New York City's courthouse overhaul emerged as a major policy issue in City Hall after the state Legislature passed a 1987 law mandating courthouse construction throughout the state.

The Court Facilities Act of 1987 forces municipalities to submit court improvement plans to the state's Court Facilities Capital Review Board and establish a timetable for the projects' completion.

According to the law, if a municipality fails to enact these improvements, the chief administrator of the state court system can petition the state comptroller to intercept state aid to pay for the courthouse construction. The chief court administrator, Matthew T. Crosson, also serves as chairman of the capital review board.

This aspect of the law has been opposed by such municipal lobbies as the New York State Conference of Mayors. Edward C. Farrell, executive director of the group, said mandated court improvements are further burdening municipal budgets already strained by a stiff regional recession.

In 1989, the administration of New York City Mayor Edward I. Koch submitted a plan to spend $1.2 billion over a 15-year period for improvements to courthouses and other criminal justice facilities, according to city documents.

But as the 1980s drew to a close, so did the spending aspirations of City Hall, touching off a battle between Mr. Crosson and some officials in the new administration under Mayor David N. Dinkins.

In 1991, for example, the Dinkins administration decided to scrap the Koch plan for one that dramatically reduced capital spending earmarked for the court system during the next decade.

According to its current 10-year capital plan, the city proposes to sell $781 million of general obligation bonds to finance these improvements.

This amended version, announced by the Dinkins administration last November, called for $500 million more in court improvements than the level cited in the Koch plan.

However, the city would delay selling bonds to cover some of the plan's implementation, paying for $1 billion of the improvements between 2001 and 2111, according to city documents.

The Dinkins revision did not sit well with Mr. Crosson, who is forcing municipalities throughout the state to comply with the law or face reductions in state aid, knowledgeable sources say.

Mr. Crosson, who in a recent interview likened the city's court facilities to a "bazaar in Calcutta," said the capital review board in told city officials after their November revision that without a renewed commitment to improve city courts, the board would "have no choice" but to petition the state comptroller to withhold local aid payments to the city.

First, Mr. Crosson, as court facilities board chairman, alerted the city that the plan it submitted in 1991 did not contain more than $1 billion in additional improvements that the board said were needed to complete all the specified projects.

Mr. Crosson also said the board demanded that the city start construction and improvements on more than $1.5 billion of the projects during the next 10 years, and more than $1.23 billion in capital spending between 2002 and 2008.

This summer a consensus emerged from City Hall that the Dinkins administration must undertake an expanded court construction plan. In July, the board approved the city's new timetable calling for $2.8 billion in courthouse construction during the next 15 years.

The plan came after what one observer called months of intense negotiations between the city and the office of court administration, as well as an internal battle between Deputy Mayor Fritz W. Alexander 2d's office and the Office of Management and Budget.

Sources with knowledge of the plan say that Mr. Crosson found an important ally in Mr. Alexander, the deputy mayor for public safety. Sources say Mr. Alexander, a former justice of the state court of appeals, had supported increasing the city's capital spending for improving the court system, despite the reservations of several officials in the city's budget office that the plan could be too costly and that revamping courthouse facilities would be unfair given the city's other capital needs.

"This increase in spending and the resultant acceleration of many project schedules is accomplished without raising net debt service costs for projects materially above the level assumed in the current 10-year strategy, until principal amortization begins in 2008," Mr. Alexander wrote in a July 24 memo to Mr. Crosson.

Mr. Alexander did not return repeated telephone calls to clarify his statement. Thomas Lotito, the director of capital programs for the deputy mayor, referred all questions on financing of the courthouse projects to the city's Office of Management and Budget. Officials in the budget office did not return telephone calls.

But a senior city finance official, when read Mr. Alexander's statement by a reporter, said, "I don't know what that means." The official confirmed that finance officials tried to defend the spending priorities in the current 10-year plan.

One city finance official said there are "competing interests" for the city capital spending, and finance officials questioned the fairness of spending money for courts as opposed to other city needs.

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