200 East 66 Street Blog: August 2006

Reforms by Spitzer's office, city have sped up permit and offering plan OKs, but developers still fret

by Jen Benepe, The Real Deal, 2006

Thousands of new condo units are going up in the city -- and so is the wait time to get those projects approved.

A survey by The Real Deal of developers, architects, lawyers, and city and state offices involved in bringing new developments to market shows that government agencies have been doing more to speed up processing of offering plans and building permits, but even this effort can't keep up with demand.

Last year was one of record growth in the number of new residential developments brought to the five boroughs, often causing a paperwork backlog that left developers frustrated. Total new construction permits issued by the city last year increased to 6,689 from its 1995 total of 3,944. In Manhattan, new construction permits more than doubled, and in Queens, the number of new permits grew by 169 percent, in Brooklyn 192 percent, and in the Bronx 140 percent.

Longer waits on offering plans

Most importantly, the office of attorney general and current gubernatorial front-runner candidate Eliot Spitzer must review all condominium offering plans, and critics (carefully) said his office still can't clear its backlog despite improved efforts.

Long delays remain an irritating and expensive stumbling block in the business, said developers, lawyers and architects affected by the slow pace of bureaucracy, which can't clear applications within the required 30-day time frame.

"The review of each plan is undertaken by an attorney, a legal assistant and an engineer," explained Brad Maione, a spokesperson for the attorney general's office. "There has been some delay during the past year in the issuance of engineering comments. However, the office has hired additional engineers to avoid any delays going forward."

Maione also said that the office returns developers' submissions with comments within the legally mandated 30 days.

But a lawyer who routinely submits his clients' plans to the state says the reality is the office sends back comments within the legally mandated time period, but there is always something to delay the final approval quickly. "Every single plan that is submitted is issued a deficiency letter" that stalls the pace of each project, he said. He requested anonymity to avoid future problems with the attorney general's office. People in the industry, he said, are "particularly upset" because the attorney general's office can't meet the 30-day deadline.

Another stalling technique is when the attorney general's office sends back deficiency letters from the paralegal and the architect, but without the required sign-off from the engineer. "Very often you will get a memo but it is not officially reviewed until it comes from all three," he said.

That appears to have caused concern at the Real Estate Board of New York, whose representatives raised the matter with the attorney general's office last winter, said Steve Spinola, president of REBNY. That's helped, but not fixed the problem, he said. Additional engineers were hired and attorneys were moved around to handle the workload. "They have reduced the time frame, and are continuing to monitor it and make improvements," Spinola said.

But the fact remains that you can't fight city hall -- not if you want to win. Spinola was quick to say it wasn't board members who complained enough for REBNY to talk to the attorney general's office, which underscores developers' fears of being labeled open critics of the state.

Dave Perry, who heads up sales at the Clarett Group, a large New York developer, said his office gets prompt replies. "We have a very gifted team, and it seems like every time we submit something there are only some minor comments," he said. "Lately, when we get anything through the A.G.'s office, we have a timetable and it's either earlier or exact." The current review of Clarett's 200 West End Avenue plans was going very quickly, he said.

Another major New York developer, who requested anonymity, was more candid: "It's never been good," he said, "and I have been doing business in New York for a long time." Even 15, eight and five years ago, his office experienced delays with the attorney general's office, the developer added. "But of course no one wants to go on the record saying that, because everyone is afraid of them," he said.

A lawyer who prepares and submits offering plans to the attorney general's office on a regular basis said that the delays reflect a small budget for personnel. "They have had three engineers for years, that's it," he said, "and the number of plans has gone up 40 percent during that time." Even with that dramatic increase in the market, it was his belief that the office still had only two architects to review "all these thousands of plans."

He said the deficiency letters that outline problems that must be corrected before an offering plan can be approved were nothing but delaying tactics to let over-burdened professional staff meet 30-day turnaround requirements.

The offering plans require a level of detail that could be improved with a little streamlining, said one real estate lawyer, who also asked to be left unnamed for fear of alienating the authorities. "The more detailed the regulation the better perhaps, but the interesting question is how many people, even the attorneys who are supposed to, will read the whole thing?" he asked. "In the '80s, they were much thinner."

But, paradoxically, the fees the attorney general's office charges for offering plan reviews can't be used to hire the very people that could clear the logjam. Because the number of people handling offering plan reviews is mandated by state law -- and budgeted through the governor's office and the state Legislature -- there is no legal way to a common-sense solution. "We raised that issue -- that if we increased the fees, would it help with the staffing issues," said Spinola, who said his members were willing to pay more to get a quicker turnaround.

Assembly Speaker Sheldon Silver's office said the issue had not been called to its attention. Spitzer's campaign offices did not return calls for comment on the matter.

City's workload up, too

The number of new construction permits and permits for major alterations is also up, making it hard for the city Buildings Department to clear that backlog as well.

Since 2001, permit applications in Queens are up 96 percent. In Brooklyn, the number is up almost 50 percent over the same time period.

But developers aren't quite as rough on the city as they are on the state.

"I haven't heard any recent complaints from our members," said Spinola when asked about reports that city permit issuance was often late. "And they are a hell of a lot better than they were 4 1/2 years ago."

He said that under current Commissioner Patricia Lancaster, the department had added new computer programs, streamlined processes and speeded permit approvals.

But one architect, who also declined to be identified, disagreed. "It's been a slower review process," he said, especially when it comes to the time it takes to get feedback on a permit request. He also said he had heard that there was a problem with training and staff in the department. "We still have deadlines we have to meet," he said. "If we are experiencing that delay, you can imagine the ripple effect in terms of the industry."

Department spokesman Ilyse Fink said the workload has grown over the past few years, but so has hiring. She said there was a continuing an "in-depth, formal effort to revamp agency operations."

In 2006, the department hired 122 people, reformed its rules to cut down on corruption, and set up electronic scheduling to eliminate the practice of appointment scalping, a sort of institutionalized system that critics have labeled near-bribery. The department's plans through 2009 focus on continuing reforms. Despite a huge increase in permits, average wait times dropped from 25 minutes in 2001 to 7 minutes in 2005, she said.

Fink said the department had increased its staff of licensed architects and engineers by 40 percent. It's also started emphasizing a pre-certification program that lets certified engineers submit already-approved permits. An audit of about 20 percent of those permits provides some assurance that the plans are solid, and also transfers liability to the certifying engineer, she said. "It is a work in progress, but the key point is that there is progress," said Fink of the agency's improvements.

"If you look at the numbers, there are a lot of plans being submitted," said one developer. At one time, there used to be zero conversions, he noted. "So, I just think they are trying, and it's tough."

200 East 66 Street Blog

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Condo surge sparks offering plan delays