In September 1991, New York City Mayor David N. Dinkins appointed a commission to study homelessness in the city. The panel of private-sector and government experts on the homeless was headed by Andrew M. Cuomo, son of the state's governor, and president of HELP, a nonprofit group he founded in 1986 to provide shelter for the homeless.
The commission's goal was to study homelessness, analyze its causes, and develop a mechanism for providing services to the homeless more efficiently. Helping the city's 24,000 homeless had been one of the mayor's campaign themes.
The commission's plan also included a controversial recommendation that Mr. Dinkins abandon his proposal to build 24 small shelters throughout the city, many in middle-class neighborhoods.
The report, titled "The Way Home: A New Direction in Social Policy," says the city should dramatically reduce its involvement in the homelessness business. It said the city should set overall policy, while services, such as housing, drug treatment, and other therapies, should be left to those that perform those functions the best - not-for-profit groups.
The report calls on the city to downsize the Human Resources Administration and the Department of Housing Preservation and Development, the agencies mainly responsible for doling out funds and services for the homeless. The savings would pay for more drug treatment and other services.
"To summarize, the shelter system inherited by Mayor Dinkins flat- out doesn't work." the report says. "The current system must be seen as the failure it is and be restructured."
The recommendations were apparently too much for the city to handle, at least all at once. About three months after the report became public, Mr. Dinkins said he agreed with the recommendations, but set a timetable for implementation that would take about two years.
Following the city's announcement in May, Mr. Cuomo charged that City Hall was stonewalling the commission's suggestions. While conceding the plan could not realistically be implemented immediately, he said the city could move faster.
City officials did not return telephone calls.
During the controversy, one aspect of the plan received little notice: a proposal for a new way to pay for construction of transitional and permanent housing for the city's homeless.
According to the city's five-year plan, more than $200 million from the capital budget will be dedicated to the construction of such housing. But instead of using the city's general obligation bonds, the commission recommended a plan in which tax-exempt revenue bonds secured by service contracts would be issued to finance the development of homeless facilities.
The financing mechanism is the same one Mr. Cuomo uses for HELP, which stands for Housing Enterprise for the Less Privileged. The bonding method, first used by HELP in 1987, provides a revenue stream that allows not-for-profits to issue tax-exempt bonds through state entities, such as the New York State Housing Finance Agency, for the construction of facilities for homeless families.
The bonds are secured through yearly appropriations of municipalities to the state financing authority. The revenue stream is created when municipalities funnel their federal reimbursement for the Aid to Families with Dependent Children program to the state agency. The municipalities agree to refund the bonds if the federal payment were to cease.
Since its first issue, HELP has sold bonds to finance projects in the city, on Long Island, and in Westchester County. Mr. Cuomo financed the latter project, known as WestHELP, through the sale of $10.8 million of tax-exempt revenue bonds in 1990. HELP issued the securities using the housing finance authority as its vehicle to obtain tax-exempt status.
Several observers who spoke on a not-for-attribution basis said the city's reluctance to embrace the plan is partly political.
Mr. Cuomo figures this shift in responsibility away from the city as well as the proposed downsizing of the homeless bureaucracy would significantly affect certain city employees.
Though Mr. Cuomo declined to elaborate on how many workers would lose their jobs if and when the plan becomes a reality, these workers represent a key constituency for Mr. Dinkins, who will seek re-election in 1994.
Mr. Cuomo discusses the commission's homeless plan and how he used Wall Street to help address the problem of homelessness in the state with staff reporter Charles Gasparino.
Q: What made you decide to start this organization?
A: We have a homeless crisis. I was working in state government for a number of years, and I was frustrated by the inability of government to address the problem. In many ways, the private sector can make a very valuable contribution to the problem. So the concept was very basic.
We were spending a lot of money, as much as $120 a night to house people in welfare hotels. But we were doing very little. So several of my colleagues and I did a white paper on how to better provide service to the homeless. And then we walked into several [newspaper] editorial boards around the state with our proposals.
One of them said, "If it works, why don't you do it?" So we did it, and that was HELP-1 [in East New York]. The plan has worked so well that other municipalities want to do more six years later.
Q: Many people would say that HELP's approach and the homeless commission's plan sound like something that would be proposed by a conservative, like Housing Secretary Jack Kemp. Do you agree?
A: I think this is more about common sense.
Q: If that's the case, why hasn't the administration of Mayor Dinkins agreed to implement the plan immediately? Some observers say the mayor is waiting until after the election, or that he may be ideologically opposed to many of the recommendations.
A: The city is implementing the plan. Is it feasible to implement the plan immediately? I don't think so. Is the rate the city is moving fast enough? No.
Q: Is there an ideological debate in City Hall over homelessness? The report advocates the use of rental vouchers for permanent housing and says the homeless often have a wide range of problems, including drug abuse and mental illness, that led to their current situation.
A: Many traditional so-called liberal doctrines say the solution to homelessness is only housing. We disagree with that. That's a policy debate. There is also a practical debate. We say disband city agencies that employ a lot of people. There is an institutional resistance to this suggestion.
Q: How much of a downsizing would occur?
A: It would be significant. But keep in mind that this plan is supported by every editorial board, almost every borough president, [City Council] Speaker [Peter] Vallone, and all the advocacy groups, both liberal and conservative.
Q: Commission member Frank G. Zarb, chairman, president, and chief operating officer of Smith Barney, Harris Upham & Co., developed a financing mechanism for the construction of shelters that would not utilize the city's capital budget. Why?
A: We called for a whole new financing arrangement that says "forget about the city's capital budget." We say construct a financing mechanism in which the bonding is done through a financing entity for a not-for-profit. This way, it won't affect the city's credit rating. We think it will be cheaper for them to do this way.
Q. Where do you think the commission's recommendations to the city will be a year from now?
A: This city says it will implement the plan. We are flattered by that. We have a different opinion as for the rate of implementation. Basically, the city has said it will adopt the program.
Q: HELP has completed a number of bond deals since the first one in 1987. Were they difficult to sell to the municipal market? How did you convince people that the bonds are good investments?
A: First, we had to help people understand the concept and that the bonds were secure. There weren't many deals like this, especially bonds secured by [Aid to Families with Dependent Children] payments. When we sought a letter of credit during the first deal [with Bankers Trust Co.], we had to show where the risk was.
As part of our service contract with the city [during HELP's first bond deal financing the construction of a transitional housing project in East New York], we had to show that if families lost their AFDC payments or if homelessness somehow stopped, then the city would come in and buy the building and pay off the bondholders.
Q: I'm sure you've faced criticism saying that HELP is a business, that it relies on homelessness to stay in business, and that it stands to benefit from the recommendations in the commission's report. Is this criticism valid?
A: No. The report merely discusses our experience. In fact, the report calls for a reduction of Tier II housing [temporary or transitional housing for the homeless that HELP provides] until there is an expansion of permanent housing for the homeless using rental vouchers, rather than building new units.
