Photo by: Marc Fader
The Boston Consulting Group is a major player in the government strategy market. This year, the New York City Housing Authority bought it on to replicate its Atlanta project in New York. Exactly what it’s doing is not clear.
As the oldest and largest public housing authority in the nation—with 414,000 residents living in 178,000 housing units spread across 344 developments whose physical plants and mechanical systems are aging out almost simultaneously amid a hostile federal funding environment—the New York City Housing Authority has a host of thorny issues it needs to tackle.
Earlier this year, seeking help to tackle them, NYCHA looked south. Not south like Staten Island. “Real Housewives of Atlanta”-type South.
Citing the ongoing work that the private consulting firm Boston Consulting Group (BCG) is doing for the Atlanta Housing Authority, the board of the New York City Housing Authority voted unanimously in March to give BCG $6.05 million to “provide comprehensive business transformation consulting services” pursuant to the terms and conditions of the current contract “between the Housing Authority of the City of Atlanta and BCG.”
That brief description was all the information that was publicly given at the March 2, 2011, board meeting. And the resolution made barely a splash. The vote to give BCG $6 million was one of five resolutions the NYCHA board voted on that morning, following votes to approve a half-million-dollar emergency contract for tree removal, a $600,000 commercial lease contract and the transfer of 32,000 square feet of land and 160,000 square feet of air rights in East Harlem to a real estate consortium building a charter school, community facility and 87 units of affordable housing.
Six months later on Sept. 14, with a nearly similar lack of fanfare, NYCHA’s board voted to extend BCG’s contract by another $4.26 million, a 70 percent increase in funding that left some in the authority doing a double take at the board’s largesse.
“In the past, with our capital projects, if a contract went before the board and the amount of the extra or percentage was this large, it would raise eyebrows, and people would get reamed,” said one NYCHA employee, a 15-year-plus veteran of the authority.
There was no incivility that morning, however, at NYCHA’s public board meeting, held in a conference room in the authority’s offices at 250 Broadway. Instead, the proposal for the contract extension was presented as a necessary but otherwise unexceptional request folded into a list of resolutions the board voted to approve, including commercial lease authorizations, capital improvements to an underground steam distribution system, and $10 million for a contract to purchase special waste-disposal bags.
There’s no question that NYCHA has a lot to think about. Since 2002 federal support for public housing operating expenses has plummeted, and capital funding has also lagged well behind the needs of an agency with buildings that are approaching 80 years old. Former Gov. George Pataki withdrew Albany support for the handful of NYCHA developments that were built by the state, and Mayor Bloomberg beat a similar retreat from several city-owned complexes. The $3 billion agency has been running an operating deficit that Chairman John Rhea has pegged between $150 million and $200 million a year and has had to lay off workers despite a staggering backlog of maintenance orders—a backlog that moved from onerous to fatal three years ago when a 5-year- old boy plummeted 10 stories down an elevator shaft in the Taylor-Wythe houses in Williamsburg, trying to escape a stalled elevator.
Ostensibly, BCG has been brought on to help NYCHA navigate these troubled waters. But exactly what the company is doing for its $10 million is a little hazy. NYCHA denied City Limits‘ request for a list of the policy recommendations BCG has made to date because these recommendations “are not yet policy,” Jacqueline C. Hernandez, the lawyer in charge of NYCHA’s Freedom of Information Law unit, told City Limits over the phone. (NYCHA agreed to fulfill a FOIL request to release a copy of BCG’s original contract, but had not released it at press time.)
NYCHA chairman Rhea describes BCG’s work in deft but general outlines. The work that the housing authority was doing with BCG is “part of a broader set of both transformational activities that we’re really embarking on here at the housing authority as well as trying to address some fundamental long-standing problems,” says Rhea, who took over as NYCHA chairman in May 2009, coming from Barclays Capital (formerly Lehman Brothers), where he served as managing director in investment banking and co-chair of the global consumer and retail group. Prior to joining Lehman in 2005, Rhea was an executive at J.P. Morgan, where he completed more than $100 billion worth of transactions overseeing corporate finance as well as mergers and acquisitions, and debt and equity underwritings for global consumer products companies, according to his official bio. Rhea’s bio also mentions that he serves on the board of the New York Business Development Corporation, is a founding member and director of the Council for Urban Professionals and has served as board chair of the Children’s Museum of Manhattan and as a member of the Obama for America national finance committee. It does not mention that he used to work at BCG.
