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New York State Ethics Commission
Alfred E. Smith State Office Bldg.
80 South Swan Street, 11th Floor, Suite 1147
Albany, NY 12210

Advisory Opinion No. 00-2: Application of the lifetime bar restrictions of Public Officers Law §73(8)(a)(ii) to a former Commissioner and member of a public benefit corporation who seeks to serve as an unpaid consultant for a developer seeking funding for a later phase of a housing project.

INTRODUCTION

The following advisory opinion is issued in response to a request submitted by [ ], a former Commissioner of the New York State Division of Housing and Community Renewal ("DHCR") and a former member of the Affordable Housing Corporation ("AHC"), who asks whether the lifetime bar restrictions of Public Officers Law §73(8)(a)(ii) would preclude him from serving as an unpaid consultant to a developer seeking funding to build a second phase of a housing project where funding for the first phase was provided by DHCR and AHC at a time when [the requesting individual] was a Commissioner and a member.

Pursuant to the authority vested in it by Executive Law §94(15), the New York State Ethics Commission ("Commission") renders its opinion that the lifetime bar prohibits [the requesting individual] from "appearing, practicing, communicating or otherwise rendering services" before any State agency including DHCR and AHC in connection with Phase II of the [ ] project.

BACKGROUND

[The requesting individual] is a former Commissioner of DHCR and a former ex-officio member of AHC. He left State service in [date].

AHC is a public benefit corporation and a subsidiary corporation of the New York State Housing Finance Agency ("HFA") (see, Private Housing Finance Law §45-b). Its members consist of the members of HFA, which includes gubernatorial appointees, the Commissioner of DHCR, the Director of the Budget and the Commissioner of Taxation and Finance.

In [date], while [the requesting individual] was Commissioner of DHCR and a member of AHC, both agencies provided funding to the New York City Partnership ("Partnership") for [a developer], to build what is commonly referred to as [ ] Phase I. Phase I involved the construction of 85 townhouses in [site] and was completed in 1998. Eligible low-income home buyers were able to receive a down-payment subsidy from AHC and a low-interest mortgage from the State of New York Mortgage Agency ("SONYMA").

[The requesting individual's] involvement with [the project] began in the early 1990's. After seeing an announcement by the Partnership, a not-for-profit organization that works closely with the New York City Department of Housing Preservation and Development ("HPD") and AHC to promote the development of affordable housing, the principals of [the developer], who are lifelong friends of [the requesting individual], approached him as the company was interested in building affordable housing in the metropolitan New York City area. The principals of [the developer] had not previously been involved in this type of development so, in and around 1990, [the requesting individual] referred them to the DHCR deputy commissioner who was responsible for that subject matter area. [The requesting individual] stated that he had no further involvement with the project until it was presented to him for approval some 18 months later.

[The developer] put together an application and submitted it to the Partnership for its sponsorship. Each year, the Partnership and the HPD jointly issue a Request for Qualification ("RFQ"), the purpose of which is to invite developers to submit evidence of their qualifications to develop sites. [The developer's] application consisted of a request to build the entire project of 143 units. It had a commitment for private sector funding from a bank and sought additional funding from the public sector. The Partnership, assessing the availability of City and State funds, would commit City funds for only 85 units, but it gave [the developer] oral assurances that if the 85 units (Phase I) were successfully completed, it would provide City funds for Phase II.(1) Thus, [the developer] scaled back the initial project and requested sponsorship of only 85 units.(2)

With a commitment from the Partnership, [the developer] applied to DHCR for a State-subsidized loan and for a grant from AHC to build the 85 units of Phase I. DHCR had already issued its annual Notice of Funding Availability ("NOFA") for general Statewide affordable housing which informs developers and other parties what level of State funding has been approved by the Legislature for affordable housing.(3)

The process for approving affordable housing loans at DHCR is as follows (see, 9 NYCRR §1920.7). The agency issues a Request for Proposals and announces a workshop within various regional offices on how to complete the DHCR application. Applications by developers, sponsored by local not-for-profits such as the Partnership, are reviewed at the DHCR regional offices for completeness. After applications are found to be complete by both regional and central office staff, the regional offices review and score applications according to eligibility, feasibility, design, site control and readiness. Recommendations for funding are forwarded to the deputy commissioner for the Office of Community Development. The deputy commissioner meets with the regional directors and assistant commissioners, and reviews the recommendations. Final recommendations are presented to the Commissioner. When [the requesting individual] was Commissioner, he would usually accept the recommendations as presented, and DHCR would begin awarding funds in order of project ranking until all the money set aside by the Legislature for affordable housing was allocated. [The requesting individual] would not be involved in specific projects until the deputy commissioner presented the staff's recommendations to him unless a legislator was involved. In such a case, the DHCR staff would flag a politically sensitive project and bring it to [the requesting individual's] attention. Generally, there would be a span of 18 months from issuance of the NOFA to project approval.

A similar process takes place at AHC. The staff reviews qualifying criteria and goes through a vetting process. The AHC board passes a resolution approving a lump sum award to fund specific projects in New York City or in the upstate area.(4) The board does not approve each individual project. However, if a member objects to any particular project, which is generally not the case, then the whole lump sum award for the region is delayed. According to [the requesting individual], he could not remember any time when he served as a member that the board rejected subsidizing a specific project that the staff had recommended.

In [date], DHCR approved the Partnership's application on behalf of [the developer] and provided the developer with a $2.5 million loan. [The developer] had asked DHCR for assurances that, when it repaid the loan at the time of completion of Phase I, the $2.5 million would be available for Phase II. The repaid money would be placed by DHCR in a revolving loan fund established under Article XI of the Private Housing Finance Law, which permits DHCR to use monies in the fund as soon as it is replenished. The $2.5 million would be available for any project depending where it stood in the agency's priority list. [The requesting individual] recalled the DHCR informed [the developer] that if it completed Phase I on time and the project was successful, the agency would put Phase II into the next available funding cycle after completion of Phase I.

The start-up of building Phase I took longer than expected due to marketing and a dispute with the bank over whether the houses were to have basements. Therefore, Phase I was not completed until [four years later]. However, once [the developer] completed and sold the first units, the project was considered a success. After the last unit was sold, DHCR was repaid the $2.5 million.

Upon completion of Phase I, [the developer] went to the Partnership for City funds and sponsorship of Phase II based on the oral assurances that had previously been provided.(5) However, the Partnership's priorities had changed over the years. Although the Partnership conceded that it had made oral assurances to sponsor Phase II and that the project met the federal and State guidelines for affordable housing, [five years after initial approval by DHCR], it sought to sponsor more rental projects. Getting nowhere with the Partnership, the principals of [the developer] asked [the requesting individual] for his assistance in obtaining overall funding for Phase II. [The requesting individual] agreed to do so, but only as an unpaid consultant.

[The requesting individual] told [the developer] to put pressure on the Partnership by filing an application for sponsorship of Phase II. Because the Partnership would not commit City funds for Phase II, [the requesting individual] told [the developer] that it would have to look for other funding sources.(6) To further that goal, [the requesting individual] accompanied the principals of [the developer] to Albany to meet with DHCR officials. The Partnership submitted an application to DHCR and AHC for State funding for Phase II, however, monies for that funding year were diverted to rehabilitation projects connected to the January 1998 ice storm in the North Country. The Partnership, on behalf of [the developer], updated the existing application and resubmitted it to DHCR and AHC for the 1999 funding cycle and, according to [the requesting individual], Phase II has been recommended by staffs at both agencies for funding. However, neither agency will take final action until the Commission determines the lifetime bar issue presented by [the requesting individual's] instant request.

APPLICABLE STATUTE

Public Officers Law §73(8)(a)(ii) provides:

No person who has served as a state officer or employee shall after the termination of such service or employment appear, practice, communicate or otherwise render services before any state agency or receive compensation for any such services rendered by such former officer or employee on behalf of any person, firm, corporation or other entity in relation to any case, proceeding, application or transaction with respect to which such person was directly concerned and in which he or she personally participated during the period of his or her service or employment, or which was under his or her active consideration.

DISCUSSION

The above provision, known as the "lifetime bar", sets the ground rules for what individuals may do with the knowledge, experience and contacts gained from public service after they terminate their employment with a State agency. The lifetime bar prohibits former State officers and employees from appearing, practicing, communicating or rendering services before any State agency, and rendering services for compensation in relation to any case, proceeding, application or transaction with respect to which they were directly concerned and in which they personally participated during the period of their State service, or which was under their active consideration during that period.

The issues before the Commission are twofold: (1) whether [the requesting individual], when serving as Commissioner and a member, was directly concerned, personally participated, or actively considered Phase I and (2) whether Phase II should be considered as part of the same transaction as Phase I.

The Commission finds that [the requesting individual] was directly concerned with, personally participated in and actively considered DHCR's loan and AHC's subsidy for Phase I. Transactions handled by senior staff are imputed to an agency head, and a former agency head is barred from working on the same transaction as one handled by top level staff. See, Advisory Opinion No. 92-20. [The requesting individual] approved the loan and the subsidy even if this decision was based solely on the recommendations of subordinates. The Commission finds that [the requesting individual], as DHCR Commissioner and a member of the AHC board, had an official role in approving funds for Phase I at each agency.

The more difficult issue is whether Phase I and II are part of the same transaction. In the opinion that most closely parallels [the requesting individual's] circumstances, Advisory Opinion No. 97-9, the Commission barred a former DOT employee from working on the latter phases of a transaction -- a highway interchange project -- where the first stage had been completed almost ten years earlier and the later phases had been put on hold due to budgetary constraints. The Commission held that the project on which the requesting individual sought to work was similar to the original concept which was redesigned and built to a smaller scale in the interim.

The instant matter is similar. The Partnership would have sponsored the entire [ ] project had it concluded that there was sufficient City and State funding available. The original plan was to build 143 units, the project was never scaled back. Rather, due to funding constraints, the project had to be built in two phases. The Partnership made oral assurances to [the developer] that if Phase I was successfully completed, it would sponsor a second phase. Likewise, DHCR gave assurances that if Phase I was successfully completed and its loan repaid, then it would place Phase II into the next funding cycle. The two phases are on adjacent pieces of property. The developer and commercial lenders are the same. Utility lines are already in place for Phase II. Therefore, like the highway project discussed in Advisory Opinion No. 97-9, the Commission concludes that Phase I and II of the [ ] project are parts of the same transaction for purposes of applying the lifetime bar.

Accordingly, [the requesting individual] is prohibited from appearing, practicing, communicating or otherwise rendering services before any State agency, including DHCR and AHC, and is prohibited from receiving compensation for services, in connection with Phase II of the [ ] project. He may render services without compensation before entities other than State agencies. See, Advisory Opinion No. 92-20.

CONCLUSION

The Commission concludes that the lifetime bar prohibits [the requesting individual] from appearing, practicing, communicating or otherwise rendering services before any State agency, including DHCR and AHC, and prohibits him from receiving compensation for services, in connection with Phase II of the [ ] project.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who requested it and who acted in good faith, unless material facts were omitted or misstated by the person in the request for opinion or related supporting documentation.

All concur:

Paul Shechtman, Chair
Robert J. Giuffra, Jr.
Henry G. Gossel
Lynn Millane
O. Peter Sherwood, Members

Dated: February 29, 2000


Endnotes

1. In its efforts to sponsor a particular project, the Partnership would engage in informal discussions with DHCR and AHC staff to determine the availability of State funds.

2. [The developer] applied for and received approval from the New York City Department of Environmental Protection for sewage and water hook-ups for all 143 units and, in fact, the 58 vacant lots have all of such hook-ups.

3. According to [the requesting individual], the Legislature sets State funding for affordable housing including target percentages for certain areas such as New York City, upstate New York, Long Island, etc. See, e.g., Private Housing Finance Law §1102.

4. The Legislature would designate what percentage of available AHC subsidies would be for New York City and for the other counties of the State. See, Private Housing Finance Law §1112.

5. According to [the requesting individual], the bank has already agreed to provide [the developer] private commercial loans for Phase II.

6. The Partnership has still not committed City funds for Phase II.

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