John Liu Knows Arithmetic, Connects with All the People
Loves New York and does not fear Compassion
The publishers of Our Time Press had the opportunity to interview Comptroller John Liu at his office in the Municipal Building. The building is already landmarked, and there should be a landmark commission for the furniture as well. It’s testament to American-made durability and even classic in its way.
We spoke with the comptroller regarding the phone calls we’ve been receiving from parents distraught about the closing of day care centers, or changes in day care management. All of it stemming from an RFP process, the complexity of which was a surprise to everyone filling it out. “That was the Early Learn program and it was a disaster in the way it was implemented,” said Liu. His office extended the existing contracts for another year back in June, but in the last couple of months, “ACS seems to be doing some work, and right now the contracts are coming in to supersede the one-year extension” but once again, Liu says he’s not sure that the parents have clarity “as to whom they’re entrusting their young children”.
“I can’t talk too much about that because once we engage the audit, it does take some time, but we intend to get to the bottom of it.” His office is looking at how the RFP process was executed and what, if any, “irregularities there were in the RFP and evaluation process”.
Another contracting issue we had was involving the privatizing of some public sector workers with the result being that the workers get lower pay and the extra money going to contractors, moving the money up the food chain and out of the city. “We’ve seen this issue with some of the tutoring companies contracted to tutor young people,” said Liu speaking of another area of investigation. “They were charging the Department of Education $50-$80/hr. and paying the tutors, something like $10/hr. That’s a huge rip-off of the taxpayers and it also speaks to the qualifications of the tutors.”
We reminded Liu that when we had last spoken, he said that the money his office was able to retrieve for the city was put into the general fund and when asked if this would this be considered “found money”, he confirmed that is the case and added, “I think the count is close to $2 billion dollars.”
Apparently, it’s the old story: a $100 million here, a hundred million there, pretty soon you’re talking about real money. Some examples he gave of money retrieved were the Economic Development Corporation ($128 million) over 4 years, $100 million in renegotiated technology contracts and, of course, the crown jewel, CityTime, a payroll project to keep track of the overtime charged by city workers. Beginning in 1998, the CityTime project grew from a projected $63 million dollars to about $760 million.
In The Public Interest, an organization offering resources on privatization and contracting, asked what does this largest-ever fraud say about the city administration “and for that matter, what does it say about the city comptroller’s office, which also had an oversight role on the payroll agency? In fairness, the current comptroller, John Liu, has aggressively raised questions about CityTime. He was the one who persuaded Mayor Bloomberg to stop the open-ended payments to SAIC, and forced them to agree to a real deadline.”
“The money was being spent outrageously and it was out of control.” Liu was speaking of CityTime and the audit he initiated and how the investigation by the U.S. Attorney’s Office sent people to jail and in March of this year, secured a $500 million refund to the city from the contractor.
If this windfall has come in, where did it go and if the check is still in the mail, what will it be spent for when it does arrive? “In the context of a $70 billion dollar city budget, $500 million almost seems like a drop in the bucket and sometimes City Hall spends it that way,” says Liu.
To put it in the context of how fiscal choices affect life every day on the ground in the city, he said, “Last year when they were threatening the closures of 105 senior centers across the city how much was that supposed to save? $27 million dollars.”
And of the other end of the weakest-among-us spectrum (mothers and children), Liu says that part of “the Early Learn dilemma that so many people are going through right now” was for a cost savings factored in at roughly $50 million dollars. And that included the closing of afterschool programs. “So when you’re talking about $500 million dollars, that is more than enough to stave off any reductions in daycare slots, cultural or afterschool programs, any threatened closures of senior centers and even all of that, is just a small fraction of $500 million. The bottom line is: $500 million dollars pays for a lot. It seems small in the grand scheme of the budget, but it does pay for a lot.”
The city actually has two budgets. All of the above are part of the budget for expenses. Thecapital budget is money borrowed and spent on infrastructure: roads, bridges, improvement in parks, etc. It is a ten-year budget financed by the city borrowing money by selling city bonds. Liu has called for an acceleration of $2 billion in capital spending for several reasons. Borrowing rates “super low right now”, and construction costs are also very low compared to the last few years. “That’s because of the excess capacity in the construction industry, saving even more money over the long term.” The benefits the comptroller sees are obvious: “We get the infrastructure built and repaired sooner and we put people to work now, when we need it most.” According to Liu, a $2 billion dollar capital acceleration would generate 15,000 jobs and we get to save taxpayers money over the long term.
He says that the main cost of the capital acceleration plan is that some of the key city agencies, the School Construction Authority, the Department of Design and Construction, they’ve got to work faster. They’ve got to get these projects up online quicker. That’s the only cost. I know the commissioners are ready, willing and able, but City Hall seems to be unwilling to do anything that someone else suggests.”
We were recently at a meeting of the Caribbean-American Chamber of Commerce and Industry CACCI headed by Roy Hastick, Public Advocate Bill de Blasio said that the pension funds had not been invested enough in affordable housing. We asked Liu about that and he responded, saying that the pension funds are invested significantly in affordable housing. “It’s the portion of the funds I call the ‘economically retargeted investments’. It’s money that is pumped back into the economy and that earns returns for our pensioners.”
The comptroller said there is a little more than a billion dollars of economically targeted investments—most of it going for affordable housing. $17 million for the Diego Beekman Houses in the Bronx and just last week in Crown Heights, a new development for local residents and people with disabilities made possible with a $13 million investment by pension funds. “The credit crunch has hit builders hard. In many instances, our financing provides financing they could not otherwise secure.”
So while money is invested in affordable housing and the like the comptroller says, “Our first and foremost responsibility is that we can only invest in projects that are going to deliver a safe return for the pension funds. It’s not like the city budget where you can play with some money. This is pension fund money, ensuring the futures of our employees and retirees”.
As far as foreclosures go, the comptroller says they have not been able to find a way to invest in such a way as to be in line with the first responsibility of a pension fund. “This is the responsibility of the banks. What we have done is use the pension fund leverage to say to Bank of America, Citibank, Wells Fargo and Chase use the power of shareholder votes to force these banks to take action to stave off foreclosure crises. We got a 40% vote for bank responsibility and they have to pay attention to that.”
The wealth divide is one of the main issues facing the city of New York, says Liu. “There is a lot of money in the city. It’s just a question of how it is used, how it is invested, how it is allocated.” And in this regard, he says key changes have to be made in fiscal policy and in tax policy. “Fiscal policy is how the city’s money is spent. Liu says that one of the things that has to go are huge subsidies to private corporations. “They were supposed to create jobs, but in most cases created no jobs, but still got hundreds of millions of dollars from the taxpayers.” On the tax policy front, he says that of all the places to have a nonprogressive tax policy, NY City is the worst. “Income tax is supposed to be progressive, the more you make, the more you pay. In the city of New York, a family that makes $50,000 a year pays 3.3% in income tax to the city. A family that makes $50 million dollars a year pays 3.7%, virtually the same. That is what’s called a flat tax. The issue of flat tax has been in presidential debates and it has been soundly rejected by both parties. And yet in the city of New York we’ve got a flat income tax. That has to change. I’ve proposed an increase on the top 1% of about 1-1.25% in income tax. That would allow the other 99% to get a tax decrease and still yield the city a quarter to a billion dollars in revenue.”
That sounds like a good idea but what about the prospect of the rich being driven out of the city, the real estate wreckage of Central Park triplexes up for sale and corporate jets being moved to hangers in Parsippany. “That has been the rallying cry for Mayor Bloomberg these past ten years. That the rich are going to leave the city. New York City is the place to be. It’s the place to be for people of any economic status.”
On education and the elite schools
A coalition of education and civil rights groups have filed a federal complaint about the racial disparities in the city’s specialized high schools that they say stems from the Specialized High School Admissions Test, the only exam that will get you in. “I don’t think it’s fair,” says Liu. “I don’t think a 2-hour test gauges what’s happened in 8 years of school.” He feels that the admissions process is flawed and there are huge ethnic disparities of the admitted students which is itself evidence of a flawed process. “Every test has a bias that has to be taken into account”, says Liu and that understanding as well as the marketing of the schools and enhanced tutoring programs all should play a part in correcting the imbalances.
We need to look at education through a “prism” that reveals how it is the “economic development policy of tomorrow”. This goes to the point of the importance of the fiscal policy change that the city has to take. The city is spending close to a $100 million on a golf course in the Bronx. “It’s a huge amount of money and without placing judgment on the value of a golf course, the point is that once again a huge amount of money is being given to a private developer (Donald Trump) and yet we’re eliminating day care slots, closing afterschool programs; it’s the fiscal policy, how we spend the city’s money that needs some serious prioritization.”
There is an ongoing federal investigation into Comptroller Liu’s political campaign. There have been questions raised about the identity of his “bundlers” — those folks who gather and combine contributions, and Liu says they were all disclosed back in January. And the other thing, the Times’ reporting of phony donors was always questionable from our point of view because every donor they asked about we gave them a copy of the personal check that the donation came in, and a copy of the donor report. So we questioned how could the Times say there are phony donors when we’ve given them personal checks that the contributions came in. The comptroller asks how can donors be fictitious when they have a checking account?
“I’ve got nothing to hide. A couple of weeks ago I was shocked to learn the FBI had been tapping my phone for 18 months. And it’s been more than a year since they finished tapping my phone. Not only my phone, but nine others that are somehow associated with me. I could have saved them a lot of money because if they had told me they were interested, I’ve got unlimited 3-way calling. I could have just dialed them in.
“It is something hanging over me, but it’s not something holding me back. I’m firing on all cylinders in respect to my responsibilities of this office and my campaign plans for next year.”