City Will Invest $16 Million on Lower East Side After Rivington House Fiasco (Updated)

45 Rivington St.

45 Rivington St.

The mayor is announcing today that the city will invest $16 million on the Lower East Side in the aftermath of the Rivington House fiasco.

Earlier this year, it came to light that the Department of Citywide Administrative Services lifted deed restrictions on the former AIDS nursing home at 45 Rivington St. in exchange for a $16 million payment. The property owner, the Allure Group, then sold the building to luxury condo developers for $116 million. Several investigations are being conducted into the de Blasio administration’s mishandling of the situation.

According to the Wall Street Journal, the mayor’s office today released a memo detailing several steps it’s taking to deal with the controversy:

In an effort to address criticism from neighborhood leaders about the Rivington deal, the mayor’s office said the $16 million the city received for the deed change would go toward senior housing in the community. The city will also explore the possibility of adding nursing-home beds in the neighborhood.

The administration, the Journal reported, is also implementing new procedures for deed changes:

Under new rules, any property owner would have to disclose whether there were talks to sell the building—and to whom—before the city agreed to modify a deed. If the city agrees to a deed change, the property owner will be required to sign legal documents specifying how the building can be used after the restriction is lifted… The city also plans to add additional layers of scrutiny to future deed changes. The Department of Citywide Administrative Services, the agency that approves deed changes, must now present its findings to the first deputy mayor, the deputy mayor for housing and economic development and the city’s legal, budget and planning departments. “A core issue in the Rivington transaction was a failure to expressly value city policy goals and to ensure that those goals were reflected” in the deed change, according to the memo.

In the future, the memo states, borough presidents, community boards and community leaders will all be consulted about deed changes.

More to come…

UPDATE 3:51 p.m. The mayor’s press office is out with the official spin on the Rivington House matter. Here’s the press release distributed a short time ago:

Mayor Bill de Blasio today announced a series of reforms to policies and procedures that have been in place since 1991 concerning the release of formerly City-owned property from limits on potential uses (“deed restrictions”). The revised process recognizes the importance of land use to the City; ensures that decisions about land use reflect the City’s policy goals; and increases transparency and community input involved in deed modifications.

“These revised rules ensure that public good comes first, while also increasing transparency and the participation of the community in future deed modifications,” said Mayor Bill de Blasio. “The proposed changes will also address issues raised by the Rivington House transaction so that we can prevent similar outcomes in the future. We’re confident that these new rules will dramatically enhance our ability to retain crucial resources in communities across the city.”

In addition to the major policy reforms, the Mayor has also directed that the $16 million dollars in proceeds connected to a deed modification at Rivington House be re-invested in the affected community on the Lower East Side of Manhattan.

The existing deed modification protocol, which was formally documented in a Department of Citywide Administrative Services (DCAS) memo in 2010, called for a payment to the City of 25 percent of a parcel’s appraised value in exchange for the release of a deed restriction on the property. Deed restrictions were lifted often with little regard for broader City policy or program goals and without substantial public participation.

The proposed changes address key issues raised by the recent Rivington House transaction will ensure a similar outcome cannot happen again. The new process requires City agencies to ensure policy goals are being adhered to, incorporates the judgment of experts in the field, and adds a much more comprehensive requirement for community notification.

Reform Proposals for Deed Modifications

Policy goals will be pre-eminent and only in rare cases will a deed restriction be removed entirely. Deed modifications will only be considered in cases that advance City policy goals.

Financial considerations to the City will be secondary to the advancement of policy goals that benefit the City and the affected neighborhood.

Additional protections will be required. When modifying a deed restriction, DCAS will include legally binding language to ensure the property cannot be used or transferred for a different purpose.

Consultation with other City agencies will be mandated. DCAS will consult with other City agencies to determine if there are alternative uses for the property or greater policy needs of the City and community that are advanced through a modification of the deed.

More timely and rigorous appraisals will be required. It will be rare where the City will modify a deed and impose purely a financial condition for the modification. DCAS will no longer apply the blanket value of 25 percent of fair market value to lift a deed and will instruct appraisers to value the proposed modification of a deed restriction on a case-by-case basis.

New layer of oversight will be imposed. DCAS will present any recommendation to modify a deed to a committee composed of representatives of the First Deputy Mayor, Deputy Mayor for Housing and Economic Development, Corporation Counsel, the Office of Management and Budget, and City Planning.

Mayor’s Office of Contract Services’ (MOCS) role will be administrative. The process will no longer reflect that MOCS has the authority to grant mayoral approvals with regard to real estate. The committee will make a policy recommendation to the Mayor for his review and action.

Community notifications will be substantially enhanced. The administration will work with the City Council to determine what additional notifications should be provided. This could include public hearings held with community boards, additional notices to the public and more information-sharing with local elected officials.

The policy changes will be incorporated into an administrative rule to be publicly promulgated in the coming months. Upon adoption, the DCAS procedure concerning deed restrictions that has been in effect since 2010 (and in use since 1991) will be replaced with these new rules. All deed modification applications currently on hold will be reviewed under the new rules.

Local elected officials and Community Board 3 were advised of the new guidelines and the commitment to invest $16 million on the Lower East Side prior to today’s announcement. The mayor’s press release included a statement from local Council member Margaret Chin:

I am pleased to see Mayor de Blasio’s much needed overhaul to the deed restriction process, as well as the $16 million returned to the Lower East Side community to fund senior housing and the commitment announced today to pursue an increase in nursing home capacity… Though these measures will not reverse what happened at Rivington House, they will establish clear protocols, greater accountability and more transparency in future cases when the City considers removing or amending deed restrictions. While I will continue to explore every option to take back Rivington House, I thank Mayor de Blasio for taking these important first steps to make this community whole again.

Manhattan Borough President Gale Brewer also chimed in:

The mayor’s proposed changes to how deed restrictions are handled are meaningful reforms that will help prevent another Rivington House… I will continue to work with the mayor’s administration with the goal of securing additional investments in Lower East Side healthcare capacity and community facilities, increasing transparency for deed restrictions in general, and making sure we’re managing these important community assets the way we should be.

This afternoon, Jamie Rogers, newly elected chairperson of Community Board 3, said the local advisory body would look forward to revisiting the Rivington House issue in September (most CB3 committees do not meet in August). This past spring, the board approved a strongly worded resolution urging the mayor to reinstate the deed restriction, to return the building to the community and to restore Rivington House as a skilled nursing facility.  Board members said it was premature to talk about compensation to the Lower East Side for the loss of the nursing facility.

The same point has been made by Neighbors to Save Rivington House, a coalition sponsoring a petition drive that now boasts more than 1500 signatures. The petition reads, in part:

Help us win Rivington House back for the community that needs it. Sign this petition and tell Mayor De Blasio to reverse the deed restriction and return Rivington House to the people of the Lower East Side.

In Politico New York, Allure Group partner Marvin Rubin had this to say regarding today’s news:

Consistent with our successful record of converting financially distressed nursing homes into high-quality, financially stable skilled nursing and rehabilitation facilities, we tried to convert Rivington House into a for-profit skilled nursing facility to serve older and vulnerable individuals in lower Manhattan…  We are gratified that the mayor’s report today recognizes that, when the plan was not feasible, we followed all existing policies and procedures and paid the city more than $16 million for the removal of the deed restriction, based on the city’s own valuation of the property… We look forward to continuing our mission of providing vital skilled nursing home services and long-term care to our aging community.