it, people familiar with operations privately admit that the administration was indeed beginning to suffer from exhaustion, attention drift and

“You have an elite set of critics, who decided in the beginning of 2009 that they would push a third-term-malaise narrative—even before the mayor was re-elected,” Wolfson said. “That was not the case prior to the snow, and the hope and expectation is that that Christmas snow was an anomaly, and that people will come to see that.” Wolfson rejected the suggestion that the problems with the snow were part of a pattern with the pushback to the Black appointment and the CityTime revelations. In fact, he said, if not for the blizzard, only a much smaller group of pure political insiders would be having the battered Bloomberg conversation at all. A pretty typical Bloomberg response has emerged out of the internal huddles in City Hall: 1) go overboard if necessary to make the response to the next storm a success; 2) make some better-than-average attention-grabbing announcements; and 3) ignore, rather than fight, the criticism from politicians and the press. In other words, keep doing what they have been doing for the last nine years, avoid getting caught up in a dip they insist will be momentary, and focus on the management approach that has been the core

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ing, expected to be the first among a series of new ideas that will not shy away from appealing to national attention. Whether that means participating in more No Labels events or other ventures. And as for step three, it will probably prove the easiest, given that this is a mayor who has never hidden his disdain for the daily press grind and those in politics who live by it. Though his eye-rolling, flushed cheeks and cutting-off of questions at press conferences in recent weeks have made pretty clear how frustrated he has been by combative reporters, Bloomberg has always made clear how little he really cares about the media opinion of him. To whatever extent he does, he often believes he is under attack in some way, even when the headlines are better. That, people close to the mayor say, may limit how much of a difference he has sensed in the past few weeks. Wolfson also rejected the idea that the recent spike of criticism was part of a truly shifted landscape, as opposed to a reasonable dip that should be seen in the context of nine years of success. “I don’t accept that we were operating in a criticism-free zone,” Wolfson said. “A) I don’t believe that is an accurate reading of the history, and B) I think it is an unjanuary 17, 2011

realistic expectation of life in the biggest city in the world’s biggest democracy.” Recommending Broadway shows or announcing that he would be spending the evening of the season’s third snow storm at Madison Square Garden for a Rangers game did not put him in league with Cory Booker’s snow-shoveling or Rudy Giuliani’s delivering pizza to 911 operators in 1996. That, of course, is never the kind of politician Bloomberg has been, and even had his advisors suggested he go that route— which they knew better than to do—few expect that he would have agreed. So yes, they have heard the punditry about searching out some new press-friendly project like the Olympics, as well as the idea of bringing in a new person to do… something. Bloomberg has never been loved the way that Giuliani was, or prone to the Koch-style showmanship. He will not be leading a rally or greeting commuters in the middle of the Brooklyn Bridge anytime soon. “We don’t need gimmicks. The basics, prior to Christmas, have worked well,” Wolfson said. Bloomberg’s version will be turning up the temperature on pension reform. “It’s not something that people will be able to see when they walk outside the doors, but they’ll be able to see that they have services as a result of the fact that we are not bankrupting ourselves with pensions that we can’t afford,” Wolfson said. In terms of the calendar, the timing could not be better. Bloomberg will come off the successful snow removals with his State of the City address, giving him the chance to set his own agenda and capture news coverage at least for a day. The presentation of his budget will follow shortly after, putting even the most vocal antiBloomberg members of the Council in a subjugated position as they plead with the administration to preserve their member items, local firehouses and other pet programs for the next five months. Meanwhile, the budget process in Albany will be underway, no doubt continuing the history of making Bloomberg look good by comparison. With Bloomberg looking at a full three years in office still ahead, Council members and others throughout the city will need to have good enough relations with City Hall to plead their cases for a long time to come. George Arzt, a political consultant who served as press secretary for Koch through the third-term scandals, said that may not be enough. In the months after the Manes suicide, Arzt said, the morning meetings became increasingly focused on trying to find usable items from agencies’ required monthly reports, and deflecting attention from articles by reporters able to get more attention and prominence for anything critical of the mayor. “Suddenly a deputy commissioner who didn’t pay his taxes became a major event,” Arzt recalled. As much as Bloomberg might detest

january 17, 2011

pressing the flesh, Arzt said, he might have no choice. Koch hated doing his annual Inner Circle response, and every year tried to complain his way out of appearing. Bloomberg might have to go for the gimmicks, too. “He’s got to demonstrate that, unlike the three previous mayors who had three terms, that this is an administration that can come up with real programs,” Arzt said. “He’s got to show innovation, and he’s got to show that he cares. He’s got to be out in the neighborhoods and he’s got to be out on the streets.” But though Arzt recommended finding a big project to hitch his turnaround and legacy to, he noted that with the city staring down a deficit that the state government will likely push into the several billions, Bloomberg might not have that as an option. “The first question will be,” Arzt said, “‘How are you going to pay for it?’”

pushback, they say. Expect more rejections of the mayor’s proposals. Council Member Gale Brewer, who was working as a staffer in city govern-

snow removal, he was already looking much more upbeat. And really, perhaps the only thing remarkable about the Daily News editorial page turning on Bloomberg is that for most mayors it happens in year two—or day two. “I think the mayor may not realize that he’s had remarkable editorialboard support and remarkable institutional support for a very long time, and sooner or later—by the sheer dint of time, decisions and circumstance—that winds up getting eroded,” said Rep. Anthony Weiner, who ran on a strong anti-Bloomberg message in the 2005 Democratic primary and was prepared to do so again in 2009 before backing out of the race. “He’s shown himself to be pretty resilient,” Weiner said. “He’s had these setbacks before, and to his credit, I think he’s doing it exactly right: he’s dealing with it head-on, not whining about it.” Bill de Blasio, whose leadership of the anti-term limits extension effort helped propel him into the public advocate’s office, echoed the idea that the mayor’s recent rough patch is part of an expected third-term evolution. Nonetheless, de Blasio said, he has taken note of how many more people have been willing to oppose the mayor as compared to during the term-limits fight. “A certain normalcy is setting in,” de Blasio said. “I think there’s been a very particular reality in the Bloomberg years, because of who he is, and I think what you’ll see with every passing month is something that resembles more of the traditional dynamics that any mayor in the city has faced, which means more give and take, more debate.” Jumaane Williams, a still relatively new City Council member who was one of the leaders of the vocal opposition to Black and co-chaired the snow response hearing, said he has felt some shift in the dynamics. Like several of his colleagues, he expressed both optimism and skepticism that the hearing might mark the beginning of a more aggressive approach, with more large-scale hearings and media attention. And while Williams left the hearing unsatisfied with the administration’s account of its performance during the blizzard, he said the call he received from Wolfson ahead of the Jan. 12 storm made him feel like the mayor might have come away changed, at least for the immediate future. Memories fade, Williams said, and this one likely will, too. “Two months from now, he may be the same old Mayor Mike,” Williams said. “But if he really has his legacy in mind, which I think he does, he wouldn’t do that.” Even if things do indeed revert, Williams said, the temporary new reality was refreshing to at least visit. “With all his money and all his power, he usually lives in a different world,” Williams said. “But at least for now, he’s back to where the rest of us live.” eidovere@cityhallnews.com

“A certain normalcy is setting in,” said Public Advocate Bill de Blasio. “I think there’s been a very particular reality in the Bloomberg years, because of who he is, and I think what you’ll see with every passing month is something that resembles more of the traditional dynamics that any mayor in the city has faced, which means more give and take, more debate.”

loomberg started his public schedule on Jan. 11 with his Mayors Against Illegal Guns announcement, and the reporters were respectful again, returned to the student-teacher dynamic he has cultivated. They were so subdued that though they spent over half an hour in the room with Rep. Pete King after he announced plans for legislation to ban firearms within 1,000 feet of federal officials, none seemed to even realize the many obvious logistical problems with the proposal that were immediately pointed out all over national blogs. By two questions into the snow briefing that immediately followed, the tone was back to where they had been the day before, and Bloomberg was back to shaking his head, visibly annoyed, cutting off and dismissing questions about his whereabouts and need for remorse. Left behind at the podium to give more answers, Sanitation Commissioner John Doherty let loose a few more mea culpas of his own, and shrugs, about predictions for the future—“he took my crystal ball away from me,” Doherty said of the mayor—before administration press secretary Stu Loeser cut the briefing short, justifying it by saying every question had been asked and answered dozens of times already. By then, the mayor had been pushed into saying something positive about the Council’s unprecedented, three-tiered dais hearing that was more intense than anything the chamber has done in memory, far beyond even the term-limits extension hearings. Council members walked out of their temporary home in the Emigrant Bank feeling emboldened, with members declaring they should and perhaps would hold more hearings like that about all sorts of things they disagreed with Bloomberg on, like housing, education and homelessness. Expect more

ment during Koch’s third term, said that she expected some level of change in Bloomberg’s third term, but a year into it, she said, she believes the mayor should be doing better than he is. “What bothers me most about this third term is that we haven’t dealt with the homeless, we haven’t dealt with the economy—that’s a national issue, but I don’t feel like the job situation is the best it could be—the agencies aren’t as well managed, and there’s not enough diversity,” Brewer said. “The Koch years, you kind of got fatigued at the end because the problems were so huge. In the Bloomberg years, the problems were not as big as Koch had. And yet here we are with management issues, homeless issues, affordable housing issues.” With 2013 creeping closer, ambitious Council members who see a political advantage will start beating up on him more, though this will likely be balanced by a Council speaker whose own mayoral hopes will almost certainly depend on Bloomberg’s support. Still, in what may be the greatest measure of how justified the Bloomberg circle is in shrugging off the current problems, the number of people who are willing to go fully on the record with their critiques is still relatively small, even though it has grown. The knocks are mostly about calling him arrogant and disconnected (the mayor’s former communications director, Bill Cunningham, argues that “this is just another version of the same argument they’ve had for nine years—‘He’s out of touch, he’s aloof, he’s arrogant’”). From the living-wage bill to rezoning fights, no one can identify a single substantive effect likely to come from Bloomberg’s trouble over the past few months. It did not take long. On Jan. 6, not one of the 38 Council co-sponsors of a bill requiring the Department of Education and NYPD to increase their reporting showed up to get in the shot when he signed it into law. But by Jan. 12, standing outside of the Queens diner where he had gone to reconnect with his old ally Peter Vallone, Jr. and bask in an apparently flawless

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City hospitals in the Bronx, Brooklyn and Queens serve poor populations, which puts them in danger of closure under federal health reforms and state Medicaid cuts

tainly lead to more hospital closures, industry experts said. “With a hospital like St. Vincent’s, it’s not like a slow death,” Raske said. “It happened overnight.” Gov. Andrew Cuomo has made clear he wants to avoid closures of safety net hospitals. By appointing health industry experts as members of his new Medicaid Redesign Team, he seems to be signaling

$40 billion Medicaid budget. One way to save money is to petition the federal government for grants available for community health centers, a funding stream Cuomo suggested the state tap in his urban-focused campaign policy book. Montefiore Medical Center President Steven Safyer, who is a member of Cuomo’s redesign team, said another option not yet being considered is making grant money available for accountable-care hospitals. These institutions combine inpatient and ambulatory services—the type of managed care the state says incentivizes performance. Safyer and other health care leaders are hoping the future will bring amendments to the federal health care reform that cover undocumented immigrants. But he acknowledged the political climate in Washington is far too toxic to give much hope. The state is a different story, he said. “I am worried that people will be hurt, that institutions will be closed, that

The financial situation created by the decrease in federal funding coupled with the increase in patients will almost certainly lead to more hospital closures, industry experts said.

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ealth care industry leaders say the situation created by the increased patient load from federal health care reform and possible Medicaid cuts at the state level could force the closure of more hospitals throughout the city, following the fate of St. Vincent’s Hospital, North General and St. Mary’s in Queens. Urban hospitals are more at risk for collapse under these conditions because they serve more of the state’s poor and mentally ill, said Stan Brezenoff, CEO of Continuum Health Partners, a group of hospitals that includes Beth Israel, Roosevelt Hospital, St. Luke’s Hospital, Long Island College Hospital and the New York Eye & Ear Infirmary. “There are hospitals that barely make it now, and [with] New York State’s horrible budgetary condition, which is certainly going to require Medicaid reductions, you put all of those things together, and you do have to wonder how the hospitals that are on the brink, how they could survive,” Brezenoff said. The Greater New York Hospital Association (GNYHA) is currently submitting the city’s hospitals to a “stress test,” much like the one administered to the nation’s banks immediately following the financial collapse, said the group’s president, Ken Raske. This test will examine hospitals’ bank statements and bond covenants while considering the demographics of their patients, to determine which hospitals are in the worst shape, Raske said. Several hospital closures and mergers are the result of recommendations made in the 2006 Berger Commission report. The document cited too many hospital beds as one glaring reason for city hospitals’ debt problems. And since the Pataki-era commission completed its report, the financial situations at many of the city’s hospitals have worsened, health industry officials said. Especially hard-hit are socalled safety net hospitals, where the city’s poor have historically turned for their health needs. Those hospitals effectively pay the price for the poor, often mentally ill, drug addicted, or undocumented populations they serve. The federal reforms are paid for in part by a reduction in the money the government gives to urban hospitals

in places like Los Angeles, Chicago, Miami and New York to help pay for the high costs of covering the poor. The rationale was that over time that same vulnerable population would become insured because they would be forced to buy insurance under the new laws. But without a public option, and without health care for undocumented immigrants, hospitals like Montefiore in the Bronx—where 350,000 of the 1 million residents are not citizens—will see their thin revenues dip to cover the funding gap. The financial situation created by the decrease in federal funding coupled with the increase in patients will almost cer-

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The city’s medical institutions prepare for twin pressures of state cuts and federal reform BY LAURA NAHMIAS

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Hospital Bills

LEGEND: Orange:hospital in area with high poverty rate defined as places where median household incomes <$25K annually, unemployment >15%

that he hopes to avoid making the kind of cuts that will force closures. The taskforce will receive the results of GNYHA’s stress test as part of its deliberations, Raske said. The team is expected to look for ways beyond provider reimbursement cuts to trim the state’s

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things will happen the way that St. Vincent’s happened,” Safyer said, “but I have confidence in the new governor. It would be nihilistic for him to just hack away at Medicaid.” There is a chance the Medicaid taskforce will push the State Senate to pass languishing bills to reform the state’s medical malpractice system, Safyer said. “If there’s ever been a moment to reform it, this is the moment. If you had Medicaid cuts for a place like Montefiore at the same time you had medical malpractice reform, you could come out of this without doing any damage,” he said. There are six weeks left before the Medicaid redesign team is supposed to present its recommendations to the governor, even amidst criticism that Jason Helgerson, the wunderkind Cuomo “seduced” away from Wisconsin to overhaul the state system, was not able to cut enough from that state’s health care spending to achieve savings. The deadline has been decried as unrealistic, but Raske sounded a cautiously optimistic note. “It will take a heroic effort, but it’s accomplishable,” he said. lnahmias@cityhallnews.com

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Bridge Over Troubled Waters

With deadlines and vetoes looming, plans for Brooklyn Bridge Park in doubt By Jon Lentz

michael van valkenburgh associates, inc

hen Ursula Hahn heard that a consulting firm would explore ways to fund the upkeep of Brooklyn Bridge Park, she figured the consultants would simply endorse the city’s current controversial plan for luxury condos and other housing at either end of the park. “Whenever you have a group that hires a consultant … the consultant’s recommendations have to meet the expectations of the group that provides the money,” said Hahn, a longtime supporter of the waterfront park. “This consultant will probably end up saying none of the things they are examining will bring enough income to maintain the park when it’s completely built.” Hahn might not have long to wait to see if she is right. The Brooklyn Bridge Park Corporation, the new city entity governing the park, could decide as early as June whether to continue with housing, rely on a variety of money-raising alternatives, or perhaps adopt some combination of the proposals. The park, which is required to fund its own operations, will cover 85 acres stretching from Atlantic Avenue to Jay Street in Brooklyn when completed. The first two piers to be developed were opened in 2010. Some neighborhood groups have adamantly opposed plans to include housing, which is projected to fund much of the park’s estimated $16 million in annual operating costs. When the state transferred control of the park entirely to New York City last year, State Sen. Daniel Squadron and Assembly Member Joan Millman secured an agreement requiring a closer look at alternatives to housing through a new committee that would report to the Brooklyn Bridge Park Corporation’s board. The two state lawmakers also were granted a veto over existing housing plans, balancing the power of the corporation’s board, which is dominated by mayoral appointees. “I’m really pleased,” Squadron said. “The point of this committee, and the point of this consultant, is to take as serious and expansive a look as possible. Putting more housing into a park has a number of reasons, from a policy perspective, that it’s really something to avoid.” But the city could counter a veto by

walking away from the project. It has agreed to pay $139 million of the total $350 million in capital costs, including $94 million it already spent. A spokesperson for the mayor did not return request for comment.

The committee agreed on nine possible funding alternatives in December, with some, such as fundraising and additional concession stands, likely to bring in far less revenue. Other more lucrative proposals, such as commercial real estate development, could also face opposition. “You could potentially turn all of Brooklyn Bridge Park into a private athletic club that still wouldn’t fully support its maintenance and operations,” said Nancy Webster, the executive director of the Brooklyn Bridge Park Conservancy, an independent citizens group. “The idea of something like a Chelsea Piers—it’s our understanding that it takes up an absolutely enormous footprint in Hudson River Park and it doesn’t supply all of Hudson River Park’s maintenance and operations dollars,” Webster said, citing another popular, self-funded New York City Park. The proposals must meet the city’s requirement that park funding “does not, in any way, displace revenue to which the City is otherwise entitled.” One proposal that will be weighed against the rule is for a park-improve-

Daniel Squadron and Joan Millman were granted a veto over existing housing plans, balancing the power of the corporation’s board, which is dominated by mayoral appointees. But the city could counter a veto by walking away from the project.

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“It’s a risky proposition on all sides, and it was a calculated risk on behalf of the assemblywoman and the senator to really hold everyone accountable,” said Paul Nelson, Millman’s chief of staff and her representative on the committee. “People were concerned that the consultant we hired would be a sham, that we would do a rudimentary study and say there’s no other option but housing. This holds everyone accountable.”

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ment district, which could assess a fee on nearby property owners. Another proposal would look to draw revenue from a nearby tax-exempt property currently owned by the Watchtower Bible and Tract Society of New York, a Jehovah’s Witness organization. The alternatives could help scale back the housing but would likely not be enough to eliminate it altogether, said Rob Pirani, vice president for environmental programs at the Regional Plan Association, an independent research group. “The things they could do would help reduce the scale of those towers, and would be really beneficial,” said Pirani, who has testified about the park in the past and who supports the housing plan. A draft report weighing the options will be issued in mid-February by Bay Area Economics, followed by a 60-day public comment period, with the final version expected in June. “It’s time to move forward from these questions,” Webster said. “So, having a process that is very public and very transparent and seeks community input, I certainly believe will be a tremendous step forward.” jlentz@cityhallnews.com

january 17, 2011

issue spotlight:

New York CitY PeNsioN

Point/Counterpoint

The city’s pension system is at a crossroads. The Bloomberg administration is determined to take control of the system to relieve pressure on the city’s budget, while the City Council, with its many ties to city unions, is stressing negotiation and compromise. City Hall asked Deputy Mayor Howard Wolfson and Council Labor Committee Chair James Sanders to size up the issue and its various proposals to see how their answers stacked up against each other. Howard Wolfson: The city’s pension costs are out of control.

Sanders: We had such a faith in the never-ending positive cycle on

We run the risk of essentially becoming like General Motors, which would not be good for our employees or residents of the city. So we’re going to try to take some steps to ensure that we get our pension costs in line.

the market. In 1999, the city requested a pension restart. The city by law is required to give a certain amount to the pension system. And the market was doing so well that the city under Giuliani went to the control board and said, “Hey look, the markets are doing so well, can we defer putting in city money and let the market make up the difference?” Everyone on the board agreed except one person: Alan Hevesi. He was the only one who said the system is not foolproof. So the city stopped putting in its fair contribution. They believed the market would do better, that they wouldn’t have to put in. Well, it didn’t. It crashed after Sept. 11 and crashed several times since then, including the predatory crash recently. Under those conditions we have underfunded our commitment, and now it’s time to pay the piper.

James Sanders: The number-one issue is that it is not sustainable. If left to its present course, it will bankrupt New York City. We’re getting different estimates on how soon; some say 20 years. Regardless of how quickly it will bankrupt [the city], there’s no question that it will if we don’t do something. Wolfson: The city doesn’t determine pension benefits—the Legislature does in Albany. So while we actually pay the costs, we don’t set them. And that is obviously a problem. When the mayor came into office, pension costs were about a billion and a half dollars. And the coming fiscal year they’ll be about $8.3 billion, which is about a 450 percent increase. Pensions are now over 10 percent of the city’s budget. That is just not sustainable. The city can’t afford to keep doing that. Sanders: If the state was a neutral entity, we wouldn’t have a problem there. However, the state has also helped us get into this problem by unfunded mandates, by okaying certain increases without putting any of their monies into it. So the state is not an outside neutral entity. I’d rather all of us sit down at the table and honestly fight our way through this situation. I’m going to hold hearings. And we can send home rule messages—if the mayor and the unions are able to come up with positive outcomes, we in the Council would join them in sending home rule in a united front on this issue.

James Sanders

Wolfson: I think there are a number of different possibilities. One of them would be to ask the Legislature to make changes to reduce costs. Another would be sort of giving the city control over pension benefits. We’re looking at a number of different options and talking to legislators and others. Obviously, we’ll move on this soon.

Sanders: We are going to use the bully pulpit that we’ve been given to try to coax people to the table, to have a fair conversation here. Now, what has to happen is, the city and the unions need to come together and decide how we are going to tackle this. But the history of how this was created is interesting. My job is to take away every single thing that doesn’t allow us to grapple with this issue, not to let personal insults or cheap broadsides from one side to the other defer us or deter us from our goal.

Wolfson: It is something of a long-term process. But that doesn’t mean it’s not without value.

January 17, 2011

Wolfson: I think it’s understandable that every union wants to win for its workers the highest possible benefits package. But I think, you know, as the UAW learned, if the benefits package becomes unsustainable in the context of what the company or, in this case, what the city can afford, that’s not a good place for workers either. Sanders: I’m hearing a willingness to discuss things [from the unions]. I’m hearing an understanding that this is unsustainable if we go on at this point. Now, to fix this, we have to establish a more realistic contribution rate. The contribution rate from the city is still too low. You need predictability in that sense. You have to have your different actuaries say how much we have to put in to fund these pensions. Each group has an interest in under-projecting. So we need an independent person to really say, ok, here’s how much these pensions will cost over time.

Wolfson: I think it’s always better to

Howard Wolfson

have broad support. It’s incumbent upon us to make the case. Hopefully, labor and others will be receptive.

Sanders: We’ve got to break the rules to get out of this one. When the city bargains with the unions, we have to make pensions the subject of bargaining also, meaning the total package needs to be involved. The city must have the total conversation. We in the Council need to insist that pensions become a mandatory subject of bargaining. And the mayor must be able to trade things for it. They shouldn’t just insist, “This is what you do.” We need this, we can get this. And that is the basis for a fair negotiation. Wolfson: I think there is a window of opportunity created by the last elections. I think this governor understands the scope of the challenge. I think he is committed to making real change. He talked about this issue in his own State of the State, from a state perspective. So I think there’s a growing awareness of the problem with a window of opportunity to make it happen.

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CITY HALL

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When greed and fraud caused Wall Street to crash, public pensions lost billions. The result is pension benefits are being slashed for state and city workers. Taxpayers are also being forced to pay more money to make up the difference. But working New Yorkers are NOT allowed to sue to recover investment losses from crooked Wall Street firms, big banks or even scam artists. Our hands are tied by the law, called the Martin Act, which currently does not allow New York pension funds and other investors the right to get back losses caused by corporate fraud or negligence. Working people need the ability to defend themselves from greed and corruption. We must take steps to give pensions the right to get back the money that was all but stolen from them by Wall Street.

Paid for by Local 237 Teamsters

7/27/10 12:2

ISSUE SPOTLIGHT:

NEW YORK CITY PENSION

Sound-bites

With Pension Costs Spiraling Out Of Control, A Variety Of Fixes Emerges

Carol Kellermann, president, Citizens Budget Commission

BY CHRIS BRAGG

or the Bloomberg administration, there is no more pressing issue than the city’s need to control its own pension costs. During Bloomberg’s nine years in office, the annual cost of the city’s pension system has risen from $1.5 billion to $8.3 billion—an increase of 450 percent. About 10 percent of the city’s budget is now made up of pension payments, crippling the administration’s ability to pursue other spending goals. Currently, the state controls the city’s five pension systems. Deputy mayors Stephen Goldsmith and Howard Wolfson have said the answer is for the city to gain local control over pension costs—an idea they believe Gov. Andrew Cuomo supporters. The Bloomberg administration believes it could rein in costs by being able to collectively bargain pensions with unions directly, which would end the practice of the Legislature quietly submitting pension sweeteners on behalf of favored unions. Critics of this approach say the very reason collective bargaining was taken out of the city’s hands—and placed into those of the Legislature—is that mayors have often been even more generous than the state in doling out pension benefits. Alternatively, the Bloomberg administration would support the Legislature adding pension tiers to city funds to crack down on abuses like pension spiking. Labor leaders, meanwhile, say the fault lies not with them but with the financial sector, whose abusive practices led to the decimation of the city’s pension funds in 2008. Last year, city unions pushed a bill in the Legislature that would have allowed large institutional investors, including pension funds, to sue Wall Street firms for fraud under the broad powers of the Martin Act. Forty-eight other states give institutional investors standing to sue financial firms. But opponents say granting pension funds these powers would simply be a giveaway to the trial lawyer’s lobby, especially since the powers of the Martin Act, used famously by Eliot Spitzer to prosecute Wall Street, are too broad. A bill to expand the Martin Act, sponsored by Eric Schneiderman and Richard Brodsky, did not pass even with the State Senate under Democratic control. And its prospects would seem even dimmer now that both are out of the Legislature and Republicans are back in the Senate majority. Still, proponents are continuing to push the idea, including State Sen. Diane Savino, the former chair of the Senate Civil Service & Pensions Committee. Council Member James Sanders, the chair of the Civil Service & Labor Committee, is also exploring whether a city law could be changed to give institutional investors power to sue financial firms. “My committee is exploring whether it is in the city’s power to change the law. I doubt that it is,” Sanders said. “We’re looking to see what is possible, because I don’t believe the citizens should be held responsible if we can prove there has been fraud.”

JANUARY 17, 2011

Changes must be made to these provisions to stem the tide of growth. In addition, the city’s actuary is now reviewing the actuarial assumptions used for the city pensions systems; there is a strong likelihood that the investment assumptions will be reduced, which will also increase costs, making changes to benefit provisions all the more important. Changes to the pension system always take the form of a new “tier” that reduces benefits for future employees. Defined contribution plans for current and future employees should also be part of the discussion.

Richard Winsten, lobbyist, Meyer, Suozzi, English & Klein

Greg Floyd, president, Local 237 Teamsters

The most important issue is to recoup through civil lawsuits under the Martin Act a dramatic $30 billion in investment losses from 2007-2009 for the five city systems due to the financial collapse precipitated by widespread securities fraud by too-big-to-fail banks, incompetent and rotten with conflict of interest credit rating agencies, and the asleep-at-the-switch SEC. These losses contributed directly and indirectly to massive city budget deficits and exponential increases in New York as employer pension contributions. I hope that in addition to seeking pension benefit reform, the mayor will focus as well on civilly recouping the $30 billion loss to the city pension systems.

Teresa Ghilarducci, chair of Economic Policy Analysis, The New School; author of When I’m SixtyFour: The Plot against Pensions and the Plan to Save Them The city needs to have control over the level of the pension benefits it ultimately has to fund. The city should take advantage of age and disease! Older people are migrating to New York, bringing their pensions and health care demand with them, and that is a great thing for economic development.

The most important issue is to let the public know that the pension is funded and is not in danger of going broke, and the benefits for the employees who rely on this system will be paid out, and they are not in danger of not being paid. The pension can be reworked where we collect more contributions going into the future. The system is not broken. Have we maintained those 3 percent payments as they were, the pension fund would have much more in them. The city did play a role in pension shortfalls. But we are not New Jersey, which has not made pension contributions since 1992.

John Samuelson, president, Transport Workers Union Local 100 The issue that is pressing to me is to defend the publicsector pensions, particularly those of transit workers, against efforts to undermine our existing pensions. We didn’t cause this crisis. To think that folks that are making hundreds of millions a year were bailed out by the government, but now there’s an expectation that public workers are going to pay for deficits with reduced benefits, is ludicrous. I can’t sum it up more simply than that.

City pensions, by the numbers $10.2 billion in the 2008 fiscal year. That amount, while separate from the budget, is equal to one-sixth of the city’s budget. The city contributed $5.7 billion to its pension funds in 2008. Those contributions rose by $4 billion over the previous five years, more than tripling in size. The city’s pension contributions are expected to hit $7.6 billion by 2013. Nearly 272,000 retirees received pension benefits from the city in 2007. As a result of the financial crisis, the city’s pension investments fell by 5.4 percent in 2008, and were projected to lose more than 20 percent in 2009. The average pension payment is $30,000 per year. For recent retirees, it is $42,150. The city contributes nine times as much money to the pensions as its employees do. About one in five retirees is under 60, many of them firefighters and police officers. New York City paid its retired workers

Source: Citizens Budget Commission, April 2009 www.cityhallnews.com

CITY HALL

Developing Stories Blue Jay

ob Steel was appointed deputy mayor for economic development last June, but he did not have his official coming out until December, when he gave a speech at Google’s Chelsea headquarters on the importance of fostering innovation in the city. A former Goldman Sachs executive and undersecretary at the Treasury Department, Steel comes to the job with a mix of private-sector and public-sector experience. His next challenge will be to help create a world-class science-and-technology school in the city, to rival MIT or Stanford. What follows is an edited transcript.

City Hall: How long is it going to take for the city to see results from its efforts to spur job growth?

CH: What about the new scienceand-technology campus? Have you received any good ideas on that? BS: The background here, over the course of the last six months, EDC has been meeting with universities and academic institutions and foundations and really wise folks. There’s a two-step process, there’s the RFEI, and people are responding to that. And the mayor attached a cover letter telling people of his own personal support for the idea. We’ll hear back from them in March or April. It will take us a little time to process and take in everything we’ve received. After that, we’ll issue a more specific RFP to fine-tune the idea and make it a more specific proposal. We’ve received many calls from New York, around the country and even outside the United State. We’re excited about the engagement. Most importantly, this is an RFEI, we don’t have to get all the nits and nats nailed down. We do need to find out what ideas people have. Some people have talked to us about partnerships between a domestic institution and a foreign institution, or a series of domestic institutions.

CITY HALL

CH: Does the city need to spend more money on job growth to see a return on its investment? BS: We’ve spent a lot of money already. I do believe a combination of private and public money is the best combination. I don’t really have an opinion on the new money. I think we’ve got the seeds planted in many good places. So we’ll see how that seed corn works. CH: Are you satisfied with the number of jobs the private sector has created? BS: When we look at the enthusiasm generated by our efforts, we’re quite encouraged. I put these types of efforts in the longterm bucket, as opposed to the short-term bucket. It’s not a matter of jobs created this month, it’s a matter of creating an environment where innovation can be recognized. The fact that companies like Google want to be in New York, that’s an exciting confirmation of our ambition. CH: You’ve been on the job for more than six months. What’s your impression of city government? BS: It’s a privilege. Serving the citizenry is mission number one. The mayor is a fantastic leader. I’ve worked with lots of terrific leaders. Mayor Bloomberg is really iconic in many ways. He was successful in finance, he was a successful entrepreneur, in politics, and understands all parts of news and media. My fellow deputies have been very welcoming and great to work with. I wander in every day and sit in the same room as the other deputy mayors—I couldn’t ask for a better group of colleagues. And the commissioners I work with are all world-class. The people I work with on a daily basis, in housing, buildings, transportation, tourism, all aspects of my portfolios, from top to bottom, it’s really been wonderful. andrew schwartz

Bob Steel: There’s the short term and the long term. The short term, clearly, we’re trying to attack some of the unemployment challenges. Whether it’s working with [Small Business Services] and the job centers, and things like that, and working on training, those are things we can do in the near term. And they really have to be a high priority for us, who are really concerned for people who are living in New York. Unemployment is still naggingly high, and it’s bothersome. But I think the longer term, and the way we think about this, we have a lot of strengths in New York. The diversity of the economy. The number of different industries where we’re a leader. We’re excited, but there are things we need to be doing. We’ve identified a couple of industries where we think there’s an opportunity to do more. In some cases we’ve launched incubators. EDC has been doing this. They’ve done half a dozen—whether it’s in technology, fashion, food services or other types like that, then they’ve got lots going on. Then we focus on longer-term industries that we think we’re underweight in. An underweight example might be in the areas related to medicine and applied parts of medicine. While we have a great high-tech story, it can still be better.

CH: Your background is in banking. Did you need a crash course in these types of industries? BS: I have some experience in banking. I’m not a research scientist. It took me a while to get up to speed. I think we need to create an environment that recognizes the importance of these new industries.

CH: Some say the city is not developing enough lab space to rival other booming biotech clusters. What do you think? BS: There are four ingredients to success: there’s the intellectual capital, there’s the technical assistance, there’s financial capital and, fourthly, is real estate. Real estate is not the only one, but it’s an important one. The good news—we’ve done a lot, we also have room to do more. On the Alexandria site, there’s the potential for another building right there. CH: Where does the effort to build out the biotech industry fall in the city’s overall economic development strategy? BS: It’s small now, but it has great potential. If you look at the East Side, and you look at the research being done at Sloan-Kettering and the other hospitals, New York has a real world-class position in terms of health care.

www.cityhallnews.com

CH: The mayor has been taken to task for the city’s response to the blizzard. What went wrong? BS: Steve Goldsmith spoke for everyone when he addressed the Council, when he said we hold ourselves to a high standard, and we didn’t live up to the standard we set for ourselves. And we’re working hard to make sure we do that when we have the opportunity. I have tons of respect for Steve. There’s things in life you can’t control. Someone sent me something the other day that said there’s a difference between school and life. In school you have a lesson and then you have a test. In life you have a test then you get a lesson. We had a test, then there was a lesson, and next time we’ll do better. —Andrew J. Hawkins ahawkins@cityhallnews.com

january 17, 2011