Roosevelt Island Westview Building Ground Lease Extension On RIOC Board Meeting Agenda Tonight - Here Are The Details On Mitchell Lama Exit And Resident Affordability Plan

On July 18, the Roosevelt Island Operating Corp (RIOC) Real Estate Development Advisory Committee met in Executive Sessioin (closed to the public) to discuss the Westview building

ground lease negotiations. As reported that evening:

Following the Executive Session, I spotted RIOC President Susan Rosenthal on Main Street. I asked what happened at the meeting. Ms Rosenthal replied:

Board meeting has been scheduled for Monday...

Translation, a Westview agreement has been reached and will be voted on at Board meeting on Monday.

More details on the Agreement coming soon.

Here are the details.

 It looks like the Westview Affordability Plan, Privatization and Ground Lease Extension will be approved at this evening's RIOC Board meeting. Among the items on RIOC Board Agenda for meeting tonight is:

III. New Business
1. Authorizations Related to Amendment to Westview Ground Lease (Board Action Required)

Below is RIOC CFO Kimberly Quinones July 20 Memo in support of the Westview Ground Lease Amendment to the RIOC Board of Directors:

EXECUTIVE SUMMARY

At its July 23, 2018 meeting, the Board of Directors of RIOC will be asked to consider approval of an amendment (the “Amendment”) to the 1973 ground lease (“Ground Lease”) with NorthTown Phase III Houses, Inc., the owner of Westview (the “Owner”). Approval of the Amendment would enable the Owner to pursue an affordable home ownership conversion plan for Westview (“Affordability Plan”). The Affordability Plan provides for current tenants to be able to purchase their apartments at below market value with non-purchasers receiving guaranteed rent protections. In approving the Affordability Plan, RIOC will need to extend the Ground Lease with increases for Tax Equivalency and Ground Rent payments as provided in the Amendment. Prior to approving the Amendment, the Board will be asked to approve certain environmental findings. Proposed Board resolutions adopting the environmental findings and approving the Amendment are attached.

PROPOSED AMENDMENT

The Proposed Amendment would modify and extend the existing Ground Lease between RIOC and the Owner governing a Mitchell-Lama building with 361 residential rental units (“Westview”). Although the Ground Lease is not scheduled to terminate until 2028, certain changes in circumstances merit the proposed Amendment. The Owner seeks to exit the Mitchell Lama program, as is its right under the State’s Private Housing Finance Law, and pursue a cooperative and condominium conversion (the “Conversion”). The Owner also seeks to refinance the mortgage on Westview. In order to accomplish these goals, the Owner needs to extend the term of the lease. RIOC seeks to preserve affordable housing, consistent with its mission and statutory purpose.

RIOC has worked with the Owner and the Empire State Development Corp. of N.Y. (ESD) the New York State Division of Housing and Community Renewal (HCR) to develop a plan that balances the parties’ goals. In exchange for an extension of the Ground Lease at a below market ground rent, the Owner has agreed to maintain Westview as an affordable housing complex for a period of 30 years pursuant to the Affordability Plan. In exchange for affordability protections, the expiration date of the Ground Lease will be extended from January 31, 2028 through December 22, 2068, and the ground rent payable to RIOC will be less than a full market ground rent unencumbered by the Affordability Plan for a lease term through 2068. In addition, the Amendment will allow RIOC to remain in occupancy of its current office space for a period of up to five (5) years, with no rent being payable by RIOC for the first three years. Finally, the Amendment will permit the Owner to refinance its existing mortgage at advantageous rates so it can make necessary capital improvements to Westview.

AFFORDABILITY PLAN HIGHLIGHTS

The Affordability Plan provides that for the next 30 years at least 55% of the 361 residential units, (199 units) will either be affordable restricted price cooperative apartments or affordable rental units. Affordable cooperative apartments will give existing tenants the opportunity to purchase at a substantial discount while restricting resale prices and instituting income limitations upon subsequent purchasers. Tenants who do not purchase apartments will be provided with rent increases tied to the “Rent Guidelines Board” increased by 6.16% plus a 0% to 5% add-on depending on the tenant’s income. Tenants who do not purchase their units will be provided subsidized rent for as long as they remain up to the next 30 years.

Please note that the cooperative Conversion will require the approval of the NYS Attorney General’s Office. In the event of non-approval, the building will convert to an “Affordable Rental” whereby at least 55% of the residential units will be provided subsidized rents as described above for the next 30 years.

As detailed in the attached Affordability Plan, the Sponsor is required to make an up-front capital contribution to the building’s Capital Reserve Fund.

GROUND RENT HIGHLIGHTS

Under the Amendment, the effective starting annual ground rent would be $325,000 (an increase as Westview does not currently pay ground rent), and would increase by 10% every 5 years during the 30 year affordable period, and thereafter at 4% per year. The ground rent amount is supported by an appraisal of the leasehold encumbered by the Affordability Plan. The ground rent was structured in order to keep cooperative maintenance charges to a minimum. Ground rent will be comprised of three components: Base Ground Rent (paid by the Lessee); Transfer Resale Fees (paid by the shareholders upon re-sale); and Capital Event Fee (referred to as Sponsor Transfer fees in the Amendment) (paid by the sponsor on initial sales). The NPV of the projected estimated revenues comes to approximately 30% of appraisal. The appraisal was performed by Jerome Haims, a highly respected appraiser with many years’ experience with public/private New York real estate. In addition, a Valuation Letter was also obtained from Newmark Knight Frank.

TAX EQUIVALENT PAYMENTS (TEP) HIGHLIGHTS

The Amendment provides for a ten (10) year phase-in of Tax Equivalent payments to market rates for units being sold or rented at market, provided that for the first thirty years, the Tax Equivalent Payments for market rate apartments will be based on 80% of the market based tax equivalent payment. Thereafter, the Equivalent Payments for market apartments will increase to 100% of market based TEP. On July, 2018, the Empire State Development Corp. of N.Y. (ESD) approved the TEP provisions in the Affordability Plan and gave its consent to the ground lease extension.

ENVIRONMENTAL REVIEW

Counsel has advised that the Proposed Amendment is a Type II action under the State Environmental Quality Review Act (“SEQRA”), and therefore does not require environmental review. However, as a conservative measure and for the avoidance of doubt, RIOC staff has worked with outside environmental counsel to prepare the attached Short Environmental Assessment Form and addendums (“SEAF”) to assess any potential environmental impacts that may result from the Proposed Amendment. Based on the SEAF, I recommend that RIOC conclude that the Amendment and implementation of the Affordability Plan will not have a significant adverse impact on the environment. Copies of the SEAF and a proposed negative declaration for Board approval are attached.

RECOMMENDATION
I believe that, in keeping with RIOC’s corporate mission of promoting Affordable Housing on the Island if economically feasible, the proposed ground lease extension accomplishes this and I recommend its approval....

Also, NY State Department of Homes & Community Renewal (DHCR) memo to RIOC in support of the Westview Affordability Plan.

Read more »

Good News, But Fingers Still Crossed - Agreement In "Principle" For Roosevelt Island Westview Affordable Privatization Plan To Exit Mitchell Lama Program Says RIOC President - Terms Not Disclosed Yet And Status Of Retail Lease Renewal Unknown

As reported almost one year ago on March 28, 2017:

Six months after approving an affordability plan to exit the NY State Mitchell Lama housing program, residents of Roosevelt Island's Westview building are worried that no final agreement has been reached between the Westview building owner/sponsor (North Town Phase 111 Associates LP) and various NY State government agencies, including the Roosevelt Island Operating Corp (RIOC), NY State Homes & Community Renewal (HCR) and the Empire State Development Corp.

As of last week, there was no word about the status of Westview privatization.

A possible obstacle - the expiration in April 2018 of Westview retail space lease to RIOC which is subleased to Hudson Related as part of the Main Street Retail Master Lease.

Would the Westview building ownership renew the retail lease space to RIOC or,would  Westview ownership recover the space for themselves and to what extent does the retail lease negotiation impact the privatization negotiations?

In response to my question last Friday about the Westview Privatization status, a spokesperson for Roosevelt Island's NY State Assembly Member Rebecca Seawright replied:

Assembly Member Seawright continues to work with State Homes and Community Renewal (HCR) and the Westview Taskforce. A meeting is being held in the district office today with Westview Task Force leadership and HCR officials to discuss the status of negotiations.

I asked RIOC President Susan Rosenthal and HCR Commissioner RuthAnne Visnauskas:

... As far a the Roosevelt Island community knows, nothing more has happened regarding Westview Privatization since this March 2017 story describing stalled negotiations.

The Westview residents have no idea what is going on.

My understanding is that the latest element in Westview privatization is the upcoming expiration in April 2018 of the Westview ownership retail space to RIOC which is subleased to Hudson Related as part of the Roosevelt Island Main Street Master Retail Lease.

What impact, if any, does the Westview ownership retail lease renewal negotiation with RIOC have on the Westview Building privatization?

What is the current status of Westview privatization?...

Ms.Rosenthal replied on yesterday:

I know you reached out to HCR and are anxious to know the terms of the proposed deal.  As soon as we share the terms with the board members,  we will share them with you.  The good news: we reached a deal in principle and we are moving forward!

I asked David Kramer of Main Street Retail Master Leaseholder Hudson Related about the Westview retail space lease renewal:

... My understanding is that the lease has not been renewed yet.

If Westview retail lease with RIOC is not renewed, what impact will that have on the Master Retail Lease with Hudson Related which includes the Westview stores?

Also, what impact will that have on Roosevelt Island retail leasing efforts and those current Westview retailers that have lease terms past April 2018?

What is the annual rental revenue from Westview retail tenants and how much revenue does RIOC receive under the Master Lease from Westview retail tenants?...

Mr. Kramer answered:

I think there are 2 substantive issues if the retail sublease is not extended.

First, it's a big hit to RIOC. They earn most of the revenue from the Westview stores (we earn a percentage of the upside over time).  I'm not sure why anyone would want RIOC to have less recurring, annual money.

Second, I think there's a logic to the Master Lease having a greater point of view to help the island. Whether it's paying for the new way finding system, or holiday lights, we've tried to help all the retailers.

We've made plenty of non-economic choices, whether it's signing a lease with NYPL or working to keep RIVAA in their space that are good for the island but don't maximize profits.

Our JV pays them ground rent from the retail revenue plus profit participation ... it comes out to approx. 83% of net proceeds. So I don’t understand why the RIOC Board wouldn’t fight to retain that revenue source.

Westview building owner David Hirschorn declined to comment on the Westview privatization status or the retail lease renewal at this time.

The Westview Task Force sent this notice out last evening to residents:

Friends, Neighbors, Westview Tenants,

We are pleased to report that we met with HCR officials and representatives of our elected officials this past Friday.

We were informed that, after prolonged negotiations, the agencies (HCR, RIOC) and Owner are now on the same page regarding all terms related to the WV Affordability Plan. Details are expected to be formalized and released soon.

We will keep everyone informed as we learn more.

Thank you for your continued support.

Westview Taskforce Inc.

Below is an excerpt from a November 3, 2017 email from the Westview Task Force to HCR Commissioner RuthAnne Visnauskas supporting the return of Westview retail space to the Westview Building ownership (click text image for larger sized print).

Today, RIOC announced that the Real Estate Advisory Committee will meet April 3 in Executive Session (closed to the public) to discuss Westview as well as an apparent settlement of Rivercross ground lease arbitration. According to RIOC:

PLEASE TAKE NOTICE that a meeting of the Real Estate Development Advisory Committee of the RIOC Board of Directors will be held on Tuesday, April 3, 2018 at 5:30 P.M. at the RIOC Administrative Office, 591 Main Street, Roosevelt Island, New York.

Agenda:

1. Chair’s Motion for Executive Session to Discuss:

a. Rivercross Arbitration Settlement

b. Southtown 8 & 9 Environmental Assessment and Zoning Overrides

c. Westview Ground Lease Negotiations

2. Any Other Committee Business That May be Brought Before the Committee.

My understanding is that if the Westview retail space lease to RIOC is not renewed, the current retail tenants will have to renegotiate their agreements with Westview owner.

Special Roosevelt Island Operating Corp Board Of Directors Meeting For August 4 To Appoint New RIOC President - Will Only 1 Candidate Be Considered?

Just received this message that a special meeting of the Roosevelt Island Board of Directors will take place on August 4, 2010 5:30 PM at the Good Shepherd Community Center. On the Agenda for new business will be the appointment of a new RIOC President/CEO. The only candidate listed on the Agenda for consideration to be appointed RIOC President/CEO is Leslie Torres.
Rioc Board Meeting to Approve New President

According to the NY State Division of Housing and Community Renewal (DHCR) web site, Leslie Torres is the Deputy Commissioner for Office of Rent Administration. During testimony before the NY State Senate in 2007, former DHCR Commissioner Van Amerongen described Leslie Torres as follows:

... I would like to introduce you to our newly-appointed Deputy Commissioner for Rent Administration, Leslie Torres, who is here with me today. Prior to joining DHCR, Ms. Torres was the Assistant Commissioner for Enforcement at the New York City Department of Buildings. There she managed enforcement units responsible for bringing NYC properties into compliance with the Building Code. Prior to that Leslie was the head of the NYC Loft Board, so she is very familiar with having to balance the interests of landlords and tenants...

What happened to the idea of considering multiple candidates for the position of RIOC President/CEO? Is Assembly Member Micah Kellner's legislation, though not yet signed by the Governor, regarding RIOC governance that:

gives the public a role in the process of hiring the RIOC President—requiring the Board of Directors to consider at least three candidates for the job and to hold hearings allowing members of the public as well as Board members to interview the candidates.

to be ignored in the selection of the new RIOC President/CEO.

If it is the case that only one candidate is being considered, not a good way to start off the post Steve Shane RIOC administration.

Update On DHCR/RIOC Chairperson VanAmerongen Resignation To Join Affordable Housing Law Firm - Government/Private Sector Revolving Door Or Not?

Revolving Door Image From CREW

An update to this post linking to a NY Observer article regarding the resignation of NY State DHCR Commissioner and RIOC Board Chairperson Deborah VanAmerongen. According to the article, Ms. VanAmerongen is resigning as DHCR Commissioner to take a position with the Affordable Housing Group of the Nixon Peabody Law Firm.

... Ms. VanAmerongen is jumping to the private sector ship, joining a firm that has an active affordable housing group and one that does significant work with Ms. VanAmerongen's agency, the Division of Housing and Community Renewal, including deals this year.

... A spokeswoman for the DHCR said Ms. VanAmerongen recused herself from decisions with the potential for conflict of interest.

Steve Wallace, a partner who heads Nixon Peabody's affordable housing group, said Ms. VanAmerongen, who is not an attorney, will be a "strategic policy adviser," offering guidance on affordable housing issues in New York and nationally. The firm represents developers and lenders, among others in the affordable housing industry...

Several readers of the post were critical of Ms. VanAmerongen and expressed concern over potential conflicts between her former position at DHCR and new private sector job including this:

VanAmerongen should disclose her business dealings with Nixon Peabody as commissioner. How well has this firm done during her tenure?

However, another reader supported Ms VanAmerongen:

You guys have all the answers, but don't know squat. At least Ms. VanAmerongen made her meetings with the RIOC Board of Directors. Her predecesor and the person who comes next .... No Shows. You'll see. All of you want to throw stones and nit-pick.

I worked with her and she has integrity. Good for her that she's moved on to a higher paying job. Public Service is a thankless job. If any of you could do it, you'd all jump to make more money for you & your families too.

I inquired of RIOC President Steve Shane:

As you know, DHCR Commissioner/ RIOC Board Chairperson VanAmerongen resigned these positions to join the Affordable Housing Practice Group at the Nixon Peabody Law Firm.

Does Nixon Peabody represent RIOC currently, previously, or are they bidding for future work?

Also, are they (Nixon Peabody) representing any other parties involved in past, current or future Roosevelt Island issues including but not limited to the potential privatizations of Island House, Rivercross and Westview.

Thank you.

Mr. Shane replied:

Nixon Peabody does no work for RIOC, is not bidding on any and any suggested relationship to the Commissioner's new relationship post State employment is entirely without foundation.

Later that day Mr. Shane elaborated:

In reviewing my e mail to you as to Nixon Peabody, the information therein is absolutely correct.

However, notwithstanding that they have not done any work for RIOC nor are they bidding on any, they are, as a large, well established law firm with a long and well deserved reputation for expertise in the area, inter alia, of affordable housing. In response to prior solicitations, Nixon Peabody is on the pre-approved panel of law firms who could be considered for employment by RIOC for matters as they might arise.

RIOC maintains such panels of architects, engineers, lawyers, plumbers, electricians, etc. with appropriate sub-panels) to respond to immediate needs without having to go through a more lengthy process in formal public bidding. We do then have a less formal bidding process among the panel members, having already familiarized ourselves with the individual qualifications of the panel members to meet the needs of the individual situation. Every so often, we refresh the panels by putting out an RFQ and bringing a recommendation to the Board for a reconstituted panel.

I replied:

Thank you for the additional infomation.

It appears that Nixon Peabody was involved in representing the Tenant organization at Island House during privatization efforts in 2005. I don't know if NP is still involved in this process.

Also, my inquiry was not meant to imply any impropriety, just fact checking.

The NY Times reported yesterday on Governor David Patterson's call for ethics reform in NY State's executive and legislative branch.

In a conference call on Tuesday, aides to Gov. David A. Paterson on Tuesday briefed reporters on the governor’s proposal for ethics reforms that, if enacted, would be the most far-reaching such overhaul in state history...

The article does not reference any policy having to do with State Officials leaving their positions to join private sector businesses in the industry that they regulated during their time in government. However, the New York State Commission On Public Integrity describes the current "Revolving Door Policy" in New York:

... The revolving door statute is designed to keep former State employees from using their former government connections to benefit themselves, their clients or the business for which they work after leaving State government. It does this (1) by restricting for two years the contacts they can have with the agency where they worked and (2) by restricting the work they can do on matters on which they worked while in State service. The first restriction is known as "the two year bar" and the second as "the lifetime bar."...

You can follow Governor Patterson's Ethics reform proposals at NYU's Brennan Center For Justice.

DHCR Commissioner/RIOC Chairperson VanAmerongen Resigns To Take Position With Affordable Housing Law Firm - What Does This Mean For Roosevelt Island?

Image of Deborah VanAmerongen From DHCR

A reader sent in this link to a New York Observer artcle reporting that Deborah VanAmerongen, the Commissioner of New York State's Division of Housing and Community Renewal (DHCR) has resigned to take a job with the Nixon Peabody law firm. In her capacity as Commissioner of DHCR, Ms VanAmerongen was also the Chairperson of the Roosevelt Island Operating Corportation's Board of Directors (RIOC). According to the NY Observer:

... Ms. VanAmerongen is jumping to the private sector ship, joining a firm that has an active affordable housing group and one that does significant work with Ms. VanAmerongen's agency, the Division of Housing and Community Renewal, including deals this year. Of course this public sector-to-private sector shift is not all that uncommon—City Council Land Use Chairwoman Melinda Katz, for instance, is headed to the law firm Greenberg Traurig, which represents developers before the Council. A spokeswoman for the DHCR said Ms. VanAmerongen recused herself from decisions with the potential for conflict of interest.

Steve Wallace, a partner who heads Nixon Peabody's affordable housing group, said Ms. VanAmerongen, who is not an attorney, will be a "strategic policy adviser," offering guidance on affordable housing issues in New York and nationally...

There are currently and will continue to be affordable housing issues for Roosevelt Island particularly in regard to the ongoing privatization efforts at the Mitchell Lama Rivercross, Island House and Westview buildings. Be interesting to see what role, if any, Ms. VanAmerongen and Nixon Peabody have in the future for Roosevelt Island Affordable Housing.

UPDATE 1/6/10 - More here.

Roosevelt Island Elected Officials Express Concern Over Westview Rent Increases To DHCR Commissioner - Is Conversion Agreement Jeopardized?

Image of Westview From Corrections History

Received a copy of the following letter from a Coalition of East Side Elected Officials representing Roosevelt Island to Deborah Van Amerongen, the Commissioner of NY State's Department of Housing & Community Renewal (DHCR) regarding the ongoing Budget Rent Determination at Roosevelt Island's Westview building. The East Side Coalition is composed of Assembly Member Micah Kellner, Borough President Scott Stringer, State Senator Jose Serrano and Council Member Jessica Lappin.

COALITION OF EAST SIDE ELECTED OFFICIALS
C/O ASSEMBLY MEMBER MICAH Z. KELLNER
315 EAST 65TH STREET
NEW YORK, NY 10065

July 21, 2009

Hon. Deborah VanAmerongen
Commissioner
NYS Division of Housing and Community Renewal
25 Beaver Street, 7th Floor
New York, NY 10004

Dear Commissioner VanAmerongen:

We are writing to express our concerns with respect to the ongoing budget rent determination (“BRD”) at 595 Main Street and 625 Main Street on Roosevelt Island (“Westview”). We are informed that, in the year since the August 2008 hearing relating to the Westview BRD, the building’s owners have abandoned their initial request for an 88% rent increase, instead insisting that an increase of “only” 12-16% would be necessary. This dramatic shift in the owners’ position gives rise to troubling questions about whether the owners are using the BRD process to manipulate ongoing negotiations with tenants over a conversion agreement. Additionally, Westview Task Force, Inc. (“WTI”), through its advisor Chad A. Marlow, has alleged that DHCR may be in substantial violation of the statutes governing the BRD process.

As you are aware, in 2006 WTI negotiated with Westview’s owners a conversion agreement designed to fund a building rehabilitation while preserving affordability for residents. However, the resulting letter of intent was negated in 2007 by the Roosevelt Island Operating Corporation’s refusal to grant Westview a ground lease extension. In April 2008 the owners served their petition for an 88% increase in rent.

As we have previously expressed in testimony and in other communications with you, we believe that granting any significant rent increase at Westview would be destructive of the tenants’ efforts to negotiate a fair and reasonable conversion agreement with the owners, as well as of DHCR’s own stated goal of preserving affordability in the building. Moreover, we are concerned that the owners’ initial request for an extraordinarily high rent increase may have been intended to prejudice these ongoing negotiations. We believe that any increase would be unjustified, given the owners’ failure to implement energy efficiency measures in the building, to refinance the building’s mortgage, or to make proper use of funds raised by previous rent increases. For instance, a 2003 increase earmarked $752,000 for improvements to Westview’s elevators, yet residents report that the building’s elevators have not been modernized and the owners have not accounted for the money intended for this purpose. While there is no doubt that funds will be required for building rehabilitation, it would be inappropriate and unfair to place this burden on the tenants in the form of a rent increase—rather, the owners should fund the rehabilitation out of the profits they generate from any buyout agreement.

Finally, we are in receipt of a letter from Chad A. Marlow, who is advising WTI, to Assistant Commissioner Richard McCurnin, observing that any rent determination with respect to the first budget year of the BRD should be made using actual data now available for that period, as opposed to the projected data provided at the beginning of the BRD process. Mr. Marlow also alleges that DHCR is in violation of statutes governing the BRD process, in particular with regard to the requirements that the Division undertake a review of the housing company’s second-year budget 165 days prior to the end of the first year of the budget cycle (in this case, on January 16, 2009), and that it then pursue one of three allowable courses of action with respect to the BRD.

In light of the drastically different economic situation since the 2008 hearing, as well as the points raised by Mr. Marlow, which cast doubt on the legitimacy of the Westview BRD process, and the facts of this case, we believe that DHCR should terminate the current BRD without awarding Westview’s owners an unjustifiable rent increase, and start the process anew.

Thank you for your attention to this matter.


Very truly yours,

Micah Z. Kellner Scott M. Stringer José M. Serrano Jessica S. Lappin
Assembly Member Borough President State Senator Council Member

cc: Assistant Commissioner Richard McCurnin, DHCR
Opher Pail, Westview Taskforce Inc.
Johan Marfey, Westview Taskforce Inc.
Chad A. Marlow, The Public Advocacy Group LLC
Stephen H. Shane, RIOC

DHCR Commissioner/RIOC Chair Among Those Cited For Use of Private Chauffeured Car By NY State Officials Costing Taxpayers $86 Million

Image of Wheel of Government article from 3/15 NY Post

An alert reader forwards this article from 3/15 NY Post detailing the use of private cars and chauffeurs by NY State officials paid for by $86 million in taxpayer funds. Among the officials mentioned for use of these free cars and drivers are DHCR Commissioner Deborah Van Amerongen who is also the Chairperson of the Roosevelt Island Operating Corp. According to the NY Post article:

... Housing Commissioner Deborah VanAmerongen, who is picked up from her Upper West Side apartment - less than one block from a subway station - and driven in a 2008 Toyota Highlander hybrid to her downtown office or to meetings. Her driver earns $57,479 a year and has no other duties.

... Gov. Paterson's office defended the use of the drivers, saying some commissioners were required to travel extensively and "use the car as a private workspace in order to maximize their time."...

In a time when corporate officials receiving federal bailout taxpayer funds are rebuked by Congress for their use of private corporate planes, perhaps NY State government officials should be more careful with their use (abuse?) of private chauffeured cars paid for with government funds as well.

Court Upholds DHCR's Rent Increase Surcharge For Wealthier Residents of Roosevelt Island's Rivercross Mitchell-Lama Co-op

Roosevelt Island Rivercross Rent Surcharge Decision by DHCR Upheld by NY Supreme Court

As first reported by RI 360, the NY State Supreme Court has upheld the NY State Division of Housing and Community Renewal's (DHCR) decision to increase the annual rent surcharge imposed upon residents of Roosevelt Island's Mitchell-Lama Rivercross Co-op whose income exceeds the maximum allowed for the building.

The Court provides some background history on the dispute.

... At the time the building opened in the middle 1970's, the initial offering plan of Rivercross specified that income based surcharges would not exceed 10% of carrying charges. In 1999, Rivercross increased the surcharge maximum to 20% upon the recommendation of DHCR. Certain dissenting shareholders sued unsuccessfully to prevent imposition of this increase (see Vink v. DHCR, 285 AD2d 203 [1m Dept. 2001]).
In 2007, the Board of Directors of Rivercross ("Board") approved and submitted to DHCR an application seeking to increase the monthly maintenance charge to shareholders by 4% in order to allow Rivercross to meet its expenses. Rivercross did not seek to change the surcharge schedule applicable to residents with incomes exceeding the maximum income allowed for continued occupancy. Despite an absence of any request to alter the surcharge schedule, the DHCR staff examined the impact of an adjustment of the surcharge schedule on the size of the maintenance charge increase required to enable Rivercross to meet all of its projected expenses. The DHCR staff analysis revealed that the maintenance charge increase could be avoided by increasing the surcharge maximum to 40%. PHFL § 31(3) authorizes maximum surcharges of up to 50% of the carrying charges.
Prior to taking action on the application, DHCR recommended that Rivercross give consideration to an increase of the maximum surcharge. Rivercross considered the request but elected to retain the existing surcharge schedule without modification. Thereafter, the DHCR Commissioner signed an order approving a smaller increase of the maintenance charge than was requested and imposing an increase of the maximum surcharge from 20% to 30% ("Order")... (Page 5, Scribd document)

The Rivercross Co-Op Board asserted in their lawsuit that the DHCR's rent surcharge increase was an illegal order and an abuse of government authority. From an earlier post on subject:

It will be interesting to see how the DHCR seeks to justify overruling the business judgement of the Rivercross Board. After all, as the Main Street WIRE reported in a prior 2001 case involving a Rivercross rent surcharge increase agreed to by both DHCR and the Board, the Appellate Division of the NY State Supreme Court ruled:
DHCR rationally construes the PHFL [Public Housing Finance Law] to allow Mitchell-Lama cooperatives to be responsible for creating their own individual surcharge schedules, in recognition of the business and practical factors unique to each..."

Now, on this issue of a rent increase surcharge the DHCR and Rivercross Board disagree and DHCR is seeking to overturn the business judgement of the Rivercross Board.

The NY State Supreme Court answered the claims of the Rivercross Board by declaring:

... However by affording the Board an opportunity to promulgate the surcharge schedule the court did not thereby endorse Rivercross' assertion that the Rivercross Board has sole authority to set it. Rivercross is not entitled to thwart DHCR's supervisory authority by stubbornly refusing to consider and act on DHCR's recommendations.

In this case, DHCR invited the Board to consider and promulgate carrying charge and surcharge increases that would allow Rivercross to cover its expenses, mindful that the Mitchell-Lama Law is "directed mostly at maintaining a stratum of middle rather than high income people" while not excluding higher income people from these buildings that receive substantial government financial support (id at 20). DHCR exercised its supervisory powers only after it engaged the Board and the Board refused to make any change to the surcharge schedule. Rivercross has not shown that DHCR acted outside the scope of its authority in this instance.... (Page 9-11 of scribd document)

In response, the Rivercross Co-Op Board issued the following memorandum.(Click on image to read.

Commenting on this case, Assembly Member Micah Kellner said:

I'm greatly disappointed in the Judge's decision which I believe ignores the facts and previous decision. The precedent set by this decision will have as yet unknown and possibly negative effects on all Mitchell Lama Coops.

Is DHCR Waging War Against Roosevelt Island's Rivercross Tenants? Tenants Will Fight Back With Lawsuit!

Image of Rivercross Complex Cowl Vents from Brian Patrick

This earlier post described DHCR's plan to increase the surcharge on Mitchell-Lama Rivercross Co-op residents whose income exceeds the maximum allowed for the building. The DHCR is attempting to impose this increase despite opposition by the Rivercross Board of Directors and knowledge by Commissioner Van Amerongen's that any rent surcharge increase will result in a lawsuit. That lawsuit by the Rivercross Tenants Corp. will now be filed according to the memorandum below.

A reader sends the following memo announcing that the Rivercross Tenants Corp. will bring a lawsuit against DHCR alleging an illegal order by DHCR increasing the surcharge and abuse of governmental power.

rivercrosssurchargememo - Upload a Document to Scribd

Read this document on Scribd: rivercrosssurchargememo

It will be interesting to see how the DHCR seeks to justify overruling the business judgement of the Rivercross Board. After all, as the Main Street WIRE reported in a prior 2001 case involving a Rivercross rent surcharge increase agreed to by both DHCR and the Board, the Appellate Division of the NY State Supreme Court ruled:

DHCR rationally construes the PHFL [Public Housing Finance Law] to allow Mitchell-Lama cooperatives to be responsible for creating their own individual surcharge schedules, in recognition of the business and practical factors unique to each..."

Now, on this issue of a rent increase surcharge the DHCR and Rivercross Board disagree and DHCR is seeking to overturn the business judgement of the Rivercross Board. A reader comments:

Seems like DHCR might be in an interesting position, having at one time argued that it could leave decisions to the cooperative board(and won!) and now ordering that same cooperative board to impose a higher surcharge?

Another reader comments:

DHCR is waging war against Rivercross. I didn't see any righteous indignation when they let Eastwood (with deep subsidies and truly poor people) out of the Mitchell Lama program. Now DHCR is "saving" Rivercross for who? The vast majority of the building has voted to explore leaving the program 3 or 4 times now. Apparently DHCR knows better...

I don't know if the rent surcharge increase is justified or not but the issue is who decides? Is it the buildings shareholders and Board of Directors or is it Commissioner Van Amerongen , DHCR and the State of New York?

Here is January 2008 interview with DHCR Commissioner Van Amerongen conducted by the Main Street WIRE and January 2008 statement by Assemblymember Micah Kellner on Tax Equivalency bill for WIRE buildings including Rivercross.

DHCR Plans Increased Surcharges for Roosevelt Island's Rivercross Building

Image of Rivercross from Adventures of a Goodman

Dick Lutz of the Main Street WIRE sends the following bulletin:

DHCR Plans Hike in Rivercross Surcharge

DHCR plans to order an increase in the Rivercross surcharge, levied on residents whose income exceeds the maximum allowed in a building, from 20% to 30%, according to an e-mail from DHCR Commissioner Deborah van Amerongen to Assemblymember Micah Kellner.

Van Amerongen said that DHCR staff called the building's managing agent today with the news. In addition, DHCR has approved an increase in maintenance charges which, if levied in one step, would be $7.45 per room (about 2.5%) per month (or $4.97/room/month if levied in two steps).

With regard to the surcharge increase, van Amerongen wrote, "...the [Rivercross] Board will be informed of our decision sometime today. If they decide to challenge this that is of course their right, we will argue the case in court."

I don't know if this is a fair and reasonable action by the DHCR or not. Nobody likes to have additional surcharges imposed or maintenance fees increased. Sometimes it is necessary, other times it may be not. I do know that it is very difficult to wage a successful legal challenge to decisions made by administrative agencies. Here's a 2001 Main Street WIRE article on same issue:

"These rulings are correct."

With that one-sentence paragraph, the Appellate Division of the State Supreme Court backed a lower-level decision holding that the Rivercross Board and DHCR acted properly last year when it increased the surcharge for over-income residents.

And:

In agreeing with the Court's decision finding no fault with DHCR's handling of the matter, the Court wrote that it "is well established that an agency is to be accorded wide deference in its interpretation of its own regulations... DHCR rationally construes the PHFL [Public Housing Finance Law] to allow Mitchell-Lama cooperatives to be responsible for creating their own individual surcharge schedules, in recognition of the business and practical factors unique to each..."

Also, a 2005 NY Times article on the changing housing dynamic on Roosevelt Island that may still hold true.

It is not the prospect of more affluent residents in their midst that rankles, but rather the fear that projects like Riverwalk and the Octagon will spur the proliferation of upscale buildings and tip the balance away from the middle-income interests.

"Millionaires' Row is O.K., but don't push us out," Maxine Siegel, an events planner at the City University of New York, said at a tenant get-together in Westview, one of the buildings scheduled to be taken out of the Mitchell- Lama program. "We are open to growth, to people with different economic backgrounds, and we are more concerned with maintaining our homes than keeping out the rich."

Here's an excellent resource for issues regarding affordable housing and Mitchell-Lama privatizations - Saving Mitchell Lama.

UPDATE - 5 PM: A reader makes this excellent comment regarding a legal challenge to the DHCR on this matter:

Seems like DHCR might be in an interesting position, having at one time argued that it could leave decisions to the cooperative board(and won!) and now ordering that same cooperative board to impose a higher surcharge?