We Turn Newsweek’s “Conventional Wisdom” on Bloomberg Upside Down: “Good” is Bad

Newsweeks’ February 9, 2009 edition’s “Conventional Wisdom Watch” (p. 14) declares with a Arrow-up for Bloomberg:

NYC mayor quiets critics with $239 mil. in ‘08 charitable gifts. Now rebuild Ground Zero.

Wrong! Bloomberg’s “charitable gifts” hasn’t quieted us as his critic. Quite the opposite. In fact, news of his 2008 “charitable gifts” (Newsweek fails to mention the $239 million puts Bloomberg #1 ahead of all other dispensers of “charitable gifts”) has been, for us, the occasion of detailed and wary criticism because Bloomberg misuses his “charitable gifts” for political ends.

(We concur that Bloomberg isn’t doing a good job rebuilding Ground Zero.- That sounds like more unsilenced criticism in itself!)

For our unsilenced criticism on the subject of Bloomberg and his “charitable gifts” you might want to see the following:

For a history Bloomberg’s annual level of “charitable gifts” see:

Monday, February 2, 2009
Bloomberg’s Annual Levels Of Charitable Giving

For how Bloomberg’s estimated wealth ten-folded in a decade transforming him while he was mayor into the richest New Yorker see:

Monday, February 2, 2009
Bloomberg’s Increasing Annual Wealth: 1996 to 2008

For our analysis about how all of this is very bad news for New Yorkers see:

Friday, February 6, 2009
The-Not-So “Ridiculous” “Outrage” of the Mayor’s Campaign Spending: Getting the Whole Story

Monday, February 2, 2009
The Good News IS the Bad News: Thanks A lot for Mayor Bloomberg’s “Charity”

A Brooklyn Paper Editorial & Atlantic Yards: With Nothing Else Good To Say, We Are Stimulated To Say. . .

There is nothing else good to say about it, but we must praise the refreshing honesty of the neighbor-be-damned cynicism with which the Brooklyn Paper makes its case in its new (font-page) editorial: Build the arena — with fed money!, The Brooklyn Paper, February 5, 2009.

The Brooklyn Paper has the temerity to advocate that Brooklynites should want to see federal stimulus funds, intended to rescue the economy, used instead for more of the sort of malfeasance that has propelled us with such force into our current cascade of economic problems. Though the Atlantic Yards megadevelopment will be deleterious to the economic health of Brooklyn and is representative of the worst kind of Wall Street and real estate industry rip-offs that are beleaguering our economy, the paper argues for a diversion of federal money into a billionaire’s pocket for more of the same.

Fattened Up for the Kill

Unlike people such as Kathy Wylde, president of the New York Partnership, who unconvincingly advocates that Atlantic Yards is the kind of countercyclical infrastructure spending that can actually aid in recovery from a depression/recession, the Brooklyn Paper editorial, considered something of a shocker in several respects, pitches its argument in gluttonish-food-language terms not to our atavistic self-serving “lizard brains” but to our “pig brains” suggesting that the table is being set by irresponsible politicians.

The bailout as structured by the House of Representatives appears to put its trust in politicians, whose backroom deals and fealty to special interests make them just as unlikely to act responsibly as the bankers and subprime real-estate promoters who got us into this mess.

Even before the Senate votes, pols everywhere are salivating over the spoils, and we can see where this is heading. . .

* * * *

. . . the bill is packed with pork, whose meat is deemed totally kosher by those invited to the table . .

* * * *

The mayor’s mission now is to lobby for as much pork as the city can digest. .

* * * *

Those requiring government assistance should be offered a chance to bid for their hunk of pork. We should not reject offhand projects that might previously have been deemed unworthy.

In the case of Atlantic Yards, for instance, critics might continue to argue over the larger project’s aesthetics and suitability for a site bridging Prospect Heights and Fort Greene, but complaints over several hundred million dollars in government subsidies are suddenly dated when a trillion dollars is sitting there for the taking. As long as Washington is doling out the gravy, Brooklyn needs to have its plate under the ladle.

Net Negatives

There are many problems with the paper’s argument. Probably foremost among them is that munching on this diet of backroom deals for which the paper suggests we whet our appetites is likely to give Brooklyn a coronary. The paper forgets that the Atlantic Yards megadevelopment is in every conceivable way a net negative for the borough. That includes the proposed arena about which no positive distinctions should be made no matter how the paper structures its case. Arenas do not produce economic benefit, certainly not this one at this location. In other words the Nets are a net negative too.

Trans-fat Equivalents

Bloomberg may crusade against trans-fats in the diets of New Yorkers but the unfavorably enriched mega-deals he is forcing down our throats, larded with no bid hand-outs to developers like Forest City Ratner, are the urban development equivalent of trans-fats, no better for our health and as clogging to our arteries (literally and figuratively).

Wylde Guesses at Keynsian Economics

Not Countercyclical Federal Money

The Kathy Wylde/New York Partnership argument that spending on Atlantic Yards could be an economic plus was palpably reflexive and disingenuous in part because it was made before the expenditures discussed would have been federally funded. Keynsian countercyclical spending is actually not possible at the state level since states cannot print money the way the federal government can.

Not Infrastructure

Also, Atlantic Yards is not infrastructure. One quick way to recognize infrastructure is that, like the Second Avenue subway or the proposed new Moynihan Station, it is publicly owned and benefits the public generally. Atlantic Yards is instead proposed to maximally benefit a single subsidy-sucking developer with a land-grabbing, public-funded blighting monopoly on 22 acres of Brooklyn. General benefit and public ownership are supplanted by the unnecessary infliction of a private monopoly that grows to cover 30+ acres of Brooklyn if you include the other immediately adjacent acreage the public has already assisted Ratner in owning.

A Taste of What Collapsed the National Economy

With federal money now in play, the Brooklyn Paper seems readily cognizant that the economic downturn was engendered by, and that we got “into this mess” through, “backroom deals and fealty to special interests” and the irresponsible actions of “bankers and subprime real-estate promoters.” We heartily agree with this analysis.

Personal Encounter With Glittering Wall Street

Let us speak from personal experience. I worked for decades at the state public finance authorities doing public finance bond deals. One of my jobs was to be on the team that evaluated proposals coming in from Wall Street. That meant a lot of smart, highly talented and well resourced Wall Street investment bankers coming in to make presentations. But a lot of those presentations didn’t, when analyzed, make any sense and this was something we had to be on guard against. It isn’t easy to have a new good idea: Good ideas get around so fast it is hard to have a good idea that hasn’t already made the rounds, but that didn’t prevent firms from coming in to present some extraordinarily bad ideas. The bad ideas would be presented with aplomb and straight faces. Some of them involved extreme complexity and ornateness. Shiny binders with impressive multi-colored charts abounded. I can’t tell you how often it would be that the supposed value of some idea being sold would seem teasingly almost-evident only to have it unravel upon careful analysis to being a black box of nothing. On Wall Street much of what glitters is not gold.

Presentations concluded, we would ask, always politely, . . . so in the final analysis, this: 1.) doesn’t benefit the agency? and 2.) doesn’t benefit the public? Often the transactions involved crisscrossing interest rate risk exchanges, one transaction taking on risk and another to mitigate it perhaps even with this crisscrossing more than once. Some proposed schemes, after lot of abracadabra left you essentially in the same place (minus some fees) and some schemes actually involved undertaking significant gambles when we were in the business of protecting bondholders form risk. The Wall Street firm representatives were polite when their “ideas” were rejected. No doubt that some of the presenters simply valued the “face time,” hoping that we would be more likely to remember how smart they were when they actually did have a good idea to come back with. Still, it is frightening to think, especially when firms came in with some political heft, that if we said “yes” to what they were proposing the agencies might have implemented some of these harmful plans.

“Churning,” Bad for You. .

When dealing with Wall Street we should be on guard against “churning,” which consists of people creating transactions that have no inherent value but from which they will take away fees. On a personal level you might experience churning when a stock broker or financial adviser woos you into transactions the main import of which is that they will receive fees; for instance, selling one set of stocks just to buy others not inherently better.

Real economic benefit involves the steady creation of additional value without the subtractions of unnecessary churning, fees or non-contributing intermediaries. In our personal life, we don’t bite when these intermediary firms call up to offer their services for a fee. Buttressing our suspicions of these intermediary firms willing to sell us their services are the many calls and emails we get from the very same firms offering us employment, the main point which would be to sell our friends, for commission, based on the idea that our friends should pay the firms fees for my/their financial expertise. So they want to both manage my money and hire me to manage other people’s money? My financial expertise? (We like to manage our money in the no-load mutual fund investments available, for instance, through the Vanguard Group).

Bloombergian Investment Banker Model for City Development

So in the financial world of Wall Street, so also in the closely-linked world of publicly financed real estate, at least if you are not on guard. We also remind people that Bloomberg has adopted an investment banker model for city development which is all the more reason to be on guard. It strays from conventional urban planning and good governance wisdom and even farther from the common sense of the highly regarded urbanist Jane Jacobs.

Bruce Ratner as “Churner”

Subsidy-collector Bruce Ratner is prime example of a “churner,” someone willing to take away a fee without delivering value in return. The danger of being shortchanged is greater when dealing with public finance projects that get subsidies because subsidies disguise the lack of fair value being given in return. It is the equivalent of the crisscrossing that allowed the creation of transactions on Wall Street so complex that bright people didn’t fully understand them and why a developer like Ratner, who can’t compete using development and better ideas, attaches himself to the pursuit of subsidies and the cultivation of public officials.

Churn Wounds

Among other things Ratner’s “churning” shows up as formulating a project that involves unnecessary tearing down to build. Lacking good ideas and avoiding development that would be a net positive, he tears down buildings of superior value like the Ward Bakery, the Spalding Building and buildings on Dean Street. In fact, the Brooklyn Paper editorial evidently pays heed to Atlantic Yards’ destruction of Brooklyn:

. . . the open wounds visible at every stalled construction site.

The word “depression” has more than one meaning.

It is not likely that the paper is intending to invoke anything other than the wound of Atlantic Yards, which the paper was convolutedly trying to rationalize.

“Churning,” Bad for the Economy. .

When all is said and done, most of our economic bubbles when pricked leave us ahead of the game. The fiber optics bubble left us with an infrastructure of fiber optic cable. The housing bubble meant we constructed extra housing that will be around for a long time to house and lower the cost of housing. However, the Wall Street bubble has been especially hazardous to our economic health because, with all the churning, it is not clear that when the bubble is pricked, anything of value was created to be left behind. People are still running from the “toxic assets,” the measure of whose poison they cannot assess. Buying into the idea Atlantic Yards megadevelopment involves the same kind of churning that, net net, leaves us poorer than we started out. Money may be splashed around but it doesn’t create.

Churning and the Redistribution of Wealth to the Wealthy

Wait! The analogy doesn’t end there. Our Wall Street debacles ended up with another untoward result, a regrettable redistribution of wealth left in the hands of the churners. The Atlantic Yards churning is also about the redistribution of wealth from the middle class and ordinary taxpayer to wealthy Bruce Ratner and his development company.

The Depression’s Frozen Monopoly Game

One analysis of the Depression was that it was preceded and provoked by an over concentration of wealth at the top. Analogous to the freezing up that occurs at the end monopoly game, the economy couldn’t move because the wealth was too concentrated in too few players. There was need and want during the depression: At the same time there was also a problem with deflation because that need and want could not be economically expressed by the poor who were experiencing that need and want. If this theory is correct, then it is likely no accident that the current melt-down has been similarly preceded by a new concentration of wealth. If the theory is correct, practices that fleece the public to build up the mega-rich like Ratner would then only exacerbate our problems. If the theory is incorrect, it is still no reason to fleece the public to build up Ratner’s wealth with churns that do harm or, at best, produce no value.

Brooklyn Paper’s Anomaly: Backroom Deals

The Brooklyn Paper editorial is shocking, in part, because it is such an anomaly. The anomaly can be seen on the front page where the editorial appears. There it is reported that the paper just picked up five more awards in five editorial and design categories (See: February 2, 2009, Simply the best! Brooklyn Paper wins five more top awards) proudly crowing that one of its first place wins was for a recent editorial that used criticism of Atlantic Yards as its launching pad to say that Ratner should not receive “more backroom deals” (December 1, 2007, Editorial: Another backroom deal). Some of what the award winning editorial said:

. . . Ratner’s completely out-of-scale skyscraper park at Atlantic Yards in the low-rise Prospect Heights . .

* * * *

Ratner’s people aren’t talking, either — more secrecy from a developer who has made his living by partnering with public entities on projects, like Atlantic Yards and Metrotech, that are approved outside the normal and rigorous city land-use review process.

All developers make promises, and some of them fall short some of the time. But Ratner has fallen short most of the time, and has been paid handsomely for each insult. From the government-subsidized sterility of his fortress-like Metrotech (with its unused retail spaces and poor job-creation numbers), to the government bailout at Ratner’s pathetic Atlantic Center Mall, to the ever-rising taxpayer subsidy that underwrites his shell game at Atlantic Yards, there has been no accountability. Government keeps on partnering with Ratner — not only on the projects, but on the clandestine planning process, too.

We too have been mostly complimentary about the paper's editorials though not always. (See: Wednesday, February 4, 2009, Reject the “Bundle” Bungle: Saying “No” to Walentas Dock Street Project Next to the Brooklyn Bridge.)

Brooklyn Paper's Weintrob on Weintrob: Nets Arena as a “Masterful Diversion” for a “Problematic, Oversized” “Land Grab by Ratner and His Political Clients”

The editorial is also an anomaly since most editorials in recent years have been written by its editor, Gersh Kuntzman, whereas this editorial was signed by its publisher, Ed Weintrob. But it is even an anomaly for Mr. Weintrob to be writing in support of the project. We went back in time to the years when Mr. Weintrob was writing editorials more regularly. His own earlier editorials specifically against the megaproject were also quite inconsistent with his surprising new one.

The publisher’s new 2009 Brooklyn Paper editorial seems to try to make a distinction between Atlantic Yards as a megadevelopment whole and just the Nets arena, pretending that somehow it is possible to suggest a “jumpstart” of the “baskeball arena” (in its “original” form?- More on this later) with “federal stimulus cash” even while maintaining that the “most problematic, oversized components of Bruce Ratner’s proposal for Atlantic Yards should not be built, no matter how much federal money is being thrown around.”

That argument ignores the fact that the arena has been used as the highly inappropriate argument for Ratner to land-grab a multi-acre monopoly swath of Brooklyn. As flawed as the argument is, unscrupulous politicians such as Mayor Bloomberg and Borough President Markowitz are bound to continue to argue for Ratner’s 30+ acre monopoly if the arena proceeds. And the rest of the problematic, oversized megaproject now facing well-deserved adversity is much less likely to be defeated if the arena-coddling rationale is supported to get it a successful start. This is as silly as jump-starting a car for a burglar making off with the family silver, expecting it will be handed back just as soon as he gets locomotion.

An earlier editorial, again signed by Weintrob as publisher, acknowledges the ploy of the stadium. In The real story is the land grab, not the Nets (January 24, 2004) Weintrob, writes:

The real story is that the Atlantic Yards project — and its companion Downtown Brooklyn Plan — is not about the Nets (whose stadium would occupy a tiny part of the massive site), it’s about a land grab by Ratner and his political clients, the largest, most expensive government seizure of private property for private benefit ever in Brooklyn.

In May, Weintrob, signing still another editorial, reinforces the point (emphasis supplied):

Bruce Ratner’s Atlantic Yards plan (it’s not just the Nets). This project gets a free ride on city approval. With the MTA apparently in Ratner’s pocket, only lawsuits may stand in the way of an ill-conceived vision. (The Nets arena, a tiny part of the Ratner-Downtown steamroller, is a masterful diversion meant to detract attention from the larger plan’s specifics.) Atlantic Yards would permanently separate the neighboring communities of Fort Greene and Prospect Heights with a high-rise, de-mapped dead zone in the spirit of Ratner’s walled-in Metrotech office complex.

(See: May 1, 2004, Support progress—reject the Downtown Plan, by Ed Weintrob, Paper founder.)

The Developers’ Mantra That Ain’t So

The editorial has other related points to make:

The “developers” and their tagalongs have their mantra down pat: Give them carte blanche to take whatever land they want, build whatever they want whenever they want, take whatever government subsidies they want, then rest assured — there will be jobs and prosperity for all.

If only the advertised conclusion was true.

Major decisions are being made right now that will either doom Brooklyn to a cold, dehumanized future incorporating the worst elements of suburbanization and Manhattanization, or offer our communities the opportunity to thrive and grow on a humane scale.

Yet in his newest 2009 editorial Weintrob disregards his own 2004 cautionary words. This time he buys into the “advertised conclusion” of the developers' mantra: “Constructing the arena and bringing the New Jersey Nets to Brooklyn would quickly create construction jobs, boost the commercial district along Flatbush Avenue.”

Yet, according to Weintrob’s May 2004 editorial this:

. . would constitute the biggest, most costly land grab in Brooklyn history and would likely leave us poorer both financially and spiritually. .

Headed to the Poor House: Raiding Public “Treasuries” (Plural)

A year later, in July 2005, Weintrob, in another signed editorial, continues to be concerned about the cost to the government and the public and he calls for the press to do its job to oppose the boondoggle (See: July 9, 2005, It’s all about money, by Ed Weintrob, Paper founder):

Whether Bruce Ratner gets to build his Atlantic Yards mega-project rests . . . on government’s willingness to put our treasuries at the developer’s disposal.

* * * *
The issue is that taxpayers are being asked to pay for Ratner’s game.

* * * *

On the eve of America’s independence anniversary, we ask New York’s high-falutin daily news media to do its job.

Simply report the news about Bruce Ratner’s project. Stop being the developer’s tool — and his fool.

If we are not to be Ratner’s fools, why is it any better to advocate robbing from the federal treasury than from “treasuries” (plural) of the city and state? Among other things, the addition of federal money does not mean city or state money would be subtracted out of Ratner’s project.
Why also does Weintrob suggest in May 2004 that a “costly land grab. . will leave us poorer . . . spiritually” while in 2009 he says it will “restore the spirit of optimism.”

Will a False Choice Play with the Peoria-minded?

The new 2009 editorial seeks to offer a false choice to rationalize why we should try to steal these federal funds:

Bottom line: If we don’t get the money, Peoria will.

That’s not true. Getting money for Ratner only takes money away from other New York projects that are truly infrastructure and that would truly benefit the city and state, projects like the Second Avenue subway, the extension of the #7 IRT subway line to the west side of Manhattan, Moynihan Station, Brooklyn Bridge Park, Governors Island, the PATH tunnel to New Jersey and and the new water tunnel. Further, Atlantic Yards would not only be a net negative harmful to Brooklyn, it would be one that would also sap city and state dollars.

“Shovel-ready” vs the Security Threat of “Shoving it to the Public”

The arena is also not, in the current fashionable lexicon, “shovel-ready.” For example, the new 2009 Weintrob editorial talks about jump-starting the “original” arena that was talked about, but the arena has to be redesigned: The developer and ESDC, the “responsible” state authority overseeing the project have finally admitted that redesign of the arena is necessary because of security concerns. Of course, that is only one reason the project not presently “shovel-ready.”
Federal stimulus money will only have the effect of making the project “shove-it-to-the-public” ready: It will not result in immediate construction jobs the way that the other aforementioned competing New York projects will.

Weintrob Hankering to Defeat Obama?

One must almost wonder whether Weintrob’s suggestion that the federal stimulus bill be laden with Atlantic Yards pork is a surreptitious (unpatriotic) attempt to defeat or delay the federal stimulus package. The stimulus bill is controversial and unpopular enough. Wouldn’t Weintrob’s objectionable reasoning based on the promotion of swinish rationales undermine President Obama and his legitimate supporters? We imagine that with something as noisomely porkish as Atlantic Yards in the bill people would point to inconsistency and aver that Obama’s exhortations of better government were mere empty rhetoric. We refer you to President Obama’s inaugural address to think about how what he said then relates to Atlantic Yards: (See: Thursday, January 22, 2009, Obama Inaugural Address: National Themes and Atlantic Yards.)

Prescription for a Downward Economic Spiral

We have been reading Amity Shlaes’ new history of the Depression (a New York Times bestseller), “The Forgotten Man” which is about how long the Depression played out over time and how not everything that was done in the name of lifting the nation out of the Depression was serviceable in doing so. Ms. Shlaes makes the case that much of what government did was unwittingly counterproductive. Indeed, a fair amount of what Roosevelt free-rangingly and experimentally tried lacked common sense and consistency.

Ms. Shlaes tells her panoramic story using a cast of individuals. One of those to whom she keeps returning to as an exemplar of what straightforward private enterprise can achieve, benefitting all, was a cousin of ours, industrialist, banker, philanthropist and former Secretary of the Treasury, Andrew Mellon. (Our grandmother, who came to the U.S. from County Tyrone Ireland, was Margaret Dorothea Lockhart Mellon Kelly and her mother Margaret Rose Mellon.) In part of the tale she tells, Ms. Shlaes recounts how Mellon, toward the end of his life, generously created the National Gallery of Art in Washington.

Ms. Shlaes may simplify somewhat for the sake of telling her panoramic story but early on she describes how Mellon grew his wealth:

Mellon had stayed close to his father’s original formula: thrift that emphasized the accumulation of capital. But he had also created value- - and not merely by cornering a market as a robber baron would, though he had done this with bauxite. Mellon invested in new innovations, functioning as an early version of the modern venture capitalist. The magazine “World’s Work” described the Mellon formula thus” “Find a man who can run a business and needs capital to start or expand. Furnish the capital and take shares in the business, leaving the other man to run it except when he is in trouble. When the business has growth sufficiently to pay back the money, take the money and find another man running a business and in need of money and give it to him on that basis.”

In other words Ms. Shlaes describes a cycle of finding and rewarding economic success. We find that the Brooklyn Paper, in its 2009 editorial advocates the exact opposite. It advocates a cycle of finding and rewarding what we know doesn’t work economically.

By advocating that federal stimulus funds, intended to rescue the economy, should be used instead for more of the sort malfeasance that has propelled us with such force into our current economic problems, the Brooklyn Paper would seemingly take us into an ever-descending spiral of economic failure.

President Obama has famously been quoted as saying “We are ready to lead once more.” (See the cover of Newsweeks’ commemorative edition.) Is this downward economic spiral where Mr. Weintrob would have him lead?

The-Not-So “Ridiculous” “Outrage” of the Mayor’s Campaign Spending: Getting the Whole Story

(Asked about capping his campaign expenditures, Mayor Bloomberg above: “Ridiculous”and “an outrage.”)

In the last 24 hours there’s been a reporting flurry about whether the Mayor Bloomberg will limit his campaign spending when he runs for a third term as mayor. The question is whether we can expect a digging down in future news reports that will lay out the whole story.

As three examples of what is being reported and how far the digging down goes so far, we can point to a story last night in the New York Times, (February 5, 2009, Testy Mayor Dodges Questions on Campaign Spending, by Michael Barbaro), and to this morning’s stories on WNYC and NY1. All three stories concern the rebuffed efforts of an Observer reporter and a NY1 reporter to get the mayor to speak to the question of whether he will limit his campaign spending to the level of his rivals.

The Times Story: The Mayor Resists the Question of His Campaign Spending

The Times short story, (preceding a longer front-page story today we will talk about later) was essentially only about how the mayor resisted answering three attempts the reporters made to ask him the question (Mayor: I don’t understand your question. I am not going to talk about the campaign. … I think it’s one of the most ridiculous things I have ever heard.) It does later quote the mayor with this much of an answer:

And I will self-finance. There is no reason for me to take public money. I don’t need the public money, and I think it would be an outrage if I took it. Period. End of story.

As we will review, that is absolutely NOT the “end of story.” What’s more, part of the story is the mayor’s effort to misdirect the sort of “outrage” to which he refers.

The WNYC Story: Resulting Expenditures of Taxpayer Money, Yes or No

The WNYC story (News: Financing New York's Elections, by Bob Hennelly, February 05, 2009) provides as its focus another Bloomberg quote that is misleading, and it also provides some correction. From the WNYC story (emphasis supplied):

. . . Bloomberg bristled at the questions and reminded one persistent newspaper reporter his campaign spending has an upside.

BLOOMBERG: I am not spending any taxpayer money so I don't know. I'll make sure that when it comes to advertising we will decide you know make sure we include you in that so you will be able to get a salary and eat.

REPORTER: Under the City's campaign finance law, publicly financed Mayoral candidates can qualify for millions of additional matching funds, if they face a non-participating opponent like Bloomberg. He spent almost $160 million in his first two runs.

In other words, Bloomberg IS causing the expenditures of additional taxpayer money.

The NY1 Story: Clearer That Bloomberg’s Refusal of a Level Playing Field Is Triggering Extra Public Spending

The NY1 story, like WNYC, reported on the extraordinary past spending by Bloomberg (WNYC set the figure at $160 million and NY1 at $ 155 million) and that the mayor “dismissed the idea of capping his own spending as ridiculous.” It showed a clip of Bloomberg saying that the idea that he should take public money was an “outrage” (the idea is actually only that he should cap his spending, not necessarily “take public money”). The story was clearer (but perhaps not clear enough) about how extra public money will be spent because Bloomberg refuses to cap his spending:

Bloomberg’s spending could triger extra matching funds for his challengers. Under city law if a self-financed candidate spends more than three times the spending limit for publicly financed candidates then the limit for publicly financed candidates is lifted and more public matching funds become available.

Digging Down, the Next Steps: What’s Still Missing From The Complete Story

Michael Barbaro, the writer of last night’s short Times article we mentioned at the start of this piece, is also the author of another long story on the front page of the Times today that gives a flavorful hint of how much more there is to report on the subject of Bloomberg’s campaign spending (Bloomberg Campaigners Taste the High Life, by Michael Barbaro, February 5, 2009).

We will get back to Barbaro’s new front page article, but first let us point out what we believe are other major aspects of the story that need to be addressed which, as informative as the new Barbaro front-page story is, are largely left out. They are also unaddressed by the other stories we have been describing above.

Summary: Comment in to last Night’s Times Article

We provided a comment to last night’s Times article (comment #12) which roughly summarizes the overall situations as follows.

The New York Times editorial page recently recommended that Bloomberg limit himself, like other candidates, to spending no more than $12.2 million. (See: Mayor Bloomberg’s Opportunity, November 9, 2008)- Note, contrary to what the mayor might have people infer, the Times is specifically not calling for Bloomberg to take public money, only to cap his spending and somewhat level the playing field, which would thus also save the public money because the so-called “Daddy Warbucks” clause would not be triggered.

The Times proposes: “Like other candidates in the system, the mayor would be limited to spending $6.1 million for a contested primary and another $6.1 million for the general election.”

The Times has reported that Bloomberg plans to directly spend $80 to $100 million on his next campaign for mayor. (See: Mayor Plans an $80 Million Campaign, by David W. Chen and Raymond Hernandez, October 9, 2008.)

And IN ADDITION the Times reported that Mr. Bloomberg “can now claim to be No. 1" in that he is “the leading individual living donor in the United States.” He did this by giving, in 2008, $235 million to “1,200 organizations.” (See: At $235 Million, Bloomberg Was Biggest Giver in U.S., by David W. Chen, January 26, 2009.)

AND the Times has run stories about Bloomberg’s abuse of charities to promote his political goals, including a front page story about the extension of term limits: Bloomberg Enlists His Charities in Bid to Stay, by Michael Barbaro and David W. Chen, October 17, 2008.

Treating all of this, quite justifiably, as campaign spending (since Mr. Bloomberg does not draw a line at using his charity for political influence) Bloomberg is spending upwards of $335 million in campaign money ($100 + $235 +?). Consider also that expenditures (or “contributions”) in past and future years should probably be thrown into the total.

We noted that for more on this people can see: Noticing New York’s The Good News IS the Bad News: Thanks A lot for Mayor Bloomberg’s “Charity” (Monday, February 2, 2009).

Beyond the Summary of the Comment

Noticing New York’s article goes beyond the summary of the comment. It extensively examines the breadth of and influence of Bloombergian wealth and charitable giving. It further examines the costly harm that Bloomberg is doing to city development by selling off the public realm and suggests that we need to question whether his recent ten-fold increase of wealth in some part derives from his being mayor and is one way or another at public expense.

For instance, just on the subject of conflicts: Yesterday, Bloomberg said of his opponents’ decision as to accepting funds and opting for public campaign funds: “They have to decide what they are going to do.” Our article points out that Bloomberg doesn’t leave that decision entirely in their hands. He has used his charities for political purposes by having Patricia Harris, (his First Deputy Mayor) chastise the recipients of his philanthropic funds for giving campaign contributions to his political opponents. The same deputy mayor oversees other largess administered by City Hall.

$$$ Shushing the Answer to the Question “Who other than Bloomberg?”

As dissatisfaction with Bloomberg mounts, Bloomberg proponents have sometimes ventured, as if it were a positive argument for the billionaire’s rule, “Who other than Bloomberg?” “Who other than Bloomberg?” is a good and valid question to which there are some good answers but the answer is not going to be available and we are not going to find out about the merits of Bloomberg’s opponents if Bloomberg is allowed to use his wealth to “pay” not to contribute to his opponents’ campaigns.

Today’s Front Page Times Story

The Times article today makes clear how lavishly those working on the Bloomberg campaign are treated, including bonuses, (a $25,000 bonus is mentioned and two $300,000 ones for a top campaign aide) and what that means:

And as he seeks to entice talent to come aboard the campaign, and possibly to a third term in City Hall, Mr. Bloomberg wields a powerful tool: the perks of inhabiting his world.

* * * *

Mr. Bloomberg, who is renowned for sparing little expense on employees at his company (they traditionally received 15 percent raises every year), offered campaign workers free health insurance. He outfitted campaign offices with a wall of televisions, flat-panel computers and Bloomberg financial terminals.

Free food was always on hand — sandwiches, soda, chips, ice cream sandwiches and popcorn. (The 2005 bill to Coca Cola was $17,000, records show.)

In 2001, the campaign even rented a Manhattan apartment for Mr. Cunningham, who lived in Albany at the time. (The monthly rent was $4,100.)

It describes how the money flow creates some questionable circumventions:

Those who joined the mayor at City Hall enjoy the kind of first-class international travel reserved for chief executives and heads of state. Mr. Bloomberg, the most traveled mayor in New York City history, has taken aides to Athens and Santo Domingo, Port-au-Prince and Dubrovnik, Berlin and Belfast, to name a few.

A spokesman said that Mr. Bloomberg pays for nearly all the travel himself and considers it a gift to the city. But the approach also allows his administration to shield details of the travel — itineraries, hotels, restaurant venues — from public scrutiny.

Once again we consider news of Mr. Bloomberg’s “gifts” to be bad news. For more on this see, as noted, The Good News IS the Bad News: Thanks A lot for Mayor Bloomberg’s “Charity” (Monday, February 2, 2009).

By the way, going back to yesterday’s press conference, was Bloomberg joking about paying off the reporter who questioned him about capping his campaign expenditures? What did he mean when he said to the reporter:

I'll make sure that when it comes to advertising we will decide you know make sure we include you in that so you will be able to get a salary and eat.

Reject the “Bundle” Bungle: Saying “No” to Walentas Dock Street Project Next to the Brooklyn Bridge

Here is Noticing New York’s Testimony presented last week at the Brooklyn Borough President’s hearing on the proposed Walentas Dock Street DUMBO project next to the Brooklyn Bridge.


Noticing New York’s Testimony

* * * *

January 27, 2009


Hon. Marty Markowitz
Brooklyn Borough President
Borough Hall
209 Joralemon Street & Court Street
Brooklyn, New York 11201

Re: Today’s hearing on 18-story Dock Street DUMBO Project just east of the Brooklyn Bridge

Dear Borough President:

This testimony is presented in the name of Noticing New York, which addresses itself to issues of what is good public policy and planning critical to New York development issues.

Rather than address the particular merits of the project, its proposed size or the merits of building the proposed school, our testimony addresses the public policy wisdom of bundling choices together, what the New York Times referred to as “a Faustian bargain,” approving a school if a developer is allowed to build a project of extra height.

1. Why not consider the school and the project as separate decisions? The Walentases are good and capable developers, some of the best in the city. Surely they can build a project that would pass muster without the tacked-on enticement of a school.

2. Is there wisdom to the bundling of these decisions? Does the bundling enhance each choice or just cause each choice to be suspect? Shouldn’t we now ask, if the building is a good size, shape and height, if it has to be “sold” to the public by incorporating a school? Is the school really good planning or the one that the public actually wants if it is being tacked-on to “sell” a project of a likely unwanted size, shape and height?

3. Involving school construction in these bundled decisions seems to be popular these days. Not only do we see it here; it was also done on the other side of the Brooklyn Bridge with the Beekman project. There we saw that the tactic backfired and the public was hurt when, with construction underway, the developer, Forest City Ratner, blackmailed the public and the community board for extra subsidy. Though it is not, per se, the same kind of bundle, the Rudin development organization is offering to help build a school at the same time it is seeking approvals to eliminate a portion of the Greenwich Village Historic District to build an extra-large, extra-dense development. (These “Faustian bargains” tend to be about giving developers the right to build extra density.)

4. Bundling of decisions puts too much power in the hands of those who bundle the choices and creates questionable equations which cannot necessarily be defended. The Brooklyn Bridge Park is another example of such bundling. To say that a park should be expected to pay for itself does not mean that such a newly invented equation makes sense, merely that it is being proposed as a take-it-or-leave-it proposition.

5. When we shop for computers we don’t like our software bundled. We prefer to get the programs we truly want. But if you buy your software programs bundled the worst thing that happens is that you waste hard drive space. Hard drives get ever-larger and you can always migrate to larger ones. But with the decisions that involve how the public realm is dealt with, there is a limited amount of density that can be squeezed in. Corrections are not possible afterward.

6. Accordingly we urge you to consider that the “bundle” may instead be a “bungle” and let the public make its decisions, as they should be made, separately.

Sincerely,



Michael D. D. White

* * * *

Some Background on the Brooklyn Bridge No Longer Being Background to DUMBO

A lot of people have the idea that the proposed new Dock Street project, which can only happen if a zoning variance is granted, is too massive to be placed, as proposed, so close to the Brooklyn Bridge. By one report, three-quarters of those attending the hearing testified against the project. (See: Full House at Dock Street DUMBO Hearing.) Though we testified at the hearing we did not attend it in its entirety. From what we were able to discern, more of that testimony that favored the project was by those who showed up early and the later testimony was increasingly weighted against the project.

Previously Rejected, Sugar Grows a Preciously Rejected Project

As testimony at the hearing indicated, the project is an enlarged variant of a project that was rejected by Community Board 2 about two years ago for being too large. The odd thing is that, although it is now larger, Community Board 2 voted 30-7 to approve this enlarged edition. It was the apparent sweetening addition of the school that makes the now 18-story development acceptable when the previous 16-story incarnation was not. (The new proposed school would occupy one story of the new version of the project.)

The New York Times article which we quoted as describing the school as a “Faustian bargain” in our testimony is: Wondering if a New School in Brooklyn Is Worth Blocking the View, by Christine Haughney, January 20, 2009.

Dashing the Dish Idea

The general view of those opposing the project is that the Brooklyn Bridge is a special architecturally beautiful landmark, the view of which should be preserved. The view is perhaps especially important to maintain on the Brooklyn side of the bridge. The thinking is that the Brooklyn tower of the bridge should essentially be visible in the middle of a dish shape cityscape with buildings rising taller as they retreat further away from the bridge. Sounds like a plan! Right now, the current zoning restricting heights surrounding the bridge is consistent with preserving view lines in this way. Sounds like a plan implemented.

The proposed Walentas Dock Street building rises up as a tower close to the bridge in a way that is inconsistent with that plan or the preservation of sight line views of the bridge. Sounds like spot zoning. That’s something a lot of people testifying at the hearing said.

Brooklyn Bridge: Exceptionably Special

We hold the following to be self-evident: Not all bridges are created equal. Elsewhere in New York, for another bridge, Noticing New York might take the position that tall buildings should be encouraged next to the busy footings in areas where other bridges touch down; for instance the area east of Bloomingdale’s where the 59th Street Queensboro Bridge touches down in Manhattan. But we agree that the stone towers of the Brooklyn Bridge, celebrated like no other in the city and representing a momentous change in the Borough’s relationship with the rest of the city, is an extraordinary viewing experience that ought to be preserved. It opened in 1883 as the longest suspension bridge in the world and a few short years later, in 1898, the City of Brooklyn consolidated to become part of the rest of the city.

But the Developer Should Not Be Made Special

Our opposition to the project is not NIMBYism. It is more about process and procedure with a mind to what bad process and procedure lead to overall. The proposed Walentas building, itself, does not seem to be that much more of an imposition than we as New Yorkers are often asked to bear for various reasons. But the only reason we are being asked to bear this particular imposition is in order to specially benefit a particular developer in a way that is not envisioned we would want to accommodate other developers in the same area. . .

. . . The project alone does not completely block out all views of the Brooklyn Bridge but the experience it creates, if replicated by other adjacent buildings receiving equal treatment, would entirely change our relationship with the bridge. Rather than having elected to uphold the bridge in a position of respect we would be relegated to catching mere glimpses of it between the blotting-out expanse of large new buildings.

School Construction Authority Out of Line On School?

That is were the question bundling the school into the building comes up.

The School Construction Authority has acted to tilt things in favor of the development. It “signaled its support for the Walentas project, by putting the school on its property list even before it’s officially approved by the city.” (See: December 11, 2008, Walentas ready to ‘Dock’ with 18-story tower, by Sarah Portlock, The Brooklyn Paper.) Previously, before this was part of a proposal to bundle benefits so a developer could build bigger, the School Construction Authority was not in favor of providing a school:

For too long, the School Construction Authority argued that a new middle school was not needed in Brooklyn Heights or DUMBO because the city had excess middle school seats district-wide.

(See: January 29, 2009, Editorial: Yes on Dock Street, The Brooklyn Paper.)

Materializing as a seeming bribe to the community, the timing of School Construction Authority’s actions are especially unhelpful to the integrity of the process. Those actions bear examination.

Brooklyn Heights Association’s Commitment to Schools

We put great stock in what the Brooklyn Heights Association has to say about schools because for years they have been deeply involved in focusing on just what is needed in the neighborhood in terms of schools. They have been involved with the fight for good and appropriate schools since long before it was proposed to bundle a school into this project as a sweetener. Their testimony, presented by several coordinating representatives, covered a number of separate aspects concerning whether the project should be approved. The Brooklyn Heights association opposes putting the bundled school in the project as inferior to more desirable alternatives.

We think the Brooklyn Heights Association’s position is more sincere, neutral, informed and consistent than those who would favor the project because of the school, including the School Construction Authority.

Brooklyn Papers Editorial Position

We note that we often place much stock in the reporting and positions of the Brooklyn Paper and that the Brooklyn Paper is editorially supporting Dock Street (see the link above). We also note that those opposing the project have pointed out that the Brooklyn Paper is a tenant of the developer.

For more information and links to other reporting on the subject, go to the site of the DUMBO Neighborhood Association.

The Good News IS the Bad News: Thanks A lot for Mayor Bloomberg’s “Charity” (Part II)

(Mayor Bloomberg above listening to public testimony about the term limits extension bill he signed immediately afterward.)

This is Part II of an article about why Mayor Michael Bloomberg’s contributions to charities from his ever-increasing wealth is bad news. The first part of this article (Click here) examines how Bloomberg uses “charitable” donations in an abusive conflict-of-interest way. This Part II of the article was necessary to address at length the important related concerns about high-level conflicts of interest in the Bloomberg administration.

We left off in Part I asking:

How separate are the worlds of big mega-deal city administration-assisted real estate development and the Bloomberg private-wealth businesses that are growing so fast? Perhaps the first and best clue would be how responsibilities divide up when Bloomberg puts his senior confidants in charge of these worlds. It turns out that at the very top of the Bloomberg administration there is a troubling lack of separation and all sorts of problems with conflicts. Let’s talk about two of Bloomberg’s top administration officials, two deputy mayors with key city real estate development responsibilities, Daniel Doctoroff and Patricia Harris. The latter, Ms. Harris is also key when it comes to Bloomberg’s charities, both dispensing them and collecting charitable donations from New York developers who are receiving city largess. Of course, Bloomberg’s own conflicts deserve further discussion too.

Doctoroff of Development: His Continuing Deputization by the Mayor

The person who was for most of Bloomberg’s administration the deputy director of development, charged with overall responsibility for the city’s mega-deal administration-assisted real estate development was Daniel Doctoroff. Daniel Doctoroff left that position relatively recently (the last day of December 2007) and when he left he became the President of Bloomberg L.P., the mayor's media corporation. That in itself may indicate insufficient separation, but Doctoroff wanted to keep working on the major city-assisted deals even when he was President of Bloomberg L.P..

Doctoroff went to the city Conflicts of Interest Board to get approval to do so. Megaprojects take decades to bring to fruition and at the times that Doctoroff went to the Conflicts of Interest Board the Bloomberg administration was destined to wrap up the end of 2009. It is doubtful that mention was made to the Conflicts of Interest Board that in less than a year the Bloomberg administration would ram through an extension of term limits in order to procure four more years in office. The Conflicts of Interest Board approved Doctoroff’s request despite the fact that Doctoroff would thereby be in a position where he was simultaneously dealing on the public’s behalf with the same developers of multi-billion dollar real estate projects and negotiating with these same developers as a private businessman (See: No Conflicts Over Doctoroff's Dealings, By Dave Hogarty in News on December 23, 2007)

Doctoroff’s continuing involvement involves some of the city’s highest-dollar volume deals. According to the Observer, Doctoroff said he:

wanted to continue on as chairman of the Hudson Yards Development Corporation—the agency that is involved in rezoning the West Side and finding a developer for the rail yards—and remain involved in the Moynihan Station proposal, Hunters Point South and congestion pricing.

(See: Doctoroff Wants to Stay Involved with Hudson Yards, Moynihan, by Matthew Schuerman, December 6, 2007)

One Clear Example of Doctoroff Conflict

The Gothamist article above points out that even though the Conflicts of Interest Board cited “extraordinary circumstances” to say that “Doctoroff's negotiations on behalf of the city with Vornado Realty Trust regarding the development of the Hudson Yards and Moynihan station were allowable,” that Bloomberg L.P.. of which Doctoroff will be president and chairman of the management committee:

will be negotiating with Vornado for additional space at the building that houses Bloomberg LP's headquarters on Lexington Ave., since Vornado owns that building. The Conflicts of Interest Board gave its blessing on the condition that Doctoroff have no direct dealings with Vornado for a year after he leaves his position as Deputy Mayor.

That is just one example of a problem, based on just one project. The Conflicts of Interest Board ruling also applies to“other city projects including the redevelopment of Governors Island, PlaNYC, and Queens West.” (See: Doctoroff Cleared to Continue Work on Moynihan Station, 2008-03-26.)

The five member Conflicts of Interest Board which considered that “extraordinary circumstances” presented themselves is made up of mayoral appointees.

An Example of How Confusing Doctoroff Conflicts Can Be, With Distinctions Not Made and Distinctions Not Observed

Adding to confusion, having issued “a waiver” in December 2007, the board followed up with a ten-page Ex-Official Cleared to Continue Work on Big City Projects, by Patrick McGeehan and Ray Rivera, March 26, 2008.)

Here is just some of what the Times wrote in that article pointing out aspects of the confusion:

The board’s decision underscores a reality that has often been noted in the city’s development community: Mr. Doctoroff may have left City Hall, but he remains a participant in — and has a big influence over — what is going to be built.

* * * *

It is not unprecedented for former city officials to be involved with public projects, but in the case of Mr. Doctoroff, the city’s longest-serving deputy mayor for economic development, the list is so long and varied that city officials and even some who serve on boards with him have expressed confusion about his roles. In response, City Hall circulated a memo in January advising city employees how to interact with him.

For a year after leaving public service, former officials are strictly prohibited from appearing before any city agency within the branch of government where they served; the ban is even longer if the subject is one in which the official was directly involved. The prohibitions do not apply, however, if the official is appearing on behalf of the mayor or another government agency.

Some questions about Mr. Doctoroff’s future role remain unanswered.

The board’s 10-page opinion did not address his participation in development decisions about the West Side railyards, known as Hudson Yards, although the city had asked for a ruling on the matter.

* * * *

On Wednesday, the transportation authority is expected to grant development rights over the railyards, a 26-acre slice of Manhattan overlooking the Hudson River, to Tishman Speyer, one of Manhattan’s largest real estate operators.

Mr. Doctoroff met during the week of March 10 with the teams of developers competing for the billion-dollar project, according to members of the teams, who spoke on the condition of anonymity because they did not want to offend Mr. Doctoroff.

Even after he left later on a business trip to Asia, Mr. Doctoroff remained in constant contact with the selection committee throughout the deliberations.

. . . . Mr. Doctoroff dismissed the notion that there might be a conflict of interest between his continuing work for the city and his new role at Bloomberg.

“Certainly, if I felt it was going to create conflict that I thought was going to be harmful to the company, I wouldn’t do it, and I’d be the same way with the city,” he said. “If there was a conflict, I just wouldn’t do it.”

At the time of that Feb. 22 interview, Mr. Doctoroff also insisted that his involvement with the city had been limited since leaving office. . . . That did not include the recent railyard negotiations.

* * * *

The opinion issued on Tuesday limits the role he can play in matters involving Vornado Realty, which owns the building housing the Bloomberg L.P. headquarters. The company is negotiating with Vornado for additional space.

The board said that given Mr. Doctoroff’s knowledge, it was best for the city for Mr. Doctoroff to continue his involvement with the Moynihan Station plans. Vornado is a developer of the station project and was one of the companies vying to develop the railyards with whom Mr. Doctoroff met earlier this month. On March 12, Mr. Doctoroff met with the Vornado chairman, Steven Roth, and the M.T.A. selection panel, and last Friday with David Greenbaum, a top Vornado executive.

The opinion advises Mr. Doctoroff to recuse himself from any discussions between Bloomberg L.P. and Vornado for one year from the date of the conclusion of the Moynihan Station negotiations, and from all dealings involving Vornado or Bloomberg L.P. in any of the other projects addressed in the ruling.

Gene Russianoff, a senior lawyer for the New York Public Interest Research Group, said he agreed with much of the ruling but was troubled by the absence of the railyards and the station exception.

“I can see recusing himself from landlord-tenant matters with Vornado, but is Vornado going to say, ‘O.K., we’re going to jack up the rent when we’re trying to make some kind of deal over Moynihan,’ ” Mr. Russianoff said.

We have set forth the above at substantial length because it is so valuable; it is worth reading the entire Times article carefully to appreciate how much more confusion of roles is involved in the Doctoroff situation.

Recusal, Refusal and Confusal

As good as it is, the above Times article did not mention yet another level of complication. Before Doctoroff officially left City Hall, he was responsible for matters from which his boss, Mr. Bloomberg was supposed to recuse himself because of conflicts of interest respecting Bloomberg, L.P. Doctoroff’s being at Bloomberg L.P. invokes those same conflicts and the need for Doctoroff also to recuse himself personally. (The Roles Blur for the Mayor and the Mogul, By Serge F. Kovaleski and Ray Rivera, December 8, 2007.) Who then is anyone reporting to and who in the chain of command doesn’t have a conflict of interest? That, in a moment, will bring us to Deputy Mayor Patricia Harris.

The Times reported on how, while Doctoroff was Deputy Mayor for Development, he had been officially charged with negotiations from which Bloomberg was required to recuse himself, but that: 1.) Bloomberg failed to effectively recuse himself, and 2.) people were skeptical about whether delegation to Doctoroff was, in any event, a sincere attempt by Mr. Bloomberg to recuse himself:

When the city began negotiating with Verizon on its bid for a cable franchise, Mr. Bloomberg, whose company, Bloomberg L.P., owns a business news channel, stepped aside and put Mr. Doctoroff in charge of the talks.

When Merrill Lynch, which owns 20 percent of Bloomberg L.P., was considering leaving Lower Manhattan and moving to Midtown, Mr. Bloomberg limited his involvement in negotiations. He let Mr. Doctoroff handle them.

The Bloomberg administration said these steps were intended to protect the mayor from any appearance of a conflict of interest. But other people were skeptical of the arrangement, given the close relationship between Mr. Doctoroff and Mr. Bloomberg.

The Times observed the following in relation to the Mayor Bloomberg / Doctoroff recusals (emphasis supplied):

The Conflicts of Interest Board agreement Bloomberg was supposed to follow:

. . .said that the mayor would recuse himself “from all city matters involving Merrill.” But when the drama erupted over Merrill Lynch’s possible relocation from Lower Manhattan, the mayor picked up the phone and called E. Stanley O’Neal, who was then the chief executive, “one or two” times, according to Jason Wright, the Merrill spokesman.

* * * *

. . . Mr. Bloomberg does not recall any such conversation. But he said that, while Mr. Doctoroff was put in charge of the negotiations with Merrill, it would have been “entirely appropriate” for the mayor to offer his administration’s assistance.

Mr. Loeser said Mr. Doctoroff will now recuse himself, as well, from any dealings involving Merrill or cable television.

In another matter involving Merrill, the mayor has signed off on $1.43 billion in municipal bond deals in which the investment firm was the lead underwriter and several more in which the firm was part of the underwriting team, according to city records.

* * * *

. . . the mayor’s office has never sought a waiver from the conflicts board to allow for an exception to its 2002 opinion.

* * * *

Councilman Avella has raised another issue involving recusal: this one about the city’s continuing negotiations with Verizon as it seeks to break into the lucrative cable television market here.

* * *.*

Bloomberg Television, which reaches more than 200 million households worldwide, is carried by major cable operators in the city. And the mayor has not been shy about voicing his views on cable industry issues, saying, for example, that cable rates should be able to rise without government interference.

Mr. Avella said it is not credible that the mayor is uninvolved, especially with the huge revenues at stake for Verizon and the city. He added: “Even if the mayor has recused himself directly, who is then overseeing the city negotiators? He is obviously involved in leading these discussions at some level, somewhere. Where is open government in all this?”

Bloomberg needs to recuse himself. Doctoroff now needs to recuse himself. Who does that leave in charge who is not recusing themselves? We are now ready to talk about First Deputy Mayor Patricia Harris, currently Bloomberg’s number one in City Hall.

Patricia Harris’ Conflicts

Deputy mayor, Patricia E. Harris (sometimes reported upon as “Patti Harris”) like former Deputy Mayor Daniel Doctoroff also has both Bloomberg L.P. responsibilities and responsibilities affecting major New York real estate development projects. Deputy Mayor Harris, a City Hall official, is who the Times went to in 2007 (when her salary was $225,000 a year) for information about and a characterization of the Bloomberg’s “private” giving through his Bloomberg L.P. business:

“He’s continuing to be more generous and give to more organizations, but the focus has remained consistent,” said Patricia E. Harris, a deputy mayor who helps oversee his philanthropy. She added that his main areas of focus have been medical research, public health and the arts.

(See: Bloomberg’s Gifts to Charity Exceeded $165 Million in 2006, by Diane Cardwell, September 17, 2007)

Ms. Harris, who once worked for the Koch administration ,shifted over to the private sector and was working for Bloomberg in 1994 before his ambition to become mayor emerged. She was “Bloomberg L.P.'s Corporate Communications Department . . . overseeing its Philanthropy, Public Relations, and Governmental Affairs divisions.”

Very important to the real estates industry, First Deputy Mayor Harris also oversees the city’s Landmarks Preservation Commission, as we noted in Times Coverage of Landmarks Preservation Commission: The Pieces Needing to Fall Into Place (Tuesday, December 9, 2008) and is likely to have had a hand in promoting the Atlantic Yards project when she and Mayor Bloomberg met with the Atlantic Yards developer Bruce Ratner. That meeting bore evidence of a quid pro quo exchange of contributions to Bloomberg charities in exchange for project approvals. For more on this, see: Are the Atlantic Yards Land Grab and City Official Fraud Being Used to Finance Bloomberg’s Bid for Billionaire Term Limit Exceptionalism? (Wednesday, October 22, 2008).

Deputy Mayor Harris’ Failure to Be Sensitive to the Conflicts

Certainly the probability of substantial conflicts is present in these dual roles. Can it at least be said that Ms. Harris and the Bloomberg administration were sensitive and attentive these likely conflicts? Now, it is reported that Ms. Harris and her assistant, Allison Jaffin, performed the dual roles, failing to inform or obtain approval from the Conflicts of Interest Board beforehand. From the Daily News coverage:

The city charter generally bans bosses and subordinates from entering into business relationships with each other or doing private work on city time unless the Conflicts of Interest Board agrees it is in New York's best interest.

As the mayor tries to figure out what his third career is going to be - politics, philanthropy, something else - the line between his public and private lives seems to be growing increasingly muddy.

He insisted this summer he had no involvement in his media company and then had to backtrack a few days later, admitting he talks to top execs frequently.

(See: Mayor Bloomberg's aides staff his foundation without city ethics check, by Kirsten Danis, December 23rd 2007.)

In the article a Bloomberg spokesperson referred to Harris’ Bloomberg, L.P. work as a “minimal amount” when just two months earlier the Times was quoting Ms. Harris and writing about her overseeing what had been $165.3 million to 1,077 groups the previous year and Bloomberg was going to be “more generous” (to quote Ms. Harris) to the tune of $205 million in the year when the question came up.

And the City Health Commissioner’s Dual Role

The article reported that the Bloomberg administration also had Health Commissioner Thomas Frieden working with the Bloomberg L.P. foundation (which involved travel to China) and because he had obtained permission from the Conflicts of Interests Board, the administration suggested that Ms. Harris similarly doing so was unnecessary. Because we at Noticing New York know and appreciate and care more about the possibilities for conflicts in the real estate industry we won’t comment to compare how similar the Health Commissioner’s possibilities for conflict were.

Bloomberg Entrusts Deputy Mayor Harris. . .

How involved in major city-assisted real estate projects is Ms. Harris and how sensitive should she have been to possible conflicts of interest with respect to them? It was Deputy Mayor Harris who submitted the request for a conflicts of interest waiver for Daniel Doctoroff to the Conflicts of Interest Board.

The Times reported that Ms. Harris’ job includes being:

officially in charge of New York City whenever Mr. Bloomberg leaves town. But perhaps more significantly, she will see to it that the mayor's vision for the city is carried out in his second and final term as he seizes on the momentum from his huge electoral victory.

(See: Bloomberg's New Deputy Has a Velvet Fist, by Jennifer Steinhauer, December 6, 2005.)

It reports:

Ms. Harris is by far the most powerful person in the Bloomberg administration, a role rooted in her past at Bloomberg LP, where she served as director of his philanthropy for several years.

* * * *

They have a very secure relationship.

* * * *

"The mayor trusts her implicitly,"

(According to William T. Cunningham, who helped run both of Mr. Bloomberg's campaigns.)

Explicit Acknowledgment of Harris’ Use of “Charity” for Political Purposes

The Times article which is almost in the nature of a puff piece reports explicitly about the her role in utilizing the mayor’s “philanthropy” as a tool for political ends; apparently without realizing the full ramifications thereof:

Last year, when Ms. Harris became aware that some people in the arts world who had benefitted from Mr. Bloomberg's philanthropy had given political donations to one of his early campaign rivals, City Council Speaker Gifford Miller, she called them and demanded to know what they were thinking.

Extensions of Deputy Mayor Harris “Philanthropy”-based Power

Right now Ms. Harris’ “philanthropy”-based power has been expanded because, besides overseeing the mayor’s Bloomberg L.P. giving, the article writes about the control and influence she exercises over the City Hall-based Mayor's Fund to Advance New York City and its chairman. That’s for now. What does the future have in store? As noted, Ms. Harris was once in the private sector working for Bloomberg (de facto chief of staff) on his “philanthropies.” Now as a city official she continues to do so and the Times article says that with respect to the future she:

will continue to run his philanthropy once he leaves office. That endows her with formidable power beyond his term, . .

(Ms. Harris’ predecessor, Deputy Mayor Mark Shaw, went to work for real estate developer Extel Development company upon departing government.)

Ms. Harris’ husband, Mark D. Lebow, is a lawyer with Lebow & Sokolow LLP whose practice areas include real estate. Bloomberg appointed him to the board of the Metropolitan Transportation Authority and Ms. Harris’ stepson also works for the Bloomberg administration.

The Conflicts of Mayor Michael R. Bloomberg Himself

What about the mayor’s own conflicts in running the city while accreting so much wealth through his private company? His conflicts while controlling so much “charitable” giving? Among other things, the above-discussed conflicts of his senior people must travel up the ladder to be laid at his doorstep as well. But Mr. Bloomberg isn’t good at seeing conflict. Even though the Times wrote so explicitly about Ms. Harris’ use of “philanthropies” for political purposes, when the need for Ms. Harris to obtain Conflicts of Interest Board approval was raised, Mr. Bloomberg professed to see no possible conflict:

“She has been handling all of my philanthropies for all the years I’ve been in office,” the mayor said. “And whether she does it through a foundation or directly, there is literally no difference in terms of potential conflict.”

(See: Ruling Allows Wider Investment Options for Bloomberg and His Foundation, by Ray Rivera, December 27, 2007.)

The mayor is perhaps right: Whether the deputy mayor handles his “philanthropies” directly or indirectly does not affect the potential conflict. The conflict presents itself either way.

New 2007 CIOB Opinion

Ironically, the mayor’s statement was in an article that reported that the Conflicts of Interest Board was issuing a new 2007 opinion imposing specific theoretical restrictions on the mayor himself vis-a-vis his relationship with his private foundation. Given Mr. Bloomberg’s use of Ms. Harris to oversee his philanthropy, one would expect that she might easily be violating those same proscriptions applicable to Mr. Bloomberg without guidance.

What a Disobedient Mayor Does

It’s worse than that in several ways. The new Conflicts of Interest Board requirements were new because they were requirements that were being relaxed from what was previously required. At the same time, long into Bloomberg’s second term, it was being reported that Bloomberg had not complied with requirements to avoid conflicts that the Conflicts of Interest Board imposed upon him at the beginning of his first term.

In that same Times article:

In a 2002 agreement with the conflicts board, the mayor promised to limit his involvement with his company to major decisions that would have a significant impact on his ownership value. Throughout his two terms, the mayor repeatedly insisted that he had no involvement in the firm’s day-to-day operations.

This month, however, The New York Times reported that the mayor talked regularly to senior officials at the company about topics ranging from new data terminal sales to expansion into new markets and the general financial performance of the company. He even recruited the company’s spokeswoman.

And despite the 2002 agreement, which required him to recuse himself from any city business involving Merrill Lynch, the biggest investor in his company, the article said the mayor had taken numerous official actions that involved Merrill Lynch.

Not unexpectedly the Administration denied any problem:

Administration officials insist that Mr. Bloomberg has not violated the 2002 opinion.

Inadequacies of Agreement With Which Bloomberg Failed to Comply

The Times reports that much of the language of the 2002 ruling with which Bloomberg failed to comply was supplied by Bloomberg’s own lawyers. It also points out that its disclosure is antique, setting forth “Bloomberg L.P.’s top 100 customers” without update since 2002 when, comparatively speaking, Bloomberg was a considerably less bruising presence, his company’s customers now including “virtually every major financial institution in the city.” (The Roles Blur for the Mayor and the Mogul, By Serge F. Kovaleski and Ray Rivera, December 8, 2007.)

Once Again the Bad News is that “Charity” is Good

What seems to have convinced the Conflicts of Interest Board to give more freedom to a disobedient mayor in the new 2007 Opinion? Apparently, the deceptively all-too-simple argument that bolstering Mr. Bloomberg’s wealth and “philanthropic” potential would be good. To this end the board decided to:

allow him to move his money into more aggressive investments, including hedge funds and publicly traded stocks.

Because?

The mayor’s spokesman, Stu Loeser, said Mr. Bloomberg was not seeking the changes to expand his personal fortune, which has been estimated at anywhere from $5 billion to more than $13 billion. But he said that as the director of the Bloomberg Family Foundation, the mayor “has a responsibility to maximize the amount of money it has to give away to charity.”

(Note: The $13 billion figure is closest to the Forbes estimates.)

New Flexibility For the Mayor

The article explained:

The ruling by the five-member panel modified a key element of an opinion it issued in 2002 that urged the billionaire mayor to sell all of his stocks, along with his interests in a hedge fund, because the holdings violated the city charter.

(Bloomberg complied with that part of the directive.)

Specifically this was spelled out as the arrangements with which the mayor (Ms. Harris too?) was theoretically expected to comply:

Under the arrangement, the mayor will select one or more investment firms to oversee his personal and charitable foundation’s investment strategies, and then recuse himself from any city business involving those firms.

The firms will then choose managers who will carry out the investment decisions, but their identities will not be shared with the mayor, the board said.

* * * *

. . . the mayor could advise the investment firms about categories of investments and could hire or fire managers based on reports about their performance. But the mayor must receive no information about the specific holdings in his or the foundation’s accounts, and must not know the identities of the managers, the board said.

Is this adequate protection for the public when dealing with a mayor who had already demonstrated disobedience? Maybe not, but it was expected that it would sound good to the public:

“The proposed arrangement will not conflict with the proper discharge of his official duties, and it avoids the appearance of conflict to the public,” the board said.

It Ain’t Something for Nothing

One should always beware when something is offered for nothing.

Once upon a time, the idea was that we were going to have a mayor so wealthy that he was not interested in the acquisition of further wealth, a mayor so wealthy that he was motivated by pure generosity. Bloomberg was supposed to represent “a new paradigm,” “a businessman and a technophile, a man focused on communication and transparency,” a “technocrat-mayor” who didn’t personalize conflict. We were even relieved of contributing to the political campaign he willingly paid for himself! (See: The New Paradigm, Has Bloomberg changed the mayoral model forever? By Edward-Isaac Dovere.) But that was always just public relations preamble to the facts. The facts now deserve another look.

The Conflicts of Interest Board’s 2007 opinion is specifically about accommodating the mayor in the continuing acquisition of more wealth. Results speaking for themselves, that is something he had already done very well throughout his administration. Rather than generously giving money away, Bloomberg “donates” money to acquire more personal power and perhaps to acquire still more money as well. It even turns out he is driving up public expenditures on mayoral campaigns! Whereas once upon a time we were told we were going to have a mayor who was so angelically generous that we didn’t have to worry about anything, we now find that we have a mayor so financially omnipresent and capable of corrupting charity that we need to worry about everything. It is almost like a real life version of the jokey chestnut episode of the Twilight Zone, To Serve Man.

An Enormous Problem in Context

Given Bloomberg’s omnipresence, getting far enough away from him to avoid conflicts of interest is a daunting proposition. It is increasingly hard since Bloomberg has gone in a decade from just one of the wealthy (# 56 on Forbes list in 1998, # 42 in 2001) to the wealthiest New Yorker (# 8 richest American on Forbes list for 2008).

The Times had a paragraph that framed the enormity of the problem nicely:

The opinion is the latest ruling to try to address ethical questions created by Mr. Bloomberg’s public and private roles. The mayor not only runs a city that is one of the world’s financial capitals and retains a majority ownership of Bloomberg L.P., a media and financial information giant whose customers include many of the city’s biggest banking firms. He is also a philanthropist whose private giving often involves nonprofit agencies active in civic and neighborhood affairs.

Increase of Bloomberg Wealth at Taxpayer Expense?

Setting aside conflict-of-interest abuse of charities to enhance personal power, there is also simply the question of Bloomberg’s possible conflict-of-interest abuse to enhance his wealth at taxpayer expense. It should not be disregarded.

Our Capability to Know

How might Bloomberg make money at taxpayer expense? And how much do we know about how he might be doing so? Don’t expect information about what Bloomberg is actually doing to accomplish the phenomenal increase in his wealth to be readily available:

Releasing details of Mr. Bloomberg's tax returns could reveal too much to his company's corporate rivals, said his director of communications, William T. Cunningham.

(For Bloomberg, 'Rich' Is Just Too Weak an Adjective, by Leslie Eaton, July 3, 2004)

Long Live Bloombergian Competition?

“Corporate rivals?” Apparently it is acceptable to acknowledge that Bloomberg IS competing for wealth when it is convenient to withhold information about what that entails, even if that may be inconsistent with the original public relations spiel that Bloomberg was a man who was beyond that self-centered phase of his life.

Education in His Finances: Bloomberg Tax Return 2002

Early in his administration the Conflicts of Interest Board ruled that Bloomberg had to sell all of his individual stocks. (Note that does not preclude all the ways that Bloomberg might benefit from changes in stock market. Note also the later, more relaxed, permissions of the COIB’s 2007 ruling.) The sell-off of the stocks involved occurred in the 2002 tax year. The Times reported that he had losses associated with selling stocks that year: “at least $1 million of his personal fortune” which was at the time, given conflicting information, $4 billion? $5 billion? Forbes had it going up from $4 billion to $4.8 billion from 2001 to 2002. According to the Times (emphasis supplied):

Only the mayor knows whether his stock market loss was close to $1 million or far more because the mayor disclosed only three numbers yesterday in making available for review heavily edited portions of his income tax returns.

(In 2002, Bloomberg Lost a Bit (for Him) and Gave a Lot, by David (Cay) Johnston, June 14, 2003.)

In the article, the mayor's communications director pointed out that Bloomberg was paying taxes at the maximum rates and despite the heavy editing of the tax returns his “charitable” giving was sufficiently evident so as to become a good portion of the Times story. All the mayor’s income was income from investment:

The two taxes the mayor escaped were Social Security and Medicare taxes because his only salary is a dollar a year from the city. Those two taxes do not apply to investment income.

Is this to say that Bloomberg was not actually working to increase his private sector wealth? (Remember his later-revealed contacts coordinating affairs with senior Bloomberg L.P. executives.)

What do we really know? (Emphasis supplied)

While the mayor's 2001 tax return was a rich sea of G's, this year a number of E's, C's, A's and a few blanks -- meaning less than $1,000 -- showed up on the heavily edited documents that reporters were allowed to examine at Geller & Company accountants in Manhattan.

Asked if the mayor would sign legislation that added new categories, say for laddered categories of amounts up to $500 million, Mr. Cunningham said he did not want to discuss policy issues.

Hot Stocks: Hot Tips?

It may readily be envisioned that the Conflicts of Interest Board required the sale of Bloomberg’ individual stocks because of the possibility that he could benefit from special information and relationships. The concern is not necessarily insider trading, per se, which would be illegal, but akin to it. In that regard, what do we know about what kind of stock investor Bloomberg actually is?

The limited documentation showed that the mayor's competing teams of investment managers sought quick gains, often investing heavily in hot stocks, and that the mayor was not a buy-and-hold investor.

With the relaxed 2007 Conflicts of Interest Board ruling this kind of stock investment (and hedge fund) activity can resume.

Released From the Stocks: Terminal Interest

But are the stocks in which a wealthy Bloomberg invests the main concern? Bloomberg’s business is founded sale of the Bloomberg terminals to the financial community. That is core to the question of where he takes in most of his profit.

The possibility that Bloomberg’s terminal business could involve conflict-of-interest problems got some attention in a January 2002 New York Times article (before the Conflicts of Interest Board ruling) which is almost laughable in the way that it fails to identify the greatest possibilities for conflict-of-interest concern.

Once Again Charity IS the Bad News

Once again, Bloomberg’s ostensibly charitable nature is the grist used in a PR feint: The Times article reports about how Bloomberg, L.P. is “donating” 35 Bloomberg terminals to the city for use by members of the mayor's staff together with “seven other terminals that were previously being leased by the city's financial departments” in order to pay “heed to conflict of interest laws that forbid elected officials to sell goods and services to the city.” (See: Mayor Brings His Gadgets, And Thorny Conflict Issues, by Edward Wyatt, January 6, 2002.)

The article almost puffs over the nonviolation of conflict of interest rules:

Mr. Bloomberg and his company will receive no direct financial advantage from the city's use of the terminals -- and as a donation, the terminals violate no conflict of interest rules

and

''The reason for the donation was to alleviate the potential conflict of interest,''

For `balance’ the article fusses over the “reputational capital,” that might be created by the “the commanding presence that the Bloomberg terminals will have at City Hall” . . . “an asset that has value even if it does not show up on a balance sheet” according to "Kevin T. Jackson, an associate professor of business ethics at Fordham University."

In fact, by the article’s fourth paragraph, it is still talking about how the appearance of the Bloomberg terminal “at City Hall put the Bloomberg, with its sleek monitors and acres of flat-screen space, on the public stage as an object of desire” is a “a product placement that would make any marketing director salivate.”

Putting the Object of Desire on the Public Stage: Ominous Message?

Albeit that product placement and reputational capital idea is a valid concern, what goes unstated in the article is the slightest thought that placing the terminals on “the public stage as an object of desire” can also send a clear message about how easy it could be to deliver benefits equivalent to a kick-back.

This is why it is a critical concern that the Times reported, as noted above, that for years thereafter (emphasis supplied):

the mayor talked regularly to senior officials at the company about topics ranging from new data terminal sales . . . .

Sales of Bloomberg terminals were shooting up in the years just before running for mayor when Bloomberg’s billionaire fortune essentially doubled, according to data available for 1997, 1998 and 1999. (See: The Company He Keeps (for Now), by Timothy L. O'brien, March 20, 2005.) But increased sales do not correspond in arithmetic proportion to increases in profit. The industry is somewhat of a diminishing marginal cost business; after a point, most costs have been paid for, so sale of each additional terminal beyond that point is essentially gravy.

If you analyze it, all it takes for New York financial firms to deliver quid-pro-quo benefit to the mayor in a virtually undetectable fashion is for them to order more Bloomberg terminals than they otherwise want or need. And, as noted, each additional terminal is almost pure gravy, pure cash to Bloomberg. For the years that the mayor has been in office, Wall Street has been far and away that largest sector of the city’s economy and, as the Times asserts, Bloomberg does business with“virtually every major financial institution in the city.”

Comfortable With the Bloomberg Terminal?

The Times article on the “donated” terminals said that the terminals had been given in part because of Bloomberg’s own comfort with the system:

The donations are not an attempt to further market the Bloomberg name, his aides said. ''It was just the fastest way to get the office set up with computers,'' said William T. Cunningham, the mayor's communications director, who added that the system is the one that Mr. Bloomberg is most comfortable with.

The new hardware lets users get e-mail messages, do word processing, make spreadsheets, surf the Internet, as well as gain access to the news services and financial market data typically offered to Bloomberg customers, all without the bother of flipping between windows on a single screen.

But the system Bloomberg was switching everybody at City Hall over to was not necessarily designed for everybody else’s comfort, as reported in the later 2005 Times article about Bloomberg’s terminal business:

Early Bloomberg users needed to pick their way around the terminals using arcane commands and interfaces, many of which persist today. Mr. Bloomberg believed that once people were trained in how to use a Bloomberg terminal, no matter how confusing, it would make them less inclined to switch to other systems. He also insisted that every new service or data point be bundled inside the Bloomberg and never sold separately, increasing the value of the machine and allowing the company to charge a premium to use one.

Skepticism? Bloomberg, Wall Street City’s Financial Leadership?

Given the lack of separation between Bloomberg business interests and Wall Street, we must inevitably speculate skeptically about poor financial leadership of the Bloomberg administration. (See: Saturday, October 25, 2008, More Discredit of Bloomberg as Qualified Financial Crisis Leader.)

Sufficient Separation?

We started this Part II asking whether we should feel confident of sufficient separation between the worlds of big mega-deal city administration-assisted real estate development and the Bloomberg private wealth businesses that are growing so fast. The answer is no, given the troubling conflicts we see at the highest level of the Bloomberg’s administration and business involving Daniel Doctoroff, Patricia Harris and Michael Bloomberg himself.

Charitable “Giving” Bad News: No Light at the End of the Tunnel

That now brings us back to where we started with Part I of this article, that more “charitable giving” by Bloomberg is bad news.

The worse news is that there is no light at the end of the tunnel.

Don’t expect the flow of Bloombergian “philanthropic” money to abate. Even though more than a billion dollars have been distributed since Bloomberg became mayor, we may have seen nothing compared to what is yet to come. Bloomberg has a hands-on attitude about distributing his money. He says he wants to do it all himself when he is alive, joking about the desirability of having the “check to the undertaker” bounce. (See: Bloomberg’s Gifts to Charity Exceeded $165 Million in 2006, by Diane Cardwell, September 17, 2007) That means we can project a huge flow of money, much more than we have seen to date. Born February 14, 1942, Bloomberg is about to be 67 years old. Assuming that he lives to a ripe old age and “gives” away all his money over another 30 years (even without his current wealth increasing still further), that would mean, dividing equally over those years, distributions of $666 million each and every one of those future years!

Bloomberg has disclosed political ambitions sufficient to keep him on the scene through a considerable portion of all his "philanthropic" years: running for governor or even a second run at the presidency. He wants to be mayor for another five of these future years. Five more years . . . unless he has another term limits extension surprise in store for us. Would that be unachievable?

As the New York Times commented about the public promise that First Deputy Mayor Harris will, in future years, even after leaving her current public office, be coordinating dispersal of Bloomberg's $20 billion:

That endows . . . formidable power beyond his term, . .