Gov asks mayor & Thompson for B.P.C. help

By Julie Shapiro

Feature article in the Downtown Express

Desperate to fill the $3 billion hole in the state’s budget this year, Gov. David Paterson is making another grab for the Battery Park City Authority’s money.

Paterson wants to take $300 million from the authority, which would be an unprecedented use of the authority’s funds. Paterson tried and failed to do something similar earlier this year, and his current proposal is also far from a done deal.

Any use of the authority’s money requires the signoff of authority’s board, whose members are appointed by the governor, and also the signoff of Mayor Michael Bloomberg and city Comptroller Bill Thompson.

Although Bloomberg and Thompson are unlikely to agree on anything with the Nov. 3 election coming up, the two mayoral candidates have opposed the state taking any Battery Park City Authority money in the past. Traditionally, the B.P.C.A.’s annual surplus has gone to the city, where it sometimes gets spent on affordable housing.

“The city and state should not be using that money to close operating deficits without funding affordable housing,” State Sen. Daniel Squadron said this week. “That’s not what that money is meant for.”

Squadron hopes to negotiate a long-term plan for using B.P.C.A. money to build affordable housing in the city.

The Battery Park City Authority generates a surplus each year with the equivalent of property taxes (called PILOTs, or payments in lieu of taxes), ground rent and a civic facilities fee, paid for by property owners and indirectly by renters. All the money goes to the authority, and after the authority subtracts its annual operating expenses, the surplus goes to the city, proportionally split between PILOTs and ground rent. The PILOTs go into the city’s general fund, while the ground rent goes into a bank account that can only be accessed by a joint agreement between the mayor, comptroller and authority board members, who are appointed by the governor.

In the past, those bodies have authorized some of the ground rent money to be spent on affordable housing, most recently in 2005, when they committed $130 million. But since then, in the absence of a similar agreement, money has accrued in the fund untouched and will soon total $268 million.

Paterson’s proposal would take $50 million from this fund and would have the authority borrow an additional $250 million, totaling the $300 million he needs. The borrowed money would reduce the authority’s annual contributions to the city, because the authority would be paying off the bonds over the next several decades, reducing its annual surplus.

“The state is facing unprecedented fiscal difficulties,” said Matt Anderson, spokesperson for the governor’s budget division, defending the need to use B.P.C.A. money. He said the governor would discuss his plan with the mayor and comptroller, and an agreement would likely include some money for affordable housing in the city as well.

The mayor and comptroller do not sound supportive so far, although the mayor did release a short, general statement last week supporting the governor’s overall budget plan.

Marc LaVorgna, spokesperson for the mayor, pointed out that the city rebuffed the governor the first time he tried to take the authority’s money, and the mayor would have no qualms about saying no again. LaVorgna said the mayor is committed to the authority’s surplus going to affordable housing, a position he took at Thompson’s urging several years ago.

But last week, the roles seemed nearly reversed, as Thompson sounded a bit more open to the governor’s proposal.

“You never reject anything out of hand,” Thompson told Downtown Express. “There is a need to help right now [with the state budget], but there is a huge need for affordable housing, and that’s what that money is supposed to be used for. At the very least, we’d like to see a balance being struck.”

Sen. Squadron and Assembly Speaker Sheldon Silver, whose districts include B.P.C., also spoke about balancing the state’s current needs with a long-term plan for affordable housing in the city.

Silver said in a statement that he supports the governor’s use of the $300 million this year to avoid more drastic cuts to services. But, he added, “We must ensure that we set aside sufficient funds for continued upkeep and quality of life at Battery Park City, and that there is an ironclad commitment that, in the future, revenue will go towards meeting New York City’s commitment to affordable housing.”

Many Battery Park City residents have long chafed under what they see as the disproportionate taxes levied against the neighborhood, and at least one was displeased with the governor’s money grab.

Eric Wallace, who lives in a condo in B.P.C. with his wife and two young sons, said it is unfair for the neighborhood’s residents to bear the burden of supporting the entire state’s budget.

“The governor seems to believe the residents of Battery Park City are significantly more wealthy than the residents of the city and state [as a whole],” Wallace said. “It’s obscene we’re being hit with these taxes that are not intended to be raised for that purpose.”

Instead, Wallace said the governor ought to institute a millionaire’s tax, which would hit some B.P.C. residents but also others around the city and state.

If the governor succeeds in getting $300 million from the Battery Park City Authority, it will be the first time the authority’s money has gone to fill gaps in the state budget. The authority does give the state money each year, often around $3 million, but that money is a repayment for services rendered by the state for the authority, said Anderson, the governor’s spokesperson.

The governor’s request for the authority to borrow $250 million comes as the authority was already planning to borrow $100 million for the next five years of capital projects.

Robert Serpico, C.F.O. of the Battery Park City Authority, said last week that trying to borrow so much money at once could hurt the authority’s credit rating, which would increase the amount of money the authority had to pay each year for debt service. Serpico was speaking hypothetically, since the governor had not yet made his most recent request.

Jim Cavanaugh, president of the authority, said several days later that the governor’s request would not prevent the authority from borrowing the $100 million, but it could reduce the authority’s ability to borrow money in the future.

Cavanaugh said he expected the authority’s board to wait while the governor negotiates an agreement with the mayor and comptroller. James Gill, chairperson of the board and an appointee of former Gov. George Pataki, referred questions to Cavanaugh. Gill’s term on the board expired last year and Paterson has not reappointed or replaced him, but could do so at any time.

Although the authority board members are all appointed by the governor, the board members have fixed terms and they are not technically bound to execute the governor’s wishes. Vice chairperson Charles Urstadt recently advocated defying the governor’s mandated pay freeze for state employees, which Urstadt said would be bad for the authority’s morale.

On the issue of the state using the authority’s money, Urstadt said last week it was “a possibility” that the board could act independent of the governor, but he needed to take a harder look at the issue.

“It’s a complex problem,” said Urstadt, who has been breaking with the rest of the board more and more. He is particularly concerned that borrowing $250 million will jack up the authority’s annual operating expenses.

Urstadt said he would put “the rights of authority and what’s good for the authority and prudent, ahead of any political instincts.”