Real estate backs renegade Dems
With billions of dollars on the line, NYC real estate lobby taps campaign war chest as it gears up for intense fight for the Senate
Outside a late September fundraiser for Jesse Hamilton — the state senator from Crown Heights — a small group of protesters jeered as guests began trickling into the chic Noho cocktail lounge Sweetwater Social.
“No fake Democrats! Take the New York Senate back!” they shouted.
As Jeff Klein made his way to the entrance, the group booed the Bronx senator and leader of the Independent Democratic Conference, which maintains a controversial power-sharing agreement with GOP senators in Albany.
The conference’s eight members — along with rogue Democrat Sen. Simcha Felder — give Senate Republicans a majority and have recently come under fire from the progressive wing of the Democratic Party. Many have painted IDC members as self-interested collaborators who’ve handed control of the legislative agenda to the “Party of Trump.”
But for New York real estate, the IDC has been a godsend. Through multiple election cycles, Klein and his colleagues have fallen in line behind Republicans and served as a key insurance policy on key issues like rent stabilization and tax abatements.
“The pro-business majority in the state Senate, comprised of the Republicans, the IDC and Felder, are basically the firing wall” that’s protected the real estate industry’s interests, said Matthew Engel, president of both the Bronx firm Langsam Property Services and the landlord lobbying group the Community Housing Improvement Program, or CHIP.
But if that political coalition cracks in 2018, there will be major ramifications for New York City landlords and for the entire real estate industry.
In an effort to keep the coalition intact, the industry is gearing up early for 2018.
The Real Estate Board of New York, the industry’s leading trade association, doled out about $260,000 in contributions to Senate and Assembly candidates, as well as to other state campaign committees, in the first six months of this year. About one-third of that went to IDC candidates or to the conference itself. By comparison, REBNY spent just $110,000 in 2015’s first half — the last nonelection year.
And REBNY is not the only powerful real estate lobbying group stockpiling cash for the upcoming election. The Rent Stabilization Association — New York’s biggest landlord group and the state’s top lobbying spender in 2016 — is sitting on $2 million, which it’s planning to unleash next year. Developers such as Glenwood Management, the Parkoff Organization and the LeFrak Organization have been among the leading contributors to the RSA’s two political action committees so far this year.
“I think you’re going to see most real estate money trying to keep Democrats from taking control of the state Senate,” said Ken Fisher, a government relations and real estate attorney at Cozen O’Connor, whose clients include SL Green Realty and Pinnacle Group.
With Democrats holding a solid majority in the Assembly and Democrat Andrew Cuomo in the governor’s mansion, the IDC’s relationship with the GOP has become indispensable. Without it and Felder, the GOP would not be in power and the industry would have a weaker position at the negotiating table as it tries to hold onto more than $1 billion in annual 421a tax breaks and prevent a variety of pro-tenant bills from seeing the light of day. The latter have flown through the Assembly only to come to a screeching halt in the Republican-controlled Senate.
IDC spokesperson Candice Giove declined to comment on the contributions from the industry except to say they “have no influence on legislation whatsoever.”
For brokers and investors more plugged into the latest investment sales market reports than into the latest Albany political breakdowns, the key thing to know is this: The New York State Senate is currently made up of 31 Republicans and 32 Democrats. But because nine of those Democrats have decided to align themselves with Republicans, the balance of power has tilted to the conservatives.
That has been a good thing for real estate. But if that deck gets reshuffled, the industry could have a problem.
Democratic activists have become increasingly aggressive in their push to unseat the IDC’s eight members — most of whom represent NYC districts — forming groups such as No IDC NY, True Blue NY and NY Indivisible, which are all actively courting primary contenders to take on IDC candidates next year.
“New York is a deep blue state, but we don’t have the firewall of progressive legislation that we would need to protect our most vulnerable residents from the worst onslaught of a Trump administration,” said Susan Kang, a CUNY political science professor who lives in IDC Sen. José Peralta’s district and who volunteers with No IDC NY.
“The reason we call them ‘Trump Democrats’ is because by aligning themselves and engaging in a power-sharing agreement, the IDC are in a sense empowering Trump in New York State,” Kang added.
The industry is fighting back on that notion. But unlike grassroots causes, such as global warming and women’s rights, no one is knocking on doors for 421a. Instead, the real estate lobby is playing a strategic political game. While the industry has yet to reveal its hand, in the past it’s aligned itself with other political movements, such as the powerful charter school effort, which has the backing of many influential players in the business world.
CHIP’s Engel painted a dire situation for the industry if Democrats succeed in dismantling the IDC, saying that the party would quickly start whittling away at all the pro-business protections in place. “The playbook is there,” he said.
Frank Ricci, government affairs director for the RSA, added that the Senate has provided political cover for many Democrats, allowing them to take more liberal positions to appease their base than they otherwise might.
“The Assembly is very reckless in the legislation they pass, because they have the luxury of knowing it’s going to stop in the Senate,” he said. “If it were a Democrat-controlled Senate, they would have to really be careful [about] what they passed.”
The big split
In January 2011, Klein — the gold-watch-wearing senator and then-law firm partner — stepped down as the deputy leader of the Senate Democrats after the party lost its majority. With three other Democrats, he defected from the party’s main conference to start the IDC.
When the Democrats retook the majority the following year, Klein refused to reunite the two conferences and instead brokered a side deal with Senate Republicans that allowed him to share authority with then-Republican Majority Leader Dean Skelos.
For the next two years, the two took turns presiding over the state Senate. While the Republicans revoked the co-leadership agreement after the 2014 elections, the IDC remained.
Democrats — who suddenly found themselves in the minority — called Klein’s gambit “a coup against all New Yorkers.”
While that may be up to the eye of the beholder, the move meant some progressive measures were put on hold. Meanwhile, it’s been a boon for real estate and business interests.
Although the legislature did pass an increased minimum wage in 2016, substantial campaign finance reform bills, for example, have failed to get through both legislative chambers. That’s meant that the so-called LLC loophole — an industry favorite that allows property owners and other private interest groups to pour unlimited amounts of cash into political campaigns though multiple limited liability companies — has remained in place.
In 2014 alone, New York businesses pumped $20 million-plus into state committees via the loophole. Tellingly, NYC’s leading rental developers donated more to Klein — $320,000 — than to any other senator between 2004, the year he was elected to the Senate, and 2015, according to an analysis of campaign contributions last year by The Real Deal and ProPublica.
Those developers used hundreds of private LLCs — named for everything from individual apartment buildings to parking garages — to make those donations.
And Klein seems to be returning the favor. The Bronx senator recently went to bat for the industry in its spat with the online listings giant StreetEasy. In August, he asked the NYC Department of Consumer Affairs to notify StreetEasy that aspects of its Premier Agent advertising feature were misleading. (REBNY has made the same claim.)
A source familiar with the situation told TRD that REBNY was not involved in Klein’s efforts with StreetEasy.
Either way, many industry players credit Klein and other IDC members with helping to maintain the status quo for the industry in other areas, including with landlord-friendly rental laws and lucrative tax breaks, which are worth billions of dollars to the industry.
“The landlords know that it’s because of the IDC that we have not been able to pass any pro-tenant legislation,” said longtime activist Michael McKee, the treasurer of Tenants PAC.
The real estate industry is always a big political spender. But it now seems poised to spend even more than usual on the next round of state elections.
Before the campaign season has even gotten fully underway, REBNY has already directed $94,500, a third of its campaign spending this year, to political committees supporting the IDC and its members, according to state campaign finance records. The rest mostly went to Senate Republicans, with a few Senate Democrats also in the mix.
REBNY has donated more to the two newest members of the IDC — Peralta and Hamilton — than to any other candidates. The trade group doled out $10,000 to each in the first half of the year.
Through a dozen cryptically named entities, Peralta — who was first elected to the Senate in 2010 but didn’t join the IDC until this year — also got a boost from Trump ally Richard LeFrak. The billionaire gave him $20,000, accounting for nearly 60 percent of the $34,000 Peralta received from city real estate donors this year.
Some have criticized Peralta for joining the IDC for personal gain, citing the $12,500 stipend he receives because of his alliance with the GOP.
But like other IDC members, Peralta has argued that joining the Independent Democrats makes him more effective in passing progressive legislation.
And while tenant groups criticize Peralta as part of the bloc preventing pro-tenant bills from reaching the floor in the Senate, the 45-year-old Dominican-American has recently voiced opposition to landlords demanding proof of legal status from their immigrant tenants.
Meanwhile, Hamilton announced that he was defecting to the IDC just after the November 2016 elections. As part of his deal with the Senate Republicans, he now chairs the Senate Banking Committee, a position he gets a $15,000 stipend for. But the agenda for what gets voted on in the committee still runs through Majority Leader John Flanagan.
REBNY is not alone in its mission to keep the Senate Republicans and the IDC in power.
In the first half of 2017, the RSA donated roughly $200,000 to state candidates and committees through its affiliated PACs, the Neighborhood Preservation PAC and RSA PAC — about double what it gave in the first half of 2015, election records show.
Most of the landlord group’s donations this year have gone to the Senate Republican Campaign Committee and to individual Republican candidates. But Neighborhood Preservation also gave $10,000 to Klein’s Senate Independence Campaign Committee, which supports IDC candidates, and made smaller direct contributions to Klein and other IDC members.
Bradley Tusk, a political consultant and former campaign manager for Michael Bloomberg, helped organize REBNY’s past alliance with the charter school group known as StudentsFirst, which also wanted the GOP in control of the Senate.
“For what REBNY is — a coalition of really wealthy individuals looking to protect a very narrow set of interests — it seems to me that they do it reasonably well,” Tusk told TRD about the board’s effectiveness in Albany.
REBNY declined to comment on the board’s increased spending and contributions to the IDC. John Banks, the group’s president, said in a statement only that the board will continue to support candidates in both major political parties who have a track record of “creating jobs, housing and increasing opportunities.”
The RSA’s Ricci was similarly evasive about discussing strategy regarding the IDC. “We’re very philosophical,” he said. “We don’t look at polls very much. We just go with candidates that we think have a good idea or the courage to stand up for their convictions.”
While the real estate industry and its top lobbyists map out their 2018 plan of attack, opposition to the IDC is spreading within the Democratic Party, both locally and nationally.
Michigan Congressman and deputy Democratic National Committee Chair Keith Ellison recently came out against the group. And 32BJ SEIU — which represents building and property workers and supported Klein for re-election as recently as 2016 — appears to be reconsidering its backing. Hector Figueroa, the union’s president, is calling on the two Democratic conferences to reunite. “The problem with the IDC now is far more complicated with the Trump situation,” Figueroa told TRD.
With the possibility of a scale-back in national health care and a crackdown on immigration, he said, the IDC poses a greater threat to progressive causes.
This year, the union pushed the state Senate to pass a bill called the STAFER Act, which would increase the minimum wage for airport, bus and train station workers in NYC. While the bill passed the Assembly and had several IDC co-sponsors, the Senate has kept it from getting heard in committee.
“The IDC members were supportive in the individual conversations we had with them, but the Republicans blocked it, and the legislation could not see the light of day,” Figueroa said.
The union is a formidable donor in New York: Since 2011, its city and state committees have spent more than $4.3 million, according to election filings. Though only a small portion of that has gone to IDC candidates, the union contributed nearly $25,000 to Klein after he was first elected.
Figueroa said the union is waiting to see if the IDC attempts to unite with the Democratic conference before deciding whether to cut off donations to the group’s members entirely.
“We’ll have to take a hard look at the situation,” he noted.
Lisa DellAquila, an attorney and founder of the anti-IDC group True Blue NY, said many New York voters are still unaware that the group’s members are a different brand of Democrat.
“It takes a little explaining,” she said. “[IDC members] are happy to co-sponsor bills that are progressive, but it takes an extra step to explain that these bills are never going to make it out of committee.”
During the most recent legislative session, the Assembly passed three key bills for tenant activists, Tenant PAC’s McKee noted. The most consequential — which was sponsored by Democratic Conference Leader Andrea Stewart-Cousins and had three IDC co-sponsors — would repeal so-called vacancy deregulation. But all three hit a brick wall in the Senate.
McKee argued that Klein has been helping Republicans stymie tenant bills since before the IDC existed.
The IDC’s Giove dismissed that as “intellectually dishonest,” saying that the senator supports measures to protect tenants and “will continue to do so.”
While IDC candidates may be feeling heat in their districts — Peralta was also recently booed at a town hall event in Jackson Heights — it’s no easy feat to unseat an incumbent.
Members of No IDC NY, including Kang, told TRD that a handful of candidates, including some who currently work for city and state elected officials, will officially announce their campaigns by early next year.
But most of the IDC’s members look well positioned going into the 2018 primaries, and only two of the group’s members have declared challengers so far.
Peralta’s sole challenger, as of last month, was a 17-year-old from Elmhurst, Queens, named Tahseen Chowdhury. He has yet to report any official fundraising. “I have literally zero special interests,” the high school student told DNAinfo in May. “I don’t owe anybody anything.”
The other known anti-IDC hopeful is former City Council member Robert Jackson, who will challenge incumbent Marisol Alcantara in Upper Manhattan.
According to an analysis by Politico, Jackson smashed the nonelection-year small-donor record in July, raising $43,000 from contributors, who wrote more than 2,700 checks. Itemized contributions were as low as $1.34, records show. Jackson’s campaign spokesman, Richie Fife, said the contributions came from an online campaign by No IDC NY and the liberal blog Daily Kos to encourage more community-level donations.
Bu Alcantara’s district is more liberal than some of the IDC home fields, CHIP’s Engel noted.
And as IDC’s members have been quick to point out, it’s not solely their existence that’s handed the GOP its majority in the Senate — they say Felder’s move to caucus with the GOP is also a culprit.
Felder — who, in turn, places the blame for the GOP majority on the IDC — reported only $500 of itemized campaign contributions in the first half of 2017. His representative did not respond to requests for comment, but earlier this year he was rumored to be interested in his old City Council seat.
Meanwhile, the real estate industry is also watching several non-IDC races that are expected to be tight and could have an impact on which party takes the majority in the Senate.
On Long Island, a handful of seats — including those held by Republicans Carl Marcellino and Elaine Phillips — that were narrowly won in 2016 could be up for grabs in 2018. REBNY has contributed $1,000 and $2,000 to the two candidates, respectively, this year.
In addition, two mainline Democratic seats could be in play in special elections before next November — Bronx Senator Rubén Díaz is running for a City Council seat, and Senator George Latimer is campaigning for county executive in Westchester. If they win, they’ll create two vacancies later this fall.
While Klein has made overtures to reunite the conferences in the past, as recently as May he told a bipartisan group of senators at a private dinner that “if I have anything to do with it, John Flanagan is going to be the leader for a long, long time,” according to several sources who spoke with the Daily News.
Fisher, the real estate attorney, said that despite the ongoing alliance between the IDC and GOP, New Yorkers shouldn’t discount a Democratic family reunion.
“If Nixon can go to China, Stewart-Cousins and Klein can work something out,” Fisher said.
Others say Klein and the IDC members have little to gain by rejoining the Democrats. “The members of the IDC have been under tremendous pressure for some time now, and they still haven’t budged,” said William F.B. O’Reilly, a conservative political consultant and partner at the New York-based communications firm the November Team.
And by next November, they will likely be bolstered by even more campaign cash from the real estate industry — which has a lot to lose if the IDC goes down and takes the GOP majority with it.
“There simply would not be a Republican majority if REBNY didn’t exist,” O’Reilly said. “There’s no other business organization that’s more important in the state.”