UPDATE: On December 6, 2016, the New York City Council voted 42-0 to approve Introduction 1182-2016 which requires the Department for Citywide Administrative Services to conduct an extensive review of a request to remove a deed restriction on a property managed by DCAS, including a public hearing, to determine whether the request removal furthers the best interests of the City.
The legislation is a response the controversial sale of the Rivington House to a luxury condo developer after DCAS removed deed restrictions that prevented such a development. “The City Council can assure that this will never happen again to any other community,” said the bill’s sponsor Manhattan Council Member Margaret Chin.
The bill will now go to the Mayor for his signature.
City Council questioned the First Deputy Mayor, the Corporation Counsel and the DCAS Commissioner on the controversial Rivington House sale. On September 29, 2016, the City Council’s Committee on Oversight and Investigations and the Committee on Governmental Operations held a six hour long joint hearing on the City’s removal of deed restrictions from Rivington House.
The issues within the existing deed-modification policies and procedures were brought to light in February 2016 when the Rivington house, a former nursing home located in the Lower East Side of Manhattan, was sold to private condominium developers immediately after the use- restrictions were lifted from the property. The Allure Group, a nursing-home operator, had purchased the former nursing home from VillageCare in February 2015 for $28 million with the intent of using the building to run a for-profit nursing home. The deed was encumbered by a two-part restriction requiring the property be used by a non-profit organization and that the building be used as a medical residential care facility. In November 2015, the City lifted the two-part restriction in exchange for approximately $16 million. Three months later, the Allure Group sold the unrestricted property to private condominium developers for $116 million.
On July 14, 2016, the Department of Investigation issued a report finding that the actions and inactions of City officials, specifically within the Department of Citywide Administrative Services (DCAS), the Mayor’s Office of Contract Services (MOCS), the Law Department, and Mayor’s Office, facilitated the sale of the Rivington House. Among its findings, DOI determined that City Hall had not typically been involved in deed restriction removals but had inserted itself into the Rivington process. Further, DOI found multiple memos from DCAS sent to the Mayor’s office which stated that the deed restrictions would be removed. For CityLand’s prior reporting on the report, click here.
On August 8, 2016, New York City Comptroller Scott M. Stringer issued his own report which, compared to DOI’s determinations, placed less blame on the quality of the legal procedures used in modifying deeds of formerly City-owned property. Instead, the Comptroller found that City officials poorly executed the formal, statutory procedures, and their actions impaired the public’s ability to participate and undermined the City’s best interests. For CityLand’s prior reporting on the Comptroller’s report, click here.
The September 29th joint hearing served an investigatory purpose, but also a legislative purpose for the consideration of Introduction 1182-2016 which would require the mayor, or a designee, to maintain and update on the City’s website a searchable electronic database of all real property of the City sold, exchanged, or otherwise disposed of if the deed contains a restriction imposed by or on behalf of the City. The bill would also require the mayor to inform the relevant borough president, council member and community board of any proposed removal of a deed restriction within a district of the City. For CityLand’s prior reporting of this bill, click here.
Council Member Vincent Gentile, Chair of the Committee on Oversight and Investigations, opened the day by outlining the goals of the hearing. He believed that trying to assign responsibility to the Rivington House issue was a little like playing the game of “whack-a-mole,” in that when you think you’ve hit that line of responsibility, it shifts and seems to move someplace else. Council Member Ben Kallos, Chair of the Committee on Governmental Operations, began by explaining that because both DOI’s and the Comptroller’s reports lacked supporting documents there was still much to learn about decision-making process, the role of outside influences and internal processes of City Hall. Further, Chair Kallos stated that from the investigations done so far it appeared that at the heart of the Rivington issue was mismanagement that spread across several agencies.
Council Member Margaret S. Chin, the sponsor of Intro. 1182-2016, spoke on behalf of the legislation. She stated that no hearing can recover the loss incurred by the community due to the loss of Rivington House, but she hoped that the proposed legislation would prevent another loss in the future.
First Deputy Mayor Anthony Shorris testified as to City Hall’s involvement in the removal of the deed restrictions. Shorris began by recognizing that what happened with the Rivington House was not the right outcome, nor was it consistent with the policy goals of the de Blasio Administration. He stated that as the chief operating officer for the City, he was ultimately accountable for the mistake. In hopes of rectifying the situation, Shorris announced that, with the help of Council Member Chin and Manhattan Borough President Gale Brewer, the City had identified a new location—30 Pike Street—to build beds for the bulk of the beds lost. Funding for the project would come from the $16 million the City received for the lifting of the deed restrictions. He was confident that with the proposed changes both by the administration and the City Council, this kind of mistake would not happen again. Shorris acknowledged that a mistake had been made but maintained that “at no time did anyone write, call, meet or discuss with me the notion that the actions being taken by the agency would allow the property to be converted to luxury housing.”
Chair Gentile questioned whether Shorris considered emails a form of writing, since updates on Rivington were sent weekly to the First Deputy Mayor from DCAS. Shorris explained that the attached updates to the emails did mention the removal of the deed restrictions but did not make mention of luxury housing. He further testified that he only read a sampling of the weekly updates and could not remember specifically reading those updates, but that had he read them, it would not have flagged his attention.
City Council Speaker Melissa Mark-Viverito questioned that if Shorris made it clear that the outcome he wanted was a continued nursing use, as he testified to, how did the breakdown occur. Shorris responded that City Hall did not have a process in place for deed restriction removals in DCAS and that past removals were based solely on financial considerations. He noted that the administration’s proposed rules would help formalize communications and policy considerations in future processes.
Chair Kallos then questioned whether with hindsight on the breakdown of communication if Shorris would directly communicate his wishes to the relevant deputy mayors. Shorris replied no, saying that, “the government is large, and we have very excellent staff at City Hall who work together very well on many, many issues. I don’t personally execute the decisions I make.”
Answering an inquiry by Council Member David G. Greenfield, Shorris stated that no one at City Hall was being disciplined over the matter. The two and a half hour testimony of the First Deputy Mayor ended with confusion over why his testimony was strictly limited. Chair Kallos stated that he had been told that Shorris had to fly to Oklahoma City for the Conference of Mayors. Shorris said he had no flight, and that he could not leave the City because de Blasio was attending that conference.
The testimony of Zachary W. Carter, Corporation Counsel of New York City, centered largely on the Law Department’s role in redacting documents requested by DOI during its investigation. A difference of opinion arose concerning the authority which DOI has under the City Charter and two Executive Orders which specify that DOI shall have “unrestricted access” to City records and documents. In his testimony, the Corporation Counsel made clear his belief that DOI cannot be given more authority than the City Charter confers, and that the Charter gives DOI access to information within the scope and relevant to the investigation. Several of the Council Members expressed their belief that “unrestricted access” would mean unfettered access to all documents and information.
Council Member Rory I. Lancman made note of DOI’s report which included a section titled “Lack of Cooperation During this Investigation.” Council Member Lancman quoted language from that section which read, “In one such production from Law, DOI received approximately 1000 documents, approximately 990 of which were blank pages containing the letters ‘NR.’” Corporation Counsel Carter responded that the passage was referring to a directory of healthcare facilities in which Rivington was mentioned on only five pages. He explained that it was common practice to redact information that was considered “non-responsive” to a request for information. Further, he emphasized that all the information had been turned over in un-redacted form, and that DOI had yet to find any relevant information that was redacted.
Lisette Camilo, who assumed the role of Commissioner of DCAS in January of 2016 after the sale of Rivington House, was unable to testify on specifics of the removal of the deed restrictions by DCAS.
There are ongoing investigations by the New York State Attorney General and the U.S. Attorney for the Southern District of New York.
By: Jonathon Sizemore (Jonathon is the CityLaw Fellow and a New York Law School Graduate, Class of 2016).