Earlier this year, seeking help to tackle them, NYCHA looked south. Not south like Staten Island. "Real Housewives of Atlanta"-type South.
Citing the ongoing work that the private consulting firm Boston Consulting Group (BCG) is doing for the Atlanta Housing Authority, the board of the New York City Housing Authority voted unanimously in March to give BCG $6.05 million to "provide comprehensive business transformation consulting services" pursuant to the terms and conditions of the current contract "between the Housing Authority of the City of Atlanta and BCG."
That brief description was all the information that was publicly given at the March 2, 2011, board meeting. And the resolution made barely a splash. The vote to give BCG $6 million was one of five resolutions the NYCHA board voted on that morning, following votes to approve a half-million-dollar emergency contract for tree removal, a $600,000 commercial lease contract and the transfer of 32,000 square feet of land and 160,000 square feet of air rights in East Harlem to a real estate consortium building a charter school, community facility and 87 units of affordable housing.
Six months later on Sept. 14, with a nearly similar lack of fanfare, NYCHA's board voted to extend BCG's contract by another $4.26 million, a 70 percent increase in funding that left some in the authority doing a double take at the board's largesse.
"In the past, with our capital projects, if a contract went before the board and the amount of the extra or percentage was this large, it would raise eyebrows, and people would get reamed," said one NYCHA employee, a 15-year-plus veteran of the authority.
There was no incivility that morning, however, at NYCHA's public board meeting, held in a conference room in the authority's offices at 250 Broadway. Instead, the proposal for the contract extension was presented as a necessary but otherwise unexceptional request folded into a list of resolutions the board voted to approve, including commercial lease authorizations, capital improvements to an underground steam distribution system, and $10 million for a contract to purchase special waste-disposal bags.
There's no question that NYCHA has a lot to think about. Since 2002 federal support for public housing operating expenses has plummeted, and capital funding has also lagged well behind the needs of an agency with buildings that are approaching 80 years old. Former Gov. George Pataki withdrew Albany support for the handful of NYCHA developments that were built by the state, and Mayor Bloomberg beat a similar retreat from several city-owned complexes. The $3 billion agency has been running an operating deficit that Chairman John Rhea has pegged between $150 million and $200 million a year and has had to lay off workers despite a staggering backlog of maintenance orders—a backlog that moved from onerous to fatal three years ago when a 5-year- old boy plummeted 10 stories down an elevator shaft in the Taylor-Wythe houses in Williamsburg, trying to escape a stalled elevator.
Ostensibly, BCG has been brought on to help NYCHA navigate these troubled waters. But exactly what the company is doing for its $10 million is a little hazy. NYCHA denied City Limits' request for a list of the policy recommendations BCG has made to date because these recommendations "are not yet policy," Jacqueline C. Hernandez, the lawyer in charge of NYCHA's Freedom of Information Law unit, told City Limits over the phone. (NYCHA agreed to fulfill a FOIL request to release a copy of BCG's original contract, but had not released it at press time.)
NYCHA chairman Rhea describes BCG's work in deft but general outlines. The work that the housing authority was doing with BCG is "part of a broader set of both transformational activities that we're really embarking on here at the housing authority as well as trying to address some fundamental long-standing problems," says Rhea, who took over as NYCHA chairman in May 2009, coming from Barclays Capital (formerly Lehman Brothers), where he served as managing director in investment banking and co-chair of the global consumer and retail group. Prior to joining Lehman in 2005, Rhea was an executive at J.P. Morgan, where he completed more than $100 billion worth of transactions overseeing corporate finance as well as mergers and acquisitions, and debt and equity underwritings for global consumer products companies, according to his official bio. Rhea's bio also mentions that he serves on the board of the New York Business Development Corporation, is a founding member and director of the Council for Urban Professionals and has served as board chair of the Children's Museum of Manhattan and as a member of the Obama for America national finance committee. It does not mention that he used to work at BCG.
The NYCHA boss insists BCG's current work for the housing authority is unrelated to his former association with the firm. Rhea similarly downplays BCG's first appearance at NYCHA two years ago, when he brought the company on board shortly after he was appointed chairman: BCG helped to design an employee survey of about the "climate" of NYCHA and helped "to crunch the data. That was pro bono. That was completely free," he stresses.
As for the work Rhea did as a BCG employee, back in the 1990s, that was "very similar," he allows, to work that BCG is doing for NYCHA now. From 1992 to 1995, he worked as a management consultant for BCG, with his projects focusing on helping large corporations "enhance revenue" and achieve "operational effectiveness."
"The work that BCG has done for us is open to public disclosure—ultimately," insists Rhea, who tells City Limits his management team made the recommendation to him to hire BCG, not the other way around. "Our management team talked about speaking to a McKinsey or a Bain," Rhea adds, naming two other prominent consultancies, "but they decided that because the work needed to be done so quickly and the same kind of work was already done in Atlanta that it made sense to just go forward and hire BCG."
But what exactly is that work, again?
Rhea describes the project as spanning two phases. In the first, BCG did a "very deep dive" into the nitty-gritty of NYCHA's workings, "taking a hard look at our central-office costs" and functions—HR, legal, procurement, IT—and figuring out "how we can make them more efficient and reinvest those savings in the front line"—the caretakers, supers, housing assistants, plumbers and carpenters, "the frontline staff that ensures that at the end of the day, the residents are served directly."
Then the firm asked itself, "OK, now that we understand all that, what does it mean for the design of the organization going forward?" and "What will it take to move the organization from where it is today to where we want to go?" Rhea says. Now the agency is in the second phase of its work with BCG. The $4 million contract extension "is about real implementation," Rhea says.
Under Rhea's predecessor as chairman, Tino Hernandez, NYCHA developed a strategy for meeting the combined fiscal and physical challenges facing the agency. It was called the Plan to Preserve Public Housing, and it called for steps like having the city pick up the cost of running NYCHA's community centers, working with the city's housing department to redevelop unused NYCHA properties into mixed-income affordable-housing projects and shrinking the workforce through attrition.
That earlier plan was good as far as it went, Rhea says, but "didn't really address the capital deficit at all." Rhea contends his own plan—also called the Plan to Preserve Public Housing—calls more comprehensively for real transformation within NYCHA, charting long-lasting change to surmount what he called "the pillar deficits" the authority is facing: an operating deficit, in terms of wages, energy, maintenance and upkeep on a day-to-day basis, "and this huge unmet multi-billion-dollar capital [project] backlog."
Anti-public-housing sentiment emanating from Washington since the second Bush administration has imperiled housing authorities, resulting in a $30 billion backlog of capital needs in housing across the country. New York's component alone is $6 billion, according to the NYCHA chairman, "and that's just to-date capital unmet investment requirements: roofs, elevators, brickwork, boilers—all the things that actually preserve the physical infrastructure."
Under the rules surrounding contract procurement as laid down by the state Office of General Services, as a public- benefit authority, NYCHA could "piggyback," says Rhea, on another housing authority's public procurement process, if that process was within the past year, done under a public procurement vetting, and the scope of work was the same. Ultimately, Rhea says, managers recommended that BCG be hired because the work NYCHA needed done was similar in scope to what BCG had done in Atlanta, BCG is "highly regarded" and the work needed to start right away. "There were many, many discussions about this," he says.
But details of the work that BCG is doing for the Atlanta Housing Authority (AHA) are as hard to come by as specifics on what BCG is now doing in New York. Repeated phone calls and emails to press representatives of AHA went unanswered. BCG itself declined to talk about its work for either AHA or NYCHA. (Spokesman Dave Fondiller emailed, "As a matter of policy, BCG does not comment on its client work.")
All we know about BCG's work in Atlanta is a brief description in Atlanta's Move to Work agreement—a strategy produced under a federal Department of Housing and Urban Development-led effort to renew and revitalize public housing. The Atlanta MTW calls for the AHA to merge funding streams to purchase new land and develop new housing, find job training and educational opportunities for residents and mandate that all working-age, able-bodied residents get a job or go to school. Under the MTW's "Goal 3: Economic Viability/Corporate Support," the report writers note, "To ensure long-term organization viability, began a business transformation initiative by hiring Boston Consulting Group, a world-renowned professional business consultancy, to make recommendations and to develop an implementation plan beginning in FY 2011 as a key component of AHA's future business plan."
According to Rhea, the consulting firm is doing similar things for NYCHA, "Which is how to rationalize their central office costs, the central office functions and to make it more efficient. And so a lot of the work they are doing there is specifically relevant to the work we are doing here." There are similarities between Atlanta and New York City. Both housing agencies are run by people concerned about the health and welfare of their inhabitants, focus on creating public-private partnerships to improve the city's housing stock and look for creative financing to keep that stock in good repair.
But in terms of size, organization, costs and scope of services, there is no comparison between NYCHA and its counterpart down south. Rhea himself made this point in remarks before the Citizens Housing and Planning Council in April 2010, when he said a plan to federalize 21 of NYCHA's housing developments—only a fraction of the agency's total holdings—was "the equivalent of having saved all the public housing in the city of Chicago or in the city of Boston or in all of San Francisco, Atlanta and Washington, D.C., combined." Put another way, NYCHA has roughly 414,000 authorized residents across its 344 developments; the population of Atlanta (not just its housing authority, the entire city) is 420,000.
This past year, NYCHA transferred $76 million from its capital budget to its operating budget, an unorthodox move it has made for the past several years to address the repair backlog. At the same time, the agency has requested funds for several years running from the City Council to improve residents' safety; so far, the City Council has given NYCHA $39 million for security measures, says spokeswoman Sheila Stainback.
Amid these pressing funding needs, why is NYCHA spending so much money on one contract with a consulting company, asks City Councilwoman Rosie Mendez, who was at the March 2 board meeting when the original $6.05 million contract was voted on. During the Council's annual budget deliberations, Mendez says she and her staff wondered at the size of the amount but were distracted by the ongoing budget fight with the mayor and didn't ask any questions. The recent $4.26 million contract extension has her asking questions. "I don't get where they are spending all this money," she says, noting that in the recent round of budget talks, NYCHA was "asking us for $10 million to catch up with repairs. So why is this $10.4 million necessary to give to an outside contractor? I just don't get it," says Mendez. "I find this alarming."
So does Robert Hall, president of the Gun Hill Houses Resident Association in the Bronx. Practically born into the job—his mother was the resident association president from 1978 to 1981, and Hall, who has lived in the Gun Hill Houses all his life, has been president of the association for the past 12 years—Hall says Rhea has done some good things, in particular federalizing the 21 housing developments, but that the leadership at NYCHA needs to look harder at what is happening in the developments on the ground.
At an Aug. 24 public hearing on NYCHA's draft agency plan for fiscal year 2012, held in the Pace University auditorium, Hall took to the microphone to query the board members on their current priorities, saying that at the development where he lives, "I see a lot of people in shirts and ties. I don't see a lot of people doing the work." There were three caretakers for his six-building, 14-story development, the manager's office was located eight blocks away, and a rep showed up only once a week, to collect rent, he said.
"We need more stoves and refrigerators—[they are] falling apart, and we don't have enough to go around. We've had leaves on the ground for two years that haven't been cleaned up," as well as garbage piling up, problems he has told NYCHA about but to which there's been no response from the site manager. "I feel like I'm living in a ghost town. There are no people on the ground to work the facility on a day-to-day basis. There is a severe lack of personnel. It's very harmful, and it's dangerous." Meanwhile, NYCHA "is top-heavy with executives."
And many residents who deal with NYCHA have reason to distrust people in suits, particularly those working for an outside consultant. Last year, in an effort to save money, computer consultants revamped NYCHA's handling of its Section 8 residents, removing the caseworkers that handled residents' issues with their landlords and setting up a computer program to automatically contact residents about issues such as overdue rent and apartment inspections.
The result has been havoc, says Judith Goldiner, a supervisory attorney at The Legal Aid Society. Residents didn't realize their rent had been changed and were learning of it only when they were ordered to show up in Housing Court for nonpayment. Landlords were getting letters addressed to residents with no address and had no way of knowing if residents were receiving their rent change notices or if they had been trying to schedule apartment inspections.
At the August public hearing at Pace, Goldiner outlined the problem for the silently listening NYCHA board. There were hundreds of Section 8 residents who had been affected by the massive screw-up in the computerization of the records.
"We have families who have paid their rent who are getting letters telling them their rental agreements are terminated, people who are going to the main office with canceled checks as proof " and are still being kicked off the rent rolls. This is happening time and time again, and it's not getting better, said Goldiner. "We are asking you to stop terminating Section 8 people until you get a handle on the problem."
So far, says Goldiner, NYCHA officials' response is that they have a backlog of corrections to make and that they are getting to them. She believes NYCHA should stop terminating residents' rental agreements until they have their problem sorted out, "but they are not doing that."
Rhea argues that BCG's input to NYCHA will more than offset the contract cost that so concerns Councilwoman Mendez and others.
So far, "we've identified in this work they've done anywhere from $50 million to $100 million in annual savings," he says. "I know that people want to look at the headlines and say 6 plus 4 is $10 million—how is that a good use of $10 million?" But if in one year, "we get to save just five times what we are spending on BCG," it's well worth it, Rhea contended. Rhea says NYCHA's been completely transparent in hiring BCG. But he declined to offer specifics on where the savings actually were, except to say that some were in procurement and others needed investment to realize the savings. Nor was it clear if the savings identified by BCG would involve more cuts to the NYCHA workforce. "Layoffs, whether we would need to do them, would not need to do them, is really not related to the BCG work," Rhea says. "That's related to budget realities versus costs. Doing business differently—there's a whole host of things, some that impact people, some that don't impact people."
When asked how long BCG workers would be at NCYHA and when the contract would end, Rhea replies, "I'm not going to say."
And while on one hand, Rhea explains the recent, $4 million BCG contract renewal as covering "implementation," on the other hand, NYCHA refuses to release any of the reports or recommendations that BCG has prepared for the agency on the grounds that they're just ideas, not policy.
Julia Vitullo-Martin, a senior fellow at the Regional Plan Association and Director of the Center for Urban Innovation, is reluctant to criticize NYCHA for hiring BCG. "I think city agencies do need very good analysis," she says. "It may well be that NYCHA is getting important information from this group—I'm all for that." But $10 million for the information— "wow, that's real money," says Vitullo-Martin. For that matter, "six million is a lot of money to spend on a consultant for NYCHA"—particularly when the agency doesn't want to disclose what the consultant is doing for it exactly. "NYCHA is a very secretive agency, and it's only become more so recently," she observes, something of a trend across the entire administration. City agencies need to be transparent, she adds. How else can their work be assessed? "In the fiscal crisis of the '70s, the city was forced by a combination of government pressures and Wall Street to set up a good number of oversight divisions that analyzed and put out information on New York—and that was great. And I think we have actually gone backward from that."
If the public is in the dark, so are NYCHA workers. "They aren't telling us anything. There are tons of people from BCG here, and they were issuing all these demands to the different departments and won't tell us what they are for. BCG has been here for more than a year, and the rumors are all over the place—about layoffs, about contracting out the commercial leasing, contracting out supplies and warehousing," one worker says. "The morale here is terrible."
All in all, adds the worker, BCG has "about maybe 20 people stationed here in-house to deal with this project. We probably have more people stationed side by side with them doing most of the research and gathering the work" than on any other single project in the agency.
But what, at the end of the day, is NYCHA going to get in return for the hiring of BCG?
"Consultants are brought in for a number of reasons, but it boils down to a few. A lot of times, consultants are brought in to make cuts that the organization itself won't make on its own," says Tom Rodenhauser, a director at Kennedy Consulting Research & Advisory, a firm that tracks trends in the field of management consulting. "Someone in the housing authority feels they need to change, but the culture can't allow them to do it internally. So they go out and hire the change agent," like BCG, "which brand name-wise is one of the biggest change agents they get. Whatever BCG comes up with may be as obvious as the day is long, but for some reason, the housing authority can't do it on its own."
Research support for this project was provided by the Investigative Fund at The Nation Institute.