"We will bring to bear whatever tools we have in our arsenal to avoid having present affordable housing units converted to market, because they would then be lost forever. They are a precious commodity and, tragically, we can’t replace them."

In brief, that’s RIOC President Steve Shane’s policy on Roosevelt Island’s remaining Mitchell-Lama buildings – Westview, Island House, and Rivercross. It’s a policy he articulated Monday night in a meeting with the Westview Task Force, and in an interview Wednesday with The Main Street WIRE. He articulates the policy with confidence that he and his boss are on the same page. She is Deborah VanAmerongen, the Commissioner of the State Divison of Housing and Community Renewal (DHCR) and Chair of the Board of Directors of the Roosevelt Island Operating Corporation (RIOC).

In his WIRE column, Shane writes on this subject, "RIOC’s core public purpose continues to be the fulfilling of the Master Plan under the GDP [General Development Plan]. There is more to affordability than the present occupants, as public policy requires consideration of the next generations during the remaining period of the Master Lease, still some 60 years away, before all reverts to New York City [in 2068]."

The policy turns the Westview Task Force’s current Letter of Intent (LOI) with the building owner into scrap paper. Shane’s position is, essentially, that without a ground-lease extension, Westview has very little value. If RIOC gives that extension, it becomes far more valuable – and a prime candidate to leave Mitchell-Lama, subtracting itself from the City’s supply of affordable housing.

Shane sees scandal in his future if RIOC gives that extension and adds that value. Not giving it, he feels, has a good chance of preserving those units of affordable housing.

Westivew residents came to Thursday morning’s RIOC Board meeting to sit, silent, protesting with signs made overnight after a Wednesday evening tenant meeting. RIOC meetings scheduled for mornings provide for no resident comment period.

But Westview tenants don’t see it that way. "This is a power play and a miscalculation in a major way," said Opher Pail, the co-chair of the Westview Task Force, the tenant group that has been negotiating to buy the building. "Just imagine," Pail told The WIRE Thursday morning, "the mayor waits until a day before the Battery Park lease expires, then he tells the developers, ‘If I sign, it’s worth a billion. If I don’t, it’s worthless.’ I think this borders on extortion. Shane will be gone after three years. He has created chaos in our negotiations with the owner. If this continues, the tenants are going to lose everything."

According to sources familiar with the history of negotiations on Island House, Westview, and Rivercross, Shane’s policy of considering a RIOC-granted ground-lease extension the key value component in any deal was first put forward a year ago by the real-estate advisor hired by RIOC to represent it on the deals, Paul Mas of Jones Lang LaSalle. It has now become the centerpiece of RIOC policy – or at least of Shane’s negotiating position – in dealing with the three Mitchell-Lama buildings, though its specific effect on Island House and Rivercross is not yet fully clear. His public purpose in taking this position, Shane says, is to preserve affordability.

With that emphasis on a continuation of affordability, Shane is in a position to hold the ground-lease extension as a trump card, but only if the buildings can be prevented from leaving Mitchell-Lama. That’s because once out of Mitchell-Lama, with or without a ground lease, an owner can increase rents dramatically in order to make a profit. But the increases required to make a significant profit in the 22 years remaining on the current ground lease would destroy the present level of affordability at the buildings.

Dorothy Davis, the head of Island House’s tenant ownership committee, told The WIRE on Wednesday that she sees her building’s deal as different from Westview’s. "The Island House negotiations are quite separate from Westview’s. Over the last few weeks we have been working closely with RIOC, DHCR, and [owner] Charles Lucido together with our lawyers and our real-estate consultant, CPC. We believe that, while the issues are complex and detailed, we’re making steady progress toward an affordable transfer of our building to tenant ownership."

Asked how his Monday-night pronouncement was received at Westview, Shane responded, "Well, there was a lot of... I wouldn’t call it hostility. There’s a lot of anxiety – an enormous amount of anxiety."

Indeed, on Wednesday night, Westview tenants gathered to hear about this latest development. Opher Pail, co-chair of the Task Force, urged tenants to appear at Thursday morning’s RIOC Board meeting, perhaps with signs indicating their concern over their futures in Westview. More than a dozen did.

"I do understand that these people are quite concerned about their homes," Shane said. "I gave them every assurance that it is my purpose, as an employee of a public-benefit corporation of the State of New York, to serve the public interest, which is, in the first instance, the people living here." But then Shane quoted from his WIRE column, "There is more to affordability than the present occupants..."

Pail characterizes Shane’s stand as "Just ‘Trust me, trust me,’" adding, "He didn’t have answers." By Thursday morning, Pail was in dismay over the of Westview tenants’ three years of negotiations being scrapped, and the tenants’ Letter of Intent being made effectively worthless by Shane’s position.

Shane emphasized that he is still open to some form of tenant ownership plan where affordability is carried into the future, but spoke of the Westview owner’s "corner of the napkin" as being out of balance, calling for a payment of about $22 million, with some 35% of the apartments remaining in the owner’s hands and available for disposal at market rates once present tenants vacate. Charles Lucido, an owner who represents the other owners as well as himself, responded to a question about the situation: "My partners and I regret that the carefully negotiated and structured Letters of Intent with Island House and Westview, which would have resulted in tenant ownership of their apartments and the buildings, at very affordable prices, and provided for affordability for many years to come, have been terminated as a result of recent decisions beyond the control of the tenants and the owners. My partners and I are ready to resume discussions to resurrect the LOIs under the appropriate circumstances which would allow for the LOIs to be fulfilled as intended. We wish the tenants well in their valiant efforts to restore the LOIs."

Saying he realizes the situation is delicate, given the high level of tenant concern, Shane said, "I rewrote that paragraph [in his WIRE column] several times," Shane said. "It’s a condensed version of what was a two-hour give-and-take with the Westview residents.

"My underlying legal problem is that I cannot be a part of a transaction where more than fair value is paid for disposition of an asset. If I execute a ground-lease extension that permits Mr. Lucido to walk away with more than the appraised fair-market value of his remaining leasehold, then I am likely to be on the front pages of The Post as having participated in a windfall transaction." By way of illustration, he mentioned the Erie Canal deal under former Governor George Pataki, whose administration attempted to dispose of valuable land at fire-sale prices.

Shane described it as a dilemma: "On the one hand, I have a group of citizens I’m here to serve, who are absolutely panicked by Mr. Lucido’s threats, which, in my professional opinion, are empty. He’s got only 22 years left. He’s got nothing to sell, because the remaining value of his leasehold – let’s pick a number – fully occupied, he could make $200,000 a year. Over 22 years, that’s $4.4 million. Bring that back to net present value and what have you got? It’s not much."

That’s the crux of Shane’s concern with the Westview LOI. He believes it would fail the smell test, and that the Public Authorities Control Board (PACB), which is responsible for monitoring the financial performance of agencies like RIOC, would consider it seriously out of line, by – as Shane sees it – "an order of magnitude."

Shane told The WIRE he reached his conclusions with Mas’s guidance. But participants on the Westview Task Force say they, too, had accepted Mas’s guidance in structuring their proposed deal. The key difference appears to be Shane’s acceptance of a contention that Westview’s value must be determined without factoring in a ground-lease extension. That changes the negotiating landscape dramatically.

At Wednesday night’s Westview meeting, Pail and his co-chair, Johann Marfey, told residents of a key concern – that a cash-rich investment group might buy the building without waiting for a ground-lease extension, then leave Mitchell-Lama and raise rents by multiples in order to recover as much money as quickly as possible, even while hoping that a ground-lease extension might be arranged "after the political winds shift again."

Earlier in the day, The WIRE asked Shane about exactly that scenario. He was not able to discuss what RIOC, DHCR, and the State might do to prevent such a development, but admitted that "we may be headed down the road to some litigation." He then suggested such litigation could take seven or eight years. "When it’s over, win or lose, the owner would then have that much time subtracted from the value of his leasehold." Shane was saying, in short, that the State will continue to hold the key card, even if courts ultimately rule against RIOC and/or DHCR.

Marfey told the Westview meeting that Task Force board members had raised that possibility – a loss in court – with Shane, and that Shane "was unable to provide an answer." He added, "We haven’t heard much in terms of a Plan B. Because of RIOC inserting inself, we’re now at an impasse with the owner. The gamble is that RIOC is telling us they feel they can stop anything. But a cash-rich company could easily buy [and leave Mitchell-Lama], and RIOC would have no say at all."

Pail said, "Years ago, RIOC endorsed an even higher price. Our LOI had everything. It was a win-win-win. Everybody was satisfied, until now." Later, he added, "We feel we should raise hell."

"We can make an outcry to the politicians," suggested Sandra Zwerling, another member of the tenant board. But Westview’s Wednesday night meeting broke up without any concrete plan in place beyond a protest appearance at the Thursday morning RIOC Board meeting.

Shane sees himself standing on two principles – obeying the Public Authorities statute by getting fair value for the property without regard to the value added by a ground-lease extension, and – equally important – preserving affordable housing for the future.

With regard to the threat of likely litigation, he paraphrased Governor Eliot Spitzer’s remarks in a cabinet meeting, telling his department heads not to fear it. "The Governor said, ‘Look, I believe that when we come to a controversy, it’s important to do the right thing, and if that right thing winds us up in court, so be it. I am willing to take the litigation risk, because we’re doing the right thing. And even if we lose, we will have done the right thing. So each and every one of you,’ and he was addressing each of his agency heads, ‘I want you to go out and do the right thing.’" To Shane, that right thing is holding onto Roosevelt Island’s affordable housing for the current residents, but also for future residents all the way through the end of the City-State lease, which completes its 99-year run in 2068. He observed that, in recent years, Governors have tended to serve twelve years, and speculated that Spitzer might, as well. He seemed confident that Spitzer’s "do the right thing" policy would last at least that long and said that, in any case, his conscience and sense of public service would require him to do anything and everything possible to maintain long-term affordability in the over 1,000 apartments involved.

The position Shane outlined Monday night for the Westview Task Force drew a letter, dated Wednesday, from attorney Chad Marlow to Governor Spitzer and DHCR Commissioner VanAmerongen. "The State’s recent activity" in becoming actively involved "in the eleventh hour," Marlow wrote, "has threatened the viability of a hard-fought deal that would keep Westview’s apartments affordable for all of its tenants, even those who choose not to buy."

Marlow’s letter (posted on Website NYC10044, at nyc10044.com, with this issue of The WIRE) says that a VanAmerongen order that vacant apartments in Westview be rented out immediately threatens "to destroy years of tenant efforts to preserve their affordable housing." The empty apartments were being held as part of the owner’s "grease" (Shane’s term) to make the deal work.

Wednesday night, Marfey told Westview tenants that loss of the vacant apartments – because VanAmerongen has ordered that they be rented – will change the numbers in their deal "only a little," and that the LOI is still viable – except for Shane’s new policy.

"In practice," Marlow wrote, "the State has inadvertently entered into a game of ‘Russian Roulette’ with Westview’s tenants’ housing... The likelihood that the State’s current approach will secure an equal or better result than that in the LOI is infinitesimal" and pursuing it "will cause irreparable damage to the tenants’ hard-earned LOI." Marlow characterizes the official actions as "choosing to roll the dice with these tenants’ homes." He goes on, "I implore both of you, in your approach to Westview, not to expose these tenants and their homes to any greater level of risk than you would accept for your own families and your own homes."

In his discussion with The WIRE, Shane emphasized repeatedly, "We and the Commissioner of Housing are actively engaged in a deep investigation of the public-policy issues that are involved in maintaining affordable housing, and that includes the issue of extensions of ground leases to enable market-rate housing." Rephrased, Shane was saying that no owner can compel RIOC to grant a ground-lease extension ("That’s not even on the table."). He sees such ground-lease extensions, and DHCR’s control over exits from Mitchell-Lama, as the ultimate power over the future of the Mitchell-Lama apartments here.

"It’s easy to argue that 361 [Westview] units walking out the door does not significantly affect the percentages [of affordable housing required by the GDP] in the context of 5,000 units. But if you let the first one go..." Shane’s implication was that the hold-the-line policy will be ironclad in terms of retaining affordability. "We are pretty much dedicated to do what we can to stem the flow, and even if we’re only standing here trying to hold back the tide, that’s probably what we’re committed to doing," Shane said. The "tide" is the rush to the doors during the Pataki administration, during which the City and State lost a significant portion of its affordable housing. Even now, Mitchell-Lama buildings are giving notice of their intent to leave the program. The law allows that but, on Roosevelt Island, there is the added State power of control over the ground leases.

Reminded that Eastwood has left the Mitchell-Lama system in a move that will eventually breach the GDP’s prescribed percentages of affordable housing in Northtown, Shane responded, "We didn’t let Eastwood go, not us. The prior administration let Eastwood go. That deal was done long before we got here. And they also did extraordinary things with respect to sticky vouchers and all the rest of that stuff for the people who are there." Admitting that when current residents depart, the Eastwood units will go to market rate, Shane said, "Yes, that’s a great tragedy, and we’re losing affordable housing units when that happens, which is why it’s a real problem." He pointed out, however, that three quarters of the new owners of Eastwood are "socially conscious investors" – retirement funds that would not participate in any deal likely to end up putting people on the street. Even so, he lamented the loss of the affordable housing that will occur over time.

Past RIOC administrations, under Dr. Jerome Blue and Robert H. Ryan, have treated the GDP as a "loose collection of ideas," and it has been amended several times by consent of both City and State. But Shane considers it "a constitutional document for this Island." He said, "It was the thesis on which Roosevelt Island was founded and on which development set forth. During the prior administrations, when they were desperate out here for funding, for the resources that maintain life here, they allowed things... they disposed of property... they allowed development which brought the [terms of the] GDP into question."

Asked about the concerns of the tenant leadership that their buildings need so much work that they are likely to deteriorate if owners or tenant-owners cannot tap the market value of the apartments, Shane pointed to plans being made at HFA, the Housing Finance Agency, to find ways to use remortgaging and bonds to fund such repairs while still keeping units affordable. He expressed confidence that ways will be found. "The State, when it puts its mind to these kinds of things, will devise a program to do it." At the same time, he admitted that the conflict between the Democrat-controlled Assembly and the Republican-controlled Senate could make implementation of such plans difficult.

Shane emphasized his personal and professional concern with the pressure on affordable housing by quoting a City official’s numbers: In the next ten years, the City expects another 900,000 people but, even with its most ambitious plan, it expects to produce only 200,000 new units of housing in that time. "The pressure on affordable housing resources is unbelievable. The public policy here is desperation. We’re really facing a lot of trouble as a society."

Shane seemed confident of the power of New York State to withstand any litigation that might come out of a denial of what Mitchell-Lama owners consider their "right" to depart the program. If there is litigation, he said, "in the meantime, you’ve got the potential for the next seven or eight years of living the way you’re living now, though with an indeterminate future after that. But I told the Westview people Monday night, the realities of the real-estate business are such that the present owners are dead in the water. At best, they’re going to get money damages for their lost deal, if the Court of Appeals says we have done wrong." He pointed out that any litigation would be handled by the State Attorney General’s office and wouldn’t cost residents anything, and that, while the case was in court, the Island’s affordable apartments "would be frozen in their present state."

Thus, the workability of Shane’s strategy for preserving affordability appears to come down to that key legal question – whether the State, acting through DHCR – can prevent Westview and other buildings from exiting the Mitchell-Lama program, or at least delay such departures through several years of defensive litigation.