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APR 03 2014
NEW YORK
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HON. MARGARET A. CHAKG.'.
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03 2014 Plaintiff,
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THE Cl TY OF MEW YORK: MICHELE OVESEY,
CommisdDner for t he 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 f dl i es. The two contracts at issue concern
Facts
shelters located at 1625- 163 1 Fulton Street (Fulton Residence) in the borough of Bronx, and 3 16
and 330 West 9Sh Street (Freedom House), in the borough of Manhattan. Comptroller J ohn 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-profit corporation representing block associations, residents,
retailers and property owners between West 90th and West 97h Streets between Riverside Drive and
Amsterdam Avenue. Neighborhood moved to enjoin the Comptroller from registering the contract
for Freedom House. As the facts relevant to Neighborhoods 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.
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 Citys 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 J ohn Liu did not do so. One contract is for 1625-1 63 1 Fulton
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 J une 5, 2013, petitioner submitted executed contracts for both shelters to the
Comptrollers office (Exh A - Fulton Residence; Exh B - Freedom House). At the end of the 30-day
period on J uly 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 J uly 9,
20 13, DHS responded to the Comptrollers 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 J uly 19, 20 13, petitioner commenced the instant
proceeding to compel the Comptroller to register the contracts.
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 9Sh Street 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
opportunity even 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 10 1 homeless families with children.
Freedom House houses up to 200 homeless adult families in two adjoining buildings.
Bloomberg v Liu - Index #40 1 122/20 13, Neighborhood v City - Index #156382/2013
Page 2 of 8
regular e-mail addresses (see Aff. 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 4,201 2, CB7 adopted a resolution opposing operation of the Shelter
on West 9Sh Street (see id., Exh 7).
Neighborhood adds that the manner in which Freedom House is operated causes a nuisance
to area residents. Examples of the Shelters negative impact included an increase in felony and
misdemeanor assaults, petit larcenies and rapes reported in the 24*h Police 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
Comptrollers 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.
Neighborhoods 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 Neighborhoods claim also fails because the Administrative Code 2 1-3 12
(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)
(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.
days of filing of the contract unless -
(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 -
3 12(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
Page 3 of 8
I
the exceptions in the section 328 mandate to the Comptroller (see Comptroller of City ofNew York
v Mayor of ci t y of New York, 7 NY3d 256 [2006]). Further, when the Mayor responded to the
Comptrollers concerns that gave rise to his refusal to register the contracts (see Petition by Mayor
Bloomberg, Exh F), the Mayor essentially overrode the Comptrollers 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 f j 2 1-3 12 (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 Mayors 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 Mayors in
determining the size of the shelter violated Administrative Code tj 21-312(2)(b). Nor did the
Comptroller distinguish or contradict the Citys argument that Administrative Code fj 2 1-3 12(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 (see Adkins v Board ofAppeals, 199 AD2d 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., 28 1 AD2d 449,45 1 [2d Dept 20011). Accordingly, petitioners claim that the operation
of Freedom House violated the bed limit of Administrative Code section 2 1-3 12(2)(b) cannot be
sustained.
Statute of Limitations
The City raises the defense of the four-month statute of limitations as a bar to
Neighborhoods action that was commenced more than thirteen months after Freedom House opened
on August 6,20 12. And as to Neighborhoods 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 J anuary 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
I 3,20 12; the Fair Share review was issued on February 4,20 13. The long-term contract was then
presented to the Comptroller for registration on J une 5,20 13. The Comptroller rejected the contract
Bloomberg v Liu - Index #401 122/2013, Neighborhood v City - Index #15638212013 Page 4 of 8
on J uly 3,2013. Neighborhood commenced the instant proceeding on or about J uly 17,201 3.
Neighborhoods 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-
issue.
~
~
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 J une 6, 2013, when the long-term
contract was submitted to the Comptroller; and not August 6,20 12, 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
agencys presentation of a long-term contract to the Comptroller for registration, which was on J une
6,20 13. Thus, Neighborhood is within the four-month time period when it commenced the instant
action on or about J uly 17, 20 13.
Fair Share Criteria
Neighborhoods 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 Homes f or the Homeless, 158 Misc.2d 184, 191 [Sup.Ct. NY Cty,
19931; see also, Tribeca Community Ass n v New York City Dept, Of Sanitation [2010 WL 15 1534
[Sup.Ct., NY Cty, 20101, af d 83 AD3d 513 [l st Dept 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 1 122120 13, Neighborhood v City - Index #156382/2013 Page 5 of 8
upon the areas surrounding the sites (NY City Charter Q 203).
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 13,20 12. 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 1 1, the City was mandated by law to open new shelters to
meet the need.
The Report informed that the Citys 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, institutions and open spaces that
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-refrigerators in every room, it is more self-contained and less burdensome on the neighborhood.
Bloomberg v Liu - Index #40 1 122/20 13, Neighborhood v City - Index # 156382/20 13 Page6of 8
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 Comptrollers 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 Neighborhoods 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, Neighborhoods 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 n v Dinkins, 207 AD2d 670,
670 [ 1 St 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 (532 Madison Ave. 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, . . . any property, funds of such
county, town, village or municipal corporation . . . . (GML 9 51). However, a suit under GML
5 1 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 (Godfrey v Spano,
13 NY3d 358,373 [2009], quotingMestiva ofForest Hills Inst v CityofNew York, 58 NY2d 1014,
101 6 [ 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). Petitioners
allegations again focuses on Administrative Code section 2 1-3 12(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 1 122120 13, Neighborhood v City - Index #1.56382120 13
Page 7of 8
4 . .
Petitioner also argues that Aguilas 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 4,200 1 (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 6 5 I .
Conclusion
The conflict between housing the homeless and maintaining a neighborhoods 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 Neighborhoods nuisance claim may be sustained, and whether DHS
and Aguilas spending gives rise to a claim under GML 5 5 1.
Based on the foregoing, the complaint under Index Number 156382/2013 by 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 Index 401 122/2013 by Mayor
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 9Sh Street (Freedom House) in Manhattan.
This constitutes the decision and order of the court.
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 J anuary estimated 64,060 homeless people in shelters and on
the streets in J anuary 2013 (Mireya Navarro, Homeless Tally Taken in .January Found 13% Rise in New York, NY
Times, NYiRegion Nov. 21, 2013).
3
Number of Homeless in City Hits Record High, Report Find, http:lwwwiny1 .comicontenthewsi205 1 16
(accessed March 12, 2014).
Bloomberg v Liu - Index #401 12212013, Neighborhood v City - Index #156382i2013 Page 8 of 8