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New York’s political consultants look overseas for campaign action.

Westchester wrestles with new Census figures on race, ethnicity.

Kathy Hochul sees an opening in NY-26.

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VOL. 4, NO. 9

MAY 9, 2011

Andrew Cuomo, Kenneth Adams and the struggle to restore New York’s economy. pg. 12

Duane also disputed the idea that his profile on the issue had diminished following the 2009 defeat. Duane said either he or his staff had been at every strategy meeting convened during the current push. Duane said he discusses the topic with colleagues constantly. “I am not only a billboard for gay marriage but I am a walking, talking bully pulpit for gay marriage,” Duane said.

“There’s been a concerted effort to keep him out of the lead of this,” said one source about Duane.

Given Tom Duane’s status as the first openly gay and HIV-positive senator, and his longtime championing of gay rights issues, his place on the sidelines is striking.

On The Outs? Eric Lipschutz

As historic gay marriage vote nears, Tom Duane sits on the sidelines By Chris Bragg


wo years ago, Tom Duane was the face of the push for samesex marriage in New York. The Manhattan Democrat repeatedly assured anyone within earshot that he had lined up 32 votes for its passage. News outlets around the state ubiquitously quoted the State Senate’s only gay member. Yet for all Duane’s efforts, the bill went down to a stunning 38–24 defeat. Now, as same-sex marriage proponents again push for the bill’s passage, Duane has assumed a noticeably lower profile. He has rarely been part of the Cuomo administration’s tightly controlled press rollout of supporters and coalitions. Instead the Empire State Pride Agenda, the Human Rights Campaign, a diverse slew of celebrities and Cuomo himself have taken center stage. Publisher/Executive Director: Darren Bloch

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MAY 9, 2011

One person close to this year’s efforts said there has been a conscious shift in strategy. “There’s been a concerted effort to keep him out of the lead of this,” said the inside source. Given Duane’s status as the first openly gay and HIV-positive senator, and his longtime championing of gay rights issues, his place on the sidelines is noticeable. But several people close the 2009 efforts believe the shift has a lot to do with alleged missteps that year. During the floor debate on the bill, amid eloquent speeches by State Sen. Diane Savino and others, Duane made a somewhat rambling case. And in the run-up to the vote, Duane took the unusual approach of publicly declaring that he personally had lined up the votes to pass the bill, while coyly declining to say who had committed. EDITORIAL Interim Editor: Philip Lentz Managing Editor: Andrew J. Hawkins Reporters: Chris Bragg Laura Nahmias Jon Lentz Photography Editor: Andrew Schwartz Interns: Ismail Muhammad, Candace Wheeler

Two sources close to that year’s efforts allege that Duane—along with then Senate conference leader John Sampson— instructed ESPA not to directly lobby senators who were publicly uncommitted to the bill for fear of scaring away votes that had been privately promised. In February 2010, then ESPA executive director Alan van Capelle, known for an aggressive approach that had long run up against Duane’s softer touch, told The New York Post that “people were less than impressed by his performance on the floor of the Senate during the marriage vote, and are concerned about his leadership on other issues.” But in an interview, Duane vehemently disputed that he had ever told anyone from ESPA not to lobby his Senate colleagues. Duane said that gay rights advocates had lobbied numerous different senators in group settings. “To say that ESPA was not allowed to lobby certain senators is just absurd,” Duane said. “Every senator was being lobbied.”

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Brian Ellner, the senior strategist for the Human Rights Campaign, said he could not speak to whether Duane had a reduced role. “I truly can’t speak to 2009, because I was working for the mayor [Michael Bloomberg] back then,” Ellner said. “Our focus is on building support. He is involved.” Some insiders close to the 2009 efforts say Duane’s lower profile has more to do with the changed dynamics of the State Senate. With Republicans back in control, vote whipping has been largely relegated to Cuomo, who has chits to play with from the GOP. In 2009, when then Gov. David Paterson was at a political nadir, Duane’s personal appeal to his colleagues was more necessary. Daniel O’Donnell, the Assembly sponsor, and a number of other lawmakers involved in this year’s push did not return phone calls seeking comment about Duane’s role. In an indication of the on-message nature of the gay marriage push this year, few people were willing to speak about the problems of 2009, even off the record. Others believe the marriage bill’s initial defeat was far from Duane’s fault. Andy Humm, a gay rights activist, recalled how he had lobbied the New York City Council in 1974 to pass a bill protecting basic gay rights, only to have a number of committed Council members go back on their word under pressure from the Catholic Church and the fire department. “They turned people around who were supporters of the bill,” Humm said. “I don’t think Tom did a bad job. I just think he was betrayed.”

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April, 2011 The Honorable Andrew M. Cuomo Governor of New York State NYS State Capitol Building Albany, NY 12224

The Honorable Dean G. Skelos NYS Senate Majority Leader 909 Legislative Office Building Albany, NY 12247

The Honorable Sheldon Silver NYS State Assembly Speaker 932 Legislative Office Building Albany, NY 12248

The Honorable John Sampson NYS Senate Minority Leader 409 Legislative Office Building Albany, NY 12247

The Honorable Brian M. Kolb NYS Assembly Minority Leader 933 Legislative Office Building Albany, NY 12248

Dear Governor Cuomo and New York State Senate and Assembly Members: You will soon have before you for consideration Bills S-4668 (Lanza/Hassell-Thompson) and A-7155 (Cusick/Farrell) which seek to cure a serious flaw in the Waterfront Commission Act. This flaw impedes the ability of employers to recruit and hire new employees who are necessary to sustain and grow the business of cargo handling, which is so vital to the economic well-being of our region. This legislation is NOT an attempt to eliminate the role or necessity of the Waterfront Commission; but it is a rather prudent and responsible action which ensures port employers will have a sufficient number of employees when they need them – not when an agency which has no economic investment in the management of the port or its activities decides they are warranted. S-4668 and A-7155 are intended to repeal Section 5-p of the Waterfront Commission Act, N.Y. Unconsol. Laws § 9920 (McKinney 2002), in the New York State legislature. Section 5-p was enacted in 1966 in response to a provision in the Collective Bargaining Agreement between the New York Shipping Association and the ILA which provided a Guaranteed Annual Income to workers displaced due to the introduction of new technology into the marine terminal environment. At that time, management and labor agreed that keeping the register open did nothing to further our competitive position, and agreed that the “controlled register statute” made sense. Today, the Guaranteed Annual Income program no longer exists and ironically, it is now the constraints placed on employers by the Waterfront Commission pursuant to Section 5-p that threatens the competitiveness of the Port. There are 361 ports in the United States and the Port of New York and New Jersey is the only port in the Nation where employers are denied their prerogative to determine when to add skilled workers to their payrolls and when to replace workers lost through attrition, retirement, or illness. Currently the Commission must approve how many workers can be hired and from where they must be recruited. New York Shipping Association, Inc., on behalf of the port employers has repeatedly stated both privately and publicly that we strongly support the law enforcement, crime fighting and licensing roles of the Commission. However, we who responsibly oversee the business of maritime commerce are better suited to determine the manpower level necessary to maximize the economic contribution of the Port to the quality of life of the tens of millions of people who reside within our service area. With the impending completion of the Panama Canal Expansion and the reconfiguration of the Bayonne Bridge, the Port of New York and New Jersey will be uniquely positioned to handle significantly more import and export cargo. Ports all along the East Coast are preparing to compete for the increase in cargo coming directly to the East Coast. We are hampered by an antiquated process for hiring longshore workers and are put in a competitive disadvantage. This antiquated process must be changed. The State of New Jersey took legislative action in 2007 to amend Section 5-p, recognizing that the Waterfront Commission should not maintain a role as a commercial market regulator long after the guaranteed annual income program has ended. The Port of New York and New Jersey is the largest and most productive port complex on the East Coast and supports more than 270,000 port related jobs in the northeast. The greater New York and New Jersey region must be permitted to reap the full benefit of the economic engine that is the Port of New York and New Jersey. Amending Section 5-p will not alter the law enforcement, investigatory or licensing functions of the Waterfront Commission. We urge you to support the repeal of Section 5-p by voting in the affirmative on S-4668 and A-7155. More information about Section 5-p is available and we would be happy to discuss this further with you in greater detail. Your support for this measure will demonstrate a commitment to a stronger economy for the State of New York. Sincerely,

Joseph C. Curto President

NYSA MEMBERSHIP American Stevedoring Inc. | The American Sugar Refining Company | APL, Ltd. | APM Terminals/Universal Maritime Service Asset Protection Group | Atlantic Container Line | Bermuda Agencies Limited | Cargotec Services | Ceres Atlantic Terminals, Inc. | China Shipping (North America) Agency Co., Inc. | CMA-CGM (America), Inc. | COSCO Container Lines Americas, Inc. | CSAV Group North America | Ecuadorian Line, Inc. | Essex Cement Company | Evergreen Shipping Agency (America) Corporation | FJC Security Services, Inc. | Global Container Terminals USA | Hamburg Sud North America, Inc. | Hanjin Shipping Company, Ltd. | Hapag-Lloyd (America) Inc. | Hoegh Autoliners AS Horizon Lines | "K" Line America, Inc. | MJ Rudolph Kinder Morgan | M. P. Howlett, Inc. (Weeks Marine) | Maersk Inc. | Maher Terminals, L.L.C. | McRoberts Protective Agency, Inc. | Mediterranean Shipping Company | MOL (America) Inc. New York Container Terminal, Inc. | NYK Line (North America) Inc. | OOCL, (USA), Inc. | Port Newark Container Terminal L.L.C. | Ports America, Inc. | Safmarine, Inc. | Sims Metal Management | Turkon America, Inc. | United Arab Shipping Company | Wallenius Wilhelmsen Logistics | Yang Ming Marine Transport Corporation (Yang Ming Line) | Zim Integrated Shipping Services Ltd. NYSA ASSOCIATE MEMBERSHIP American Maritime Service of New York Inc. | Bay Container Repairs of New Jersey | Container Services of New Jersey, Inc. | FAPS, Inc. | Portwide Cargo Securing Company | Securitas Security Services USA, Inc.

Daniel Case

New construction at Kiryas Joel, which is among the top communities in terms of political contributions.

Higher Power Technically impoverished, Kiryas Joel among most politically generous districts By Laura Nahmias The poorest census district in the United States is also one of the most generous—in giving to New York’s political campaigns. Residents of zip code 10950 in Orange County, home to the Satmar Hasidic village of Kiryas Joel, gave $310,000 in 2009–10, placing the area in the top quartile of fund-raising for zip codes that gave to New York candidates, according to an analysis of campaign finance data. The spending, unusual for a poor community but not for one that wields such political influence, reveals that Kiryas Joel is not shy about exercising its political power. “What we offer elected officials is: We do our job here; you do your job there,” said village government relations coordinator Ari Felberman. “Meaning, we bring out the vote. If that’s worth anything to them, they’ll know that our constituents are tuned in.” That kind of political pragmatism is necessary for a village growing as fast as Kiryas Joel. Over 20 years the population has mushroomed from 7,000 to 20,175— driven by a high birthrate and an influx of community members from Brooklyn. This has created a local economy fueled by government funding, with most residents employed by nonprofits


MAY 9, 2011

and schools that receive federal aid. The surging population has also created an immediate need for infrastructure— housing and other necessities—where state aid is needed. The U.S. Census Bureau calculates the poverty rate by dividing personal income by population. In Kiryas Joel, where most families have eight children and the

“We take voting seriously, and as a result, things happen for the village,” village government relations coordinator Ari Felberman said. median age is 14, that skews the numbers, giving the village a very high poverty rate. Another factor in the village’s high poverty rate is that many Kiryas Joel businesses handle a high percentage of their transactions in cash, making the town appear more poverty-stricken on paper, according to one operative who has worked in the community. Underneath the plain, comfortable village exterior is an expansive business empire. Despite its high poverty rate, the

Satmars have an estimated half-billion dollars’ worth of real estate holdings, in addition to a network of private schools, home-health agencies and factories. For two decades the community has had tremendous success securing promises of aid from elected officials in exchange for votes. More than 80 percent of the village’s residents voted in the last election, nearly five times the national average. “We take voting seriously, and as a result, things happen for the village,” Felberman said. In recent times, political consultants say the Satmar’s clout has been diminished. Factionalism has split the once-unified voting bloc, and Gov. Andrew Cuomo seems far less concerned with appeasing the group than his predecessors. Kiryas Joel has recently become two blocs, which often oppose each other. In 2006 the death of Rabbi Joel Teitelbaum split the community in two, following a massive custody dispute between Joel’s two sons, Aaron and Zalman. Both the Aronites (followers of Aaron) and Zalmanites (followers of Zalman) have a presence in Kiryas Joel and Williamsburg, Brooklyn, and the groups have a tendency to vote in opposite ways. But both factions agree on the need to fund their rabbinical schools. Much of the $310,000 raised in 2009–10 from Kiryas Joel was for a campaign to insert $18 million into the state’s budget for Tuition Assistance Program (TAP) grants for students of yeshivas, undergraduate rabbinical schools. Kiryas Joel residents

reportedly raised more than $140,000 for then Gov. David Paterson and $40,000 for Senate Minority Leader John Sampson in hopes of securing the aid. But it was Senate Majority Leader Dean Skelos who ensured the bill’s final passage, apparently in exchange for a promise from Southern Brooklyn’s Orthodox Jews to vote Republican in the event that indicted Sen. Carl Kruger lost his seat. The announcement of the TAP money was celebrated in Orthodox community newspapers statewide, which praised a troika of young Hasidic fund-raisers: Jacob Sofer, a housing builder in Kiryas Joel; Akiva Klein, co-owner of a camera store; and Bernard Mittelman, who owns a clothing distributor on the Lower East Side. Klein, 38, is also a board member for the Kiryas Joel yeshiva, which enrolls upward of 1,000 young men, 92 percent of whom rely on federal assistance to pay the $5,000 annual tuition. The private college was incorporated in 1999, last reported annual earnings of $5 million and maintains a stock portfolio with at least a million shares in an international mining company called Legend International Holdings. Klein is the sole trustee. For elected officials, association with Kiryas Joel can be a political liability in other Orange County towns. Residents in Orange and Rockland Counties are increasingly frustrated with the village’s ability to pull down expensive public works, like a $30 million state-funded water pipeline and an $11.5 million postnatal care center funded almost exclusively through executive and legislative member items. In 2006 the Satmars opposed Rep. Sue Kelly, who was not a strong supporter of their projects; she was subsequently defeated by Democrat John Hall. “[Kelly] had promised to do all kinds of things for the village…and somehow she felt that right before the election she was afraid to keep her word because the outside communities might not take kindly to it,” Felberman said. Governor Cuomo is less willing to be seen as cozy with the community, said several political observers. As attorney general, Cuomo prosecuted Satmar fund-raisers for a $23 million home-health-care Medicaid fraud. He respected a gubernatorial campaign tradition by meeting with Rabbi Aaron Teitelbaum and posing for photographs, but continues to target home health care in his Medicaid reforms. The village’s ability to fund its projects probably won’t change. Brooklyn legislators with large Satmar neighborhoods can still leverage support from city elected officials for projects in Kiryas Joel, and for all the discussions of backroom dealing, the village is also exceptionally well organized and always ready to apply for state and federal grants. “We always plan for the future,” Felberman said. “If we need sidewalks, the plans are already on the drawing board.”

















A Few Facts About Rent Regulation… Fact: From 1994 to 2007, the deregulation of high-income/high-rent apartments resulted in a $6.9 billion infusion to the New York City economy.1 Fact: This included $2.1 billion in increased real estate tax revenue that funded municipal services and $4.8 billion in housing construction and improvements that generated thousands of jobs.1 Fact: During the same 14-year period, while 75,250 apartments were deregulated, rent-stabilized units increased by 25,811 to 1,077,333.1 Fact: Eighty percent of deregulated apartments are in Manhattan.2 Fact: Wealthy renters in Manhattan saw their rent subsidy increase from $159 in 1987 to $345 in 2005.3 Fact: A majority of multi-family property owners own less than 20 units of housing.4 Nearly half of all owners are at risk because rental income fails to exceed building operating costs.5 You Can’t Argue Against the Facts. Vacancy De-Control Stimulates Investment in Quality Affordable Housing, Fuels the Local Economy, Generates New Tax Revenue Streams, Creates Jobs and Protects Affordability for the People Most in Need.

Why Would Anyone Want to Repeal Vacancy De-Control? “The Impact of Deregulation of Rent Stabilized Units by High-Rent/High-Income Decontrol and High-Rent Vacancy Decontrol: An Economic and Fiscal Impact Study” Urbanomics, March 30, 2009 2 “Changes to the Rent Stabilized Housing Stock in New York City in 2008” The New York City Rent Guidelines Board, June 4, 2009 3 “The Value of Rent Subsidies from Rent Stabilization by Borough & Neighborhood of New York City: An Econometric Study based on the2005 Housing and Vacancy Survey” Urbanomics, May 15, 2009 4 The Rent Stabilization Association Membership Files 5 “Survey of Owners of Rent Stabilized Property” Urbanomics, June 17, 2009 1

RENT STABILIZATION ASSOCIATION • 123 William Street New York, NY 10038 • TEL: 212-214-9200 • WWW.RSANYC.ORG

Redistricting Untangled As the clock runs down, state’s redistricting efforts appear headed to the courts By Laura Nahmias


Andrew Roberts

ew York likes to wait until the last possible moment to complete its redistricting process. Only once in 30 years has the Legislature passed a plan it wrote itself, and the proceedings have never been completed by the timetable government watchdogs suggest is appropriate—at least six months before an election. Although Gov. Andrew Cuomo has pledged to veto any unfair lines drawn by

Despite calls for reform, Shelly Silver and Dean Skelos will likely control the redistricting process this year. the Legislature in the 2012 redistricting, demographers and redistricting experts say it may be politically expedient for Cuomo to let the clock run out and force the courts to step in. Cuomo has already made good on a campaign promise by issuing a program bill that would place the job of line drawing in the hands of a nonpartisan team. The bill would ban those individuals who have held a position in government for four years prior from serving on the redistricting panel, to avoid conflicts of interest. But the governor’s bill, along with another similar bill put forth by Democratic State Sens. Mike Gianaris and Dan Squadron, is stuck in committee. Cuomo’s bill was sent to the rules committee by Senate Majority Leader Dean Skelos with no sponsors, a legislative technique that makes it impossible for Democrats to bring it up for debate. “There’s still some time yet for this to play out,” said Gianaris, who also conceded that fair lines could eventually be drawn by the federal courts. In the past, the courts have mandated that the state have a plan in place by April or May in an election year. That would give sufficient time for the U.S. Depart-


ment of Justice to ensure that it is in compliance with the Voting Rights Act. The Legislative Task Force on Redistricting (LATFOR) has yet to have a full meeting to discuss the 2012 lines. In December, good-government groups said redistricting reform would have to be passed by February 2011 to give enough time to set up a bipartisan or nonpartisan commission. But that deadline has come and gone. History suggests that waiting for federal intervention can be a prudent strategy for governors. In 1992 and 2002, Mario Cuomo and George Pataki both failed to have plans in place in time to avoid judicial takeover of the process. Both times the state courts appointed a special master, a former judge named Frederick Lacey, to draw the lines. But even with the selection of a special master, the Legislature can still pass its own redistricting plan. For example, in 2002, despite Lacey’s reappointment, the Legislature submitted its own plan under the direction of Shelly Silver and Dean Skelos, which the federal government eventually accepted. The longer the Legislature waits to put a plan together, the less likely legal challenges will succeed. Challenges filed too late in the process can hold up elections. And even with judicial involvement, the Legislature finds ways to draw lines that favor incumbents. In 2002, Skelos submitted a plan that was ultimately adopted by the state court, which conceded that while the plan cracked county lines and had wide population divergence between districts, it still met the guidelines set out in the state constitution. And while partisan gerrymandering is decried by good-government groups, it is also openly discussed and accepted among legislators. In 2002, during New York’s congressional redistricting, Rep. Nita Lowey argued that her district should remain “safe” because she was then the chair of the Democratic Congressional Campaign Committee and shouldn’t have to fight for reelection. Several Democratic lawmakers said they were concerned that Cuomo might cut a deal with Senate Republicans on redistricting: He doesn’t need fairer lines to maintain power, and a Republicanled Senate has been cooperative with Cuomo’s legislative agenda. A persistent rumor is that Cuomo may approve a plan that helps the Senate Republicans in exchange for an up-or-down Senate vote on issues he considers more of a priority, such as gay marriage. Marriage-equality advocates dismissed those rumors as preposterous.

New York State

Can Save Millions

Use private engineers to design public works projects. n

Recent data shows use of private sector engineers on public works projects lowers design costs by 14-20%.*


Private engineers are paid only for the time they work on a project and offer flexibility in manpower time and labor costs.


Studies show the increasing disparity between public and private sector compensation. The U.S. Department of Labor Statistics and the U.S. Census Bureau’s Current Population Survey both show public sector wages, benefits and pensions were higher than private sector wages for comparable positions.


According to 2011 testimony by the Governor’s office, the average compensation and benefits for state employees has increased 14% during the past three years, while private sector wages in New York dropped 8.8% from 2008 to 2009 alone.


A 30-year DOT employee costs New York $6.4 million, on average, over his/her lifetime (including fringe benefits, health care and pension).

* “NYSDOT Engineering Costs: In-House vs. Outsourced Engineering,” Polytechnic Institute of NYU, Jan. 2011

Leaders in the business of engineering

MAY 9, 2011


Behind the political rhetoric, rent regulations debate is about supply and demand By Jon Lentz


ith only a few weeks to go until rent regulations expire, New Yorkers living in rentstabilized apartments are again squaring off against their landlords. Another group of tenants with a stake in the debate are newer residents, who have little chance of finding and moving into regulated apartments, which are in perpetually short supply. Defenders of all three groups are reviving an old debate over what ought to be done with the regulations, which restrict how much landlords can raise rents for tenants in more than one million rent-stabilized apartments in and around New York City. The person whose point of view matters the most, Gov. Andrew Cuomo, says he supports bolstering the laws along the lines of a bill the Assembly passed in April, which would prevent landlords from deregulating vacant apartments with rents of $2,000 or more. The bill would also increase deregulation thresholds by raising allowable income levels to $300,000 from $175,000 and increasing maximum rents to $3,000


MAY 9, 2011

from $2,000. Landlords, who are opposed to strengthening the current laws, say the existing system already makes a mockery of free-market economics. They say the rules prevent them from charging what the market will bear, essentially forcing them to subsidize their tenants. The real estate industry also argues that regulation discourages investment in new housing. “It is a subsidy,” said Joe Strasburg, president of the Rent Stabilization Association, which represents landlords. “Because if the fair market calls for X, and you’re prevented from going to fair market, then the difference is clearly a savings to somebody. If you’re going to provide a subsidy, you have to have a means test.” Strasburg’s call for a means test would address another key critique of rent regulations: that middle-income tenants get the biggest benefits under the program, while many needier New Yorkers are not covered at all. Only about 60 percent of the benefits of rent stabilization go to households with incomes below $50,000 a year, according to the nonpartisan Citizens Budget Commission. About 14 percent goes to households that bring in $100,000 or more.

“Rent regulation is just not a welltargeted way to get at the problem,” said Tammy Gamerman, a researcher with the CBC, which supports maintaining the

“Everybody is entitled to live in a decent unit,” said Peter Salins, a professor of political science. “Is everybody entitled to live in a decent unit in a fashionable neighborhood? I think not necessarily.” current laws while exploring new alternatives. “There are people who benefit from rent regulation at the higher end of the income stream, and for those renters it’s harder to make the case that they need protection from rent increases.” Tenant advocates say that landlords are only telling half of the story. They say the current protections prevent landlords from price-gouging or booting renters from their apartments. The crux of their argument is that the city’s chronically tight supply of housing,

Joey Carolino

Rental Economics

which leaves New York City with the lowest vacancy rate of any major city in the country, requires protections to keep rents at reasonable levels. In the latest housing survey in 2008, New York City’s estimated vacancy rate for rental apartments was 2.9 percent, down slightly from the previous 2005 study. It has long stayed below 5 percent, the legal threshold for the decades-long housing emergency that is the rationale for continued regulation. Tim Collins, former director of the state’s Rent Guidelines Board, said the laws were designed to create normal market rents in the absence of a normal market. The factors behind the unusually tight housing market include the city’s limited land area, a steady influx of new immigrants, a complex zoning code and a high cost of construction, he said. “That creates a tremendous amount of pressure on the housing stock, and the idea is to ensure that there’s some fair bargaining between owners and tenants,” Collins said. “We could eliminate the housing shortage and even the playing field by getting rid of zoning regulations, selling off the parks and green spaces in the city, drastically cutting back on the building code, that sort of thing. We’d have plentiful supply of lowcost housing and the city would be intolerable and dangerous to live in.” Collins said the criticism of rent regulation is only valid if one takes the view that the regulations constitute a welfare system. He added that the costs of regulation, such as higher costs for some renters and less renovation in some apartments,


have only a minor impact in New York City. But Peter Salins, a professor of political science at Stony Brook University, said that phasing out the laws would give landlords a much-needed incentive to improve the city’s “shoddy” housing supply. It would also benefit tenants outside the system, “the people that really suffer from rent regulation,” Salins said. He noted that some tenants in market-rate apartments find it difficult to pay their rents, in part because of artificially low rents in regulated units, which rarely turn over and reduce the supply of available housing. The CBC estimated in June 2010 that marketrate rents would decline by 15 percent if regulation was abolished. Economists have come up with other figures over the years, but they generally agree that repeal would reduce rents for people in market-rate apartments. Salins said that’s exactly what he’d like to see, even

Rent Regulation Redux From 1997 to 2011, supporting cast on rent control fight mostly the same Back then, Republican Gov. George Pataki was in charge, not Andrew Cuomo. Republican Joseph Bruno was Senate Majority Leader, not Dean Skelos. And the fight was over repealing New York’s rent regulations, not strengthening them. But many other aspects of the debate have remained the same as in 1997, the last big battle over rent laws, when luxury decontrol was introduced and the laws were scaled back in ways that Democratic lawmakers are now seeking to reverse. While two of the three lead characters are new to the negotiations, much of the supporting cast is the same 14 years on, apart from a few more gray hairs and some extra inches around waistlines. Sheldon Silver is still Assembly speaker, Assembly Member Vito Lopez is still chair of the Housing Committee, and both Democrats are still pushing for stronger tenant protections. On the other side, the Real Estate Board of New York’s Steven Spinola and the Rent Stabilization Association’s Joseph Strasburg are still defending the interests of the real estate industry and landlords. That shared history with key players can be an advantage, said Spinola. That even includes his relationship with Silver, an opponent on the issue. “I always believe it’s easy to make a deal when people know each other and hopefully to some degree like each other,” Spinola said. “I like the speaker. I think he’s an extraordinary speaker and very talented.” While some have gained respect for their longtime opponents, other players maintain a dim view of the opposition. Michael McKee, who in 1997 was policy director of the New York State Tenants and Neighbors Coalition, mocked what he called the real estate industry’s unwavering reliance on “money and stealth.” In terms of strategy, veterans more often avoid strategic missteps, said Strasburg, who heads the RSA, a landlord group. But familiarity can nullify any advantages earned through hard experience. “There’s only so much you can do to strategize, because everybody knows everybody’s moves,” Strasburg said. Of course, the presence of experienced advocates and lawmakers will have only so much impact, since the “three men in a room” will ultimately negotiate


though it’s highly unlikely to happen. The spike in rents for lower- and middle-income tenants in Manhattan and other parts of the city would spark widespread outrage, an outcome politicians would like to avoid at all costs. Rents in the other four boroughs are generally lower, and in some cases even equal to the rentstabilized levels, but thousands across the city would bear the brunt of repeal, though Salins said the impact could be eased by phasing in the changes. As for residents who want to stay in the expensive neighborhoods they grew up in or lived in for years, that’s simply outweighed by the benefits that come with a freer market, Salins added. “Everybody is entitled to live in a decent unit,” he said. “Is everybody entitled to live in a decent unit in a fashionable neighborhood? I think not necessarily.”

the final compromise. Though Skelos served as Bruno’s deputy in 1997, rent regulation was primarily Bruno’s issue. The one holdover of the three, Silver is recycling at least one tactic. In May of 1997 he suggested he would tie rent regulations to property-tax cuts, much as he is linking them to a proposed propertytax cap this year. “Most of the builders and developers in the city of New York and throughout the state are willing to accept regulated rents in exchange for low-interest loans or some kind of real property-tax reductions on their developments,” Silver told The New York Times in 1997. “There is nothing inappropriate in having an overall housing discussion.” The other two men in the room, Democratic Gov. Cuomo and Republican Senate Majority Leader Skelos, will likely have the most impact on the outcome, several observers said. Cuomo’s teaming with Silver to support stronger regulations echoes Pataki’s partnering with Bruno to weaken them. Pataki eventually broke with Bruno on repealing the laws and reached a compromise with Silver that allowed landlords larger rent increases for vacant apartments, among other changes. “In order to deliver for landlords, Pataki had to leverage concessions out of the speaker in 1997,” said one Albany observer who followed the debate closely that year. “In 2011 the governor is still the player with the greatest leverage, but the two-on-one in Albany has flipped. Clearly the measure of Cuomo’s effectiveness on the issue will be his ability to leverage significant tenant protections out of Skelos.” What Cuomo might use as leverage is unclear. But unlike Pataki, who faced reelection the following year, Cuomo is still in his first few months in office and has plenty of time to insulate himself from unpopular decisions. So far, Cuomo has also avoided some of the mistakes of his predecessors. In the weeks before the regulations were set to expire, Pataki unveiled a concrete proposal without securing a deal on it, a move Bruno criticized for giving up leverage. Instead, Cuomo has been vague about what changes he would ultimately support. Strasburg joked that once a deal is reached, he doesn’t want to deal with another rent-law fight. “All of us would prefer that this issue, whatever happens, gets extended so far down the road that it will be dealt with by somebody else,” he said. “I would let them do a 14-year extender; this way I could be gone. It will be somebody else’s headache.” —Jon Lentz

Smart Grid = Clean Environment By Melvin Burruss, Esq.

An effective energy policy for New York State must make economic sense and offer clear environmental benefits. To achieve this goal our state must aggressively continue taking steps toward the integration of smart grid technology. While New York State has made commendable progress in reducing its carbon footprint, there is still an over-reliance on aging fossil fuel-burning power plants. Much of the downstate region has been designated by the U.S. EPA as non-attainment areas for poor air quality. The American Lung Association’s 2010 State of the Air Report has Queens and New York (Manhattan) Counties tied for the second dirtiest counties for short-term particle pollution, the Bronx is the dirtiest county for the highest annual and short-term levels of particle pollution for any county on the nation. The Journal of Natural Resources & Environmental Law has shown that pollutants from fossil-fuel power plants are linked to asthma, premature death, respiratory and cardiovascular disease. Since African Americans live in more polluted areas, this has a lasting affect on both their respiratory and cardiovascular systems. New York must continue to use our existing sources of affordable, clean and reliable electricity sources such as Indian Point and the state’s other nuclear power plants. The state legislature must also adopt a comprehensive power plant siting law to expedite the development of new, clean sources of energy to fortify our energy supply, create jobs and ultimately grow our economy. The continued development of smart grid technology is also critical to an effective statewide energy policy. Delivering electricity from suppliers to consumers using two-way digital communications, this technology will ultimately lead to greater use of household functions during off-peak hours, such as dishwashing and the charging of electric vehicles. By digitally monitoring power supply and demand in real time, we can notably improve energy efficiency, reduce energy consumption and costs, fortify the stability of our energy supply and avoid increased reliance on “peaker” units, while creating lasting environmental benefits as a result. The use of smart grid technology will ultimately benefit consumers, businesses, power producers and the environment. Our leaders in Albany and Washington should continue to make the development and implementation of smart grid technology a top priority in 2011. Melvin Burruss, Esq. is the President of the African American Men of Westchester and a member of the New York Affordable Reliable Electricity Alliance.




New York AREA’s membership includes some of the state’s most vital business, labor and community organizations including the New York State AFL-CIO, Business Council of New York State, Partnership for New York City, New York Building Congress, National Federation of Independent Business and many more. W W W. A R E A - A L L I A N C E . O R G MAY 9, 2011


Provided by Michael Caputo

Michael Caputo, Carl Paladino’s former campaign manager, in Moscow in 1993.

The Quiet Americans In an off-cycle election year, New York consultants look abroad for campaign action By Chris Bragg How do you follow up managing a campaign for a candidate who made anti-gay remarks, was caught forwarding pornographic emails and nearly traded blows with a newspaper columnist? Apparently you hightail it for Ukraine, a place where things can also get pretty hairy. “Last time around, my Ukrainian campaign manager was murdered,” said Michael Caputo, Carl Paladino’s former campaign manager, via an email from that country. “Tough place, but Ukraine is a cakewalk compared to the New York governor’s race—and off Fred Dicker’s beat, thankfully.” Caputo, a sharp-witted consultant who has worked everywhere from Nicaragua to Russia, has returned to Ukraine to work as a strategist during that country’s parliamentary elections. He is one of a number of New York consultants who have gravitated to the sometimes risky business of working for foreign clients, a trade that can prove especially appealing during offyear election cycles in New York. On Caputo’s previous campaign in Ukraine alone, he was joined by flamboyant Republican strategist Roger Stone and Western New York Democratic operative Steve Pigeon—a veritable dream team of New York dirty tricksters. Possessing some of the most renowned and ruthless consultants in the country, New York has increasingly become a place where operatives are chosen to provide campaign expertise in fledgling democracies. And with so many demo-


MAY 9, 2011

cratic movements unfurling around the globe, those opportunities are only likely to expand, though most consultants believe that scoring clients in burgeoning Middle East democracies is years away, given the anti-American sentiment in the region. Some New York consultants, bored with American politics, do it for the thrill; others do it for the payday. Some say the motivation is to build the reputation of American democracy. But nearly everyone agrees that the work is not for the faint of heart. “Most of my pals in the arena don’t have the spare time, patience or absent self-preservation impulse required to do this,” Caputo said. The job offers many challenges. American consultants must blend in to unknown lands, providing their technical skills while seeking out trustworthy local campaign professionals to fill in the cultural nuances. Bernard Whitman, a pollster and strategist who has worked for Bill Clinton and Michael Bloomberg, said that by the end of the Clinton administration, he had grown tired of the American two-party system, in which policy differences are extremely mild compared with those in developing countries. He began to work as a pollster and advisor in Bermuda, the Cayman Islands and, most frequently, in complex national elections in Central and Eastern Europe. In Ukraine, for instance, there are a handful of major parties but also dozens of smaller ones whose intentions and financial backers are largely unknown.

Whitman said business interests in these countries often form fake political parties to siphon off support from larger ones. “You are, in effect, playing threedimensional chess,” Whitman said. “If you make a push in one area, you can never be certain of the result.” American operatives rarely reveal their foreign-client lists, even after a campaign. Often New York consultants are not even hired by a foreign campaign

“When you’re working in places like Harlem or Brooklyn or Buffalo, you learn trench warfare and hand-to-hand combat,” Pigeon said. Another Stone protégé, Elnatan Rudolph, who worked last year for both the Senate Democrats and Paladino, had previously worked abroad in Russia, Israel and the Dominican Republic. Rudolph said campaigns on foreign soil allowed operatives to use unsavory tactics that would not pass muster New York. “In New York, campaigns could not get away with using [the kind of] dirty tricks that are done abroad,” Rudolph said, “because reporters and editorial boards would use that against the campaign, and they would backfire.” Some of New York’s more left-leaning firms are getting into the action. Red Horse Strategies, the field-operations shop that works closely with the Working Families Party, is currently devising a plan for the Socialist Party in the Castile-La Mancha region of Spain. The firm was connected with the party by a former Spanish intern. Marc Lapidus, a partner in the company, is currently in the country tailoring a field plan to fit its cultural quirks. Veteran Democratic strategist Hank Sheinkopf is believed to have one of the longest foreign-client rosters, though he declined to reveal it except to say that it includes heads of state from Europe, South American, North America and Africa, where he worked with Pigeon. Sheinkopf said he has good reason to keep his clients’ names confidential, since being an American consultant in a foreign land can be dangerous. He once

“In New York, campaigns could not get away with using [the kind of] dirty tricks that are done abroad,” Elnatan Rudolph said, “because reporters and editorial boards would use that against the campaign, and they would backfire.” itself but rather by a “shadow campaign” backed by powerful business interests that support a candidate but do not trust in-country political talent to do the job. One local consultant, who has worked on campaigns in Bulgaria but declined to be named for fear of upsetting their client, said American consultants were often brought in to do the dirty work—for example, drumming up a party’s ethnic base—while the parties themselves maintained a more legitimate front. Many foreign consultants are associated with Roger Stone. That includes Pigeon, who is best known for helping orchestrate the 2009 State Senate coup and then scoring a job as legal counsel to then Senate Majority Leader Pedro Espada. Pigeon, who has worked on campaigns from West Africa to Jamaica, said that having a reputation as an aggressive operative in New York certainly does not hurt efforts to land clients abroad.

had to switch hotels every night during the last week of a campaign in the Caribbean for fear of reprisals. Sheinkopf learned the foreignconsulting business from his mentor, the trailblazer of the field, Joseph Napolitan, who was an advisor to John F. Kennedy and Lyndon Johnson. In 1969, Napolitan famously helped polish the image of Philippine strongman Ferdinand Marcos as he ran for reelection. Sheinkopf also has some pearls of wisdom for those thinking of getting into the foreign-consulting game. Like many others who represent clients overseas, Sheinkopf said one of the keys is always to secure payment before boarding the plane back to New York. “The important rules are to keep your head down as you work, leave quietly, name your price beforehand,” he said, “and get paid in advance.”


Housing Crunch Scant results of mortgage refinancing program due to foreclosure delays

By Lenny Caro

By Jon Lentz Nine months ago, Gov. David Paterson signed a law to encourage banks to refinance mortgages on luxury condominium developments that froze up during the financial crisis, provided they include some affordable housing as part of the deal. However—despite the best of intentions—the legislation has had little effect, due to lengthy foreclosure proceedings and other delays. The law would make buildings with tens of thousands of units, many of them in Brooklyn, eligible for insurance through the State of New York Mortgage Agency if they were converted to affordable housing. The cheaper financing provided by the state would reduce project costs, but there hasn’t been much demand for the state insurance. “Currently those units are generally in the foreclosure/workout process and have not been presented to us for insurance,” New York State Homes and Community Renewal spokesperson James Plastiras said in an email. The program, called Project Reclaim, was sponsored by Assembly Member Hakeem Jeffries, who has been trying to address the problem of half-completed or only partially filled housing developments throughout Brooklyn. In 2009 he conducted a block-by-block survey of his district to identify stalled projects. “It’s my understanding that HCR is currently in negotiation with several developers to refinance failed market-rate projects using the vehicle of the legislation,” Jeffries said. The measure allows banks to refinance troubled loans in amounts up to $150 million for multifamily

The state’s lengthy foreclosure process, which can take two years, is one factor that has hindered the refinancing effort. apartment buildings financed between 2004 and 2008, when credit was easy and housing developments abounded. The bill was introduced in response to the credit crunch and the resulting wave of stalled luxury condominium projects that dotted Brooklyn, which Jeffries represents. “If someone can’t afford their house, and you want to keep them in that house, you have to refinance the mortgage,” Jeffries said. “Essentially Project Reclaim legislation uses that theory on a broader scale.” Jonathan Miller, president of Miller Samuel Real Estate Appraisals, said that lawmakers are trying to kill two birds with one stone: getting distressed condominium projects to accept their losses and move forward while also boosting the supply of the city’s affordable housing. “In New York, there’s always a challenge of finding affordable housing, so this seemed to sort of marry the two problems together,” Miller said. But as the shaky real estate market in New York City shows some tentative signs of recovery, attempts like Jeffries’ have struggled to gain traction.


Legislature Can Make NYS More Competitive With No Cost to State Budget The recent spike in fuel prices has once again brought home the reality that energy is a significant cost that impacts everyone. For businesses, ensuring a reliable supply of energy with stable prices remains a top challenge as our region seeks to emerge from the recent economic downturn. Businesses are heavily dependent on electronic technology. New York State already has the nation’s third highest electricity rates, trailing only Connecticut and Hawaii. Adding to our competitive disadvantage in the battle for jobs is our aging energy infrastructure. There continues to be an over reliance on older, inefficient power plants and an energy delivery system that is largely antiquated.

Andrew Schwartz

Hakeem Jeffries, who sponsored Project Reclaim, has been trying to address the problem of half-completed or only partially filled housing developments. A separate $20 million city program subsidizing vacant or half-completed condominium projects that add middle-income housing funded its first project in March. The state’s lengthy foreclosure process, which can take two years, is one factor that has hindered the refinancing effort. Speeding up foreclosure proceedings could help get projects moving again but would also put individual homeowners at risk of losing their homes more quickly. “The one challenge, of course, is we have to wait for the seizure of this property to take hold,” Jeffries said. “I’ve spoken to several financial institutions who have expressed interest in this tool that now exists with the state, but they’ve said they can’t act until they gain title of the building through the foreclosure process.” A few other deals are being negotiated in which the bank already has the title, or the distressed developer is open to working it out prior to foreclosure, Jeffries said, but those are the exception. Miller said that banks have also been avoiding writing down their losses on the housing projects for as long as possible, a practice called “pretend and extend.” When the plummeting market wiped out developers, banks were bogged down with assets that were less valuable than the original loans. Converting empty condos to affordable rental apartments would add a loss to the banks’ fragile balance sheets while also diminishing the property values of condominiums that owners already purchased. Miller said that though the legislative efforts were small, they were a step in the right direction. “This is a block of units sitting empty, creating blight, and some sort of funding or way to enable all parties to share pain and enhance the local community,” he said. “I think that’s a very good thing.”

Mayor Bloomberg’s recent PlaNYC update outlined numerous ambitious objectives to improve New York City’s environment, including ending the use of #4 and #6 heating oil in all city buildings, reducing greenhouse gas emissions by more than 30%, the increased use of hybrid vehicles, and creating solar power plants on top of sealed landfills to generate an additional 56 megawatts of power and cut the city’s reliance on fossil fuel energy sources. PlaNYC also supports keeping Indian Point on-line to ensure stability in our electric grid. Passing a new power plant siting law would be a significant step in the right direction towards creating new, well-paying jobs without any additional cost to the state’s taxpayers. Attracting investors to fund critical updates to New York State’s energy infrastructure by building new power plants and energy transmission lines would create thousands of well-paying jobs. With new power plants and energy infrastructure up and running, the resulting jobs will be engines for local economies statewide. The ultimate benefit is more sources of affordable and reliable electricity, lowering rates and making New York State more competitive with the rest of the country. Lenny Caro is a member of the New York Affordable Reliable Electricity Alliance and CEO of the Bronx Chamber of Commerce, representing over 600 Bronx employers. The Chamber promotes business and opportunity within the borough to enhance and stimulate the marketing of Bronx based employment, products and services.




The New York Affordable Reliable Electricity Alliance (New York AREA) is a diverse group of business, labor, environmental, and community leaders working together for clean, low-cost and reliable electricity solutions that foster prosperity and jobs for the Empire State. W W W. A R E A - A L L I A N C E . O R G MAY 9, 2011



By Andrew J. Hawkins 12

MAY 9, 2011


Andrew Cuomo, Kenneth Adams and the struggle to restore New York’s economy. THE CAPITOL


eorge Washington may have coined it, the building at the corner of 5th Avenue and 33rd Street may symbolize it and Alicia Keys and Jay-Z may have put a beat to it, but Kenneth Adams thinks New York State’s 225-year-old sobriquet has lost its luster. “This is going to be a conflict for the Department of Motor Vehicles,” said Adams, the new president and CEO of the Empire State Development Corporation. “But this ‘Empire State’ nonsense at the bottom of my license plate has been misleading for years.” Strong words from someone who has recently been put in charge of the state’s powerful quasi-public economic development agency. But even though it says it right there in his agency’s name, Adams is unmoved. “I can’t think of any legitimate economic indicators that allow us to put that at the bottom of our license plate,” Adams said at a recent meeting of the ESDC Board of Directors, shaking his head. Gov. Andrew Cuomo, who appointed Adams last January, seems to agree. In his “State of the State” speech, he said, “What made New York the Empire State was a not a large government complex; it was a vibrant private sector that was creating great jobs in the state of New York. That’s what made us the Empire State once, and that’s what’s going to make us the Empire State again.” More than ethics reform, a propertytax cap, marriage equality or an on-time budget, Cuomo’s first term in office will be judged on how well he grows the state’s economy. And he seems to relish the challenge. He knows his job depends on how successful he is in bringing businesses to the state, spurring job growth and stemming the tide of young people moving away from struggling upstate communities. You can see it behind every jubilant statement he releases touting the retention of a growing business, the acquisition of a new industry, the creation of new jobs. Adams, who ran the Business Council of New York State for five years before accepting Cuomo’s offer, will lead the governor’s effort to improve the state’s economy. He comes to the job with deep relationships in the business and real estate community, a sharp political acumen and a flair for micromanaging that would probably make the boss proud. But he will also have to deal with a weakened agency that is low on dollars and morale. Not only is Adams pessimistic about the state’s claim to its nickname, he is also somewhat skeptical about what government can do to encourage growth in the private sector. Days before he accepted Cuomo’s offer to join the administration, he was in full advocate bluster. “State agencies like ESDC are not normally viewed as helpful to people who are trying start, run and grow businesses,”


he said in an interview. “It’s that old story: ‘Hi, I’m from the government, I’m here to help.’ Left to their own devices, these bureaucracies create significant roadblocks to regional projects.” Unsurprisingly, joining the government payroll has not dimmed this opinion. Nor has Cuomo’s commitment to creating 10 regional councils to drive economic development and spur job growth across the state, although the councils could add another layer of red tape for businesses to cut through. But joining the administration has added some clarity to Adams’ view of the government’s role in economic development, which he believes should be more focused on advocating for lower taxes and reduced regulatory hurdles to allow businesses to grow jobs.

ident of the Buffalo-based M&T Bank, to chair the entire agency, and Marisa Lago, a former Citigroup official, as president and CEO. Reprising the Schick-vs.-Foye fights, Wilmers and Lago were reportedly at loggerheads throughout most of their brief tenure. Wilmers also brought some eccentricity to the role, allegedly ordering psychological tests for all top employees. He eventually stepped down after less than a year, as did Lago, leaving Dennis Mullen, who oversaw the agency’s upstate work, to run the entire agency. Under Mullen, the agency’s abused Empire Zone program, which was the centerpiece of the state’s economic development efforts for more than two decades, was replaced with the Excelsior Jobs Program, a new set of incentives

More than ethics reform, a property-tax cap, marriage equality or an on-time budget, Cuomo’s first term in office will be judged on how well he grows the state’s economy. This will likely put him at odds with many in the Legislature and the labor community, who continue to push for higher taxes on top income earners and closing loopholes in the state’s corporate tax structure as a way to increase revenue and eliminate future budget gaps. But Adams is resolute. “Private-sector investment and privatesector job creation: That is economic development,” he said at the board meeting. “Obviously the private sector is the source of wealth. Government doesn’t create jobs.” Perhaps realizing his new credentials, he quickly corrected himself. “We don’t create jobs.”


overnment may be restricted in its ability to create jobs, but that won’t stop Cuomo from taking credit for every new job created—or slated for creation—under his watch. The governor’s desire to grow the private sector will be tested, though, by the internal complexities at ESDC, a sprawling agency with 10 regional offices, 430 state employees, hundreds of subsidiaries and oversight over thousands of public-private partnerships, from mega-projects like the $4.9 billion Atlantic Yards project in Brooklyn to much smaller grant programs for equipment procurement and facility upgrades. For years the agency has been plagued by infighting and a lack of a clear chain of command—“the dark days,” as a source close to the agency called it. The leadership was bifurcated between upstate and downstate chairs by Eliot Spitzer, and lacked a cogent management structure. Avi Schick, the downstate president, had a notoriously caustic relationship with Patrick Foye, the downstate chair. After doing away with the split system, Paterson appointed Robert Wilmers, pres-

that reward companies for creating jobs and expanding their business. The Legislature also overhauled the state’s public authority system, requiring more disclosure and transparency from agencies like ESDC and its subsidiaries. Mullen said that many of ESDC’s inherent flaws remain to be smoothed out. “When I got there, I was the fourth leader of the organization in a two to three year period of time,” said Mullen, a former president of Birds Eye Foods who now heads his own consulting firm based in Rochester. “Any time an organization, whether it’s in the public sector or private sector, goes through those types of changes, it gives cause for pause amongst its employees.” Mullen gave a firm hand in steering the agency to smoother waters. But Cuomo wanted his own man to oversee the agency’s operations. In naming Adams for the post, the governor was sending a signal to the state’s politically potent business community that the state would look favorably on their pet issues. Before joining the Business Council in 2006, Adams was president of the Brooklyn Chamber of Commerce, where he gained a reputation for evenhandedness. He even raised over $50,000 for a run for New York City Council that never materialized. He is the son of Murray Adams, a longtime civic activist from Brooklyn who sometimes would be on the opposite side of a fight from his son. The elder Adams died in late March, just days before his son was sworn in as ESDC president. As head of the Business Council, Adams endorsed Cuomo during the 2010 election, a first for the 30-year-old advocacy group. Since joining ESDC, Adams has been a bull in a china shop, startling some old agency hands with his aggressive and

decidedly hands-on approach. He has ruffled a few feathers with his pointed criticisms of some in-progress projects, but impressed others with his commitment to building and cultivating the agency’s staff. However, some legislators and labor officials are skeptical of Adams’ bigbusiness credentials, worried that his focus on bringing leading industries to the state may come at the expense of helping small businesses. And his ability to repair some of the structural problems at ESDC may be hampered by recent staff reductions, both through layoffs and attrition. Over the past two years, ESDC has lost 70 employees—or almost 17 percent of the workforce—with more cuts expected. But even critics of the agency’s work express optimism that change is on the way. “Ken Adams should provide a greater measure of stability and accountability at the agency, which has suffered over the years as a result of the constant musical chairs at the top,” said Assembly Member Hakeem Jeffries, an outspoken critic of the agency’s handling of the Atlantic Yards project. Jim Brennan, a Brooklyn Democrat and chair of the Assembly committee on corporations and authorities, said Adams is joining ESDC at a unique moment in history. “To some extent he’s getting kind of a fresh slate,” Brennan said. “He’s taking the culmination of a whole series of years of reforms to overhaul the program operation of that agency and now start anew.” But the basic functions of the agency remain. ESDC’s prime tool to encourage business retention and growth is through tax breaks, which critics deride as “corporate welfare” or “backdoor spending.” New York spends approximately $5 billion a year on business tax breaks, whether it’s Brownfield tax credits, Empire Zone tax credits, film-production credits, investment-tax credits, retailenterprise credits and many others. “The expenditure side of the budget certainly got a lot of scrutiny this year, down to the individual program level,” said Frank Mauro, executive director of the labor-backed Fiscal Policy Institute. “But the revenue expenditure, the so-called tax expenditures where we do things to the tax code, didn’t get any evaluation. And we’ve been adding credits as if they’re free.” And that will likely continue under the Cuomo administration, which has promised $10 million in economic development grants to upstate communities to help compensate for job losses brought on by planned prison closures. Adams said he wants ESDC to be an advocate for the private sector within the ranks of government, which includes reaching out to agencies seen as unfriendly to economic development, like the Department of Transportation and the Department of Environmental Conservation, and advising them to ease regulations MAY 9, 2011


that businesses view as a hindrance to job growth. That said, Adams acknowledges that there is much work ahead. “I honestly haven’t totally figured it out,” he said. “I think a comprehensive approach to economic development requires that [there be a] balance between the economic development projects, programs and services, with advocacy to improve the business climate, especially in New York.” He added, “But New York has a very challenging business climate.”


MAY 9, 2011

N.Y. Governor’s Flickr


t the outset, the as-yetunformed regional councils will be the bedrock of Cuomo’s economic development agenda, and Adams’ biggest challenge to date. Few details have emerged about the councils, even though Cuomo announced their creation back in January. Adams said the administration should be ready to launch the project at the start of the summer, though he declined to discuss details surrounding recruitment or membership. The business community, meanwhile, is eager to see the regional councils in operation. Until then, some business leaders say they are withholding their opinion of Cuomo’s efforts to spur economic development, especially since much of the chain of command—which includes Adams, Foye (in a returning role as deputy secretary for economic development) and Lt. Gov. Bob Duffy, whom Cuomo has tapped to oversee the councils—remains murky. “To us, the customers, there’s still confusion as to what the role of the councils is, what the role of Adams and the folks at ESDC is, relative to what Patrick Foye’s role is going to be,” said Andrew Rudnick, CEO of the Buffalo Niagara Partnership. “And Duffy as well.” Rudnick said the regional councils should steer clear of community development, such as brick-and-mortar construction projects, and stay focused on economic development, such as incentive programs to encourage privatesector investment. According to agency sources, Adams will report to Foye, who reports directly to the governor’s secretary, Steve Cohen. Duffy’s role with regard to the councils, while a signal of the administration’s seriousness about economic development, still remains to be defined. David Catalfamo, a former aide to George Pataki who also served as a vice president at ESDC, said that clearly sketching out the powers and responsibilities of the regional councils will be crucial going forward. “I’m not ultimately sure what the vision is,” Catalfamo said. “Recognizing [that] each region has its strengths and opportunities is fundamentally important. The challenge then is to focus that and be able to be nimble enough in these difficult economic times, as well as have enough resources to leverage those

Kenneth Adams at a recent cabinet meeting in Albany. different regional opportunities.” Adams said the intention is not for the councils to become another layer of government bureaucracy but to have a real say in regional economic development decisions. “If it’s a good two-way street, it’s not just going to be them saying, ‘We need money for this, or we need money for that,’ because there’s only so much money,” Adams said. “It also has to be a conversation about what we can do that

budget structure that he himself helped create. “The money is just gone,” he said. “We have less to deal with, and I think that’s why we’ve got to acknowledge that economic development isn’t only investing taxpayer dollars into a project. It’s also improving the business climate so we can attract investment. Improving the business climate is also to avoid the hassles and the hurdles that are making companies leave. Companies are still leaving all

“Any time an organization, whether it’s in the public sector or private sector, goes through those types of changes,” said Dennis Mullen, “it gives cause for pause amongst its employees.” doesn’t cost money but will improve their economy.” The recently approved state budget was a huge success for the business community, and for Adams himself. As one of the driving forces behind the Committee to Save New York, a Cuomobacked pro-business coalition, Adams and his colleagues lobbied the Legislature to let the millionaire’s tax expire and to hold the line on any new fees that could further damage the state’s business climate. The budget that eventually passed the Legislature did both. The budget also slashed ESDC’s funding by 10 percent, forcing Adams to live within the confines of a more austere

the time, so we have to stop that.” Adams is realistic about the challenges ahead of him. Although he is a known quantity in the Legislature, he can’t predict how lawmakers, or their labor union allies, will react to the administration’s efforts to encourage private-sector growth in the state, especially if it requires throwing more public dollars at private businesses. “We recognize [that] New York must compete for industrial investment that leads to job creation,” said Darcy Wells, a spokesperson for the state Public Employees Federation, which represents workers at ESDC and the Department of Economic Development. “But if

saying ‘get out of the way of the private sector, let them do their thing’ means no accountability and regulation—that’s absolutely wrong.” Adams is itching for a fight. He sees the dramatic drops in population upstate and the decreases in personal income based on census data—statistics he believes will adversely affect the state’s ability to compete with other states—and he knows what kind of message that sends. Businesses are picking up and moving south, where the taxes are milder, or overseas, where the regulatory environment is more lax. “We won’t win every one of these arguments,” he told the board of directors. “But we’ve got to be that voice, and we’ve got to go to the data and say, ‘How can we craft policy proposals, policy solutions, to improve the business climate?’” But Adams’ fight will start at home— more specifically within state government itself, where he must confront the challenge of rebuilding a battered economic development agency, as well as a host of other departments with priorities that run contrary to economic development. He aims to change that. “If it should happen, it won’t be with the DMV,” he said, giving a nod to his issues with the state’s license plates. “But if there are other agencies within government that question our policies, well, that’s a healthy and important debate to have. And we’ll have it.”


Dollars And Census Despite minority population gains, Westchester required to promote diversity through housing

“Anybody who lives in Westchester will tell you that if you walk around, you will see how diverse Westchester is,” said Liz Feld.



ver the past decade, the wealthy suburb of Westchester County has added nearly 63,000 Hispanic residents, boosting that demographic group from 15.6 percent to 21.8 percent of its population. In 2010, the county ranked as one of the state’s most diverse, as measured by the overall percentage of Hispanics and African-Americans living there, behind only a few boroughs of New York City. And despite a reputation as a bastion for affluent whites, Westchester’s overall racial and ethnic makeup puts it on a par with Manhattan, which has a somewhat larger Hispanic population but an almost equivalent proportion of AfricanAmericans (13.4 percent in Manhattan, 13.3 percent in Westchester). Yet none of those details from the 2010 Census will do anything to alter the county’s 2009 legal settlement with the U.S. Department of Housing and Urban Development, which requires that Westchester spend $51.6 million to develop at least 750 units of affordable housing, most of them in predominantly white neighborhoods and targeted toward minorities. The requirements have never sat well with some Westchester residents, who think the settlement was both unnecessary and intrusive. Now their resistance is fueled by the growing minority population, which they say is proof that federal intervention is pointless and even wasteful. Liz Feld, who served as mayor of Larchmont until 2010, said it was unfair that Westchester had been made the poster child for discrimination. She said the new census figures showed that the government shouldn’t be mandating the construction of affordable housing. “Anybody who lives in Westchester will tell that if you walk around, you will see

In 2010, Westchester ranked as one of the state’s most diverse counties. how diverse Westchester is,” said Feld, who now serves as a spokesperson for the conservative group New Yorkers for Growth. “I’m not surprised at the change. It’s a trend we’ve seen for a while.” County maps show that a number of communities that were mostly white in 2000 have become more diverse. Yorktown, North Salem, North Castle and several other municipalities have moved up from the least diverse of the settlement’s four categories—municipalities that are less than 7 percent Hispanic and 3 percent black—to a more diverse category, with fewer than 10 percent Hispanic and 7 percent black residents. Other towns and villages, including

Lewisboro and Scarsdale, did not see significant enough demographic changes to move up to another category. Ned McCormack, a spokesperson for County Executive Rob Astorino, declined to comment on the housing settlement, but said the census figures speak for themselves. But several experts involved in the settlement said that the demographic trends are not relevant because the county is contractually obligated to fulfill what it agreed to do. In 2009 a federal court ruled that the county had misrepresented itself in applications for federal funds that required an effort to promote affordable housing. The

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county approved the controversial settlement, which required the new housing be built in seven years and marketed in minority communities. Even if Westchester could back out of the agreement, the countywide numbers don’t tell the whole story, advocates say. “The picture and the concern of the consent decree is broader than just numbers moving into Westchester,” said James E. Johnson, the federal monitor overseeing the settlement. “The concern is deeper and more refined, not just looking at the Westchester numbers, but

within Westchester, looking at particular census blocks and where people live.” Craig Gurian, the executive director of the Anti-Discrimination Center, which filed the original lawsuit against the county, said that despite the influx of Hispanics, the county is not getting more diverse. “The whole point of the case and of the consent decree is that the overall composition of a geographic entity, in this case a county, is not the issue,” Gurian said. “The issue is whether within that county, is it characterized by residential racial segregation. And that remains still powerfully the case.” While more Latinos are moving into the county, if they all move to a few concentrated neighborhoods, there is little meaningful change to segregation, Gurian said. The composition of whites in the county is just over 57 percent. To measure the level of segregation, Gurian looked at each census block, a geographic unit smaller than a municipality, to see to what degree each one diverged from the county average. Only 2 percent of the blocks had population levels for African-Americans, whites and Latinos that were within even a 20-percent range of the county figures, he found. “So if what you’re doing is taking a snapshot, Westchester is still highly segregated,” Gurian said. Andrew Beveridge, a demographer and sociology professor at Queens College who served as an expert for the plaintiffs in the court case, said that Westchester County probably had experienced a mild decline in segregation, but nothing huge. “People’s general notion of integration is, a few people move in,” Beveridge said. “There might be a few Hispanics that moved into a municipality, but part of this is that they’re also supposed to move to neighborhoods that are unconcentrated. So if you’re going to have a nice little ghetto in Bedford, it’s not going to help you.” MAY 9, 2011


At issue is who will run the state’s new insurance exchange program: a state agency, a newly created public authority or a nonprofit. Joey Carolino

Exchange Program No consensus on how to administer federally required health-insurance exchanges By Laura Nahmias Marriage equality, a property-tax cap and rent regulations are getting most of the attention this session, but another issue that so far has flown under the radar is federal health-care reform. Legislators are hopeful Gov. Andrew Cuomo’s office will offer a proposal for setting up the state’s insurance exchange, a marketplace where individuals and small businesses can buy health-care insurance. The new federal health-care law requires every state to have an exchange in place by 2014. At issue is how the exchange will be run: by a state agency, a newly created public authority or a nonprofit. At a series of roundtable discussions last month, lawmakers, insurance executives and health-care industry stakeholders outlined the potential perils of each option: A state agency would be slow. Public authorities are subject to little oversight. A nonprofit would be subject to almost no oversight. The decision must be made quickly, experts say, because it will take several months to test the program and ensure its viability. The exchange must be fully operational by 2013, because it has to begin accepting customers by 2014, according to the federal law. If the state


MAY 9, 2011

does not have a program in place by 2013, the federal government will step in to run the exchange on New York’s behalf. But a decision on how it will be run will need to be made far in advance of 2013. State Insurance Department spokesperson David Neustadt said that the Legislature must decide who will run the exchange by June. Otherwise, “it would be difficult to do all the work we have to do if we don’t have that in place by the end of the session,” he said. To some, a public authority would be the most efficient way to administer the exchange. Public authorities can perform some tasks more quickly than state agencies, including hiring and contracting. And under a 2009 law, authorities are required to report more information to the newly created Authorities Budget Office. However, the Cuomo administration has expressed concern over the use of a public authority, mostly because authorities are allowed to issue bonds without seeking voter or legislative approval, with taxpayers paying the costs of bonding over time. Sens. Jim Seward and Kemp Hannon, respective chairs of the Insurance Committee and the Health Committee, said selling the public on a new authority could be a headache. During his gubernatorial campaign,

Cuomo suggested that even enhanced reporting laws would fail to completely “eliminate the inherent problems that result when so many vital public functions are operated by authorities.”

to comment on which system Cuomo prefers. After a decision is made on who will administer an exchange, the state will have to write laws dictating the eligibility requirements for potential insurance companies who want to join the exchange. It will also decide the role the exchange operators will have in policing insurers and offering aid to consumers picking insurance. The additional pieces of the legislation

“This would not be an authority that would be floating bonds and building bridges. It’s an operating entity,” Dick Gottfried said. A health-care authority would be different, said Assembly Health Committee chair Dick Gottfried. “This would not be an authority that would be floating bonds and building bridges. It’s an operating entity,” Gottfried said. Unlike other states that have chosen to let the federal government plan their exchanges, there is a consensus in the health-care industry that New York should maintain as much control over the process as possible. The state has more liberal eligibility requirements and benefits than the federal law requires, and a complex system of health networks that could be disrupted under new management. Legislation setting up exchanges has already been proposed in 20 other states, according to a memorandum from the governor’s office. Eight have chosen the public-authority system that New York’s industry seems to favor. A spokesperson for the governor’s office declined

are complicated and will be difficult to pass, given the short timetable the state has to write them, said Paul Howard, a senior fellow at the Manhattan Institute. Once the Legislature decides how to administer the exchange, it can turn its attention to the more complex pieces of the reform law. Gottfried anticipates that a fight may be brewing between Democrats and Republicans on the role of the insurance industry in determining the shape of the exchange. Democrats, Gottfried said, favor setting up the exchange as both a marketplace and a quality monitor, which would screen potential insurers before admitting them. Republicans favor an exchange with less regulation, to encourage more insurers to join. “How contentious it is will depend a lot on the position of the insurance industry,” he said. “You know, they carry a fair amount of influence with the Republican Party in the Senate.”



By Richard Brodsky

Blood Speaks: Obama, Osama and Albany L ike almost everyone else, I shared in the moment. Triumph, revenge, justice, anger, redemption and the overwhelming sense of having turned a page, finally, on the grimmest public event since the Kennedy assassination, all boiled up together. Something had been restored to us, something we had lost and done without, all restored by the violent end of a violent man. Blood spoke, as powerfully as it spoke 10 years ago. But blood has its limitations. It isn’t policy, and it isn’t politics. America thrives because, with notable exceptions, we haven’t allowed blood to define our public life. We’re in no real danger of letting blood lead us, but there has been a real change in the public vocabulary, and too often we hear things that veer uncomfortably close to the language of jihadists and their secular counterparts on the left and right. Blood is the political currency in societies that first verbally delegitimize the opposition and then apply the tools of physical violence. But the rhetoric of delegitimacy is all over television, newspapers and public life. And it has consequences. Comes now President Obama, in the hours and days since the killing of Osama bin Laden. He has been a verbal and political minimalist, saying as little as he can and appearing infrequently, conveying


In Pennsylvania, Well Blowout Brings New Scrutiny To Hydrofracking By Ismail Muhammad


ydrofracking may be the subject of almost daily protests in Albany, but in Pennsylvania, the impact of the controversial gas-drilling method has had a much deeper—and more dangerous—impact. With the recent blowout at a naturalgas well operated by Chesapeake Energy in Bradford County, the environmental effects of hydrofracking in Pennsylvania have once again come under intense scrutiny. Drilling in the Marcellus Shale, the geological formation spanning six states including New York and Pennsylvania, is the site of particular controversy as energy companies attempt to tap the area’s natural-gas reserves. The blowout is already having wide repercussions in the Keystone State. In


that emerges. And whatever else you may think about Obama, he’s challenging us to seize this moment and to use it. He has been the victim of a keener and deeper attack on his legitimacy than any president in my memory. His persona, his personal origin and history, his legal status have all been subject to examination and an attack that goes well beyond the most ferocious disagreements about war, the economy and the relationship between government and its citizenry. His very legitimacy as a leader has been called into question. Then, in a moment of national and personal triumph, he says and does little, and sounds no triumphant note, and leaves us

after Bin Laden reminded us of the limitations of our physical power. Obama is reminding us of the limitations of a particular kind of politics. The chattering class, as of today, hasn’t the faintest notion about what he’s doing. Most Americans, more than capable of absorbing his message, are left to ourselves, and to a president whose silence speaks to each of us. He’s trying to lead us back to higher ground, but he’s leaving the decision to us. Think a little about the debates in New York on taxes or abortion or ethics or jobs or unions. Reflect on the vocabulary we all use, the violence of the language of campaigns and TV ads and the derisive-

ness of language used by editorial writers we all accept. Think about the divisions of identity, of class, race, gender, age, orientation, geography, language, education that we also accept. This leads to division and madness, and it must stop. The blood of 9/11, the blood of Bin Laden, so incomparable in moral quality, speak about the redemption of our politics. We can use the triumph of American might to illuminate the power of American ideas and values. And Obama is trying to take us there, by his silence. I’m not naïve, and nobody has enjoyed the give-and-take of political combat in Albany more than I. I don’t expect a great revelation, or for the milk of human kindness to flush out the vitriol and anger now everywhere. But I do think that change sometimes comes strangely, and only when we accept and embrace it. We won’t ever solve the smaller problems if we can’t find a way to restore balance and dignity to the political process. We’ve just won a marvelous military victory, replete with blood and fire. If we’re up to it, we can use it for our greater good, for an America that speaks, outwardly and inwardly, in a language that includes all and lets the practical solutions flow from that renewal. Obama gets it. Do we?

Harrisburg, the state capital, leaders are considering new policies to offset the potential side effects of naturalgas drilling. Republican Senate president pro tem Joe Scarnati proposed an “impact fee” in late April that would reimburse local governments for any damage or cleanup associated with natural-gas drilling. The state’s Democrats take solace in the fact that Republicans have proposed such a measure, citing previous inaction by the GOP. But the proposal could run into trouble given Pennsylvania Gov. Tom Corbett’s stated opposition to severance-tax legislation. Still, the impact tax may not be enough to effectively regulate the drilling practice. Drillers are not currently required to disclose the potentially poisonous chemicals that comprise the fluid used to drill for natural gas, an oversight State Rep. Camille George aims to rectify. “We had a hearing, and I asked them what the materials were, and they said it was a trade secret,” George said, referring to representatives from Chesapeake Energy. He added, “Until they accept my bill that protects water, that allows and forces them to survey and sample the water, and until they protect our water

supplies, what they’re doing right now is downright slaughter.” Others were hopeful that Scarnati’s proposal might represent a change of course. Jan Jarret, the CEO of environmental group Citizens for Pennsylvania’s Future (PennFuture), said that the Corbett administration and Republicans had taken a regressive approach to regulation she hoped the blowout would reverse. As an

to disclose what chemicals they use. “A whole series of scientific reports, including a report released by Congress, highlight that lots of poisonous chemicals used in the process are ending up in water,” she said. “But no one has done anything about it. My bill would require companies to disclose the chemicals they’re using, and would go a long way to solving some of these problems.”

calmness and a steady hand. Surely that’s politically smart—and he’s entitled to calculate the political consequences of this hugely successful and popular decision. But there’s more here than meets the eye. A real crisis or a real opportunity is defined by the quality of the leadership

to reflect on what al-Qaeda did to us, what we’ve done to them, the consequences of violence to victor and vanquished and how we move forward. I don’t believe this is an accident, or a mere political calculation. It’s a challenge by a leader who has had to think deeply about legitimacy and the public dialogue. The unsuccessful chase

The unsuccessful chase after Bin Laden reminded us of the limitations of our physical power. Obama is reminding us of the limitations of a particular kind of politics.

“Until they protect our water supplies, what they’re doing right now is downright slaughter,” said State Rep. Camille George. example, she cited a leaked Pennsylvania Department of Environmental Protection memo that made it more difficult for well inspectors to cite drillers for violations. “That generated a public outcry,” she said. “Only inspectors on the ground can issue notices of violation, which is the first step in getting a problem corrected and doesn’t usually lead to fines.” The same sentiments echoed in Albany, where legislators have put forward bills in the Bedford County incident’s wake, including an outright ban until the procedure’s safety can be assured. Sen. Liz Krueger, a Manhattan Democrat, proposed a bill that would require drillers

Though the New York State Department of Environmental Conservation has already stated that permits will not be issued to companies that don’t disclose their chemicals used, Krueger doesn’t believe firms like Chesapeake Energy will do so willingly. She wants the full force of the law to hold them accountable for potential environmental consequences. “There’s a reason we have laws,” she said. “We want that to be law in New York State; we want you to face legal consequences if you lie to the state or violate the department’s regulations about not using dangerous chemicals.” MAY 9, 2011


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healthcare issue spotlight: TRANSPORTATION and Infrastructure issue spotlight: PENSIONS Point/Counterpoint

The debate over pensions has heated up over the last few months, with both Gov. Andrew Cuomo and Mayor Michael Bloomberg calling for an overhaul of the rules governing state and local pension systems. Will Cuomo call for the end of the sole-trustee model, in the wake of Alan Hevesi’s imprisonment? Will Bloomberg influence pension negotiations from Albany? The Capitol asked State Sen. Marty Golden, chair of the Civil Service and Pensions Committee, and Assembly Member Peter Abbate, Jr., chair of the Governmental Employees Committee, to discuss the pension issues that now face the state. What follows is an edited transcript. Peter Abbate, Jr.: The fund itself is coming back. We did suffer, like everyone else, because of the stock-market crash and all, but the market is coming back. I know we are close to the 10-percent mark in making money back. We’re a lot different than most other states, [in] that we do not borrow on our fund, and we make payments every year into that fund. Now [for example], New Jersey didn’t make their payments, so they’re way down. The comptroller is the sole trustee of that, which basically means he has a team of advisors around him that advise him on the investments the fund should make. And over the last couple of years we’ve expanded on what we call the basket of investments that the fund can invest in. Peter Abbate, Jr. Every couple years, we change the basket. We gave them more permission to invest in real estate. So hopefully [the comptroller’s] people will make up the difference—if they see something good in the market, they’ll buy it. Marty Golden: In the pension funds, the investments are up over the past two years. They had a difficult time, obviously; like other traded funds, they were impacted, but they’re on the rebound. I see them funded; I see them in decent shape. Abbate: I don’t know what [the governor’s] thinking of reforming.… I think the pension should be reviewed every couple of years—what type of investments we make, our transparency—and I know Comptroller DiNapoli has done a lot of those reforms in the past couple of years. There’s always room for reform, but right now I think the system itself is working. The costs of the pension is what the problem is right now. Golden: There’s a whole host of negotiations going on between the mayor and the governor. They’re all looking at different tiers—some tiers haven’t even been implemented yet to their fullest. So it’s an ongoing piece of work. I guess they’ll have to see what unique concessions they can come up with in the art of negotiation and put forward what they believe will be a responsible plan for the state, for the city, and of course for the working men and women of the city and state. We’d like to see the negotiations finish with the UFT and move on from that [to] come up with some type of a standard for what’s going to happen here with these layoffs. I think that’s a pending issue. I believe there’s definitely going to be teacher layoffs; it’s just a matter of how many and who should be laid off. We’d like to see that out of the way. And of course we’d like to see the negotiations—as many as can be, for the 40 different unions in the city and the state—come to agreed-upon dollars. I think the governor’s looking for $450 million in savings. I believe he’ll get it. And I believe the city’s looking for a host of different changes they’re looking at in different union contracts, and hopefully that will be achieved as well. Abbate: The system, the way it’s set up now—I know Andrew Cuomo [and] his dad once tried to borrow money. There was a court case on that. That money is put in there, and it’s sacrosanct. We do not borrow from it. We make timely payments into the system. And that’s the reason why we’re rated as one of the top pension systems in the country. I don’t think the format of the pension system should be messed with. Golden: I think when you’re in a negotiation, the last thing you need is a legislator saying what you should take off or what you should leave on. I think it’s up to the negotiators to negotiate what they believe is best for the city, for the state. Abbate: I’ve spoken to the mayor’s people [about gaining more control over pension negotiations]. I don’t see a track record where they would know what to do. There’s a lot of negotiations and things that have to go on. Right now the mayor is—there are 47 different bargaining units with the city, he’s paying five pensions, five pension systems within the city, right? Right now he’s trying to negotiate with the teachers on LIFO. He’s also trying


to negotiate with the police and firemen; he’s trying to take away the variable supplement. My answer to them was, since they have three of the 47 bargaining units right now, let’s see how he does with those three bargaining units before you give all 47 over to him. How do we know they’re capable of doing it? When he says he wants power to negotiate pensions and all— when they negotiate their contracts with all their unions in the city? Pensions and health care are always brought into that. They cannot vote on them but it doesn’t stop them from negotiating. You want to a two-percent raise? You got to give back a little bit of this. Golden: I have no idea [whether Bloomberg will gain Marty Golden more control over pension negotiations]. We have about seven weeks left of this negotiation in this year’s Senate and Assembly legislative session. Everything gets done in the latter parts of June. Anything is possible, so I leave that open. Abbate: The mayor should sit down with the local unions in the city; and the governor, I know, is sitting down with CSEA and PEF, two major unions of state employees. And they should negotiate what can be changed. But I don’t think something can be changed right away. We talk about the Tier VI system the governor’s talking about, and the mayor.You know, we only did Tier V a year and a half ago. Pension systems shouldn’t be used as something to make up money, you know, make up gaps in the budget. Tier IV was enacted way back in the ’70s, and it lasted until a year and a half ago. You want to take some time and sit down if you’re going to change a system. Take a year or so, two years, come up with a system that’s going to last another 30 or 40 years. You can’t just jump every budget cycle: “Let’s add a new tier to pull in a few more bucks.” That’s not the proper way to do it. Golden: That’s between management and the unions—between the mayor and the governor, and the town and villages across the state of New York, to artfully put their contracts with their workforce. We just have to see what they come up with. Abbate: I opposed [Cuomo’s proposal to get rid of the single-trustee pension-fund model]. I didn’t think that was a good system to have. He wanted a 13- or 15-member board, I think, at the time. I don’t think that’s a great idea. I just think the pension fund would be less manageable that way. When I spoke to the governor, who was then the attorney general, I said, “Now you’re taking a format like the MTA board. You know, why would you want to have some board?” I said, “You want Paul McCartney’s girlfriend on the board?” Golden: I don’t think that will come up for negotiation at this point, within the seven weeks. I don’t think it’s viable at this time, but again, anything is possible. Abbate: The key is to look down-range. A pension system can’t be based on a one- or a two-year thing. You really got to really look out 5, 10 years. And as I said, the problem right now, why the costs are skyrocketing are: one, the market. And second, if you look at the city, the mayor’s talking about the exorbitant cost on the pensions, from his own mouth he says he’s proud to say he’s given teachers a 43-percent increase in the time he’s been in office. Golden: I think it would be a good investment for the unions to invest in an infrastructure fund. That would have a return on investment, but the best return on investment would be to rebuild this great city and state. It’s one of the bills I have, [which is] trying to give preferences to companies here in the city and state and put the workforce back to work here in New York. That would be a good investment and a wise investment for the unions. MAY 9, 2011


issue spotlight:

double-dipping. No one should be scamming the pension system—and it should be stopped—but it is not the majority of public-service workers. A radical overhaul is not in the interest of either public employees or New York taxpayers.


Sound-bites Danny Donahue, president, CSEA CSEA-represented public-service workers earn less than $40,000 a year. State workers and most local government workers in New York pay towards their health insurance. Nearly all contribute toward their pensions, which average $14,000.

New York’s eight separate public-employee pension systems are faring better than many pension systems nationally. Each has some issues that should be addressed, such as padding and

Teresa Ghilarducci, director, the Schwartz Center for Economic Policy Analysis at The New School The issue is not how to cut pensions for state workers, but how to increase pension coverage for all New Yorkers. New Yorkers are falling behind the rest

We make a big differeNce! Not a big pension. The next time you hear someone railing against excessive, bloated public pensions, you might want to know the facts: A CSEA public service worker earns an average pension of $14,000 a year. That’s right. $14,000. The vast majority pay into their pensions and overtime is capped for pension purposes.

Yet the misrepresentation continues. That’s wrong and false. So is calling public employees “overpaid.” Recent research* has found that state and local employees make 11-to-12 percent less in salary than workers in the private sector, when education and experience are considered. Stop scapegoating public employees.

*Sources: The Center for State and Local Government Excellence and the National Institute on Retirement Security.


E.J. McMahon, senior fellow, Empire Center for New York State Policy In the long term, the single most important priority should be to scrap the traditional defined-benefit (DB) pension model for most employees. For teachers and other civilians, the DB plan can be replaced with defined-contribution (DC) accounts or a DB-DC hybrid that caps the tax-funded employer contribution. In the short term, rising pension costs can be absorbed if other employee-compensation costs are kept flatter. In other words, employees need to share the pain. The focus of would-be pension reformers has been on individual abuses or excesses, such as overtime “spiking” and double-dipping. However, what we really need to be concerned about is financial risk for taxpayers on a macro level.

Frank Mauro, executive director, Fiscal Policy Institute

It’s time to help our communities and focus on New York’s real challenges.

208613_Pensions_7.458x10.indd MAY 9, 2011

of the nation. Less than half of full-time New York workers have any pensions besides Social Security, and coverage rates lag behind the nation’s. Those who flirt with cutting publicsector pensions don’t think about what life would be like if public-sector workers didn’t have pensions and jobs worth keeping. We’d have geezer teachers hanging on and on and never retiring, and police officers indifferent to tending bar, selling cars or running numbers. Good pensions are more likely than not to attract and retain commitment and loyalty.

12/29/10 3:18 PM

The financial challenges that are currently being faced by pension funds throughout the United States are primarily attributable to the collapse of the financial markets in 2008, which was precipitated by the marketing of toxic securities and other excesses engaged in by many large financial institutions. But New York’s pension funds do not have the ability (a “private right of action”) to seek redress for their losses under New York’s securities laws. This shortcoming in the state’s legal system needs to be corrected. The fact [is] that New York’s combined pension and long-term debt liabilities are proportionately much lower than those of other states. According to a recent Moody’s report, New York’s combined liabilities rank 35th lowest as a share of personal income, 35th lowest as a share of gross domestic product (GDP) and 32nd lowest as a share of state operating revenue.


issue spotlight: PENSIONS

Despite Cuomo’s Wishes, Board Model For Pension Fund Appears Unlikely By Colby Hamilton


eading recent headlines about Gov. Andrew Cuomo’s push for pension-fund reform, you would be forgiven for feeling a sense of déjà vu. Back in 2009, then Attorney General Cuomo championed major overhauls to the state’s pension system in the wake of the Alan Hevesi scandal. Indeed, a number of the proposals from 2009 are again being recommended by Cuomo, including eliminating “pay to play” and placement agents. However, there is one major component of Cuomo’s 2009 proposal that hasn’t been mentioned by the governor or his supporters this time around: changing the state’s comptroller-vested sole-trustee system in favor of a board of trustees. Many states use a board to manage their pension funds. New York City also manages its funds through the board system. Teresa Ghilarducci, director of the

Schwartz Center for Economic Policy Analysis at the New School, thinks New York should follow suit. “It’s about time the state changed its system,” she said, calling the state’s comptroller-run system “anachronistic.” “One trustee over hundreds of billions of dollars is inconsistent with modern-day judgment of oversight.” Ghilarducci said the issue wasn’t a matter of if, but when the change will happen. A former pension-fund board member herself, Ghilarducci said she has had conversations with officials in Comptroller Tom DiNapoli’s office in which the subject of pension management was raised. According to her, the sense was that a proposed change to a board system was imminent. However, for Ghilarducci, the more important issue is the board’s structure and governance rules. “It’s really important for the governor to look at best practices and see what the optimal size of the board is, and not try and get a lot of representatives from

Questionable Authority Legislators draw up plans to eliminate hundreds of defunct authorities By Jon Lentz


rie County’s six industrial development authorities, or IDAs, all have essentially the same task: offering financial incentives to businesses and companies to expand or relocate to the area. Assembly Member Sam Hoyt, who represents part of Erie, thinks the county only needs one IDA, not six. The overlapping responsibilities of the six IDAs lead to competition that ends up hurting the overall goal, he said. “In Erie County, you’ve got a countywide IDA, you’ve got the three biggest towns in the county having IDAs, you’ve got towns with 10,000 people in them having IDAs,” Hoyt said. “They pick each other’s pockets. They pirate each other’s businesses.” The proliferation of IDAs and other public authorities isn’t limited to Erie County. Approximately 114 IDAs are spread across the state’s 62 counties, as numerous cities, towns and counties have created their own authorities. The total number of authorities, including all state


and local development corporations, is estimated at 700 or more, but they are sprouting up so quickly that nobody has an exact tally.

“In one fell swoop, my legislation could actually reduce the number of authorities by anywhere from 10 to 15 percent,” Sam Hoyt said. Whatever the number is, it could drop significantly in coming months. Gov. Andrew Cuomo has called for reducing the number of state agencies, authorities and commissions by 20 percent, and he has created a Spending and Government Efficiency Commission to develop a set of reorganization proposals in the next year. The commission’s work follows legislation passed in recent years to increase oversight of both local and statewide

different groups,” Ghilarducci said. “He should really propose a smaller board with professionals on it.” The board model is no panacea, though, experts say. In fact, the consensus among a wide range of goodgovernment groups was that, board or no, the issue of improving the management of the pension fund was more one of oversight and transparency than systemic change. “All of the worst-run pension systems in the country, and all of the biggest pension scandals in the country, have been presided over by boards of trustees,” said E.J. McMahon of the Empire Center for New York State Policy, noting that the New York scandal was a very large exception. For McMahon, the method of governance for the state’s pension fund is not the issue; the overall benefits structure and lack of accounting transparency are. James Parrott of the labor-backed Fiscal Policy Institute likewise questioned any inherent benefits in moving away from the sole-trustee system.

“Even if you did have a board model, you would need the safeguards in place to prevent favoritism [and] backroom deals,” he said. His concern, like McMahon’s, was with transparency, noting that after the financial meltdown of 2008 that battered the state’s funds, no significant investigation was launched. Cuomo’s office, for its part, has said it remains committed to the idea of transitioning to a board system. Yet the chances of the move coming in this legislative session seem slim. The heads of the commitees dealing with pensions in the Senate and Assembly, respectively, Sen. Marty Golden and Assembly Member Peter Abbate, Jr., have both said the issue was off the table. Additionally, Assembly Speaker Sheldon Silver—a major supporter of DiNapoli—is standing in the way. If the state is to move back to the future on pensionfund management, it will likely have to wait until next year.

public authorities. A new law created an Authorities Budget Office and requires authorities to disclose debt levels and audits and open certain contracts to outside review. Critics say that the changes were necessary to rein in the independence and lack of accountability authorities have enjoyed while having the power to decide where to spend taxpayer dollars. “The Yankee Stadium deal wasn’t done by the City Council and State of New York; it was done by the New York City IDA,” said Richard Brodsky, a former state lawmaker who spearheaded the push for greater oversight. “No one in the world knows who the 12 people are who essentially made that decision.” One of the next steps for reformers could be to eliminate dozens of inactive authorities. Hoyt is sponsoring legislation with State Sen. Michael Ranzenhofer that would end more than 100 authorities that are defunct or no longer serve a public purpose. Brian McMahon, who represents local economic development organizations as executive director of the New York State Economic Development Council, said it would be unfair to strip municipalities of an important development tool without their consent. “If it was a forced merger to do with all sub-county IDAs, we would strongly oppose it,” McMahon said. “To us the legislation is trying to fix a problem that

doesn’t exist.” He added that the multiple Erie County IDAs cooperate with each other, offering the same application and coordinating to decide which IDA will finance each project. “There may have been problems years ago, when some of the suburban IDAs were building commercial office buildings, and there were businesses leaving downtown,” he said. “That doesn’t happen any more. That’s been addressed.” State Sen. Andrea Stewart-Cousins introduced legislation to cut 118 IDAs, restoring those local governments want to keep. Both versions of the legislation are based on the recommendations of the Authorities Budget Office, which is working with Hoyt to put still more authorities on the chopping block. “So in one fell swoop, my legislation could actually reduce the number of authorities by anywhere from 10 to 15 percent,” said Hoyt, who hopes the SAGE Commission will take up his legislation. With Ranzenhofer, a Republican, and Hoyt, a Democrat, both on board, the legislation has some bipartisan backing. The opposition is likely to come when a specific authority is targeted and local backers protest. “For every IDA, there’s a state legislator, county executive or mayor who’s going to fight like hell to keep it,” Hoyt said. “Particularly with the IDAs, there’s always politics involved.” MAY 9, 2011


stated. “School districts that are already financially challenged and have limited ability to offset reductions through spending cuts, reserves or tax-rate increases will face continuing financial pressures, as the budget contains permanent changes to the school-district funding.” Standard & Poor’s voiced concern not only about the state’s debt load but “about a large and growing $46.3 billion unfunded other post-employment [benefits] obligation”

Moody’s said the approximately 6 percent school-aid cut in 2011–12 “may challenge school districts’ financial stability.”

Tom DiNapoli


Credit rating agencies give state budget high marks, but structural concerns remain BY ERIK KRISS


tive Empire Center for New York State Policy, warned that “the structural gap has shrunk, even though there haven’t been major structural changes.” “The fund drivers of Medicaid are not changing,” McMahon said, with the exception of shifting long-term Certified Home Health Agency patients into managed care. “It’s just that now Medicaid is subject to an arbitrary cap. The most significant change is [that] the governor [not the Legislature] now controls rates.” Frank Mauro, head of the labor-backed Fiscal Policy Institute, said the court-ordered Campaign for Fiscal Equity decision requiring increased aid to New York City schools remains in place. The budget’s current cuts in school aid and the limits it places on future increases mean “we will never actually honor the CFE commitment,” Mauro argued. Moreover, Moody’s said the approximately 6 percent school-aid cut in 2011–12 “may challenge school districts’ financial stability.” “Offsetting the aid reductions will be more difficult for [the poorest school districts] than for more affluent communities, as they will not be able to rely on propertytax payers to make up the difference,” Moody’s analysis

t got good reviews on Main Street, and so far Wall Street generally likes what it sees in the new $132.5 billion state budget: little reliance on “oneshot” revenue sources and progress in reducing New York’s structural deficit. Comptroller Tom DiNapoli agrees, calling the new spending plan an improvement over many recent budgets. But independent fiscal watchdogs are questioning the soundness of the budget’s structural improvements, saying major cost drivers and legal liabilities remain in place. One rating agency predicted school-aid cuts would make budgeting difficult for New York’s poorest school districts. And rating agencies remained concerned about what they called New York’s moderately high debt load, with interest costs projected to rise nearly 20 percent between last year and 2014–15, according to Gov. Andrew Cuomo’s budget proposal. The new budget caps future Medicaid spending While rating services like New York State’s 2011–2012 growth at the rate of medical inflation, currently 4 budget, they do have concerns about the state’s rising percent, and limits future school-aid increases to debt levels in future years. growth in personal income. Cuomo has touted the budget for using spending discipline to eliminate a $10 billion projected deficit without raising taxes. DEBT SERVICE (as percentage of Moody’s Investors Service called the budget all funds receipts) “credit positive for the state…because the legislature relied on recurring solutions to solve the gap.” STATE-RELATED Fitch Ratings noted that there was “no deficit DEBT, OUTSTANDING financing” in the plan. (in billions) “The out-year gaps are much smaller than what we’ve seen in previous years,” said David Hitchcock, STATE OPERATING FUNDS, senior director and primary analyst on New York ANNUAL DEBT SERVICE State for Standard & Poor’s. “From a credit perspec(in billions) tive, that’s a positive.” But E.J. McMahon, director of the conserva-

(OPEB)—or non-pension benefits to retirees, including health-care premiums and deferred compensation. And that doesn’t include $9.6 billion in OPEB for the state-university system. “The state has not established a fund to pre-fund OPEB,” an S&P analysis stated. The analysis also noted that despite efforts to control spending, overall general-fund disbursements will rise by more than 2 percent. “We believe that New York, as a state that provides a relatively high level of service to its residents, will continue to face difficulty achieving ongoing structural balance,” the S&P analysis said. But it added that Cuomo’s Medicaid and school-aid caps “alleviate out-year budget gaps,” noting the approximately $2 billion-plus projected state deficit for 2012–13 is “modest” compared with out-year gaps in the recent past. DiNapoli also gave the budget a positive review on balance, but saw some potential problems. “It did not rely on gimmicks—fund sweeps and oneshots that built in structural imbalance in the past,” said DiNapoli, cautioning that his office’s official review is not yet complete. “When you compare this to the past and the overly optimistic assumptions then, this is much more responsible and much more conservative in its revenue estimates.” But he did identify as questionable some projected savings in Medicaid and state-employee labor costs, as well as collection of taxes on Indian cigarette sales— collections the courts have thus far blocked. Fitch’s managing director, Laura Porter, also warned of “downside risk to the revenues,” and added, “On the Medicaid side, we’ll be closely watching implementation.” DiNapoli said he too worried about state debt levels. In the past, he said, “we borrowed for projects that should be pay-as-you-go. Long-term, I think we should tie debt to capital assets and infrastructure,” and limit “back-door” borrowing through public authorities.

Rating Concerns

FY 2010

FY 2011 4.5%

FY 2012 5.0% $58,017

4.4% $56,438






MAY 9, 2011



The Long Shot Blue Jay

since Republicans swept the 2010 midterms, the race between Democratic Erie County Clerk Kathy Hochul and Republican Assembly Member Jane Corwin is tightening. Hochul and Corwin are the front-runners in a pack of contenders, including Jack Davis, running on the Tea Party Line, and Ian Murphy, on the Green Line. Hochul spoke to The Capitol about the race’s symbolic importance to the Democratic National Committee, her poll numbers and what it was like to work for Daniel Patrick Moynihan. What follows is an edited transcript. The Capitol: The most recent Siena poll showed you trailing Jane Corwin by just five points. That’s a very narrow margin—were you surprised?

TC: Have you gotten any unusual phone calls from politicians or people on the national level that you were surprised by?

Kathy Hochul: I wasn’t. We’ve known all along we’ve been doing what it takes. I think the poll is a rejection of my opponent’s support for the Republican budget in Washington.

KH: Not really. I would say I get support from people of all parties—Republican businessmen and members of the labor community and independents, women and seniors and men. It’s wonderful to see people coming together behind one campaign. They know they can trust me and that I have integrity and I’ll do the right thing for them in Washington.

TC: Is that what you’re hearing from people in the district? KH: Absolutely, Corwin said she would have voted for the Ryan budget. I tell people sitting in the diners and senior centers around the district that one candidate supports the defamation of Medicare, and I will fight to protect Medicare and make sure it’s here for the future. Another thing is, and the poll reflects this, that people do not support tax breaks for wealthy Americans or for corporations. So…that’s the conversation in the diners and at the dinner tables.

“I do not need Washington running my campaign. But certainly I would not turn down assistance.”

TC: You’ve been posting good fund-raising numbers. What’s your campaign strategy and your media strategy in the coming weeks?

TC: You’re getting an unusual amount of attention for this race, because it could be seen as a referendum on the Paul Ryan budget. Do you see it that way?

KH: It’s a full media campaign. It has to be. But I also have grassroots individuals giving anything from five dollars on up, and if you look at the numbers, well over five hundred individuals have given me smaller donations. Last night a man came up to me and gave me ten dollars. He said, “I make a hundred dollars a week, but I want you to have this.” That’s the kind of person who inspires me to continue. Even though people perceive me as an underdog, I know that the people believe in my issues, and I’m on the right side of the issues when it comes to protecting seniors, protecting Medicare and ending tax breaks for multimillionaires. That message is resonating and helping people come to know me, and they’re willing to open their wallets in even small denominations to help fund the campaign. We will have the resources to continue a strong television campaign until the end. The question is the personal contacts—it’s what I love to do, walk up to strangers at restaurants and events and just speak to them directly. I feel that that’s part of the whole campaign.

KH: I think you hit the nail on the head. If you support decimating welfare or giving tax breaks to the wealthiest Americans, do not vote for me. That’s not what my message is. And I think that my message resonates with the majority of people in this district and this country. So to the extent that this is viewed as a national race and a referendum on the Ryan budget, that’s fine with me. While Republicans have good ideas, and Democrats have good ideas, we need to put all this fighting aside and come out with the right solutions for the American people. But I’ll tell you right now, decimating Medicare and giving tax breaks to the wealthiest Americans is not going to help.


TC: What’s the most unusual comment you’ve gotten from a constituent during the race? KH: Definitely the man who gave me the ten dollars. It was very unexpected and very touching to me, that someone would give me ten dollars when they live off a hundred a week. The middle-class people and small businesses in this district, they know I have their backs. So that meant a lot to me.


TC: You haven’t had much help from the DNC, and haven’t sought it. Can you do all the fund-raising you need to win this race on your own, or have you had conversations with the Democratic National Committee about getting some aid? KH: From the get-go, Jane Corwin has had her campaign run out of Washington. Speaker John Boehner is going to come out here and campaign for her. I’m running a different kind of campaign. We’ve raised more money than any candidate running for Congress, three times more than anyone in this race in our first quarter, and again, most of that came from people giving $250 or less. Certainly people from outside the state want to be helpful, but that has not been powering our campaign. I do not need Washington running my campaign. But certainly I would not turn down assistance.



ith weeks to go before the first Congressional special election

TC: Do you have anything to say about Chris Lee as a legislator, apart from his obvious personal issues? KH: Well, we have differences of opinion on some issues. He was the only member of Congress [from New York] not to support giving the additional benefits to the workers at 9/11. That’s something people have brought to my attention. But he represented his district the way he thought he should, and that’s all I’ll say about that. TC: What do you think about your opponent Mr. Davis? His entrance into the race is siphoning off Corwin’s votes and maybe even some of yours. Is his candidacy cause for concern? KH: It’s a different dynamic in this race in that it’s a fourway race. Davis has run multiple times, so he is a known commodity. He has had the opportunity to spend part of his fortune, as Jane Corwin has, in an attempt to buy this seat. He announced that if elected, he would join with the Republican Party and the Tea Party caucus. I think once people hear that, they will know what his true colors are. So I’m not concerned about that cutting into what we have already achieved. TC: What about an endorsement from Governor Cuomo, the most popular elected official in the state? KH: Certainly statewide elected officials have been supportive, but I don’t have any information to release at this time. Eric Schneiderman has been supportive, Senator Schumer is supporting me, Senator Gillibrand is supporting me. These announcements will be coming out. There are other members of the New York delegation as well. But we’ve done very well up to this point running our own campaign, focusing on the people in the district, and getting our message out. In the final couple weeks, if people want to join us, I welcome them, but I believe we’ll be successful independent of everything because we’ve already defied all expectations. TC: You once worked for Senator Daniel Patrick Moynihan. What did you do for him? What was it like to work with him? KH: My title was legislative assistant, and I was an attorney on his staff. I was there at a time when there were very strong differences between the parties, but Speaker Tip O’Neill sat down to watch a football game with Reagan. That’s what’s missing, that spirit of compromise that will bring our parties together the way they need to be. It was an honor to work for Senator Moynihan. TC: The seat you’re running for could disappear in the next redistricting. What will you do if it gets erased? Would you try to run again for County Clerk, or County Executive? KH: That’s the least of my concerns right now. I’m trying to win an election, and that’s 110 percent of my focus. —Laura Nahmias MAY 9, 2011


Instead of closing the courthouse doors to injured New Yorkers...

...let the sun shine in on the auto insurance companies. New York’s outdated auto insurance laws close the doors on deserving New Yorkers injured by irresponsible drivers, and keep policymakers and policyholders from getting real information about insurance industry profits. • A.4787 (Titone) / S3790 (Bonacic) will update Section 5102(d) of the Insurance Law to provide clarity to judges and juries, ensuring that the No-Fault Law is administered fairly. All serious injuries should be compensated under the Auto No-Fault Law.

• The Auto Sunshine Bill, S5009 (Maziarz), will finally give lawmakers access to insurance carriers’ data to help them make sure automobile insurance carriers charge consumers a fair and reasonable premium.

Open the doors and let the sun shine in. Support updating the auto threshold law and the Automobile Insurance Sunshine Act of 2011.

New York State trial l awYerS aSSociatioN Protecting New Yorkers Since 1953

The May 9, 2011 Issue of The Capitol  

The May 9, 2011 Issue of The Capitol. The Capitol is a monthly publication, targeting the politicians, lobbyists, unions, staffers and issue...