NY lawmakers miss budget deadline

New York State’s April 1 budget deadline came and went over the weekend without resolution of outstanding policy issues tied to the massive spending blueprint.

Legislative leadership and Governor Andrew Cuomo have been locked in intense negotiations over the past week-and-a-half as they seek to resolve a handful of issues, first and foremost the question of raising the age of criminal responsibility in the state from 16 to 18. Other negotiation hang-ups include extending the 421-a property tax abatement, expanding ride-hailing outside of New York City, and increasing public and charter school funding.

On Monday, April 3, the state Assembly and Senate passed budget extender legislation to fund the operation of the state government through May 31, thereby avoiding a government shutdown that, by most accounts, would have taken place on April 4. The extender legislation, unlike the full state budget, is largely devoid of the policy issues that have impeded negotiations, but does include proposals to curb drug prices and provide funding for direct care workers, and also includes a number of the Governor’s large-scale economic development projects and $2.5 billion for water infrastructure improvements.

This year’s budget marks the first significantly late budget of the Democratic governor’s tenure. Late Friday evening, the Governor issued an official statement granting the state Legislature a “grace period” over the April 1 weekend to work towards a deal on outstanding issues. The Governor’s statement cited the “extraordinary times in our state and country” as reason for the reprieve, but he warned that if no agreement was reached by the end of the weekend, he would be issuing emergency extender legislation.

Negotiations between the governor, Senate Majority Leader John Flanagan (R), Independent Democratic Conference (IDC) Leader Jeffrey Klein (D), and Assembly Speaker Carl Heastie (D) are expected to continue with the same intensity over the next few days, as the various conferences work to bridge disagreements on outstanding policy issues. Insiders and observers point to the end of the April 3 week as an unofficial “deadline” to pass a “full” budget—citing the scheduled two-week April legislative break which accommodates the Passover and Easter holidays.

If no budget agreement is reached by the close of this week, negotiations could potentially carry into the end of the month, or even into May.

Meet New York’s four congressional freshman

New Yorkers elected last month an evenly partisan quartet of congressional freshman to represent them in the 115th Congress. While the new members–two downstate Democrats, another two upstate Republicans–are new to Washington, they’ve long been fixtures of the state’s political landscape.

Here, the New York public policy team lifts the hood and kicks the tires on incoming freshman delegation.

 

3rd Congressional District – Tom Suozzi (Democrat)

Congressman Tom Suozzi has a long career in public service. First elected to public office as the mayor of the town of Glen Cove in Nassau County where he served for four terms, he was most recently the Nassau County Executive from 2002 to 2009. Credited for bringing Nassau County’s finances back from the bringing of bankruptcy during his two terms in office, Suozzi sought the Democratic nomination for Governor of New York in 2006, ultimately losing to Eliot Spitzer in the primary. Three years later, Suozzi lost his reelection campaign to then Nassau County Legislator Ed Mangano in 2009 by less than 300 votes. In 2013, Suozzi attempted to regain the County Executive office but lost in a rematch to County Executive Mangano. New York’s 3rd Congressional District, previously served by former DCCC Chairman Steve Israel, encompasses the North Shore of Long Island from the northeast edge of Queens in New York City, across northern Nassau County into northwestern portions of Suffolk County on Long Island.

13th Congressional District – Adriano Espaillat (Democrat)

Congressman Adriano Espaillat replaces longtime Democratic Congressman Charlie Rangel in the Harlem-based 13th Congressional District and now becomes the first Dominican-American member of Congress. Espaillat has served in the New York State Senate since 2011, and previously served in the State Assembly for 13 years, from 1997 to 2010. Espaillat ran against Congressman Rangel in the 2012 and 2014 Democratic primaries, narrowly losing to Rangel in both primary elections. Demographic shifts over the course of the last two decades in the traditionally African-American neighborhoods of Harlem and Washington Heights – most notably an influx of Hispanic and Latino residents – played a critical role in buoying Congressman Espaillat’s primary challenges. In 2014, Congressman Rangel announced he would retire from Congress at the end of his two-year term, resulting in a Democratic primary battle between Espaillat and long-serving Harlem Assemblyman Keith Wright, along with a handful of less established candidates. Espaillat won the 2016 Democratic primary with 36 percent of the vote. The 13th Congressional District includes all of Harlem and Washington Heights in Manhattan, and a small portion of the Bronx.

19th Congressional District – John Faso (Republican)

Congressman Chris Gibson’s announcement in 2015 to adhere to a self-imposed term limit and not run for reelection in the 19th Congressional District immediately set the stage for a high stakes political battle in the Hudson Valley for the competitive House district. Congressman Gibson, considered one of the most moderate House Republicans and widely popular in the District, would have likely sailed to an easy reelection in 2016. John Faso, a former member of the State Assembly from 1987 to 2002, where he also served as Assembly Minority Leader, was the leading establishment favorite for the Republican nomination from early on. Faso faced off against Zephyr Teachout, a Fordham Law School Professor who, as a Democratic candidate for governor in 2014, had a surprisingly strong showing against incumbent Andrew Cuomo in the 2014 Democratic primary. Congressman Faso handily beat Teachout in the general election, winning by 9 percentage points. Faso, who is a former attorney and lobbyist at Manatt Manatt, Phelps & Phillips, LLP, will serve the sprawling 19th Congressional District which spans the Hudson Valley from the Southern Catskills, west to Oneonta and through the outskirts of the Capital District and east to the Connecticut, Massachusetts and Vermont borders with New York. Congressman Faso is expected to follow closely in outgoing Congressman Gibson’s footsteps as a more moderate member of the Republican House delegation.

22nd Congressional District – Claudia Tenney (Republican)

Congresswoman Claudia Tenney arrives in Washington after a relatively short career in the State Assembly, where she has served since 2011. Tenney replaces outgoing Republican Congressman Richard Hanna, who she ran against unsuccessfully in the Republican primary in 2014. Congressman Hanna announced his retirement just weeks after Congresswoman Tenney’s announcement to run again for the 22nd district in November of 2015. Tenney is expected to bring a decidedly more conservative message to Washington than Congressman Hanna, who was the first House Republican to cross party lines to endorse Hillary Clinton in the presidential race. During the campaign, Tenney was endorsed by conservative groups and media personalities, including radio talk show host Laura Ingraham and Sean Hannity. The NRCC had also initially lined up behind Congresswoman Tenney’s Republican primary opponents before ultimately supporting her in the general election.

Congressman Crowley Elected as House Democratic Caucus Chairman

Congressman Joe Crowley, who has represented Queens and parts of the Bronx in the House since 1999, was unanimously elected by House Democrats to serve as the Chairman of the House Democratic Caucus for the 115th Congress. Congressman Crowley will be succeeding Xavier Becerra, who was appointed attorney general of California earlier this month by Governor Jerry Brown. Crowley is now the fourth-ranking member in House Democratic leadership.

Governor, legislative Leaders continue to discuss special session

The culmination of a handful of recent developments has led to high-level discussions between legislative leaders and Governor Andrew Cuomo about a possible special legislative session before the end of the year.

The major catalyst for the discussions was the decision by the recently created State Commission on Legislative, Judicial and Executive Compensation (the “Pay Commission”) to reject a proposed salary increase for lawmakers, which would have provided lawmakers their first pay increase since 1999. The gubernatorial commission appointees abstained from voting on the proposed salary increase, instead citing the need for significant structural reforms, like the creation of a full-time legislature.

Voting for pay raises can be politically tricky for legislators. Moreover, while New York law permits the state legislature to vote for its own pay raise, that pay raise cannot take effect until a successive legislative session. Given this, the State Legislature, together with the governor, passed a law in 2015 that created the Pay Commission. Under the law, if the Pay Commission had recommended a raise at their final meeting in November, it would have taken effect automatically on January 1, 2017, thus eliminating the need for the legislature to vote themselves a raise. The Pay Commission ceases to exist on December 31, 2017. By rejecting the pay raise, however, the Pay Commission put the raise issue back to the legislature. Many members of the legislature have been seeking a pay raise and were depending upon the Commission’s approval of such a raise.

The Governor has subsequently defended his appointees’ decision and urged lawmakers to return to Albany to deal with outstanding issues – in particular, ethics reform, a housing subsidy, and the finalization of an agreement to release $2 billion in affordable housing funds. The special session would also provide lawmakers the opportunity to re-authorize the commission, whose appointees have stated that they would approve a modest increase in the context of a special legislative session, despite their previous rejection the proposal.

Legislative leaders, in particular Assembly Speaker Carl Heastie, have been less than receptive to the governor’s tactics. In a strange series of events last week, Speaker Heastie took to Twitter to flatly reject statements from the Governor’s office regarding special session negotiations, stating “[t]here is no truth to the article claiming we are discussing term limits or constitutional amendments in exchange for a pay raise.” The Assembly Democratic conference held a lengthy meeting in Albany on Monday, December 5 to discuss the developments and proposals surrounding the special session. Speaker Heastie reiterated after the meeting that he was unsure whether a special would take place, and also rejected the idea of the legislature passing a pay hike on their own, and potentially overriding any veto from the governor.

We expect closed-door talks to continue between legislative leaders and the governor, and as is often the case in Albany, agreements can coalesce quickly. The New York public policy team will be providing updates as they develop.

NY ‘Zombie Property’ Legislation Is Back From The Dead

Originally published on Law360 (subscription required) on July 11, 2016

On June 23, Gov. Andrew Cuomo signed into law legislation passed just days earlier that, among other things, is designed to tackle New York state’s “zombie property” problem. The term “zombie property” refers to a residential property abandoned by a homeowner after the initiation of a foreclosure action but prior to the completion of such action. They have been on the political radar in New York for the past number of state legislative sessions. The new law will take effect on Dec. 20, 2016.

The zombie property issue had been especially prevalent in upstate New York cities and in suburban counties and towns, largely as a byproduct of the devastation to these areas caused by the 2008 financial crisis. Prior to the passage and enactment of the zombie property legislation, New York law required that the mortgagee maintain the vacant residential property only after a judgment of foreclosure and sale had been entered. Since the bank or mortgage servicer did not have the duty to maintain the property until the judgment entry, the law incentivized mortgagees and loan servicers to delay the foreclosure process. As a result, it was left to the local government of a municipality where the property was located to maintain the abandoned property. The cost of such maintenance was ultimately passed along to the local taxpayer.

The problem of zombie properties and their impact in New York has been the subject of a number of government reports and private studies in recent years. A report released in January 2016 by the State Senate’s Independent Democratic Conference (IDC) and Mount Vernon Mayor Richard Thomas focused on zombie properties located in suburban Westchester County. The report examined 107 such properties in Westchester and determined that they resulted in a loss in value to neighboring properties totaling $10.8 million. The report advocated for creation and passage of legislation requiring banks who initiate foreclosure actions against a home to maintain zombie properties from the time they are vacated, rather than the time ownership is transferred to the banks. Additional policy recommendations in the report included the creation of a database of bank-owned, foreclosed properties to track the properties and to allow the state attorney general to impose fines.

Other studies revealed the extent of this problem to upstate New York municipalities. A report released by Buffalo Assemblyman Michael Kearns, D-Buffalo, disclosed the existence of nearly 800 zombie homes located in Erie County alone. The report indicated that such properties had a collective assessed value of $58 million, or an average value of $72,500 a house. The report also contended that the local municipal burden associated with maintaining these abandoned properties had cost taxpayers more than $1 million.

Another report issued by RealtyTrac.com in the fall of 2015 presented a broader view of the state’s zombie property problem as compared to the rest of the United States. The report ranked the state third in most vacant “zombie” foreclosures (after New Jersey and Florida), with 3,365 properties in limbo. New York’s rank moves up to No. 2 when evaluating the states with the highest share of vacant “zombie” foreclosures as a percentage of total vacant properties. New York’s 8.2 percent is bested only by New Jersey. The report also revealed that three of the top four major metropolitan areas in the country with the highest share of vacant “zombie” foreclosures as a percentage of all vacant properties are in New York. Rochester was ranked first (14.3 percent), New York City third (10 percent) and Albany fourth (7.9 percent).

In 2015, Attorney General Eric Schneiderman proposed legislation to address the issue of the state’s zombie properties. The legislation, introduced by Assemblywoman Helene Weinstein, D-Brooklyn, and Sen. Jeffrey Klein, D-Bronx, (who heads the IDC), set out numerous requirements intended to alleviate the zombie property problem. The legislation sought, among other things, to require that the mortgagee or its loan servicing agent provide written notice to homeowners that they are legally entitled to remain in their homes until ordered to leave by a court, make it unlawful for a mortgagee or loan servicing agent to enter a property that is not vacant or abandoned to intimidate or harass the occupant to vacate, and would have required mortgage lenders to take over the responsibility for properties soon after they are vacated — and not, as the current New York law had required, at the end of the foreclosure process.

The attorney general’s bill garnered widespread support from upstate New York mayors, 29 of whom, including the mayors of the four largest cities in upstate New York, penned a letter to legislative leaders urging support for the legislation. The legislation was not acted upon in the 2015 legislative session but was ultimately passed by the Assembly in May of 2016. The Senate never acted upon this bill in either the 2015 or 2016 session.

While members of the state Legislature renewed their calls and efforts to secure passage of a zombie property bill during the 2016 legislative session, legislation did not see momentum until the closing days of the legislative calendar. First, on June 7, 2016, Gov. Cuomo announced the release of more than $100 million in funds to help new homebuyers purchase and renovate zombie properties. New York State Homes and Community Renewal agency will disburse the funds through a new Neighborhood Revitalization Program by providing grants to not-for-profit organizations and municipalities in specific areas of the state. The program is expected to subsidize and finance the purchase and renovation of up to 500 foreclosed and abandoned properties for low- and middle-income residents of the state. Almost one-quarter of the $100 million fund will be provided through settlement proceeds obtained by New York in connection with the residential mortgage-backed securities settlement.

Just a week later — as a result of a behind-the-scenes legislative push from municipalities, the governor and state legislators long-engaged on the issue, in particular Sen. Klein — the state Legislature introduced and passed a new bill to resolve the zombie property problem. The new legislation, SB 8159, included several of the key provisions seen in previous incarnations of the legislation.

The heart of the new law can be found in the newly created sections 1308, 1309 and 1310 of the Real Property Actions and Proceedings Law (RPAPL). Section 1308 of the RPAPL places a duty to maintain zombie properties on the servicer of a mortgage who has the first lien on the property. This section sets forth certain timetables and requirements for a mortgage servicer to ascertain whether a property is vacant and abandoned, as well as a very comprehensive list of obligations and requirements to ensure the maintenance of the abandoned property. These obligations include, among other things, securing, replacing or boarding up broken doors and windows and winterizing plumbing and heating systems. This duty, however, will only apply to one-to-four family residential properties that the servicer has a reasonable basis to believe are vacant and abandoned. The duty to maintain applies to the servicer until the occupant has asserted their right to occupy the property, the borrower has filed for bankruptcy, a court has ordered the servicer to stop any maintenance, the property has been sold or transferred, the servicer has released the lien or the mortgage note has been assigned, transferred or sold to another servicer. Section 1308 will also:

Allow the state Department of Financial Services (DFS) or the municipality where the real property is located, to bring an action against a servicer failing to maintain a property. DFS must provide seven days notice of a violation to the servicer before action may be brought. A municipality must provide DFS with 10 days notice prior to initiating the action. Courts may impose fines of up to $500 per day, per property.

Allow municipalities to recoup costs for any maintenance work they do on a property not properly maintained.

Critically, section 1308 carves out banks, savings banks, savings and loan associations and credit unions that originate, own, service and maintain their own mortgages and originate less than 0.3 percent of mortgages in New York. Although the bill does not contain a defined term, this exemption is understood to cover primarily local community banks. Moreover, section 1308 now precludes any municipality from enacting local legislation that would impose a duty to maintain the zombie property inconsistent with the state law duties established under this law.

Section 1309 of the RPAPL sets forth a new judicial relief for the foreclosing bank. In this instance, section 1309 would permit a plaintiff to expedite the foreclosure process for properties proven to be vacant and abandoned. Section 1309 defines “vacant and abandoned property” to include proof that no occupant was present in the home and no evidence of occupancy on the property during certain inspection periods and the property was not maintained in a manner consistent with certain sections set forth in Chapter 3 of the New York property maintenance code. Section 1309 sets out what shall constitute as evidence of a lack of occupancy, which includes, overgrown or dead vegetation; accumulation of newspapers, circulars, flyer or mail; past due utility notices, disconnected utilities or utilities not in use; or one or more boarded, missing or broken window.

Section 1309 allows a lender, once the defendant’s right to answer the initial foreclosure proceeding has expired, to make a motion or order to show cause that a property is vacant and abandoned. The lender, however, is obligated to provide the defendant notice of this action, and the court is also mandated to send its own notice that such an action is being taken. The lender must also provide evidence with its motion that a property is vacant and abandoned. The new Section 1310 requires DFS to create and maintain a statewide vacant and abandoned property electronic registry. Information in the database will be considered confidential, although the DFS superintendent is afforded the discretion to release information if deemed to be in the best interest of the public. Any released information will continue to be treated confidentially by the parties. Local and state officials may also request data from the registry for their own districts.

Critically, this new section also obligates lenders, assignees and servicers who become aware that a property is vacant or abandoned to submit information about the property to the registry within 21 days of learning about the vacancy or abandonment. DFS is also charged with creating a toll free hotline for individuals to call and report vacant or abandoned properties, or any hazards, blight or concerns related to such properties.

The Legislature passed the bill in the closing hours of the legislative session. Gov. Cuomo signed it five days later, an indication of its priority. The governor held a series of ceremonial bill signings across the state on June 23. During these signings, he said that state has at least 7,000 zombie properties, a much larger number than seen in previous reports.

As highlighted above, oversight and enforcement of the new zombie property law are now under the purview of DFS. Whether DFS has the financial and personnel resources to take on this new responsibility will certainly impact the law’s effectiveness. Stakeholders in this issue may want to look to the fiscal year 2017-18 state budget when it is released by the governor in January 2017 to see whether there is an increase in funding provided to DFS related to their new obligations under this law.

New York 2016 Legislative Session Wrap Up

The New York state legislature closed out its 2016 legislative session  Saturday. A number of significant legislative accomplishments were finalized in the closing hours of this year’s legislative calendar although a number of big-ticket items, such as comprehensive legislative ethics reform, an effort to bring ridesharing to upstate New York, and a replacement for New York City’s 421-a tax program, came up short.

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New York State Senate Special Election Update

It appears that Democratic candidate Assemblyman Todd Kaminsky finished ahead in a very tight race for the Long Island seat vacated by convicted former Senate Majority Leader Dean Skelos in Tuesday’s special election.

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