Experts say Stringer’s rejection of homeless shelter contracts is ‘illegal’

Giuliani vs. Hevesi. Bloomberg vs. Thompson. Bloomberg vs. Liu. Given the historic – and often litigious – disagreements between New York City’s mayors and comptrollers, the current standoff between Bill de Blasio and Scott Stringer over the registration of homeless shelter contracts is far from shocking.

However, as dozens of shelter contracts remain in limbo, some legal experts are suggesting that the comptroller has exceeded his authority in rejecting, or “kicking back,” contracts. And nonprofit leaders say the ongoing dispute is hurting their ability to provide services to homeless New Yorkers.

“Late payments and delays in contract registration don’t just cause headaches, they hinder organizations and impact service delivery,” said Michelle Jackson, associate director and general counsel for the Human Services Council, which advocates on behalf of many of the city’s homeless shelter providers.

“Nonprofit workers on these contracts are placed in limbo, working in temporary spaces and starting programs without necessary documents and funding,” Jackson continued. “And ultimately it’s the clients who suffer – the delays divert limited resources away from programs, impact staff morale, and make it difficult for nonprofits to plan and invest in programs at the outset.”

Registration of contracts for city-run homeless shelters has been an ongoing point of contention between the mayor and the comptroller, especially since a damning Department of Investigation report in March catalogued the unsafe and squalid conditions of many shelter sites.

The report was unforgiving in its assessment of the Department of Homeless Services’ oversight of 25 sites, saying, “DHS should, but does not, enforce building maintenance or ensure violations are resolved. It should, but does not, force repairs or regularly do its own repairs, nor does it seek assistance from other agencies in getting repairs made. As a result, many shelters operate with existing violations that make life unsafe for its children and family residents.” 

The report also highlighted that many city-funded homeless shelters have been operating without contracts on an emergency, per diem basis, making them both costlier and harder to hold accountable.

“With no contracts, providers and landlords are not subject to competition, and are not held to enforceable contract terms that could, in theory, require them to maintain their buildings or make needed repairs, or else be subject to penalties such as rent reductions or fines,” the report said.

In response, DHS has led an intensified effort to improve conditions at city-run sites and establish contracts for sites that have been operating outside of the contracting system. According to a spokesperson, DHS’ Shelter Repair Squad has completed more than 2,000 inspections over the past several months, clearing more than 7,000 violations and completing almost 3,000 repairs. The spokesperson also said 83 percent of the violations cited in the DOI report have been cleared.

However, according to the comptroller’s office, these efforts have been insufficient in ensuring the safety of many sites that the city has attempted to bring under contract. Over the past 20 months, Stringer’s office has rejected 33 homeless shelter contracts, saying 18 have open violations, and 21 contracts are missing a routine site review inspection, which DHS uses to evaluate safety at the sites.

City officials say the rejected contracts represent tens of millions of dollars in outstanding payments to nonprofits, which provide a total of nearly 2,000 beds for single adults and nearly 900 family units.

Some of the rejected contracts are with nonprofit organizations, such as Samaritan Village, that the city has partnered with for decades. Samaritan Village’s contract for operating a shelter at the former Pan American Hotel in Elmhurst – which initially opened as an emergency site – has been rejected three times over the past several months, with the comptroller citing numerous health and safety concerns.

Despite the cost to providers – some of which have accepted bridge loans to keep their operations going – the comptroller has insisted that his office should not – and cannot – register contracts without documentation showing that sites have either corrected violations or have a concrete plan to do so.

His office also says that in many instances, DHS has been unresponsive to requests for several months.

“The Department of Homeless Services should get its act together, make sure shelters are safe and provide the very basic materials required for us to register these contracts,” said John McKay, the comptroller’s communications director. “The fact that they have not done so, despite our offers to help them navigate this process, speaks to a lack of professionalism and an inability to handle the details necessary to run this city.”

But some legal experts say the comptroller’s refusal to register contracts is an overreach of authority.

Roderick Hills, a New York University School of Law professor who specializes in local government law, cited Section 328 of the city charter, which states that the comptroller must register a contract unless there is not enough funding for the contract to be paid, the Mayor’s Office of Contract Services has not certified the contract, or there is reason to suspect corruption.

Given that none of the homeless shelter contracts have been rejected on those grounds, Hills said the comptroller is operating outside of his office’s authority. 

“For the comptroller to slow down or stop the mayor’s contracting policy is frankly illegal,” Hills said. “The charter makes the comptroller a warning light, not a brake. The mayor is the driver, and all the comptroller can do is cry foul, not stop the car. It’s up to the mayor to decide whether to listen.”

The comptroller’s office, meanwhile, says it is justified in rejecting contracts and sending them back to DHS with requests for additional documentation, citing a Procurement Policy Board rule that lays out which documents should be included in all contracts and allows the comptroller and the head of the Mayor’s Office of Contract Services to agree upon additional requests.

But legal experts have suggested that the Procurement Policy Board rule is not sufficient grounds for delaying the registration of a contract, and that such delays deprive nonprofit providers of the funds they need to make the very improvements cited in the contract rejections.

“The PPB rule doesn't override the charter and it doesn't let the comptroller do the very things the courts have repeatedly said not to do,” said Marla Simpson, a nonprofit executive who was the head of the Mayor’s Office of Contract Services from 2003 to 2012. “Nonprofits are lifelines for New Yorkers who need services. When a well-known community-based group steps in and agrees to provide much-needed programs, if the goal is to improve conditions for clients, the last thing we ought to do is to prevent the city from paying for the work.”

McKay, however, says the comptroller is simply providing the oversight needed to ensure the safety of New Yorkers while acting as a check on the mayor’s authority, which is in the spirit of the charter.

“The charter has a separation of powers for a reason – it’s to protect the integrity of the contracting process,” McKay said. “These are huge contracts, worth millions of dollars. We’re not asking for perfection here, we’re asking them to get complete contract filings to us. That shouldn’t be so hard.”

But Simpson argues that the comptroller should hold city agencies and nonprofits accountable in ways that recognize the realities – and legal limitations – of the current system.

“City agencies are slow at getting contracts done. Many programs pay less than our services actually cost, and nonprofits are not always perfect,” Simpson said. “Of course the comptroller should hold city officials and nonprofits accountable. There’s huge room for improvement and there’s lots of ways to draw attention to that. But it’s not OK to stop paying for services because a city agency screws up the paperwork.

“And even if there are some more substantive issues,” Simpson continued, “it's unfair and illogical to think that taking funding away will make anything better. For the sake of the nonprofits trying to do this work, it’s important for the comptroller and the mayor to figure it out. Contracts should be registered on time, or deemed as registered, and providers should be paid on time.”

The dispute between the two offices may be exacerbated by the city’s payment system, which, according to a knowledgeable source who spoke on the condition of anonymity, does not accurately reflect the offices’ roles as defined in the charter.

“To pay anybody for anything, the city has to use a database system called the Financial Management System, or FMS,” the source explained. “When they built this system in about 1999, the city didn’t specifically build in an override option so the mayor could push the button when the comptroller chooses not to register a contract, although that override power exists in the charter. Only the comptroller can push the button so that payments can be made.” 

Despite the differences in legal interpretation and the complex logistics of the city’s contracting system, city officials have pledged to keep services for the homeless moving forward.

“Ensuring homeless families in need are housed and receive the services they need is our first and foremost priority, and we won’t let any paperwork issues impede that,” said First Deputy Mayor Anthony Shorris. “We’ve been aggressively repairing shelters to ensure they’re safe for homeless families and individuals. We’ve also consistently provided the comptroller’s office the information and paperwork they request, but these nonprofits provide critical services to New Yorkers in need and are owed funding – we have to remedy this situation.”