The Streets Were Paved with Gold (10 page)

The issue of rent control received little attention in the 1977 mayoral campaign. Each of the candidates was too busy promising to forge a new, pro-business climate. The candidates never made the connection between this stance and their sworn opposition to even a means test for rent control. Certainly, Mayor Ed Koch never understood the contradiction. Like many legislators and judges who pass on rent legislation, this foe of special privilege knew a good thing when he didn’t have to pay for it. “I’m not going to let it go,” he declared a month before he was sworn in as mayor. The “it” was his cheap apartment, which he promised to keep while living in his official residence, Gracie Mansion.

Privately, many politicians concede that rent control protects some people who need no protection. Publicly, most perform like seals, squeaking their undying devotion to tenants. Since there are more tenants than landlords—75 percent of city residents are renters—it’s a politically safe pose. Which explains why all the studies urging reform remain parked on shelves in the municipal library.

New York is different, says Commissioner Joy, because “75 percent of our population are renters.” In Detroit and Philadelphia,
only 40 percent are renters; in Houston, 47 percent. New York is different, says Kristoff, thinking of rent control and subsidized middle-income housing, because “There’s an unbelievable psychology that you find nowhere else. Tenants here believe they have a right to be protected against high rents.” It’s a problem shared, for instance, with Washington, D.C., where they also have controls.

In fact, much of the city’s population cannot afford to pay an economic rent. The median income of rent-controlled tenants, says Leventhal, was $7,057 in 1974; in 1975, half the controlled “female-headed households” paid 36 percent of their income for rent, while the majority of senior citizen households paid more than 40 percent. Rent control is not just “metaphysical,” as Sternlieb said, but may well be an insoluble problem. Most tenants simply cannot afford to pay the rent landlords need to cover costs or earn a profit. Thus smaller landlords frequently reduced services, failed to make building improvements, abandoned their buildings or refused to invest in new housing. The logical solution: a subsidy program to pay the difference between what the tenant can afford and the landlord needs. The question: Who should pay? The city can’t afford it. Nor can the state. The federal government, which has a small Section 8 subsidy program under the Housing and Urban Development agency, is not likely to institute a massive new program. A means test for those living in rent-controlled apartments would help. But even if it removed 20 percent of the tenants from controls, the poorer landlord’s problem would remain unsolved since most of these tenants live in the larger buildings of wealthier landlords. Solving one problem would create another, since the absence of controls would, no doubt, prompt desperately needed middle- and upper-income residents to flee the city. The city is damned if it does, damned if it doesn’t.

In the absence of government subsidies, it’s unfair but probably unavoidable that landlords will be stuck with the subsidy. In the short run, they pay. In the long run, the city will continue to pay dearly for politicized housing decisions.

What came to be known as the “Little Wagner Act” was in fact the Big Wagner Act for municipal labor unions. On March 31, 1958, Mayor Robert F. Wagner signed an executive order granting
100,000 employees the right to join the union of their choice and to bargain collectively, which implied the right to strike. In retrospect, one would think this an easy decision.

It was not. The Mayor’s advisers were strongly divided. One group argued that unions were just another special interest and that granting them too much power would whet their appetites, encourage inflated settlements and give unions too much sway over elected officials; the opposition countered that collective bargaining would impose an orderly machinery for the settlement of disputes, bring stability, promote efficiency, do justice to workers. As was his custom, Wagner agonized quietly, exhausting everyone. When he finally decided to sign the order, political considerations played a part. As would become the case in subsequent negotiations, the Mayor did not want to give up too much immediate money so he gave up something else. “… the Mayor’s decision to act now was influenced by a desire to conciliate major union groups on the eve of the publication of the executive budget,” wrote Abe Raskin, the respected labor reporter, on the front page of the
Times.

Jerry Wurf, then Regional Director (now national President) of the American Federation of State, County and Municipal Employees, was more than conciliated. A week before, Wurf had threatened a strike of his 25,000 members. When the executive order was signed, he hailed it as “a monumental forward step,” predicting that his membership would double within a year.

Within seventeen years, Wurf’s membership swelled to 125,000. By 1977, all but 4,500 city employees—less than 2 percent—were represented by unions. With this growth in membership came new power. The city came to collect and turn over to the unions the dues of their members, including a political action fund to support union-backed candidates. With city support, in 1977 the state approved an agency shop law requiring all employees to pay union dues, increasing the political action kitty. The city came to fully fund the health and welfare benefits of its employees, allowing the unions to administer these funds and hire small armies for that purpose. By 1977, the city was paying the salaries but releasing 126 employees for full-time union activity; another 96 were released with the union paying their salary and the city their pension, health and welfare contributions; still another 41 union organizers were released on a part-time basis.

The union’s growing strength is gauged by glancing at the budget of the Office of Labor Relations, the city agency responsible for
representing 7.5 million taxpayers in contract negotiations. In the last year of the Beame administration, this office had fifty employees and a puny budget of $800,000. That same year, one union—Wurf’s D.C. 37—had fifty-one members released by the city for union work. The dues of all city unions were $32 million, and, in early 1978, one—the PBA—lavished $750,000 to retain an attorney, Richard Hartman.

In addition to their ability to paralyze the city with a strike, as the transit union proved in 1966 and the bridge tenders in 1971, over the years the unions gained management powers and became partners in the city’s governance. Executive Order No. 52, signed by Mayor Lindsay on September 29, 1967, allowed such previous management prerogatives as “workload and manning” to be placed on the collective bargaining table. Everything became negotiable. “Collective bargaining has become a means not only for determining the wages and conditions of employment of public employees,” writes former city Personnel Director Sol Hoberman, “but also for modifying the nature of public service and the role, authority and responsibilities of the Mayor, the City Council, and agency heads.” Union contracts now determine class size and welfare caseloads. The Transit Authority was not permitted to hire part-timers, ensuring that work patterns conformed to employee, not rider habits. The sanitation union successfully insists that three men are required on a truck, though most cities and private carters employ two and even one. Unionization reaches almost to the top. Mayor Koch complains that all but 2,000 of his managers don’t belong to a union. He says he can’t properly manage since most supervisors have divided loyalties because they belong to a union—often the same one as the people reporting to them—and discipline breaks down.

With the weakening of the political party machine, unions filled a political vacuum. “We have the ability, in a sense, to elect our own boss,” conceded Victor Gotbaum, who succeeded Wurf in 1965. Unions also now have the ability to be the city’s chief banker. The employee pension funds they control are today New York’s foremost lender, pumping a scheduled $3.8 billion into city securities. With such political and governmental power, it has often been difficult for public officials to distinguish between their personal and the public’s interest, between the danger of a crippling strike and the danger of giving away the public purse.

The people in the middle—the public—got squeezed. Between 1960 and 1975, the Bureau of the Budget reports, wages and salaries
jumped 316 percent, faster than the rate of inflation or comparable wage gains in the private sector. But city services did not rise with wages. In the 1971 to 1975 period, the Temporary Commission on City Finances spotted what they called “some startling trends”:

A decision that seemed just and sensible in 1958, which was to promote efficiency and stability, greatly altered power in New York. Before he died, Liberal party and United Hatters union chief Alex Rose, one of the advisers who urged Wagner to sign the order, told me he thought it was “a mistake.” He observed that city workers were not like the trade unionists he led because “the city is not an employer in the traditional sense. Profits do not exist. Workers are not extracting a share of the profits but rather a share of taxes. Unlike bargaining in the private sector, municipal collective bargaining is part of the political rather than the adversary process. Therefore, municipal unions are really a pressure group, a special-interest group.” Unlike the private sector, governments usually have no real competitors for the services they provide. Short of moving from the city, taxpayers cannot take their business elsewhere. When labor exercises its traditional right to withhold its labor, the public, unlike the private sector, cannot exercise its traditional right to withhold its business.

Asked if he thought his executive order was a mistake, former Mayor Wagner said, “No. Just like anyone else, these people have a right to bargain collectively.” But, of course, everyone does not have that right. Welfare recipients don’t. Unemployed youths don’t. Taxpayers don’t have recourse to binding arbitration if dissatisfied with a tax hike. Later, Wagner added, “There’s no question it gave the unions muscle.… It was a significant decision; but I still say it was the right thing to do. If we didn’t do it, it would have happened eventually anyway.… Even with collective bargaining, we were able to hold down settlements.”

Wagner’s successors fared less well. After the fiscal crisis struck, Mayor Beame and the union leadership agreed they were “partners” in saving and running the city. At one of his first City Hall meetings in 1978, Mayor Koch told me early in his term, “The union leaders kept saying we were ‘partners’ and had to work together on everything. After a half-hour, I felt compelled to say, ‘Wait a minute. We share many of the same goals, but we’re not partners. You represent one hunded ninety thousand people. I represent seven and a half million. We don’t sit side by side at that desk.’ ”

Former Mayor Wagner vividly recalls a Loyalty Day parade in 1960. On March 23 of that year, Governor Nelson Rockefeller signed into law a bill increasing by 5 percent the state’s contribution to its employee pensions. The Mayor and Governor were, in Wagner’s words, “heading up the parade. The policemen and firemen were shouting as they went by, ‘Atta boy, Rocky!’ ” The Governor had become a hero to public employees, and the Mayor didn’t like it: “So I turned to Nelson and I said, ‘You son of a gun, taking all the credit.’ He just laughed.”

The bill Rockefeller signed appropriated few dollars. In the long run, however, it opened the door to other pension sweeteners and was the first salvo in a political competition between the city and state and its various unions, each seeking to outdo the other. For the first time, this legislation made pensions part of the collective bargaining process.

City politicians jumped in feet first. Following the state’s action, Beame, who was then city Budget Director, announced that the Wagner administration was seeking state permission to “increase the take-home pay of city employees” by increasing the city’s share. Not to be outdone, Rockefeller, over the objections of Wagner, signed a bill in 1963 compelling the city to compute police and firemen’s retirement benefits on the basis of their final year’s pay rather than the average salary of their last five years. Soon other unions would clamor for and win this benefit—inflating overtime and pension costs. In fact, this practice became so abused that the Transit Authority’s 1978 contract demands called on the union to agree to limit pensions to 120 percent of the final year’s salary. (The union refused.)

The twenty-year retirement at half pay—granted to police in 1857 and firemen in 1894—became part of the collective bargaining demands of every other union. In 1963, sanitation men were permitted to retire after twenty-five years. In 1964, twenty-year retirements were extended to corrections officers and Transit and Housing Authority police; teachers were granted earlier retirement at age fifty-five after twenty-five years’ service. In 1966, police were given full-pay pensions after thirty-five years’ service. In 1967, sanitation men won twenty-year pensions—an agreement labor attorney Theodore Kheel says was due to labor consultant Jack Bigel, adviser to sanitation union chief John DeLury and many of the city’s municipal unions: “Bigel convinced Lindsay that sanitation workers faced the same physical dangers—hernias and that sort of thing—as cops.” Also in 1967, firemen kept pace with police and won full-pay pensions after thirty-five years. In 1968, transit employees snared twenty-year retirement at the age of fifty; District Council 37 members got to retire at age fifty-five after twenty-five years, as did many Board of Education employees. In 1969, higher education workers also got twenty-five-year pensions. In 1970, corrections and housing officers won twenty-year pensions; most transit employees were no longer required to contribute to their pensions; and the teachers’ union—which helped Governor Rockefeller by remaining “neutral” in that year’s gubernatorial race—captured a twenty-year retirement plan at age fifty-five. Teachers also won a pension sweetener, forcing the city to pay more of their pension costs. A study by former city Budget Director Fred Hayes and then Professor Donna Shalala called this sweetener “the largest unconditional commitment of city funds in the history of American city government.” The city, they said, was forced to assume $1.2 billion of liabilities and up their annual teachers’ pension contribution by $55 million. Sweeteners for other unions followed.