Monday, September 12, 2005

Set Asides and Bloomberg's "Patricianage"

On Saturday the Post editorialized against Mayor Bloomberg's executive order 71, an edict that resurrects the old Dinkins set-aside program for minority and women-owned businesses in city contracting. While not setting any strict quotas, the Order does establish a "goal based program" to increase the participation of the targeted firms.

As we have said on other occaisions we're not big fans of set-asides. In our view, and we have advocated on quite a few occaisions for minority businesses looking for city contracts, this kind of approach encourages a dishonest "booty capitalist" system with bogus front companies allying themselves with majority-owned firms.

That being said, however, it is important to point out that the current contracting system cries out for reform. Under Mayor Guiliani, praised by the Post for scuttling the Dinkins set-aside program, the awarding of development rights was strickly based on one's political loyalty to the mayor. So much so that we've described the Guiliani slogan: "One City, One Standard", as more aptly named "The Double Standard." Favoritism was simply given a lighter and greener pallor. In Guiliani's world, making room for up and coming minority entrepreneurs was simply never even considered.

Which brings us to to the Mayor Bloomberg. The key issue is always opportunity and fairness. Reaching out to minority entrepreneurs, and not just for a few subcontracting crumbs, should be part of any administration that is looking to encourage the greatest degree of inclusiveness. This is something that this mayoralty has not done.

The reason that it hasn't is because of the man in charge of economic development, Dan Doctoroff. The Deputy Mayor has raised favoritism to a new level so much so that we believe it deserves its own term: "patricianage." We are referring, of course, in particular to the relationship between Deputy Dan and Related's Steve Ross.

The deal at the BTM, as we have pointed out exhaustively, is one of the prime examples. No-bid contracts with city syrup sweetening the packages is the hallmark of the Dan-Steve collaboration. If you are going to advocate for "one standard," as the Post does, then you are under the obligation to examine how the city contracting process actually works. If you don't, you put yourself in the position of decrying favoritism while turning a blind eye to the kind of unequal treatment that gets overlooked because it is seen as business as usual.

Related, Ross and the Bradhurst Development at 145th Street

The most eggregious example of patricianage in the agrandizement of Related came right at the start of the Bloomberg term. In February, 2002, at the same time that Deputy Dan was requesting a conflicts ruling from the COIB about his relationship with Steve Ross, he personally intervened in the Bradhurst development contract that had been languising in the final days of the Guiliani administration.

The reason the development was on life support derived from the failure of Related to properly gauge the full scope of the development costs. Having failed to do so the developer, hat in hand, had come back to the city for additional subsidies.

The problem here was that a number of other folks had bid for the development rights including the Fernandez brothers whose company, M&M Enterprises, owns five supermarkets in the Bradhurst area. Since the Bradhurst project included a supermarket as well as housing, the Fernandez bid had a great deal of merit. M&M, grossing over $50 million a year, was also backed be the White Rose Food Corporation and Chase Bank, making it a substantial bidder.

It would seem, as the Post editorial suggests, that the city should be awarding bids based on expertise. When it was shown, however, that Related, with billions of dollars of equity, couldn't do the Bradhurst deal without additional city funding the award should have been withdrawn and a new bid process begun.

In fact, when Related came to the city for more money in the previous administration then Deputy Mayor Rudy Washington, the one man in the Guiliani crowd who had a sense of fairness and decency, flatly turned Mr. Ross and company down saying that if the city was going to subsidize anyone than it should be local minority entrepreneurs like the Fernandez brothers. That is the kind of simple equity that doesn't exist when the cronyism of the mega-wealthy dictates policy (Is anyone really surprised that Rudy Washington, as loyal a soldier as anyone in the previous administration, seems to have been the only one not included in Guiliani Partners. Yet Bernie Kerik was!).

Post Needs To Examine Bradhurst and the BTM

One of the catchy lines in the Post editorial was the observation that set-asides lead to "corruption, overpricing and less-than-top-services." We agree, but only if the concept of set-asides is expanded to include the setting aside of city property for Deputy Dan's good friend.

Any comprehensive examination of the BTM deal will reveal that in the sale of the property and in the "negotiation" of the 99 year lease the evidence of corruption and overpricing is manifest. So our advice to the Post is to keep advocating for a level playing field but do so with an eye towards exposing those occasions where old fashion political payoffs or cronyism give unfair advantage, at the expense of city tax payers, to the well-connected.