Money Matters

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The office of city comptroller seems to have little fanfare or panache. There is the perception that he or she is a number cruncher who sits quietly in the background of municipal government. Even the race for comptroller is normally eclipsed by a high profile, competitive mayoral Democratic primary.

But this year, the mayoral primary a foregone conclusion—Comptroller William Thompson, a Democrat, will likely face Mayor Michael Bloomberg in November. Plus, the bad economy is dragging down the pension fund, which the comptroller must protect. The fund covers benefits for 237,000 retiring municipal employees, police officers, firefighters, teachers and Department of Education officials.

This past March, the value dropped to $77.1 billion, down from $82.5 billion in December of 2008.

A sagging pension fund is seemingly of little concern to residents of the Upper West Side, a neighborhood where municipal pensioners are a rarity. But as the fund dips, taxpayer costs rise. In 2009, nearly one in every 10 dollars spent by the city will go toward pension costs. By the time the new comptroller ends his or her first term in 2013, pension costs to the city are projected to jump to $7.6 billion, from $6.4 billion this year. Moreover, the city must pay out pension benefits to retirees regardless of the fund’s health, leaving taxpayers on the hook for a large tab. And with the economy creating gaping deficits in the city’s budget, spending is being scrutinized more than ever.

That leaves the 2009 Democratic candidates for comptroller—Melinda Katz, John Liu, David Yassky and David Weprin, all City Council members—rolling out plans to better identify government waste, provide stringent oversight of municipal agencies and bolster the pension fund.

The comptroller is the city’s chief financial officer, the most public and visible trustee to four pension boards and an investment advisor to all five. Along with the other trustees, who include leaders from the city’s most politically powerful unions, a mayoral appointment, the borough presidents, their appointees and the public advocate, the comptroller is responsible for protecting and improving the pension fund.

As the city’s fiscal watchdog, he or she can nix any contract deemed questionable. Thompson famously rejected the city’s contract with the beverage company Snapple in 2004, calling the bidding process tainted.

But even a job that is essentially about money is fraught with political decisions that go beyond running for mayor, a popular career trajectory for most former comptrollers. Comptrollers have taken an activist approach to the job, leading to divestment in apartheid South Africa in the 1980s. Politics can also influence the decision to audit a particular city agency, or choose a sector in which to invest the pension fund. And as the city’s authority on finances, the comptroller can help sink or propel any proposal to balance the city budget, or bail out a struggling public authority. There can even be a role on social issues: Thompson released a report that detailed the economic benefits of same-sex marriage to the city and state.

“It’s got real power,” said Doug Muzzio, a political science professor at Baruch College’s School of Public Affairs. “This is a job worth having.”

Council Member Melinda Katz, who represents Forest Hills, Queens, seems to understand that. Beyond simply earning a return on city investments, she believes that the comptroller can invest in companies that will benefit the city while upholding her responsibility as steward of the pension fund. Katz says this will allow her to get concessions that will benefit New Yorkers, promote job creation and bolster the local economy.

“If you’re a big corporation and want millions from hardworking men and women, what are you doing for New York City?” Katz asks. “Where are your corporate offices? What will you do to train people being laid off?”

This aggressive approach toward shareholder rights is similar to how Katz chaired the Council’s Land Use Committee, which has a powerful role in shaping any housing development proposals that come through her committee. Despite being the preferred candidate of real estate industry donors, Katz said she has a record of pushing developers to include more affordable housing and create jobs.

“I’m willing to not back down. I’m someone who will negotiate better things for New Yorkers,” she said.

Tapping into her early career as a mergers and acquisitions attorney, Katz wants to invest a small part of the pension in companies that can make a profit but that are saddled with paying off debt. This investment strategy, skewed toward helping New York City companies, would allow businesses to restructure and emerge as a new company, debt-free.

John Liu, a Council member from Flushing, Queens, criticized the plan, saying that the pension fund should stay away from assessing the viability of struggling companies and providing taxpayer funds to help them get out of debt.

“That is not a function of pension plans,” Liu said. “That is a function for bankers.”

Liu has taken a hands-off approach to the pension funds, which he said wax and wane given that investment returns are cyclical. Besides, the real power of the comptroller, in Liu’s opinion, is in the ability to audit.

The comptroller has a mandate from the city charter to audit the mayor’s agencies every four years.

“The audit function is, at its core, the substance behind any system of checks and balances,” Liu said. “Tangible measurements are necessary.”

Liu notes his background as an actuary and management consultant for PricewaterhouseCoopers when highlighting his qualifications. Deadpan, he rehashes the joke that actuaries are like accountants, but without a sense of humor.

Liu developed a reputation as a pit bull by aggressively questioning city officials during his eight years in the Council, where he chaired the Transportation Committee. He has also fiercely criticized the Department of Education and the much-maligned MTA, claiming he was the first elected official to discover the authority’s now-infamous second set of financial books.

In addition to auditing city agencies, Liu wants to expand the comptroller’s influence to include the Department of Education (the gridlocked State Senate would have to act first to give the city comptroller that authority) and federal stimulus money.

“It’s a lot of money over a short period of time. It’s a recipe for waste and possible fraud unless someone is keeping an eye on it,” Liu said. “That would be my top priority.”

David Yassky, who represents Brooklyn’s brownstone belt, is another candidate who’s playing up his wonky persona. As the city was “within a whisker” of shutting down senior centers and firehouses, he says, it is increasingly crucial to use government money efficiently.

“That’s why I’m so determined to transform the comptroller’s audit staff,” he said, “into an in-house management consultant team that goes agency by agency to find the wasteful and inefficient spending.”

His goal is to identify the 10 percent of an agency’s budget producing the least results.

Yassky was a budget analyst in the mayor’s Office of Management and Budget, where he sat at a computer to analyze spreadsheets and create economic models to direct revenue. In the Council, he touts a law he authored that busted fraudulent claims to the city and his role in a bill that closed a loophole that gave luxury developers a tax break without building affordable housing. “You want to look for a background that tells voters: I know this candidate will produce in the comptroller’s office,” Yassky said.

Yassky has positioned himself as the “progressive” candidate, that is, the one poised to sweep Manhattan primary voters, though he has been criticized for his vote to extend term limits.

He is already the lone supporter—albeit a lukewarm one—of creating a new tier of less expensive pension benefits for future municipal employees. Gov. David Paterson and Bloomberg have endorsed the proposal as a way to bring down skyrocketing pension costs.

Yassky has also made green technology and the environment key components of his campaign. As comptroller, Yassky would push companies to account for their carbon footprint and plan for environmentally sound growth. He’d invest 5 percent of the pension fund in green technology.

“I don’t think it’s a conflict between a strong return and investing in the environmental sector,” Yassky said. “Most economists’ view is that the environmental sector will be the growth area when the economy as a whole rebounds. We want to make sure that that growth happens as much as possible in New York.”

David Weprin, however, is looking at a different kind of grassroots growth. The northeastern Queens Council member wants the comptroller to be the people’s financial planner, as well as guardian of the city’s finances. In addition to the comptroller’s headquarters in lower Manhattan, Weprin wants an office in every borough, plus one in northern Manhattan. These offices would educate New Yorkers on financial literacy, banking issues and predatory lending practices.

“I would have a more consumer-friendly office in the five boroughs,” Weprin said. “When I leave office, the public will know what the comptroller does.”

Though his proposals aim at creating an accessible comptroller’s office, Weprin has a propensity to use fiscal jargon that can sound like a foreign language to the average Democratic primary voter. When he talks about the pension investments, Weprin muses about investing in real estate now—“Buy low, sell high,” he quips—or talks about the merits of bond underwriting. It can be dense, but Weprin wants voters to know he is as knowledgeable on the economy as his resume suggests.

Weprin was deputy superintendent of banks under Gov. Mario Cuomo, served on the state banking board, spent time on Wall Street in municipal finance and has chaired the Council’s Finance Committee for the past eight years. These connections, he argues, are crucial for a comptroller.

Rather than detail a pension investment plan early in the campaign, Weprin says he would assembly a “blue-ribbon panel” of advisors and rely on the advice of fellow trustees to craft his policies.

“My whole professional career has been tailored to being comptroller,” he said.

While each of Weprin’s challengers would likely say the same thing, it remains to be seen what’s going to resonate with primary voters.

Perhaps they are looking for the candidate who promises to be a strong, independent check on the mayor (as Liu wants to be). They may want a comptroller who can help them handle a tax problem (Weprin’s vision). Or are they looking for investment in local business (Katz) or green technology (Yassky)?

Whatever these candidates’ goals or plans, the pension fund is low and a bad maneuver can cost taxpayers money to cover retirement benefits, points out Carol Kellermann, president of the Citizens Budget Commission.

“The fiduciary duties to maximize the funds come first,” Kellermann said. “When some of these creative ideas are placed into office, they might not be quite as enthusiastic about it.”

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