National News

U.S. Oversight of City Housing Is Seen in Deal

Posted May 31, 2018 9:03 p.m. EDT
Updated May 31, 2018 9:06 p.m. EDT

NEW YORK — New York City would be forced to spend at least $1 billion and accept a federal monitor to oversee its dilapidated public housing system, as part of a settlement being finalized with the U.S. attorney’s office in Manhattan, according to two people familiar with the negotiations.

The settlement, which still requires approval from the parties, would bring an end to the federal government’s sweeping and yearslong investigation into conditions at the New York City Housing Authority, the country’s largest public housing stock, which houses more than 400,000 poor and working-class New Yorkers.

Federal intervention would mark a turning point in the efforts to salvage NYCHA, as the housing authority is known, which slid into a state of disrepair after the federal government began to disinvest in the authority’s 325 housing developments two decades ago.

Since 2001, NYCHA has suffered more than $2.7 billion in cuts from the federal government. Under the city’s watch, maintenance was deferred, capital projects were delayed and a backlog of repairs burgeoned. The authority has $17 billion in unmet capital needs, a number that is expected to grow when NYCHA releases its new assessment in June.

Two major requirements of the settlement had been agreed upon: the court-appointed federal monitor; and the $1 billion, which would be spread over four years and go toward repairs to NYCHA.

But some of the details were still being contested, including whether a state monitor for NYCHA ordered in April by Gov. Andrew M. Cuomo would be necessary, given the federal oversight, the two people said.

That possibility would complicate Cuomo’s all-but-explicit effort to subject Mayor Bill de Blasio — a fellow Democrat and his local political nemesis — to additional oversight and political pain over his management of the housing authority, whose leadership de Blasio appoints. The federal government’s investigation into NYCHA began in 2015, but it became public in March 2016 when Preet Bharara, then the U.S. attorney for the Southern District of New York, revealed that prosecutors were investigating the housing authority for possibly submitting false claims related to lead paint to the Department of Housing and Urban Development.

City investigators later revealed that the housing authority did not conduct lead inspections in thousands of apartments from 2012-16, and that it submitted false paperwork to the federal government saying it had conducted the inspections most of those years.

That paperwork was approved by Shola Olatoye, then NYCHA’s chairwoman, even after she had learned of the lapses in 2016, the city found.

The city’s findings set off a chain of events that culminated in the resignation of Olatoye; Thursday was her final day at the agency. The findings also led the federal housing department to prohibit NYCHA from drawing on federal funds without approval.

Although NYCHA relies primarily on the dwindling federal funds and rent collection, the de Blasio administration has nonetheless chosen to voluntarily fund NYCHA, investing $3.7 billion in the agency since de Blasio took office, city officials said.

At an unrelated news conference, de Blasio on Thursday declined to discuss the parameters of the potential consent decree, but said that prosecutors brought up a “set of concerns” with NYCHA that “are historically grounded.”

“I think if we can get to a fair settlement, that’s in everyone’s interest,” the mayor said.

The city potentially would be on the hook for additional NYCHA spending — possibly about $200 million each year after the initial four years — if the consent decree is left in place because its requirements were not fulfilled, one person said. With the deal, the city would avoid a protracted legal battle with federal prosecutors. After a settlement is reached, and approved by a federal judge, a monitor would be appointed by the court.

It remains unclear how a federal monitor would interact with the state monitor, ordered by Cuomo to oversee $550 million in new state spending on the authority. That appeared to be delaying the negotiations, with the city preferring that the two roles be combined in some way, one person said.

In April, de Blasio publicly criticized the governor for meddling in NYCHA’s affairs after he signed an executive order that called for a state monitor. (De Blasio described the order as “convoluted” and “thrown together.”)

The mayor, the speaker of the City Council and a representative for NYCHA tenants have until Friday to select a state monitor, but the parties have only met twice in two months and potential candidates have not been discussed. Lawyers representing the tenants said that city officials have dragged their feet.

“There were serious people in the room but they were not taking it seriously,” Elie Hecht, a lawyer for NYCHA residents, said. “The whole thing was a joke.” Asked whether his administration had eschewed any role in picking a state monitor because such a role would be superseded by a federal monitor, de Blasio declined to offer “a whole lot of detail,” then appeared to signal the eventual outcome.

“I would only say that the federal government is clearly the top level of government, and a federal monitor changes the entire discussion,” he said. “We’ve had federal monitors before, very productively, right now, this minute, at the police department and the correction department.”

City officials have not scheduled any future meetings to discuss the governor’s order, Hecht said. If the deadline passes, the decision falls to the city comptroller, Scott M. Stringer.

But Stringer’s office said on Thursday that he cannot choose the monitor for the state: Auditing rules mandated by the City Charter prohibit him from appointing someone to a position in an agency that his office audits. The legal problem with the governor’s order was brought to the attention of Cuomo’s aides early in the process, according to a person familiar with the discussions, but those involved assumed that either the city would choose a monitor, or it would be superseded by the federal court before it fell to the comptroller.

“I will not be appointing the independent emergency manager,” Stringer said in a statement, referring to the state monitor.

The governor’s press secretary, Dani Lever, said in an email that Stringer’s claim of being legally barred had “no merit,” adding that “we do understand that politically the comptroller doesn’t want the responsibility and accountability.” (Stringer later responded, “I will not be bullied; the law is the law.”)

Lever declined to comment on the city’s negotiations with federal prosecutors “or any attempt by the city to settle it to avoid going to trial.”

A spokesman for the U.S. attorney’s office declined to comment, as did those at NYCHA and City Hall. The settlement with federal prosecutors, elements of which were reported by Politico, would be but the latest in a cascade of interventions that have befallen the housing authority as a result of the worsening conditions in many of its aging buildings.

NYCHA is already under the supervision of a special master, appointed in 2015, to oversee mold removal, and a state judge recently ordered that the housing authority conduct lead inspections in thousands of apartments it had overlooked.

Last winter, thousands of tenants were left without heat or hot water after a widespread heat outage. De Blasio then committed $82 million to replace 39 boilers that heat 104 buildings with the worst heating problems.