Take TWO (AYR’s) On Times Coverage- Revisiting Light Shed by CityTime Outsourcing Scandal When Reexamining Bloomberg Management Myth

In beating the New York Times to the punch covering the Bloomberg administration’s admissions about the city’s failed outsourcing policy, an about-face in that came in response to the CityTime scandal, Noticing New York presented a very different and much bigger big picture story than did the Times Sunday. - - Missed in being so Johnny-on-the-spot was the opportunity to incorporate observations by Atlantic Yards Report today about how the Times story buttressing a key point of that Noticing New York coverage: That the ill-fated trust the administration placed in delegations of government duties to the private sector carries over into its failures with respect to the management of the city’s mega-development projects.

Atlantic Yards Report (Monday, March 28, 2011, Behind the Bloomberg administration's CityTime scandal: budget director Mark Page (who helped steer the revision of Forest City Ratner's MTA deal)) connects a dot the Times article neglected to (Behind Troubled City Payroll Project, Lax Oversight and One Powerful Insider, by David W. Chen, Serge F. Kovaleski and John Eligon, March 27, 2011). . .

. . . Atlantic Yards Report points out that the “drive to install the” [disastrously outsourced CityTime] “system could be traced to the determination of one powerful administration insider: the budget director, Mark Page” (Times quote) “one of the two Bloomberg appointees on the board of the Metropolitan Transportation Authority who pushed hard against any skepticism” (AYR quote) for the continued uncontrolled outsourcing of the Atlantic Yards megadevelopment (as a monopoly) to Forest City Ratner in June 2009 when that entailed a substantial revamping of the project without bid for the developer's benefit (and the public’s detriment).

Atlantic Yards Report thereupon lays out the course the city, MTA and ESDC should have taken at that juncture in 2009, which course might well have been pursued were it not for the obdurate case that budget director Mark Page helped spearhead to continue outsourcing to the weaseling Forest City Ratner as developer; Atlantic Yards Report does so, quoting shrewdly from a 1994 New York Times editorial written when a similar juncture was reached with respect to the Coliseum site at Columbus Circle:

The most sensible course now is for the city to find out anew the market value of this property, and that cannot be accomplished through negotiations with one bidder.

New Details in Times Coverage Plus Blame-Trading

Yesterday’s Times story and the Noticing New York coverage from Sunday (which draws partly on prior New York Times coverage) are `apples and oranges' enough so that one cannot really say either is necessarily, per se, better than the other. But let's consider.

The Time article gets to the issue of private sector outsourcing in its third and fourth paragraphs and then never returns to examine the issue of that policy (now reversed):

Last week, Deputy Mayor Stephen Goldsmith declared what had become obvious: the city cannot rely on outside consultants to monitor multimillion-dollar technology contracts, which it had done with CityTime. He added that the city would create a new office inside City Hall to do so.

An examination of the events that led to the CityTime scandal reveals lax oversight, mismanagement and a basic failure to control costs.

The Noticing New York article spent some reviewing the flaws likely inherent in outsourcing of government responsibilities.

What the Times article does do is furnish details about who saw or should have seen the CityTime disaster coming and how the ill-advised work proceeded at great expense anyway. The details for the story seem to have been furnished and fueled by some behind-the-scenes efforts at blame-trading even as the Bloomberg administration was publicly accepting responsibility with adult sobriety.

Mounting Ironies

One thing the Times failed to do is observe this irony noted in the Noticing New York Coverage:

. . . that a fraud involving a system to reliably monitor city employee attendance was perpetrated in part with the submission of false time sheets.

The details in the Times, however, addressed other management ironies:

Mr. Page, a lawyer, had little familiarity with technology, but he believed CityTime would curb timekeeping abuses and save the city tens of millions annually.

(To fully savor this one has to remember- unstated in the Times- that other factors aside, the city is said to have been taken for $80 million in fraud, perhaps more than it hoped to save.)

And:

The industry standard for payroll or other automated projects is typically a cost per user of $200 to $1,000. By contrast, CityTime’s cost per user is roughly $4,000. New York State, for example, is spending only $217 million to modernize its finance and accounting systems — a far more ambitious project — that will be used by 200,000 people.

(Previously in its story the Times provides the context that: CityTime switched from being a “fixed-price contract, in which a negotiated amount is paid for services delivered, to an hourly one. The cost then climbed from $224 million in 2006 to $628 million by 2009. Investigators say the hourly-wage arrangement, coupled with a lack of oversight, facilitated the corruption scheme.” Incidentally, when you think of the lack of any fixed enforceable price or scope of work leading to disaster, think Atlantic Yards- and Mark Page’s support for it.)

Administration Turning on Page (With Blame for Thompson Added In)

The main effort in the article to deflect blame from the Bloomberg administration is by pointing to supervision over the CityTime contract that was supposedly shared with Bill Thompson as the then city comptroller, but immediately before getting into that the article first disassociates the rest of the Bloomberg administration from Mr. Page:

“Nobody was enthusiastic about CityTime,” said one former high-ranking Bloomberg administration official who, like most people interviewed, insisted on anonymity because the investigation was continuing. “Our take was that CityTime was long and troubled, but that it had a champion, and that champion was Mark Page.”

Shades of the Atlantic Yards, also so generally unpopular (but supported by the mayor)! (Page is described in the article by a senior Bloomberg administration official as an obsessed “Ahab”.)

We learn that Thompson did not “audit CityTime, despite a crescendo of grumblings” but conversely (according to one of his former high-ranking aides) “the comptroller’s office raised, on at least five occasions, concerns over costs in meetings with Mr. Page, as well as with others working for Mr. Bloomberg.” So does the quoted claim that Thompson was “asleep at the switch” hold up?

The debate about Thompson vs. Bloomberg administration responsibility for shared responsibilities that went wrong is reminiscent of the Bloomberg/Thompson debates during the last campaign for mayor when they traded play-to-pay accusations about city pension fund investments previously covered by Noticing New York.

The skinny on this is that Thompson defended against Bloomberg’s charges saying that Bloomberg was accountable for pension funds investments since the mayor appoints the majority of board members and the chairman of the pension boards that vote on the investments. (The Times offered the judgment that the buck ought to stop with Thompson under the city charter.)

Thompson’s defense meant that he and the mayor were pointing fingers at each other, each saying that the other either 1.) had the responsibility (all of the “buck”), or 2.) was at least supposed to be acting as a check against their own abuse. Could we really expect Bloomberg and Thompson to be a check and balance for each other when it came to the pension fund investments, or CityTime or Atlantic Yards?

What came out after the election was that Bloomberg and Thompson were far cozier than almost anyone knew: “The mayor has directed or triggered between $43 million and $51 million in public and personal subsidies into a museum project led by Thompson's current wife and longtime companion, Elsie McCabe-Thompson, dumping $2 million of additional city funding into it as late as September 30, in the middle of the mayoral campaign.” (See: Bloomberg and Thompson: The (Really) Odd Couple, Now it can be told: The surprising ties between the billionaire mayor and the poor slob who ran against him, by Wayne Barrett, January 05, 2010.)

So much for the idea that the two men were a check and balance against each other.

Connect the Dots

So, bottom line, the Times article is pretty good for some original reporting that surfaces additional details respecting the particulars of Bloomberg’s CityTime embarrassment and, in addition, thank God that Atlantic Yards Report weighed in afterwards pointing out the Mark Page/Budget Director link between the CityTime scandal, but if you want a bigger picture of the connected dots when it comes to delegating the duties of government to the private sector with outsourcing together with basic examination of the myth of Bloomberg management expertise, I think you will find the Noticing New York article on this subject extremely valuable: The Myth Of Bloomberg’s Management Expertise Reexamined: What Happens When Government Doesn’t Manage Its Programs (Saturday, March 26, 2011)

The Myth Of Bloomberg’s Management Expertise Reexamined: What Happens When Government Doesn’t Manage Its Programs

Perhaps Mayor Michael Bloomberg will actually be flying through the air tonight, “taking,” as the Times puts it, “a few free swings” at the notoriously mismanaged “Spiderman” musical, but such leaping stunts from Hilton balcony heights will be sharing headllines this week with stories about Bloomberg’s own mismanagement on the job.

Word is that the Bloomberg administration is busy making acknowledgments that it screwed up (and consequently needs to make some serious readjustments) when it delegated to the private sector complex technical projects for which the administration should have retained responsible for itself. In its ill-fated relinquishment of these responsibilities to others, the administration much vaunted for its management expertise lost control of the management, cost, and scope of essential work and tens of millions of dollars of fraud ensued. All of this is surfacing with announcements Thursday night that the administration is now shifting (contritely?) to a policy of “insourcing” from what it had been a policy of “outsourcing.”

Mythical Management Stories

Before we get started on this story it would be good to review the operative myths of Bloomberg management expertise that hang in the air, courtesy mostly of Mr. Bloomberg, together with a perpetually tractable city press corps. (As he is concurrently a media mogul himself, Bloomberg even literally owns a piece of it, forget about figurative ownership.)

Let’s start first with this reminder: When Bloomberg was campaigning to change the city charter so that hizzoner could be specially bestowed a unique third term, Noticing New York furnished articles debunking Bloomberg’s claim that he, in fact, had the self-purported unique financial expertise making it essential he remain in office through the financial crisis. (See: Friday, October 24, 2008, Bloomberg Qualified Financial Crisis Leader? He Can Learn Says Schumer!, Saturday, October 25, 2008, More Discredit of Bloomberg as Qualified Financial Crisis Leader.

The Source of Government Expertise: The Private Sector vs. Government Itself

Beyond that third-term-garnering canard, the promoted myth has always been that Bloomberg is administratively an exceptionally good mayor of the city because he comes from the business world and is therefore equipped with superior proven talents. But is that really that case? To ask the question is not to say that Bloomberg is a poor manager or that he, with his team, isn’t a reasonably good one. The fair question to ask is whether he is as good as he promotes himself to be.

And maybe something else needs to be questioned in this respect as well: It is very possible, perhaps even probable, that the talent requisite for running government is special enough in itself that one shouldn’t necessarily presume that talent imported from the private sector is superior. On this point, last spring when Bloomberg had a high-profile deputy mayor slot to fill, he filled it with someone who had government experience, not private sector experience when he appointed Stephen Goldsmith, a former mayor of Indianapolis, “to the powerful post of deputy mayor for operations.” Mr. Goldsmith’s career in government dates back to 1978 when he became a county prosecutor. And what of the qualifications of Ed Skyler, the man Bloomberg had in place in the powerful deputy mayor for operations post preceding Goldsmith? 37-year old Skyler “worked his way up to run much of city government as the youngest deputy mayor.”

Skeptics may wonder however, whether, Bloomberg’s pick of Goldsmith was principally because Goldsmith was “a management guru” according to the New York Times or, as the Times also noted, “an adviser to George W. Bush during his 2000 campaign for president.”

Bloomberg’s Hires From the Government Sector

Even when Bloomberg hires people in his `private-sector' incarnation he has shown a predilection for hiring people from government, the first most notable example being when Bloomberg hired (at Bloomberg, L.P.) his apparently top and apparently most trusted aide, Patti Harris, now the city’s First Deputy Mayor while continuing to fulfill private sector duties for Bloomberg. That predilection continues to show up as Bloomberg hires at Bloomberg L.P. people exiting his City Hal administration, an example being Former Deputy Mayor for Development Daniel Doctoroff (although even at Bloomberg, L.P. Doctoroff has been somehow permitted and utilized to play a continuing role in city development projects.)

Ms. Harris’ paramount role in Bloomberg’s life, whether she has been pay-checked on the private-sector or City Hall government side, is as his top political adviser and strategist. Hired before Bloomberg announced his interest in politics Harris, with her previous City Hall experience under Koch, was key to Bloomberg’s first run for mayor wherein he successfully captured that office. Ergo, we might note that in Harris, like new Deputy Mayor of Operations Goldsmith, Bloomberg has hired someone capable of advising him on the pursuit of the next political office he might have his eye on.

Based on Bloomberg’s pre-government curriculum vitae the expertise we could expect Bloomberg might have brought to government, besides general private sector management expertise, would be salesmanship expertise. Perhaps, more specifically, like Cathie Black, the woman Bloomberg recently hired as Schools Chancellor for her private sector expertise, media-company salesmanship expertise. The other kind of expertise we might expect from Bloomberg’s CV (and we will get back to this in a moment) is computer systems development expertise.

Salesmanship Expertise

Black came up through the advertising sales side of the magazine business. Like Bloomberg, Cathie Black puts some premium focus on self promotion. In a New York Magazine cover story profile of Black (The Very Public Schooling of Cathie Black -“Just Smile” Mayor Bloomberg hired magazine executive Cathie Black as schools chancellor to sell his educational philosophy to the public. But she’s having a hard enough time selling herself, Feb 6, 2011) Chris Smith (who also wrote the excellent Mr. Ratner’s Neighborhood, Aug 7, 2006) provided some assessments of Black’s management skills and how she got to whatever pinnacles she achieved:

Some corporate executives and former colleagues praise Black’s ability to run a tight ship, while others say her managerial talents are at best ordinary. “I never thought of her as a brilliant manager,” says a magazine editor who worked with Black for years. “I thought of her as a competent person. She was always kind of a mystery to me, because she kept getting big jobs and seemed to do all right with them, but it was never quite clear how that happened.”

Colleagues, however, sometimes wondered whether Black’s energies were devoted to promoting her magazines or herself. “She would be in her office all day, and much of her time was spent writing notes: ‘Dear Dr. Kissinger, what a pleasure it was to sit next to you at dinner last night,’?” remembers an advertising associate.

* * * *

One guest, a longtime colleague of Black’s, was reminded of a different setting. “I remember going into her home library, and it’s all these books: Swim With the Sharks Without Being Eaten Alive, What They Don’t Teach You at Harvard Business School. All these self-help business books, hundreds of them: ‘How to do the direct eye contact,’ ‘How to learn how to shake a hand,’ ‘How to learn to tell people you’re listening.’ All these tricks!” She was less of a superstar manager, in this view, than a gifted saleswoman of magazine ads—and herself.

Computer Systems Development Expertise

The core of the Bloomberg, L.P. business, the success from which it was all built, is the computer system that was put together to deliver financial data that became the Bloomberg terminal business (presenting huge conflict of interest with Bloomberg’s role as mayor) and then ultimately the larger (perhaps itself money-losing) Bloomberg media empire.

One might therefore presuppose that Bloomberg knows how to manage the development of sophisticated and complex computer systems. Does he?

The 411 on 311

Almost everyone, whether they are a Bloomberg detractor or not, considers that one of the greatest successes of the Bloomberg administration was its introduction of the 311 complaint system. In fact, Bloomberg himself promotes it as an important success and Bloomberg was around for a photo-op to personally answer the system’s 100 Millionth Call. (See: Bloomberg Answers 311 For 100 Millionth Call, by Jaya Saxena, May 10, 2010.)

One place where Bloomberg promotes his 311 system accomplishment is on his self-adulatory MikeBloomberg.com, a site almost too ludicrous to be believed and which we will have to spend a moment considering. The site devotes a page with links to how the 311 system won a Digital Government Achievement Award in 2010.

That particular page is bylined “NYC.gov,” whatever that means. Which brings us to the our next point for consideration.

Digression on the Self Adulation of Mike.com, Mike.gov, Mike.org

Though it is in fact only one url site, MikeBloomberg.com is set up to look as if Bloomberg has multiple operative sites: “Mike.com” representing Mike as a businessman, “Mike.org” representing Mike as a philanthropist, and “Mike.gov” representing Mike as public servant (i.e. mayor). Up top there are buttons that bring up a separately masthead design for each of Mike’s purported incarnations. In so doing, Bloomberg actively glories in what makes many of us very uncomfortable, that Bloomberg is wearing too many hats and that there are insufficient protections to keep these roles safely separate.

As per prior Noticing New York coverage the concept of Bloomberg as philanthropist needs to be carefully examined.

The mastheads just mentioned are so precious I am producing them below ad seriatim, preserved for posterity. On a roll, Bloomberg actually has six buttons producing various mastheads. The other three are: “Independence” (essentially a stand-in for the "No-Labels" party Bloomberg likely wants to run on and may have bankrolled to start), “One of 2010's top philanthropists” (that makes two philanthropy mastheads, and an OpEd praising labor with a steel union hard hat.

Mike.gov (Mike as Public Servant, i.e. "Mayor")

Mike.com (Mike as a Businessman)

Mike.org (Mike as a Philanthropist)

“Independence” (Watch for the New No Labels Party)

“One of 2010's top philanthropists”

OpEd praising labor, with a ironworkers union hard hat.

This is not to mention the Run Mike Run site already actively promoting a Bloomberg run for president.

Back to the 411 on 311

The 311 system is a commendable achievement but if you think about it, given the rapid advances in computers that had occurred by the time Bloomberg took office (January 1, 2002) it was a computer system whose time had inevitably come.

Neither Bloomberg nor New York invented the 311 system. The actual history on this?:

In 1999, Chicago created a “311” call center, which takes citizen complaints and refers them to the appropriate department for resolution.

* * * *

New York, Baltimore, Albuquerque, Dallas and other cities quickly copied Chicago. (For a map of the cities currently using 311 click here.)

(See: Customer Service & the 311 Transformation- and BTW if you click on the link you will see how widely spread the system is to other lower-echelon cities.)

As the above article indicates the cutting edge matter to consider in this area is not now whether these 311 systems are widely spread throughout the country, but that the cities using them, (including New York) have not been advancing their development for the full range of capabilities that are possible.

Is Mike Good With Computer System Development?

This brings us to the stories that concerned us when we started off at the beginning of this post: How good is Bloomberg at managing the development of sophisticated computer systems? Of all conceivable places, this is where the Bloomberg administration seriously fell down on the job with a spectacularly embarrassing management failure. This is why the administration is now announcing that it will be switching to a policy of “insourcing” from “outsourcing.”

At the end of last year it came out that the city was the victim of a “$80 million information technology fraud scheme involving development of the CityTime project, “an automated system devised to streamline employee timekeeping.” The New York Times wrote that the ongoing federal investigation was:

casting a pall over an initiative that the mayor had championed as a hallmark of efficient, computerized management, the case does little to help the opinion of the administration’s outsourcing practices.

(See: Director of City Agency at Center of Fraud Case Is Suspended, by David W. Chen and John Eligon, December 16, 2010.)

Here is more from that story:

Mark Mazer, a consultant, orchestrated the scheme, which got under way in 2005. He awarded contracts to people he had ties to, and took nearly $25 million in kickbacks, prosecutors said. Mr. Mazer, his colleague Scott Berger and the men whose companies he directed business toward, Dmitry Aronshtein and Victor Natanzon, were charged with filing fraudulent time sheets for consulting work. Mr. Mazer’s wife, Svetlana, and his mother, Larisa Medzon, were also arrested, accused of money laundering by funneling the kickbacks through a series of shell companies.

It is ironic that a fraud involving a system to reliably monitor city employee attendance was perpetrated in part with the submission of false time sheets.

Here, from the Times site, is an assessment of the performance of the Mayor’s Office that comes with help from a FOILed letter from within the administration itself:

The indictment raises questions of the city’s oversight of the CityTime project, and how the Office of Payroll Administration lost control of the project under the office’s executive director, Joel Bondy. Mr. Bondy has been suspended without pay by Mayor Michael R. Bloomberg and Comptroller John C. Liu.

* * * *

Although he was a subcontractor, Mr. Mazer held an informal position of authority in the city’s payroll administration office, with . . . the power to shape and approve contracts and work orders, the authorities said.

Some city officials had huge concerns as far back as 2003 about the integrity of the project, whose costs have ballooned by hundreds of millions of dollars.

In a scathing letter made available in December 2010 through a state Freedom of Information Law request, the city official in charge of overseeing the project, known as CityTime, accused the company that designed CityTime, SAIC, of repeatedly delaying the project in order to get paid more, failing to hew to basic industry standards and rewriting contracts on its own. The official even predicted, sarcastically, that SAIC would try, in a year’s time, to charge the city “8,000 hours” for shoddy work.

The letter, dated Feb. 19, 2003, offers a devastating critique of the company, and raises questions about the city monitors of the project — the mayor’s and comptroller’s offices. And the consultants hired to ensure quality control, it appears, were doing very little of it.

The Times story goes on. Can one simply just expect “a certain level of professionalism and compliance with acceptable industry standard practices” when outsourcing huge sophisticated projects to private sector vendors? Hmm. We read this:

In the letter, Richard R. Valcich, executive director of the city’s Office of Payroll Administration, assailed SAIC, a giant engineering company based in McLean, Va., for conducting numerous reviews without approval from the city, other than to “further delay the project and, of course, increase SAIC’s costs.” Mr. Valcich also said “a certain level of professionalism and compliance with acceptable industry standard practices is expected of a contractor for the execution of a $100 million-plus project.”

(See: CityTime, Dec. 21, 2010.)

This Weeks’ Headlines About Bloomberg Administration Policy Change

It may seem unfair (and not conducive to governmental transparency) to jump on the Bloomberg administration just as it is admitting its own mistakes this week, but these things are important to understand and this is a window into serious questions about how governments should manage their important projects. Deputy Mayor Stephen Goldsmith (the fellow discussed above) was the administration representative tagged with getting the word out with both a press conference and a Daily News OpEd piece. (Daily News OpEd: To tighten belts, let's insource: Deputy Mayor Stephen Goldsmith says city workers can do more, by Stephen Goldsmith, Thursday, March 24th 2011.)

The basic ideas Goldsmith was getting out were in his Daily New OpEd:

I have concluded that much of the solution lies not in more outsourcing to the private sector, but rather in employing city workers to perform more of our IT work. So in the weeks and months ahead, we will decisively shift more work from consultants outside government to our talented public employees. This will save taxpayers millions of dollars a year.

* * *

And we are going to start challenging all components of technology contracts, and ensure that the city does not pay a markup to a consultant for work we could just as well do internally.

* * *

Insourcing the management of projects and important decisions about scope and cost will allow us to save taxpayer dollars, enhance service delivery and ensure that IT vendor resources throughout the city are delivering on time and on-budget for New Yorkers.

According to Crain’s coverage of the press conference (noting it was “something of an about-face” for the administration) Goldsmith’s expression of promised savings at the press conference was 100-fold of what he promised in the OpEd:

“I think the eventual savings will be in the hundreds of millions of dollars,” Mr. Goldsmith told reporters at City Hall. No formal estimate of the savings has been calculated, but “there are some folks we're paying contractors' [higher] rates to that we could easily get done on our side.”

And Goldsmith said:

the change promises not just to save money but to reduce fraud. “Whenever you have a vendor, you have to have a high-quality city employee supervising the vendor,” Mr. Goldsmith said. “This level has caused us not only to pay more, but has caused us to lose too much control.”

City Comptroller John Liu also weighed in:

“Comptroller Liu has consistently expressed his concern that too many projects were spiraling out of control and that privatization and outsourcing are not a panacea,” said Mike Loughran, a spokesman for the comptroller. “We think this newfound understanding by City Hall will be in the best interest of New Yorkers.”

At 7:04 that night WNYC had on the air a franker Goldsmith quote with an interesting ring to it (not available on the web):

I think the bigger problem is they become the City. Right? We lose control of the scope and we lose control of the price and we need to bring more of the management on our side of the table.

Crains went back a year pre-scandal for this prescient quote from the union side:

Last year, Henry Garrido, an assistant associate director at District Council 37, said, “They continue to hire contractors left and right to do a lot of the work that could be done in-house.”

WNYC had this in the above quoted report:

Union leaders are praising the decision. District Council 37 president Lillian Roberts calls it a "beginning."

[Roberts says the City currently has 17 thousand contracts worth $10 billion dollars.]

The same night, WNYC’s Bob Hennelly reported on his interview with Goldsmith on the subject in its Financial 411 noting that the CityTime payroll program was supposed to cost $63 million but ballooned to more than $700 million: Financial 411: Insourcing Vs. Outsourcing, Thursday, March 24, 2011.



Questioning an Excuse IFF-Muss-ly

If you listen to the Hennelly report you will hear him disparaging the idea of the city attempting to maintain quality assurance by “having a contractor on top of a contractor to make sure the contractor was doing the job.”

Apparently Goldsmith when talking with Hennelly slipped him an excuse for the problems. In Hennelly’s words:

What happened here is that, you know, the department of information telecommunications and technology was only founded in 1994. That’s not a long time in terms of these huge contracts so just in the last few years it really has gotten to the place where it has technological capabilities inside the city workforce that can, indeed, ride herd on these outside contractors.

I am not sure that is exactly true. Back in the 70's a close friend of mine was involved in setting up the city’s computerized “Integrated Financial Management System” (IFMS- pronounced “IFF-Muss”) which was a fairly sophisticated computerized system designed to restore management controls after the state and city fiscal crisis. In theory this “mastermind of the City of New York” . . “that makes Hal, the computer in the film ''2001: A Space Odyssey'' look like a pocket calculator” should have supplied Bloomberg and cohorts with resources to avoid the rampant out-of-control fraud of the CityTime scandal.

Applied to Development in New York City

Do you want to know what was most on my Noticing New York mind the entire time I was considering all this information about the ill-advised course taken with the Bloomberg administration’s outsourcing of these sophisticated and technically complex projects? It’s the penchant of the Bloomberg administration to do essentially the same thing when, by policy, it hands over large swaths of the city like Atlantic Yards, Willets Point, Columbia's West Harlem takeover, and Hudson Yards, to private developers (or paves the way for the leveling of Coney Island), essentially subcontracting the public’s warfare to those developers and just hoping for the best. It is the same thing: Government walking away from the job that only government can really do well.

Surely, with these subcontracted handouts to the private sector, the public similarly loses money, but this time billions instead of hundreds of millions. Similarly, just as Deputy Mayor Goldsmith says: “the bigger problem is they become the City. Right? We lose control of the scope and we lose control of the price and we need to bring more of the management on our side of the table.” And if this loss of control doesn’t lead to what is technically “fraud” it leads to essentially the same kind of losses for the public as the unleashed developers ultimately deliver mega-messes that differ significantly in quality, scope, and nature from what they promised on day one.

(This is one of two sister Noticing New York articles being posted simultaneously on the subject of what happens when government neglects its duty to manage the work of government. To read the sister article, click here.)

The American Jobs Creation Act, Job Creation That Wasn’t: What Happens When Government Doesn’t Manage Its Programs

Thursday night American Public Media’s Marketplace ran a story that told of how the American Jobs Creation Act passed by Congress seven years ago didn’t create jobs. On the theory that it was inducing corporations to bring home foreign profits to create jobs the act created a window of time during which taxes on those profits were greatly reduced.

What happened since that the law passed had such a pretty title stating its goal with such incontrovertibly boldness? This is what Marketplace tells us:

C. Fritz Foley teaches finance at Harvard. He found more than half of every repatriated dollar went to something other than job creation.

C. Fritz Foley: The funds were used to pay dividends to shareholders, and to repurchase shares.

We are told that jobs weren’t created because government fell down on its own job. Under the act Congress passed, the federal government simply did not actively manage the program for the purpose the act was passed. According to economist Allen Sinai, when it comes to companies participating in such a program, Congress “should hold their feet to the fire.” Here is more from Marketplace on Mr. Sinai’s views:

Economist Allen Sinai heads the research firm, Decision Economics. He says back in 2004, companies weren't punished if they didn't use their repatriated profits to create jobs. . . . .

Allen Sinai: They can set conditions, set an accountability mechanism, which says you get this money only if you hire people.

Why is an ineffective law from seven years ago and questions about what Congress should do coming up now? Because a “group of high-tech energy and pharmaceutical companies” wants a replay of the tax-reducing American Jobs Creation Act. They’ve launched a website to promote the idea and they are again saying that “the money would be used to create jobs here at home.”

The website is WinAmerica (the url contains “winamericacampiagn”) and here is what you read as soon as you get there (emphasis supplied).

The lead-in:

We have an opportunity right now to strengthen our economy, pay down our debt, put people back to work, and invest up to $1 trillion in America.

The wrap-up:

Providing American businesses with incentives to invest at home is a common sense solution that will immediately inject up to $1 trillion into our economy and provide businesses with the certainty they need to help get Americans back to work. The time to act is now. Let’s invest the money here at home – not spend it there.

What’s the response of the companies promoting the new law when asked about how the old law didn’t create jobs? They acknowledge what they have to and move on to “Rationalization B.”

According to Marketplace:

The companies pushing for another tax break say that's true. [What Havard’s C. Fritz Foley said about how the corporations used the `repatriated’ monies to pay dividends to shareholders, and to repurchase shares.] But they say the money still made its way into the U.S. economy. Shareholders reinvested the dividends or spent the money.

The Marketplace story can be found here: Companies press to repatriate overseas profits, by Nancy Marshall Genzer, Thursday, March 24, 2011.

Applied to New York City Development

What is the fascination of this story for Noticing New York? It reminds us of the non-job-creating “job creation” programs we get that funnel money into real estate mega-developments like- oh, why bother with any other example- Ratner’s Atlantic Yards mega-monopoly.

Basically the same thing is true: Why should we ever expect that these programs would ever be effective at creating jobs when government isn’t on duty managing matters to ensure the programs are being run for that purpose. And when government isn’t, the programs become just about the developer's lining their pockets at public expense.

In the case of Atlantic Yards we have two levels of AWOL government, each level with its own fictional job creation program that is not fulfilling its ostensible purpose: At the state level the ESDC (the “New York State Urban Development Corporation” doing business as the “New York State Urban Development Corporation”) does not monitor or pay attention to how many jobs are created at the megadevelopment and on the federal level (Congress again neglecting the declared core of a program) we have the non-job-creating EB5 program that we will get to in a minute. Perhaps what mightily facilitates the ease with which the EB-5 program is abused is that it is not known by any formal title, like the American Jobs Creation Act, leaving the New York Times to struggle as it refers to Ratner’s `enrollment’ of “498 Asian investors” in “an obscure federal program that grants [“sells” is a better word] green cards in exchange for a $500,000 investment in a job-producing American project,” thereby stumbling compliantly into having referred to `job-production’ which is, as discussed, actually nonexistent.

As for ESDC, it pushed through Ratner’s net-loss-to-the-public basketball arena (now the Ratner/Prokhorov arena) with the unsound idea that even if public money would be lost on it, at least jobs would be created. But there are numerous problems with the idea that ESDC or the government is on the case in this regard:

1. ESDC doesn’t have a place to start from in tracking jobs, since all the job creation figures bandied about to promote the project were insanely phony to begin with.

2. ESDC doesn’t itself actively keep track of or monitor job creation. When stories surface about the number of jobs being created (or lack thereof) it is Forest City Ratner that is supplying the figures.

3. The actual jobs, to the extent that they can be detected, are much lower than (expected?- NO) originally bruited. Very low indeed.

4. Ratner is doing what he can to keep employment resulting from the megadevelopment at a minimum, particularly union employment, including through the use of untested modular construction.

5. The role of government to monitor and administer its own job creation programs really oughtn’t be delegated by abdication as, for instance, to the CBA (so-called “Community Benefits Agreement”). Rather, to the extent that this is what ESDC did with Atlantic Yards, Forest City Ratner has actively gone out of its way to avoid hiring an Independent Compliance Monitor as called for by the CBA.

6. To the extent that any part of the provision of jobs is meant to be related to the provision of minority jobs, the responsibility for tracking that remains in the hands of someone Ratner hired, Darrle E. Greene, best known for being indicted for (and ultimately having to make restitution for) falsifying numbers he was submitting to government. When the disgraced Greene was found to be involved in the Aqueduct Raceway scandal (involving multiple parallels to Atlantic Yards) Greene was forced to withdraw from the Aqueduct transaction but he is still around for Atlantic Yards.

Ratner must have thought, “Gee, the racket of getting credit for phony jobs is pretty good” (a little like the old joke about what a good business prostitution is- “you sell it, you still got it!” Or maybe it's like a four-year-old girl’s tea party with the pretend tea you can keep offering no matter how many Barbie or Winnie the Pooh guests show up- “Would you like some”- and then you pour the invisible liquid of which your imagination has an infinite supply). So Ratner figured he ought to branch out and diversify in the phony jobs business. Hence, the EB5 program where he gets to sell to the federal government the same non-job-creation he sold to ESDC, getting credit twice for the very same quite minimal, decreasing and mostly phantom jobs.

What’s lost in all this nonsense when honest government has strolled off the beat is that this vast capacity for delusional benefits is displacing real economic activity that would have a much better chance of creating jobs.

(This is one of two sister Noticing New York articles being posted simultaneously on the subject of what happens when government neglects its duty to manage the actual work of government. To read the sister article, click here.)

Cuomo’s H.E.L.P. History Potentially a Pertinent Factor Vis-à-vis Ratner’s Atlantic Yards’ Dense Modular Construction

It seemed worthwhile to take the Way Back Machine for a spin to retrieve for present-day consideration what may be some pertinent background vis-à-vis Forest City Ratner’s announced intention to build the tallest prefab modular building in the world and then, perhaps, to proceed to build the densest thicket of such buildings imaginable. (See: Friday, March 18, 2011, The Real Question to Ask About the Ratner Bait-and-Switch Approach on Atlantic Yards and Friday, March 18, 2011, A Ratner Bluff on the Not-So-Fab Prefab Modulars? A Second Opinion.)

A mere score of years ago, Andrew Cuomo was using modular to build some of his H.E.L.P. projects, projects that provided transitional or permanent housing for homeless families. This was back when Mr. Cuomo, now governor of the state of New York, was just the son of the then governor of the State of New York, his father Mario. (See: Housing for Homeless Approved, by James Feron, Special to The New York Times, April 24, 1990.)

Why is this important? Because Mr. Cuomo is the decision maker to who controls ESDC (the “New York State Urban Development Corporation” doing business as the “New York State Urban Development Corporation”) and could thereby, with relatively little difficulty, pull the plug on Bruce Ratner’s Atlantic Yards Mega-monopoly to send Mr. Ratner packing. He should.

Although it is potentially pertinent background, it should not be thought that Mr. Ratner is proposing to build in the footsteps of Mr. Cuomo. Mr. Cuomo was never building the sort of tall buildings or high-density project that Mr. Ratner is talking about and he did not push the envelope beyond tested technology as Mr. Ratner proposes to do. Mr. Cuomo promised high quality cost effective design (donated by contributing architects), he did not engage in a bait-and-switcheroo that started with a promise of premium starchitecture via the likes of Frank Gehry.

Nevertheless, there are those who are likely to remember, recalling the issues of the day. The unions are likely to remember. Mr. Cuomo is likely to remember. And who knows what those who may be talking to Governor Cuomo may be saying to him about this, perhaps thinking that the rest of us don’t remember. One of the issues that came up back then, an issue you can only get with modular construction, is whether the modular units might be built out of state. Heck, with modular construction you could build in Canada! But, back then, not even the governor’s son was supposed to build out of state, not even to save money to house more of the homeless.

Using the Way Back Machine capabilities of the New York Times (via an article bylined by Joyce Purnick best known these days as Bloomberg’s biographer) here is what some of the debate looked like back in 1986:

The reasons given for the delay differ. Andrew Cuomo, who does not acknowledge a delay, said it has taken this long to line up the financing and iron out the legal questions over the title to the land. . . .

Others working on the project cited complications with local unions. The building-trades unions are balking, they said, because they object to using prefabricated units in the place of traditional construction.

'Lot of Misdirection'

A number of people involved in the project said this week that although statewide union leaders had agreed, in principle, to using prefabricated units, local leaders and members do not. Workers elsewhere in the state would make the prefabricated parts, but local workers would lose on-site work.

Some described the problem as an internal union dispute. Others agreed, but also said the project's sponsors, including Mr. Cuomo, had failed to anticipate the problem before announcing the plan.

''There was a lot of misdirection from the beginning,'' the president of the State Federation of Labor, Edward J. Cleary, said. ''This thing has turned into a political thing. There's too much talk out in the public. Nothing is ever accomplished in doing things in the newspapers.''

* * * *

The project, the first stage of what is ultimately to be 10 shelters housing 2,000 families around the state, was seen as an innovative solution to the problems of the homeless, as well as a political solution, for the Mayor and the Governor. . . . .

Harsh Exchange With Unions

According to city officials, Mr. Cuomo and leaders of local unions exchanged harsh words at a meeting six weeks ago. Mr. Cuomo said he would not characterize the meeting that way, but would not be more specific.

The type of construction to be used remains unresolved. Mr. Cuomo, a lawyer in private practice, said that as soon as the remaining financial and legal matters were resolved, ''we'll sit down and work this out in one session.''

The city and state prefer using the prefabricated, or modular, units, because, the officials said, they would cost up to 20 percent less than conventional buildings and would save as much as five months in building time.

Mr. Cuomo described the debate over the construction methods as a long-running one between the city and the unions.

Long-Term Controversy

''It's gone on for 10 years and will probably go for another 10 years,'' he said. ''Has the controversy arisen again? Yes it has. But does the outcome of the controversy have a significant impact on the ultimate outcome of Help I? The answer is no.''

In a subsequent interview, he acknowledged that if conventional construction were used, the project would take more time. ''It has not been the cause for delay up front, but it would delay it at the back end,'' he said.

It remains unclear when construction on the shelter could begin or how long it would take. . . . .

The timetable depends on the construction method. If it is prefabricated units, he said, the shelter could be completed by next spring or early summer.

(Andrew Cuomo's Proposal for Shelter Runs into Snags, by Joyce Purnick, September 23, 1986.)

A note of disclosure: I was the attorney in charge of working on these H.E.L.P. projects with Mr. Cuomo at the New York State Housing Finance Agency which provided financing.

Whither the New York Times? Noticing New York Comment Respecting a Manhattan Institute Sponsored Debate

Monday, Atlantic Yards Report reported on a question I asked about the cognitive dissonance of the New York Times coverage of Atlantic Yards, at a debate last month sponsored by the Manhattan Institute for Policy Research. The debate was essentially a promotion for the book “Gray Lady Down” by William McGowan. The debate, moderated by Fred Siegel and hosted at St. Francis College in Brooklyn Heights was between author McGowan and Michael Tomasky, Editor of Democracy Journal and American Editor-at-Large, Guardian.

Mr. McGowan’s book posits that the Times has lost its way and much of its grandeur as a highly respectable publication mostly by reason of becoming a reflexively knee-jerk liberal and a politically correct organ on social issues. That then is pretty much what the debate was about. McGowan was clearly able to identify multiple mistakes made by the Times, but much of his fault-finding came across as strained. When he asked for a show hands it was interesting that although the audience had a predominantly conservative bent, few in attendance indicated that they had given up reading the Times. (The Times readership decline must be occurring elsewhere.)

Here is Atlantic Yards Report’s transcription of my question concerning the Times’ cognitive dissonance:

“Is the Times earnest and philosophically consistent, or is it making calculated decisions about its financial survival and benefit? As I go back in time and look at their coverage of eminent domain abuse issues, or, for example, the Columbus Circle development, and I compare to their coverage of what I think is a very big story, Atlantic Yards, which has to do with their real estate partner, Bruce Ratner, and it takes place after they engaged in buying a building with eminent domain for their new headquarters, I don't see consistency.”

Mr. McGowan’s response can be read as a part of the AYR coverage: Monday, March 21, 2011
"Gray Lady Down," a debate on the Times, and an AY mention. A video of the entire evening from which that response was extracted was made available is on the AYR site and reappears below:

Some Valuable Ideas from the Manhattan Institute. . .

The conservative-leaning Manhattan Institute can be a source of exceedingly valuable ideas, particularly in pointing out government interventions in the natural operations of the economy that wind up proving the law of unintended consequences. For instance, Peter D. Salins, a senior fellow with the institute, was a professor of mine at Hunter Urban Planning school (and also Dean of the school at the time) and is a thinker for whom I have particular fondness. I especially recommend an elegant if physically slim little volume (and now hard to find) he wrote about the decline of the Bronx: The Ecology of Housing Destruction (NYU Press, February 1980). Salins is not a fan of housing subsidies.

Based on what I know of his work, I predict that Salins would side with urban planner and author Alex Garvin (whose ideas were recently selectively popular in the Bloomberg Administration) in saying that if you want more affordable housing the better way for government to promote it is to invest in infrastructure that opens up a wider range of building opportunities for developers. In other words: `development-oriented transit’ is preferable to that which the Bloomberg administration is doing too much of- `transit-oriented development’ (e.g. Atlantic Yards).

Intending the Consequence of Improper Public Official Conduct?

One might say that Atlantic Yards itself is an example of the law of unintended consequences especially if one conceives that the law extends to government officials dishonestly conniving with a politically connected developer to abuse public programs. But, as powerful as the law of unintended consequences, may be, Atlantic Yards is not a true test of whether many of the programs involved in supporting the megadevelopment could actually work because public officials are not administering those programs as they were intended to be administered. The absence of bids is one thing, and then no one involved actually honestly believes that there was any blight at the site, although a blight-removing public program was invoked as a government tool to remove Ratner’s competitors from the vicinity of his other properties.

If the law of unintended consequences doesn’t already encompass it, then there should be another close cousin to that law: The law of unintended (or undesired) public official dishonesty. Consideration of whether or not the myriad public subsidy programs that Salins criticizes are inherently flawed or might, if they were properly run, achieve some admirable objectives ought to be tempered with another concern: Whether these programs are also inherently dangerous to the public given that they are so readily susceptible to being hijacked by “rent seeking” developers whose goals are to redirect subsidies intended to benefit the public to into their own pocket instead.

Noticing New York Philosophy

Where does Noticing New York stand on the political spectrum? Noticing New York attempts to apply both conservative and liberal tests of what good government should be. They overlap a great deal more than is generally acknowledged. Conservatives may fear big government and liberals may fear big business, but these days the preeminent problem both should unite to oppose is the collusion of big government to give big business the edge.

Examination of the Times

Surely, the Manhattan Institute has good work to do and surely a careful examination of the Times is an important undertaking. No matter what, the evening would have been valuably thought provoking, but whereas Salins' work is regularly on target much of the evening’s critique of the Times seemed like superfluous quibbling, off-target and not up to the best of what the Manhattan Institute has to offer.

The Line That Doesn’t Exist

The Times is having a harder and harder time not covering Atlantic Yards. That’s partly because Atlantic Yards is a bigger story than the paper has heretofore rightfully acknowledged. Basically, I think there was a decision at the Times made, albeit in the necessarily amorphous and unstated way that decisions would have to be made in such a news organization, to relegate Atlantic Yards, and more specifically the governmental misconduct and impermissible cronyism associated with Atlantic Yards, to the status of an official non-story within its pages. But the story won’t go away.

With new revelations like the Forest City Ratner pattern of being involved in the bribery of government officials, the recently unveiled ambition to make Atlantic Yards the densest forest of modular units in North America and EB5 program abuses in selling green cards to the Chinese solely for developer benefit the Atlantic Yards saga is a constant poster child for malefaction. But what the Times most misestimates is the extent to which the Times story interrelates with the coverage of the national and local stories it editorially believes it should be covering vigilantly.

I believe that the Times made a miscalculation that Ratner, as a financial buddy, could be off-limits for critical pieces- but not puff pieces- (Its own little behind-the-scenes deal with the devil), but that indulgences would come (in the good old religious sense of buying indulgences to recover from sin) via its moralistic vigor on national issues. But there is no such line to be drawn. Everything is connected. (This is one of the points of an epically idiosyncratic Noticing New York piece currently in the works: Adding A few More Off Topic Notes (Or Are They Really?).)

(* You encounter a similar Jekyll and Hyde split with Michael Ratner: On the one hand he is a defender of intentional human rights coordinating with the likes of Naomi Wolf and on the other he is feathering his nest with political contributions to now-indicted state senator Carl Kruger, no doubt with the intention of keeping the money flow from his brother Bruce Ratner off the radar screens)

The Times can’t write about race relations without observing the context in which white men like Ratner have attempted manipulate those concerns for their own financial advantage. The Times can’t cover Bloomberg and his potential run for president without observing how he favors awarding the development of big swaths of the city to a small in-crowd of connected developers. The Wall Street shenanigans covered by the Times very popular op-ed columnist Paul Krugman echo in the goings on with respect to Atlantic Yards as do all the Times stories about the accelerating redistributions of wealth from the middle class to the upper echelons.

The list of what the Times is missing by failing to make connections goes on ad infinitum. It also all relates to the question asked by the title given to the St. Francis evening debate: “Is the New York Times Good for Democracy?” The Times seriously hamstrings itself with respect to covering the big story on American Democracy by failing to adequately cover Atlantic Yards.

Noncoverage of Noncoverage

Here is another related story covered by the Atlantic Yards Report that the New York Times in its own noncoverage couldn’t report on: The sudden shift to noncoverage of Atlantic Yards by the Brooklyn Paper after that paper, like a lot of other local neighborhood papers was bought by Rupert Murdoch in 2009. (See: Sunday, March 20, 2011, Seven years ago, Brooklyn Paper house ad touted "the most complete and honest coverage" of Atlantic Yards and "changing face of Brooklyn".)
Notably, mega-mogul Murdoch is not only the owner of Fox News and the New York Post: With the acquisition of the Wall Street Journal he is intending to be, as was discussed during the evening’s debate, the Times number one competitor. Among other things to compete more directly with the Times Murdoch the Wall Street Journal has started covering local New York City news. The local news newspaper war aspect to this is a story in itself but the other big story on the multiple Murdoch-owned publications has always been the (largely right/Republican/big corporate player) slant to their coverage. (See: Any Jon Stewart Daily Show or The Raging Septuagenarian, by Gabriel Sherman, Feb 28, 2010.)

The recent Atlantic Yards Report piece takes us back down memory lane to March 20, 2004 when the Brooklyn Paper ran a full page ad toting its critical coverage of Atlantic Yards, including:

The proposed Nets arena is just a small part of the master plan, the most expensive Urban Renewal and property condemnation in Brooklyn’s history.

Only The Brooklyn Papers has asked: Is this the Manhattanization of Brooklyn ... or the “depeopling” suburbanization of our streets?

Are these projects good for Brooklyn?

YOU'LL FIND THE MOST COMPLETE AND HONEST COVERAGE OF THE CHANGING FACE OF BROOKLYN ONLY IN THE BrooklynPapers.

Atlantic Yards is still the biggest story in Brooklyn but since the Brooklyn Paper was acquired by Murdoch (and Ratner became its landlord) it has been relegated to a non-story within that paper’s pages just as at the Times. Atlantic Yards Report comments: “The Brooklyn Paper did an aggressive job covering Atlantic Yards, though that's diminished since” the paper was acquired by Murdoch. `Diminished’ is a severe understatement. Among other things it hasn’t covered the EB5 story concerning the sale of green cards to Chinese `investors.’ And the paper would certainly never now run a full page advertisement trumpeting its critical coverage of Ratner.

"Grey Lady Down"

In the Atlantic Yards Report coverage of the "Gray lady Down" debate Norman Oder offers this assessment:

I have no doubt that the editorial page is committed, by virtue of the "spirit of the Times" (aka Sulzberger), to supporting Atlantic Yards, or, at least, keeping its mouth shut about dismaying details.

Is the Metro desk in the tank? I don't think so--and I can't let myself think so. But the Times has done, on the whole, a lousy job covering Atlantic Yards.

Though little discussed during the debate evening in terms of Atlantic Yards, the events organizers framed part of the overall concerns for the evening thus:

The Times’ editorial page has always set and followed an agenda. The problem, some argue, is that its editorial viewpoint has bled over into the news reporting itself.

“Is the Metro desk in the tank?” Mr. Oder says he can’t let himself think so and that is probably not 100% the case, but Mr. Oder answers his own question more or less when he concludes by saying:

Editors make choices, and the Times has chosen to put far less energy into looking carefully at Atlantic Yards than at a number of other issues. Meanwhile, the Sports section laps up Nets publicity.

Bloomberg Muscles In On Earthquake and Tsunami in Japan With the “Mayors Fund to Advance the City”: Charity? We Groan Again!

(Bloomberg's appeal above muscling in on the earthquake and tsunami action.)

Mayor Michael Bloomberg wants in on the charity hoopla about the necessary task of sending assistance to the victims of the Japanese earthquake and quickly ensuing tsunami that struck
at 2:46 p.m. Tokyo time, on Friday, March 10. Hardly had the Japanese been struck information was appearing in the press (the Associated Press, Huffington Post, and, if you were listening, on WNYC, New York’s public radio station) that Bloomberg was soliciting to be the conduit vehicle, through the Mayors Fund to Advance the City, for sending money in aid to the Japanese! Great! That put Mr. Bloomberg immediately into the midst of one of the most Googled subjects from that point on.

But why should a Bloomberg-controlled charity run out of City Hall with “Fund to Advance the City” in its title be presenting itself front and center in this effort? And if that oddity doesn’t disconcert you enough, consider Bloomberg’s propensity to use the control he has over charitable giving (of vast sums) to further his personal political ambitions. (See: Monday, October 20, 2008, “Charity?” We Begin to Groan, Monday, May 24, 2010, Looking a Gift Horse in the Mouth? An Examination of Brooklyn Bridge Park in Terms of the Politics of Development, Part I, and Tuesday, October 21, 2008, Time to Report on the Best City Council Hearing Testimony.)


Here is the text currently on Mayor Bloomberg’s website (image at the top of this article and, closer up, immediately above):

The Mayor’s Fund is accepting donations in response to the earthquake and tsunami in Japan. 100% of your donation will be allocated to aid these disaster relief efforts. Click here to make a donation.

Below is an image of what you get if you click to donate.

Even if the money Bloomberg induces people to donate with this gambit is not deployed with political strings attached as has reportedly been the case in Bloomberg’s distribution of other “charity” in the past, this looks like it is undoubtedly a political calculation.

Want convincing on this?

Bloomberg’s charitable distributions have always been supervised by his senior political strategist, Senior Deputy Mayor Patti Harris. And, as previously covered by Noticing New York, back in 1997 when Mr. Bloomberg had already put Ms. Harris in charge of such giving, Bloomberg said in his book, “Bloomberg by Bloomberg” (which also unveiled his ambitions to be mayor and president of the U.S.):

. . . . that the FIRST consideration of charity was helping Bloomberg, L.P. We must therefore necessarily ask whether this Bloomberg who previously looked at charity primarily in terms of being “useful to our company later in our commercial activities”

(See: Friday, October 2, 2009, No Real Debate About It: Press Remains Way Off Track in Presupposing Bloomberg’s “Charity”.)

Here are links to other coverage. The comments are more interesting than the stories that simply repeat the information Bloomberg apparently disseminated press-release style to the press.

Japan Earthquake 2011: Bloomberg Says City Will Donate To Relief Efforts
First Posted: 03/11/11 02:37 PM

Commented on:
Japan Earthquake 2011: Bloomberg Says City Will Donate To Relief Efforts

Bloomberg says city will help with quake donations, Associated Press
Last Updated: 2:25 PM, March 11, 2011

A Ratner Bluff on the Not-So-Fab Prefab Modulars? A Second Opinion

In today’s earlier Noticing New York post about Ratner’s plan to build the tallest prefab modular building in the world and then, perhaps, to proceed to build the densest thicket of such buildings imaginable (Friday, March 18, 2011, The Real Question to Ask About the Ratner Bait-and-Switch Approach on Atlantic Yards), I dealt with the possibility that Ratner might be bluffing thus:

Is Ratner really intending to carry out this most recently proposed bait-and-switch or is it just blackmail to get the state and city to give him more money? Does it make a difference? The result is the same; the public has been gypped. And thank you very much ESDC; this comes courtesy of you.

The analysis of whether the public is being blackmailed essentially harkens back to the way that Ratner threatened Community Board 2 for additional approvals on his Beekman Tower project by saying he wouldn’t build the community’s promised school. He was already theoretically obligated to build the school in connection with the permission he had been given to erect such an immense building on the site. He got the benefit of the extra approvals from the community board.

On today’s WNYC 411, Greg David has another take on the possibility that Ratner is bluffing, this time harkening back, also to the Beekman Tower, but this time to the way that Ratner later (bluffingly?) halted the tower's construction in order to exact concessions from the construction unions. The tower DID eventually proceed and Ratner DID get concession from the unions.

The fact is we may both be right. If it is potentially a ploy Ratner may intend it do double duty and do both.

Business reporter Mr. David appears to be having a harder time saying he still supports Ratner’s Atlantic Yards mega-monopoly, but he refused to say, when questioned during his interview, that he was wrong from the start. He offered a tempered and lukewarm hedged assessment: “Sure I regret that it’s not going to be beautiful off the bat, but you know fifteen years from now it might be great, - I’m hoping.” - - Fifteen years as hoped for by Mr. David is, of course, outside the 10-year time frame for which ESDC did its environmental assessment and the project is actually now expected to take decades.

To listen go here for the WNYC site or click below: Financial 411: Weekly Business Roundup
Friday, March 18, 2011

The Real Question to Ask About the Ratner Bait-and-Switch Approach on Atlantic Yards

In the lightning-keeps-striking department, state officials over at ESDC* appear to have been embarrassingly stung by yet one more bait-and-switch by Atlantic Yards developer Bruce Ratner with his just-announced intention to convert the now erstwhile premium design he once promised for his Atlantic Yards mega-monopoly to a mere assembly of prefab modular units. Ratner would thereby be bestowing upon Brooklyn the world's tallest prefab building (with untested technology) and what is projected to be the densest 22-acres of residential units in North America would then become a super-tall forest of cheap prefabs.

(* the “New York State Urban Development Corporation” doing business as the “Empire State Development Corporation)

A List of Ratner Atlantic Yards Bait-and-Switches (incomplete)

This most recent episode means that an incomplete list of the bait-and-switches that have been `foisted’ upon the ESDC to date now includes the following:

1. Cheap, untested, modular construction instead of premium `starchitect' (Frank Gehry) design (or high quality materials) for the residential portions of the project.

2. The revamping of the basketball arena Gehry design to an airplane hanger design dressed up with a theoretically temporary metal lattice work wreath. That arena is also smaller than promised and apparently can’t accommodate a hockey team, not that the surrounding Brooklyn Brownstone community should actually be happy if it could.

3. A shift from a swift 10-year build-out of the megadevelopment to a schedule that (like the now 40-plus-year development of Roosevelt Island) will take the protraction of “decades” to complete.

4. Constructing, in return for the MTA’s contribution of land, a significantly downscaled train yard with 7 tracks rather than 9 or the original 10, which reduced and minimized train yard will not provide the MTA with the flexibility it needs for long-term plans.

5. A ditching of promised green space both in permanent and immediate terms.

6. A substantially lower, in fact pathetically paltry, purchase price for public land paid out over time and at the developer’s option rather than upfront. The developer also gets an artificially low interest rate courtesy of the taxpayers puts down just 20% to start and doesn't having to pay the bulk of the already discounted price the government had previously accepted, a remaining $80 million, until 2031.

Incompleteness of the List

The list above is incomplete not only because it is virtually impossible to remember well enough to enumerate every single alteration of this project for the benefit of the developer at the expense of the public, but also because there are undoubtedly more bait-and-switches in store for us. Further, as ESDC often keeps bait-and-switches under wraps, there may actually be more in place at this moment.

ESDC kept the switch from a 10-year build-out to a multi-decade build-out secret, including by its calculated decision not to give pertinent documents to Judge Marcy Friedman in the current ongoing litigation respecting the consequent inadequacy of the environmental impact reviews. Similarly, ESDC kept under wraps the substitution of the ethically questionable Russian oligarch Mikhail Prokhorov for the usual good-old-familiar American investors . . . . even if those good-old investors come as crooked as Ratner. Let’s add that Prokhorov substitution to our growing, but still incomplete, list:

7. Substitution of ethically questionable Russian oligarch Mikhail Prokhorov for familiar American investors.

Beyond numerous other giveaways, like gifting the renaming rights of two major New York City subway station hubs for the developer to sell, we can probably also toss into this stew the way that New York State public officials have abased themselves by shilling for various developer tactics designed to divert more of the public’s tax dollars, including lobbying for the granting of a special IRS loophole's continuance to finance the arena and the use of EB5 sale of green cards to the Chinese via a program theoretically intended to increase jobs in the United States even while the developer, through maneuvers like this shifting to cheap modular construction, is hacking away at the already fictional number of jobs the project once promised. We could easily include such public official abasements for the developer’s sake but perhaps the willingness of ESDC officials to abase themselves this way is just something inherently in these officials’ DNA. . . they just naturally give things away for free.

Ratner’s Preintention When It Comes to Bait-and-Switch

I am not surprised that the first thing a friend asked me upon hearing of this latest bait-and-switch was: “Do you think that Ratner intended this all along?” Whether Ratner intended this particular bait-and-switch all along is not the question. What is important, as we have pointed out before, is that ESDC worked from the beginning to put the Forest City Ratner organization in the driver's seat, giving it, without bid, exclusive rights to this megadevelopment in such a way that Ratner could always shortchange and blackmail the public with frequent bait-and-switches thereafter. This setup for bait-and-switches was certainly intended by Ratner and consciously facilitated by ESDC officials from the get-go. So whether or not Ratner intended this particular bait-and-switch is not important: He intended a framework in which he could pull off this bait-and-switch or any other bait-and-switch he could think of.

Is Ratner really intending to carry out this most recently proposed bait-and-switch or is it just blackmail to get the state and city to give him more money? Does it make a difference? The result is the same; the public has been gypped. And thank you very much ESDC; this comes courtesy of you.

Ratner and the Construction Unions

Is it possible that Ratner is a man who can say something reassuring to your face even while intending exactly the opposite? If there was any doubt, this bait-and-switch addresses that question. Yes he can. From a Noticing New York viewpoint it is possible to have some sympathy for unions some of the time (see, Monday, February 28, 2011, Private Sector Croynism Seeks to Replace Government in Wisconsin: Might New York Be Leading the Way?), but when it comes to the construction unions supporting Atlantic Yards and other mega-schemes in New York like the rezoning of Coney Island little sympathy should be extended to them.

Construction unions are interested in the churn. They are not interested in what is in the public interest (hence their partnering with Ratner). Frank Lloyd Wright once facetiously proposed that all of Manhattan be leveled and replaced by just two phenomenally enormous tall towers. I often think that if such a plan were proposed today the construction unions would be out in droves to support it, not because it was in the public interest but because it would mean a huge amount of union jobs, both demolition and construction.

It has, of course, been noted that Ratner’s switch to modular construction leaves the unions high and dry, eliminating almost all of the promised jobs and replacing them with much cheaper low-cost and perhaps out-of-state jobs. Atlantic Yards Report has posted an article, complete with embedded video of Ratner saluting his union allies at the at the ceremonial groundbreaking for the Atlantic Yards arena (Thursday, March 17, 2011, At the March 2010 groundbreaking, Bruce Ratner saluted union labor, to cheers, thanking them for "arm in arm support for this project" (video)). That was March 10, 2010.

A One-Year-Old Ratner Plan to Shaft the Unions

On March 17, 2011 (St. Patrick’s Day), the front page New York Times story that informed us that Ratner was shafting the unions by going with modular construction also informed us that, “Mr. Ratner’s development company, Forest City Ratner, has been investigating modular construction for a year, but has kept its plans secret.” For a year!

That sounds like two things were going on simultaneously, Ratner was praising the unions as his allies and secretly planning to shaft them.

Where Now and Who's Watching?

Where do we go from here? The state ESDC is now owned lock, stock and barrel by Andrew Cuomo now that he is governor. Everything that happens from here on in, every future bait-and-switch, is on his watch. If Cuomo wants to prove that the money he accepted from Forest City Ratner during his campaign for office didn’t mean anything he should terminate the project and take the land back from Ratner now. Similarly, Eric Schneiderman, our new New York State Attorney General who promised to investigate abuses of eminent domain like Atlantic Yards but took $12,500 from Forest City Ratner for his campaign should get busy investigating as he promised. With the Ratner organization being implicated in paying off public officials with respect to two of its biggest projects in both Brooklyn and Yonkers, he has plenty to investigate.

Note that both Mr. Cuomo and Mr. Schneiderman should have a freer hand to act (without sacrificing any significant political capital) now that the Ratner plan to shaft the unions has seen the light of day. One thing that taking the project from Ratner and bidding it out to multiple developers (as at Battery Park City) could do is bring those jobs back into play and, with multiple developers. . . And the work would likely materialize far sooner.

How Could Cuomo Give Ratner the Boot?

One simple, efficacious way for Cuomo to send Ratner packing would be to simple settle the current environmental lawsuit before Judge Marcy Friedman in favor of the myriad community plaintiff organizations that joined together to bring it. In fact, looking at this switch to modular prefab, Atlantic Yards Report has just added one more reason why that lawsuit should be settled in the plaintiffs’ favor: See, Thursday, March 17, 2011, Does modular construction mean a new environmental review is needed for Atlantic Yards? Settling in the plaintiffs’ favor would give us all one dead Ratner project. It would also mean an end to the current structure that locks the state and city into being the victim of a constant round of bait-and-switch operations throughout the foreseeable decades. Your move, Governor Cuomo.