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Notice of Motion/ Order to Show Cause _- Affidavits _-

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THE ClTY OF MEW YORK: MICHELE OVESEY,

CommisdDner for the New York City Department

of

Homeless Services; JOHN C. LIU, Comptroller

of the City of New York, and AGUILA, INC.

Defendants.

In the Article 78 proceeding under Index number 401 122/2013, the petitioner is Mayor Michael Bloomberg and the New York City Department of Homeless Services (DHS);the respondent is Comptroller John Liu. By order to show cause, Mayor Bloomberg sought a preliminary injunction to compel the respondent to register two contracts between the DHS and AgUila, Inc., which operates shelters for homeless fdlies. The two contracts at issue concern

shelters located at 1625-1631 Fulton Street (Fulton Residence) in the borough of Bronx, and 3 16 and 330 West 9ShStreet (Freedom House), in the borough of Manhattan. Comptroller John Liu cross-moved for consolidation of the instant proceeding with a related case, Neighborhood in the

Nineties, Inc. v The City of New York,John C. Liu,Comptroller of the City of New York,et. al.,

under Index Number 156382/2013. The plaintiff in the related case is Neighborhood in the Nineties, Inc. (Neighborhood), a not-for-profitcorporation representing block associations,residents, retailers and property owners between West 90thand West 97‘hStreets between Riverside Drive and Amsterdam Avenue. Neighborhood moved to enjoin the Comptroller from registering the contract for Freedom House. As the facts relevant to Neighborhood’s case are fairly much the same as those to the proceeding brought by Mayor Bloomberg, the two cases are consolidated for only the purposes of the decisions on these motions.

Facts

Briefly, DHS is a mayoral agency of the City that is tasked with providing transitional housing and services, short-term emergency housing and re-housing support to the City’s homeless families and individuals. Under section 328 of the New York City Charter (the Charter), the Comptroller is mandated to register contracts between DHS and service providers such as Aguila, within 30 days of receipt. Comptroller John Liu did not do so. One contract is for 1625-163 1Fulton Residence’; the second contract is for Freedom House’. Faced with an urgent need to house the unprecedented number of homeless people, these shelters had started operation pursuant to an emergency declaration. The Comptroller had approved and registered the emergency contracts in early 2012. On June 5, 2013, petitioner submitted executed contracts for both shelters to the Comptroller’soffice (Exh A - Fulton Residence; Exh B - Freedom House). At the end of the 30-day period on July 3,2013, the Comptroller informed DHS by e-mail that both contracts were rejected and raised issues relating to re-inspection of cured building violations and Administrative Code section 21-3 12(2)(b) limiting the number of adults for each shelter at 200. By letter dated July 9,

20 13, DHS responded to the Comptroller’s rejection informing him that the statute was inapplicable to the subject shelters as it applies only to “shelters for homeless ‘adults’” rather than “shelters for homeless families - either families with children, or adult families” (Cross-Motion, Spolzino Aff., p 3), and that since the allotted 30-day period for registering the contracts had elapsed, the contracts

were deemed registered. Thereafter, on or about

proceeding to compel the Comptroller to register the contracts.

July 19, 20 13, petitioner commenced the instant

Neighborhood commenced a plenary action, which _is more properly an Article 78 proceeding, in September 20 13 to enjoin the Comptroller from registering the contract between the City and Aguila for Freedom House. Neighborhood claims that its district, covered by Community Board 7 (CB7), is over-saturated with support housing. When the shelter on West 9ShStreet started operations on August 6, 2012, it was under an emergency short-term contract of six months. As such, there was no opportunity for public review preceding the opening. Indeed, there was no opportunityeven to attend a public hearing as neither DHS nor Aguila notified any CB7 officers of the hearing date; and the notice by e-mails purportedly sent to elected officials were not sent to their

Fulton Residence is a residence for 101 homeless families with children.

’Freedom House houses up to 200 homeless adult families in two adjoining buildings.

Bloomberg v Liu - Index # 40 1122/2013, Neighborhood v City - Index # 156382/2013

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regular e-mail addresses (seeAff. of Aaron Biller, Exh 6, p 2). Neighborhood also argues that DHS misrepresented the fair share review to the community and the Mayor. The DHS’ fair share review did not include the following facilities: 2643 Broadway - Volunteers of America; 3 16 West 97th Street (The Yale) - HRA and HPD; 306 West 9Sh Street (Camden) - HRA; 2508 Broadway (Naragansett) - Housing and Services; 336 West 8Sh Street (Brandon House) - Volunteers of America; and scatter site housing in SROs for HRA and DHS clients throughout community district 7 (see id.,p 15). On September 4,2012, CB7 adopted a resolution opposing operation of the Shelter on West 9ShStreet (see id.,Exh 7).

Neighborhood adds that the manner in which Freedom House is operated causes a nuisance to area residents. Examples of the Shelter’s negative impact included an increase in felony and misdemeanor assaults, petit larcenies and rapes reported in the 24*hPolice Precinct (see id.,p. 20; Exh 14); an increase in trash strewn in the streets around the shelter; unreasonable loud noises; and loitering. The residents have also seen an increase in panhandling; public drinking; drug use; people sleeping in streets; and altercations (see Aff. of Dennis McGath, p 2). Finally, Neighborhood asserts that the cost per unit constitutes a waste under the General Municipal Law, and that the Comptroller’s Audit of DHS’ control of payments and expenditures with Aguila shows an abysmal operation.

The City and DHS argue that Neighborhood is time-barred from its action because it is more properly an Article 78 proceeding that would be subject to a four month statute of limitations. Neighborhood’s action was brought thirteen months since the Shelter opened, and six months since DHS submitted its Fair Share document for Freedom House. Aside from the statute of limitations defense, they argue that Neighborhood’s claim also fails because the Administrative Code § 2 1-312 (2)(b) regarding the 200 person limit on adult shelters is inapplicable to adult family shelters, which is defined as adult families without children. Freedom House provides shelter for up to 200 adult families where each family is given a separate unit. Further it is pre-empted by state law.

Analysis

New York City Charter Section 328

Section 328 of the Charter directs the Comptroller to register the contract within thirty (30) days of filing of the contract unless _- “(i) there remains no unexpended and unapplied balance of the appropriation or fund thereto, sufficient to pay the estimated expense of executing such contract, as certified by the officer making the same; (ii) that a certification required by section three hundred twenty-seven of this chapter has not been made; or (iii) the proposed vendor has been debarred by the city in accordance with the provisions of section three hundred thirty-five.” (NYC Charter 5 328 (b)).

The reason cited by the Comptroller for declining to register the contracts was his determination that the contracts facially violated New York City Administrative Code Section 2 1- 312(2)(b) for housing above the limited number of 200 adults. However, this reason is not one of

Bloomberg v Liu - Index # 401 12212013, Neighborhood v City - Index ## 15638212013

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_I the exceptions in the section 328 mandate to the Comptroller (see Comptroller of City ofNew York v Mayor ofcity ofNew York, 7 NY3d 256 [2006]). Further, when the Mayor responded to the Comptroller’s concerns that gave rise to his refusal to register the contracts (see Petition by Mayor Bloomberg, Exh F), the Mayor essentially overrode the Comptroller’s concerns, whereupon, it was incumbent on the Comptroller to carry out the mandate in section 328 (see NYC Charter tj 3289 (c); see e.g., Giuliani v Hevesi, 276 AD2d 398 [lst Dept 20001 “Under normal circumstances, the Comptroller need not register a contract where he suspects corruption, but once the Mayor chooses to override those objections, the Comptroller must carry out the mandatory function. The legislative history of this provision of the Charter confirms that conclusion” [internal citation omitted]). Thus, whether the two contracts fall under Administrative Code fj 2 1-312 (2)(b) is not one of the reasons for which the Comptroller may refuse to register the contracts.

The Comptroller posits that the Court of Appeals in _{Comptroller v. Mayor (supra)only} held that the Comptroller may not withhold registration based on procedural grounds. The distinguishing factor between Comptroller v. Mayor and the instant case is the illegality of the Mayor’s direction rather than the procedural omission by the Comptroller in Comptroller v. Mayor. The Comptroller did not explain how his legal reasoning and findings are superior to that of the Mayor’s in determining the size of the shelter violated Administrative Code tj 21-312(2)(b). Nor did the Comptroller distinguish or contradict the City’s argument that Administrative Code fj 2 1-312(2)(b) is inapplicable to the subject shelters. However, the Comptroller is not compelled to do so as he is not mandated to analyze a statute - procedurally or substantively - under section 328 of the City Charter;rather, the Comptroller is mandated to register the contracts for Freedom House and Fulton Residence. Nevertheless, the City responds to this challenge and points out that the local law pertaining to adult shelters has been preempted by state law (see inJFa).

Preemption by State Law The City argues that state law preempted Administrative Code section 21-3 12(2)(b),which puts a cap on the number of beds in adult shelters at 200. Citing Social Services Law tj 460, the Appellate Division in the Second Department has held that regulation of adult-care facilities has been preempted by the State (seeAdkins v Board ofAppeals, 199AD2d 261 [2d Dept 19931). With this field preemption by state law, local laws such as Administrative Code section 21-312(2)(b) placing control on the operation of an adult shelter is illegal (see DeStafuno v Emergency Housing Group,Inc., 281AD2d 449,45 1 [2d Dept 20011). Accordingly, petitioner’s claim that the operation of Freedom House violated the bed limit of Administrative Code section 2 1-312(2)(b) cannot be sustained.

Statute of Limitations The City raises the defense of the four-month statute of limitations as a bar to Neighborhood’s action that was commenced more than thirteen months after Freedom House opened on August 6,2012. And as to Neighborhood’s claims relating to the Fair Share Analysis, the clock started to run from February 4, 2013, and therefore, the Fair Share Analysis claims are also time- barred. The dates pertinent to this issue are as follows: In January 20 13, _DHS sought a six-month extension of the emergency declaration from the Comptroller, which was refused. Thereafter, DHS prepared to finalize a long-term contract for Freedom House. A public hearing was held December I3,2012; the Fair Share review was issued on February 4,2013. The long-term contract was then presented to the Comptroller for registration on June 5,20 13. The Comptroller rejected the contract

Bloomberg v Liu - Index # 401 122/2013, Neighborhood v City - Index # 15638212013

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on July 3,2013. Neighborhood commenced the instant proceeding on or about July 17,2013.

In an Article 78 proceeding, there are two requirements in calculating the statute of limitations: “the agency must have arrived at a definite position on the issue inflicting actual injury, and the injury may not be significantly ameliorated either by further administrative action or steps taken by the complaining party” (Comptroller v Mayor, 7 NY3d at 262, quoting Matter of Best

Payphones, Inc. v Department of Info. Tech. & Telecom. of City of N Y., 5 NY3d 30, 34 1720051).

Here, Neighborhood argues that the actual injury occurred on June 6, 2013, when the long-term contract was submitted to the Comptroller; and not August 6,2012, as that was under an emergency short-term plan. As to the Fair Share review, Neighborhood opines that it need not be challenged independently as it is not a final agency action.

The key question from these two arguments is when the actual injury occurred. Based on all accounts, Freedom House started on an emergency basis on a short-term contract. As it was a short- term contract, whether it was a 200 bed shelter for adults or a 400 bed shelter for adult families, is not so consequential since there is a not-so-distant end to the shelter operation at that particular site. However, with a long-term facility, the type of shelter Freedom House is of significant consequence as there is no end in sight to the effects to the neighborhood. Therefore, the actual injury is the agency’spresentation of a long-term contract to the Comptroller for registration, which was on June 6,2013. Thus, Neighborhood is within the four-month time period when it commenced the instant action on or about July 17, 2013.

Neighborhood’s argument is reasonable considering that absent a final determination, a challenge to the report would be academic. Hence, the statute of limitations on the fair share report is a non-

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Fair Share Criteria Neighborhood’s fair share report claim is that the City did not follow the Fair Share Criteria when it did its siting review because it did not consider similar housing facilities in the district. The Fair Share Criteria has been viewed as a guideline for siting city facilities, and not as regulations (see

Community Planning Bd. No. 4 v Homesfor the Homeless, 158 Misc.2d 184, 191 [Sup.Ct. NY Cty, 19931;see also, Tribeca CommunityAss ’nv New York City Dept, Of Sanitation [2010 WL 151534

[Sup.Ct., NY Cty, 20101, af’d 83 AD3d 513 [lstDept 20111). While a flagrant disregard of the Criteria could give rise to a cause of action (see Community Planning Bd. at 192), there is nothing alleged here that rises to that level.

Section 203 of the New York City Charter requires the City Planning Commission to adopt rules establishing criteria for the location, expansion, reduction, or closing of City Facilities. The goal of the criteria is to “further the fair distribution among communities of the burdens and benefits associated with city facilities, consistent with community needs for services and efficient and cost effective delivery of services and with due regard for social and economic impacts of such facilities

Bloomberg v Liu - Index # 40 112212013, Neighborhood v

City - Index # 156382/2013

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upon the areas surrounding the sites” (NY City Charter Q203).

Article 6.53[a] of the Fair Share Criteria requires the City to consider “[wlhether the facility, in combination with other similar city and non-city facilities within a defined area surrounding the site (approximately a half-mile radius, adjusted for significant physical boundaries), would have a significant cumulative negative impact on neighborhood character.” (62 RC.NY § Appx. A to Title 62 Article 6.53[a]).

Article 6.53[c] of the Fair Share Criteria requires the City to consider “[wlhether any alternative sites actively considered by the sponsoring agency or identified pursuant to section 204(f) of the Charter which are in community districts with lower ratios of residential facility beds to population than the citywide average would add significantly to the cost of constructing or operating the facility or would impair service delivery.” (62 RC.NY 5 Appx. A to Title 62 Article 6.53[c]).

The Fair Share Report (the Report) at hand claims to have met the Fair Share Criteria. It reported that there are a total of seven shelters in CD7, including Freedom House. Those six shelters are not located within a 400 foot radius of Freedom House. Two of those shelters services house families with children and are within a half-mile of Freedom House, while the other four, three of which are for single adults and one for families with children, are outside the half-mile radius. The Report also informed that Aguila had notified CB7 of its proposal to operate a family shelter at Freedom House. On August 3 and 6, DHS met with Manhattan Borough President Scott Stringer,

Council Member Gail Brewer, Assembly Member Linda Rosenthal (collectively, the elected officials), and CB7 Chair, Mark Diller, to discuss the shelter proposal. Subsequently, by letter dated November 30, 2012, DHS informed all five Borough Presidents, the City Council, and the City Comptroller of its intention to enter into a long-term contract with Aguila to operate Freedom House and the public hearing date on December 13,2012. The public hearing with date, time and place was advertised in the City Record. The Report stated that no opposition to the proposal was given. On January 30,2013, CB7 convened a two-hour town hall meeting at which DHS and Aguila attended, and the elected officials addressed community concerns and answered questions regarding the shelter. The Report added that due to the unprecedented need for homeless shelters, a demand that

increased 2 1 percent since November 20 11, the City was mandated by law to meet the need.

open new shelters to

The Report informed that the City’s selection of sites is affected by the size and type of

buildings offered for shelter purposes. In selecting the West 9Sh site, the Report found the two adjoining seven-story buildings, which can accommodate 400 adults in 200 units, could meld with the multifamily residential, and mixed-use commercial and residential neighborhood with community facilities and would not cause traffic congestion because of available public transportation nearby. The Report noted that DHS did a field survey of the neighborhood and reviewed relevant literature to determine whether Freedom House would create or contribute to a

concentration of facilities. It listed the various facilities, programs,

are within a half-mile radius of Freedom House. It also spoke to the cost-effectiveness of the services to the homeless adult families such as case management, employment, and rehousing assistance. Because of the size of the facility, these services can be provided on site. Further, because the site is fully equipped with communal kitchens, on-site laundry facility, and individual mini-refrigeratorsin every room, it is more self-contained and less burdensome on the neighborhood.

institutions and open spaces that

Bloomberg v Liu - Index # 40 1 122/2013, Neighborhood v City - Index # 156382/2013

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As to alternative sites, the Report indicated nine alternate sites - five in Manhattan, three in Bronx, and one in Queens - were considered. Two sites in Bronx had contracts either in procurement or awaiting registration at the Comptroller’s office. The other seven sites were not viable or suitable as one landlord decided against use as a shelter, and the costliness of another site as the building would have to be converted, or they were too close to other shelters.

Therefore, contrary to Neighborhood’s claims that the DHS did not abide by the Fair Share Criteria in creating the Report, it appears that DHS addressed the issues of other shelters in the area and the impact to the neighborhood of adding Freedom House. In fact, the Report had a diagram depicting and identifying the support housing, service centers, schools, clinics and such facilities within both 400 feet and a half-mile radius of Freedom House. Accordingly, Neighborhood’s claim that DHS did not abide by the Fair Share Criteria contradicted by the Fair Share Report, which shows substantial compliance with the Fair Share Criteria _{(see Turtle Bay Ass} ’nv _Dinkins, 207 AD2d 670, 670 [1St Dept 19941).

Nuisance Neighborhood claimed that the operation of a shelter in the area created a nuisance for the neighboring residents. A public nuisance “is an offense against the State and is subject to abatement or prosecution on application of the proper governmental agency” (Copart Indus. v Con Ed Co., 4 1 NY2d 564, 568 [1977]). To make out a cause of action for public nuisance, Neighborhood “must establish by clear and convincing evidence that the conduct amounts to “a substantial interference with the exercise of a common right of the public, thereby offending public morals, interfering with the use by the public of a public place or endangering or injuring the property, health, safety or comfort of a considerable number of persons’’(532MadisonAve. Gourmet Foods v Finlandia Ctr.,

96 NY2d 280,292 [2001]; see DeStefano v Emergency Housing Group, Inc. 281 AD2d449,45 1 [2d

Dept 20011 [internal citations omitted]; lv to appeal denied, 96 NY2d 715 [2001]). Further, as a private party, petitioner has to show that it suffered some special damage, separate and apart from that suffered by the public at large (see 532 Madison Ave. Gourmet Foods, 96 NY2d at 292). Neighborhood alleged that the community at large was affected by the conduct - loud noises, loitering, littering, panhandling, and an increase in crime. As the injury to petitioner also affects the community at large, it is not special within the meaning of a public nuisance. As such, petitioner has no standing to bring this public nuisance claim (see id. ).

General Municpal Law 4 51 Pursuant to General Municipal Law 5 5 1, taxpayers may bring suit to prevent illegal acts by

officials or agents of a municipality or to prevent waste or injury to,

.” (GML 9 51). However, a suit under GML §

county, town, village or municipal corporation

.any property, funds of such

51 “lies only when the acts complained of are fraudulent, or a waste of public property in the sense that they represent a use of public property or funds for entirely illegal purposes” (Godfreyv Spano,

13 NY3d 358,373 [2009], quotingMestiva ofForest Hills Inst v CityofNew York, 58 NY2d 1014,

1016 [19831). There is no fraud alleged here. Therefore, for this claim to be viable, petitioner must “state a claim an illegal dissipation of municipal funds” (Godfrey, 13 NY3d at 373). Petitioner’s allegations again focuses on Administrative Code section 2 1-312(2)(b) which limits a shelter for adults to 200 beds. As discussed supra, this section of the Administrative Code is preempted by state law, which does not make the operation of a shelter for 200 adult families (400 beds) unlawful.

Bloomberg

v Liu - Index # 40 112212013, Neighborhood v City - Index # 1.5638212013

_{Page 7of 8}

4.

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Petitioner also argues that Aguila’s performance of its obligation has been poor and improper, and the contract between Aguila and DHS should not be registered. Petitioner cites the audit report by the Comptroller on DHS’ control of payments to Aguila dated November 4,2001(see Aff. of Aaron Biller, Exh 19, which “recommended that the city recoup $900,000.00 in payments made to Aguila and to further investigate additional Aguila expenditures totaling $9.1 million” (Aff. ofAaron Biller, T[ 58). The affiant, however, did not cite to any place in the 50 or more pages of Exhibit 15 that supports his allegation. In any event, the allegation remains void of any fraud or illegal dissipation of municipal funds. As such, petitioner failed to state a cause of action under GML 65 I.

Conclusion

The conflict between housing the homeless and maintaining a neighborhood’s status quo is hardly ever easily resolved. Given the increasing number of homeless people in New York City3, and the duty incumbent upon the Mayor to provide them shelter, New York City is often rife with such conflicts. The homelessness problem is not likely to go away soon as the numbers continue to rise4. Nonetheless, with regards to the case at hand, this court need only address whether the Comptroller has a duty to register the contracts, whether DHS complied with the Fair Share Criteria in creating its report, whether Neighborhood’s nuisance claim may be sustained, and whether DHS and Aguila’s spending gives rise to a claim under GML 551.

Based on the foregoing, the complaint under Index Number 156382/2013by Neighborhood

of the Nineties to enjoin the Comptroller from registering the contract between DHS and Aguila for the operation of a homeless shelter for adult families located at 316 and 330 West 9Sh Street

(Freedom House) in Manhattan is dismissed. The petition under

Michael Bloomberg is granted; the Comptroller shall register the contracts between the DHS and

Aguila for homeless shelters at 1625-1631 Fulton Street (Fulton Residence) in the borough of

Bronx, and 3 16 and 330 West 9ShStreet (Freedom House) in Manhattan.

Index 401 122/2013 by Mayor

This constitutes the decision and order of the court.

3 The number of homelessness grew in New York City by 13% at the start of 2013, in contrast to the rest of the country, with the exception of Los Angeles, California. “In New York, where the shelter population has reached levels not seen since the Depression era, the count in January estimated 64,060 homeless people in shelters and on the streets in January 2013” (Mireya Navarro, Homeless Tally Taken in .January Found 13% Rise in New York, NY Times, NYiRegion Nov. 21, 2013).

Number of Homeless in City Hits Record High, Report Find, http:lwwwiny1 .comicontenthewsi205116 (accessed March 12, 2014).

Bloomberg v Liu - Index # 401 12212013,Neighborhood v City - Index # 156382i2013

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