Tag Archives: Cuomo

Amazonian Rage in NYC

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Vice quoted me in Amazon Is Bringing in Elite Lobbyists Amid Seething Rage Over HQ2. It opens,

Amazon might be too big to tax, but it’s not too big to freak out.

As the company tries to erect a massive headquarters in America’s largest city, it has come up against staunch opposition from residents, politicians and unions—all concerned the powerful monopoly will serve to inflate rent and strain local infrastructure, especially the housing supply and subway system. And while it might seem like a trillion-dollar company could easily quash protesting naysayers, turns out CEO Jeff Bezos might actually have good reason to try and win the haters over.

On Wednesday, the Wall Street Journal reported Amazon hired high-powered Democratic consulting firm SKD Knickerbocker, and a lobbying shop called Greenberg Traurig, to help smooth the way forward for its new HQ. While Amazon remained relatively tight-lipped, the company has sought to make inroads into affected communities—planning meetings with public-housing residents and reaching out to members of the city council. But some elected officials, including Senator Mike Gianaris and NYC Councilman Jimmy Van Bramer, whose districts include the HQ’s proposed turf in Long Island City, have refused to serve on its advisory board, indicating instead a desire to kill the project entirely. Meanwhile, a Quinnipiac poll that dropped this week showed the majority of NYC residents backed the HQ2 plan, but activists groups and community board members have continued to organize, spurred on by Congresswoman-elect Alexandria Ocasio-Cortez—or at least her Twitter account.

In fact, the new Amazon influence operation, which emerged a few weeks after HQ2 plan was made official, suggested there were still concrete ways locals could thwart or at least put a dent in the company’s expansion scheme. If nothing else, an extremely-powerful company that has experience in the DC lobbying game is finding out it won’t get a new home in NYC without a fight that cuts at the core of the Democratic Party’s identity.

According to Richard Brodsky, a lawyer and veteran Democratic politician who served in the state assembly, if city officials or other activists took Amazon or the politicians who supported the plan to court, they could employ legislative subpoenas to demand more documentation of the project, and investigate compliance issues. Brodsky argued Amazon’s bid might provide the jobs promised, but that the company still had a long way to go in informing the public about how it would impact communities.

“Because the governor and the mayor have given this project to a set of soviet-style bureaucracies, there’s no one to ask the questions and no one to answer,” he told me, referring to the special fast-track process Mayor Bill de Blasio and Governor Andrew Cuomo, both Democrats, have tapped to push through the Amazon deal. “Who the hell do you ask?”

Litigation is a fairly common way of handling disputes over projects like this in the city, according to David Reiss, a law professor and expert on community development at Brooklyn Law School. “Not being a shy bunch, New Yorkers often file lawsuits that try to set up procedural roadblocks to the project,” he told me via email. “These suits can slow down or even stop projects—and can give community members leverage with the City, State and project developers.” Even if it isn’t stopped altogether, legal action could help modify the project and fund parks, schools or transit.

Under the current approach from on high, however, the Amazon HQ also had to be approved by the Public Authorities Control Board (PACB), comprised of gubernatorial appointees mostly made in consultation with the state legislature. This may prove to be among the only serious points of leverage Amazon opponents have to stall, or, in an extreme case, block the whole project. Even then, Brodsky said, the PACB was only technically supposed to oversee financial concerns, and not necessarily gauge a project’s social impact.

The city, for its part, appeared to largely be standing behind its original plan as it geared up for public hearings beginning next week. A spokesperson from the NYC Economic Development Corporation, the nonprofit development agency contracted by the city that helped broker the deal, told me Amazon was working to broker partnerships with affordable-housing developments and other community organizations, as well as provide concrete details about the 25,000 jobs promised in the company’s initial memo about the project.

The spokesperson also dismissed the idea that the new HQ would strain the city’s mess of a public transportation system. They argued the current flow of traffic on the subway routes amounted to Queens residents commuting to Manhattan for work, and that the “reverse commute” of Amazon employees coming to Long Island City would balance things in the other direction, not jam up trains in some new way. (It’s worth noting that Amazon employees were already reportedly looking for rental properties in Long Island City proper.)

Those resisting the headquarters, however, were unlikely to be swayed by more details, logistical help, or civic engagement on part of a brand many despised for what it represented in the annals of modern capitalism. Ocasio-Cortez, who has become a national spokesperson for anti-Bezos sentiment and a leading light of a left-wing insurgency in the Democratic Party, took to Twitter again on Tuesday: “Now what I DON’T want is for our public funds to be funding freebie helipads for Amazon + robber baron billionaires, all while NYCHA and public schools go underfunded & mom+pops get nowhere near that kind of a break,” she said, capturing criticism of some of the most comical parts of the Amazon deal as brokered by de Blasio and Cuomo.

Ocasio-Cortez’s Democratic Socialist bent may still be a nascent one, and her job in DC means local activist groups will have to lead the fight on the ground. (Some unions actually supported the deal, further exposing the internal Democratic Party divide at issue here.) At the same time, it’s important to look back to previous massive corporate deals for context on what’s going on. While Amazon, as a company, doesn’t have many contemporaries in the city trying to launch a new home at this scale, the way stadiums, universities and other hubs have been constructed in NYC in the past will help inform what does—and doesn’t—happen in Long Island City.

The EDC spokesperson, for example, pointed out that other big projects—such as Columbia University’s expansion and Atlantic Yards—were also achieved via a General Project Plan pushed through by the state instead of undergoing to the more public land review process at the city level. Using that fast-track in Amazon’s case has been a key flashpoint in the dispute over its origin, garnering frustration from Van Bramer and his colleagues. (Announcing a project before knowing the specific details, the EDC spokesperson insisted, was par for the course in cases like this one.)

This fast-tracking does happen often with larger projects, Reiss agreed, noting that land procedures can be bypassed when the state government is involved, leaving some feeling like their voices were ignored. “This can cut deeply because they are often the ones who are most affected by the negatives of the construction process and the changes that the project bring about in their communities,” he told me.

Mortgages for Grads

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Realtor.com quoted me in College Grads Can Get Home Grants—but There’s a Catch. It opens,

Recent college graduates hoping to buy a home have one more reason to toss their caps in the air these days: Programs offering home grants to new grads are popping up across the country, offering thousands of dollars in assistance that could put homeownership within reach. Talk about a nice graduation gift!

In New York, for instance, Gov. Andrew Cuomo recently announced a $5 million pilot program, “Graduate to Homeownership,” providing assistance to first-time buyers who’ve graduated from an accredited college or university with an associate’s, bachelor’s, master’s, or doctorate degree within the past two years. That aid can take the form of low-interest-rate mortgages, or up to $15,000 in down payment assistance.

The catch? You’ll have to live upstate—in Jamestown, Geneva, Elmira, Oswego, Oneonta, Plattsburgh, Glens Falls, or Middletown—eight areas that many just-sprung college students tend to flee as soon as they have their diploma in hand.

“Upstate colleges and universities have world-class programs that produce highly skilled graduates—who then leave for opportunities elsewhere,” Cuomo admitted in a statement. “This program will incentivize recent graduates to put down roots.”

The trade-off for college grads

New York is not the only state offering this type of assistance to college grads, many of whom are saddled with significant student loan debt. According to analysis by Credible.com, nearly half of states offer some form of housing assistance to student loan borrowers, with a handful focusing on recent grads.

For instance, Rhode Island’s Ocean State Grad Grant program offers up to $7,000 in down payment assistance to those who’ve earned a degree in the past three years. Ohio’s Grants for Grads program offers down payment assistance or reduced-rate mortgages to those who have graduated in the past four years.

Still, what’s noteworthy about programs like New York’s is that you can’t just buy a home anywhere. Rather, you have to plunk yourself down in semi-ghost towns. That’s hardly ideal for someone who’s trying to kick-start a career.

So as tempting as this home-buying “help” might appear at first glance, you have to wonder: Is it enough to offset what these students give up? Some experts say it’s a risky bet.

“The New York program aims to retain highly educated people in economically depressed regions and revitalizing struggling downtowns in those regions,” says David Reiss, research director for the Center for Urban Business Entrepreneurship at Brooklyn Law School. “It can certainly help people who are dealing with high student debt burdens. But programs like this have to deal with a fundamental issue: Do these communities have enough jobs for recent college graduates? Time will tell.”

Find a job first, then a home

Experts say students should think carefully before they pounce on this “gift” and make sure they can be happy in one of the designated locations—and gainfully employed.

“No question, they should have a job lined up first [before buying a house],” says Reiss. After all, “a good deal on a house or a mortgage is not a good deal if we don’t have a job to go along with it.”

Tough Edge for Financial Services

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Maria Vullo

 

 

 

 

 

 

 

Law360 quoted me in Cuomo’s DFS Nominee Likely To Keep Tough Edge (behind a paywall). It reads, in part,

Although New York Gov. Andrew Cuomo turned to a longtime BigLaw attorney to lead the New York State Department of Financial Services, observers say the agency is likely to continue taking the aggressive regulatory and enforcement stance that has become its calling card.

The governor tapped Paul Weiss Rifkind Wharton & Garrison LLP’s Maria T. Vullo to lead the DFS, completing a monthslong search to replace former New York Superintendent of Financial Services Benjamin M. Lawsky. In turning to Vullo, Cuomo brings on a litigator and former prosecutor with 25 years of experience in the law, including two decades of representing banks.

But given the reputation that the DFS has built up since it burst onto the scene with its $340 million sanctions violation settlement with the U.K.’s Standard Chartered PLC in 2012, advocates and observers believe that if confirmed, Vullo will continue to push for tough enforcement and big penalties against the banks, insurers and other financial firms that the DFS oversees.

 *     *     *

However, because Vullo comes from a BigLaw background with extensive experience representing financial firms, some have raised concerns that the agency will become less aggressive in enforcing New York state’s financial regulations.But observers who spoke to Law360 said her noncorporate experience gives a clearer picture of how she might run the DFS.

Vullo has been an advocate for women in the legal profession and represented women who sued for damages after being raped during the war in Bosnia between 1992 and 1995, helping secure a $745 million verdict in that case.

And in her work for Cuomo during his tenure as New York’s attorney general, Vullo oversaw a staff of around 200 that worked in the office’s investor protection, antitrust, real estate finance, consumer fraud and Internet bureaus.

In that position, she took action against Ezra Merkin and Ivy Asset Management for their roles in defrauding investors in Bernard L. Madoff’s $65 billion Ponzi scheme, as well as launching an investigation and action against Ernst & Young for investor losses in Lehman Brothers Holdings Inc.’s 2008 bankruptcy.

Those past experiences should allay any fears that Wall Street’s critics might have, said David Reiss, a professor at Brooklyn Law School.

“I thought that Governor Cuomo would seek an aggressive replacement for Lawsky,” Reiss said. “Vullo fits the bill.”

To that point, financial reform and other advocates said in interviews that they knew little about her, but were encouraged by what they did know.

“What we’re hoping is that the reputation that the department has established will continue through the new leadership,” said Andy Morrison of the New Economy Project, a New York-based advocacy group.

Indeed, Cuomo has an interest in maintaining an aggressive DFS.

The billions of dollars in fines it collected from banks have gone to fund state infrastructure projects, including the construction of a new Tappan Zee Bridge across the Hudson River north of New York City.

And that get-tough approach has also been a way to attract voters.

“My sense is he benefits from the halo effects of an aggressive DFS,” Reiss said.

Property Tax Exemptions in Wonderland

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Cea

NYU’s Furman Center has released a policy brief, The Latest Legislative Reform of the 421-a Tax Exemption: A Look at Possible Outcomes. This brief is part of a series on affordable housing strategies for a high-cost city. It opens,

Since the early 1970s, New York City has provided a state-authorized, partial property tax exemption for the construction of new residential buildings. In the 1980s, the New York City Council amended the program to require that participating residential buildings in certain portions of Manhattan also provide affordable housing. Most recently, New York State extended the existing program through the end of 2015 and created a new 421-a framework for 2016 onward. However, for the program to continue beyond December, the legislation requires that representatives of residential real estate developers and construction labor unions reach a memorandum of understanding regarding wages of construction workers building 421-a program developments that contain more than 15 units.

This brief explores the possible impacts of the new 421-a legislation on residential development across a range of different neighborhoods in New York City, including neighborhoods where rents and sale prices are far lower than in the Manhattan Core and where the tax exemption or other subsidy may be necessary to spur new residential construction under current market conditions. We assess what could happen to new market rate and affordable housing production if the 421-a program were allowed to expire or if it were to continue past 2015 in the form contemplated by recently passed legislation. Our analysis shows that changes to the 421-a program could significantly affect the development of both market rate and affordable housing in the city (1, footnote omitted)

The 421-a program operates against the backdrop of a crazy quilt real property tax regime where similar buildings are taxed at wildly different rates because of various historical oddities and thinly-sliced legal distinctions. Like the Queen of Hearts, the rationale given by the Department of Finance for this unequal treatment amounts to no more than — And the reason is…because I say so, that’s why!

The brief concludes,

Our financial analysis of the possible outcomes from the 421-a legislation offers some insights into its potential impact on new construction. First, if the 421-a benefit expires in 2016, residential developers would lower the amount they would be willing to pay for land in many parts of the city. The result could be a pause in new residential developments in areas outside of the Manhattan Core as both buyers and sellers of land adjust to the new market.

*     *     *

Second, if the newly revised 421-a program with its higher affordability requirements and longer exemption period goes into effect in 2016 without any increase in construction costs, the city is likely to have more affordable rental units developed in many parts of the city compared to what the existing 421-a program would have created. Condominium development without the 421-a program may still continue to dominate in certain portions of Manhattan, though the program appears to make rentals more attractive. (12)

The first outcome — lower land prices if 421-a expires — is not that bad for anyone, except current landowners. And it is hard to feel bad for them, given that they should not have expected that 421-a would remain in effect forever (and not to mention the rapid increases in NYC land prices). The second outcome — the new 421-a framework — sounds like better public policy than the existing program.

But one wonders — what would it take for NYC to develop a rational real property tax regime to replace our notoriously inequitable one, one that treats like properties so differently from each other. Can we escape from Wonderland?

NYC’s 421-Abyss

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New York City’s 421-a tax exemption has lapsed as of yesterday because of disagreements at the state level (NYS has a lot of control over NYC’s laws and policies, for those of you who don’t follow the topic closely). 421-a subsidizes a range of residential development from affordable to luxury. In the main, though, it subsidizes market-rate units.

This subsidy for residential development is heavily supported by the real estate industry. Many others think that the program provides an inefficient tax subsidy for residential development, particularly affordable housing development.

I fall into the latter camp. I would note, however, that NYC’s dysfunctional property tax system is highly inequitable because it taxes different types of housing units (single family, coop and condo, rental) so very differently.

With that in mind, let me turn to a policy brief from the Community Service Society, Why We Need to End New York City’s Most Expensive Housing Program. The reports key conclusions are,

At $1.07 billion a year, 421-a is the largest single housing expenditure that the city undertakes, larger than the city’s annual contribution of funds for Mayor de Blasio’s Housing New York plan.

The annual cost of 421-a to the city exploded during the recent housing boom as a result of market changes, not because of any intentional policy decision to increase the amount of tax incentives for housing construction.

Half of the total 421-a expenditure is devoted to Manhattan.

The 421-a tax exemption is a general investment subsidy that has been only superficially modified to contribute to affordability goals.

The 421-a tax exemption is extremely inefficient as an affordable housing program, costing the city well over a million dollars per affordable housing unit created.

The reforms made to 421-a in 2006 and 2007 have not resulted in a significant improvement of 421-a’s efficiency as an affordable housing program.

A large share of buildings that receive 421-a and include affordable housing also receive other subsidies, such as tax-exempt bond financing. Affordable units in these buildings cannot be credited entirely to the 421-a program.

The great majority of the tax revenue forgone through 421-a is subsidizing buildings that would have been developed without the tax exemption. (3-4)

The brief argues that 421-a should be allowed to expire and be replaced “with a targeted tax credit or other new incentive that is structured to provide benefits only in proportion with a building’s contribution to the affordable housing supply.” (4)

I don’t have any real disagreement with the thrust of this brief. I would just add that the fight over 421-should be expanded to include an overhaul of the City’s property tax regime. It is unclear, of course, whether Governor Cuomo and NYS legislators have the stomach for a battle so large.

Reiss on Lawsky Legacy

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Law360 quoted me in Lawsky’s Aggressive Tactics Provided Model For Regulators (behind a paywall). It reads, in part,

New York Superintendent of Financial Services Benjamin Lawsky’s frequent, aggressive and often creative enforcement actions generated billions of dollars for the state and put his agency at the forefront in financial services regulation, and observers expect a similar approach from Lawsky’s successor when he leaves his post next month.

Confirmed to lead the New York Department of Financial Services in May 2011, few expected the new agency, which combined the state’s banking and insurance regulators, to make much of a mark. But after collecting $3.3 billion in penalties and forcing several traders and top executives out of their positions, Lawsky’s agency has proven to be a powerful enforcer.

“His biggest legacy is simply that he stood up a brand new regulator in one of the global financial centers and made it matter almost immediately,” said Matthew L. Schwartz, a partner at Boies Schiller & Flexner LLP and a former federal prosecutor. Lawsky, who announced his departure from the agency on May 20, established a name for himself and for the Department of Financial Services when he jumped ahead of federal banking regulators and prosecutors in announcing a $340 million settlement with British bank Standard Chartered PLC over its alleged violation of U.S. sanctions against Iran and other countries in August 2012.

That a newly formed state regulatory agency would move ahead with a stiff penalty and threaten to wield the most powerful of weapons — the pulling of Standard Chartered’s license to operate in New York state — reportedly rankled his federal counterparts

*     *      *

“He made clear that consumer protection is integral to the mission of the agency,” Brooklyn Law School professor David Reiss said.

Despite Lawsky’s frequent reminders that he works for New York Gov. Andrew Cuomo — for whom he has also served as chief of staff — and the superintendent’s constant praise for his staff, there is fear among some reformers that the DFS won’t be the same without Lawsky at the helm.

“Lawsky proves that the character of individual regulators can make a crucial difference more than the letter of the law itself,” said Bartlett Naylor of Public Citizen.

“Ideally, he’ll inspire his successor and other regulators that honor awaits the vigilant and opprobrium will fall upon the indolent. More practically, however, the problems of regulatory capture by an enormously influential industry reliant on government favor can prove overwhelming,” Naylor added.

Others are more confident that the agency Lawsky set up will continue its work even after his move to the private sector.

In part, that’s because the penalties the DFS has wracked up have been a boon to New York’s budget.

Cuomo, the state’s former attorney general, has an interest in many of the issues Lawsky acted on, as well.

“I have every reason to expect that Cuomo would want to have a very vigorous enforcer to replace Lawsky,” Reiss said.

En-Titled Insurance

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Benjamin M. Lawsky, the New York State Superintendent of Financial Services, has promulgated a proposed regulation regarding title insurance that is sure to shake up the title industry and, more importantly, reduce closing costs for NY homeowners.

The proposed regulation opens with a statement of its scope and purpose:

(a) The purpose of this Part is to promote the public welfare by proscribing practices that are not in accordance with Insurance Law section 2303, which provides that insurance rates shall not be excessive, inadequate, or unfairly discriminatory. This Part also interprets and implements Insurance Law section 6409(d), which prohibits giving any consideration or valuable thing as an inducement for title insurance business, as well as Insurance Law section 6409(e), which states that title insurance premiums shall reflect the anti-inducement prohibition of Insurance Law section 6409(d).

(b) This Part further protects consumers, pursuant to the authority of Insurance Law sections 2110 and 2119 and Article 24 and Financial Services Law sections 301 and 302, by ensuring that the title insurance industry provides valuable products and services to consumers at reasonable rates and fees and does not overcharge consumers or charge improper and excessive fees that constitute engaging in untrustworthy behavior and unfair and deceptive acts and practices. (Section 227.0 )

New York has long had some of the most expensive title insurance premiums in the country, so homeowners and other owners of real estate should welcome this development. Title insurance agents are not allowed to compete on price in NY, so they compete for business from real estate lawyers (who typically select the title insurance agent for any given transaction) by offering them all sorts of perks such as hard-to-get tickets to events and fancy meals. The proposed regulation attempts to rein in this behavior.

The NYS Department of Financial Services will be accepting comments for 45 days after the proposed regulation is published in the State Register, so get crackin’.