After Years of Graft and Inefficiency, Can the DOB Turn Things Around?


Last month, a two-year-long nightmare seemingly came to its ignominious conclusion for the New York City Department of Buildings when a 38-year-old Brooklyn landlord named Herman Epstein was sentenced to three to six years in prison for bribing a DOB inspector.

A “sophisticated, serial briber,” according to prosecutors, Epstein’s track record of paying off city buildings inspectors—offering them everything from car insurance payments disguised as interest-free gemach loans to brown paper bags filled with cash—dated back to at least 2009.

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Epstein’s efforts, prosecutors said, were done with the goal of removing DOB violations on a dozen Brooklyn apartment buildings that he owned or managed. According to court documents, the landlord had amassed 390 building violations and nearly $513,000 in unpaid civil penalties at many of those properties.

Epstein was only one of 50 people—including 11 DOB employees—indicted in 2015 after a sprawling investigation by the Manhattan District Attorney’s office and the city’s Department of Investigation into bribery schemes that compromised officials at DOB (as well as the city’s Department of Housing Preservation and Development).

Around $450,000 in bribes were found to have changed hands, with landlords and proxies working on their behalf providing city employees with perks including SUVs and vacation packages in exchange for preferential treatment. Among the more than 40 people eventually convicted was Donald O’Connor, the DOB’s chief of development for its construction division in Manhattan, who pleaded guilty to third-degree bribery and served a four-month split sentence.

The investigation was yet another blow to a city agency that wields tremendous authority over the real estate and construction industries in New York City but has long been hindered by concerns about its effectiveness and functionality. Beyond instances of graft and corruption that have plagued the DOB for decades, developers and contractors remain frustrated by issues such as untimely delays in receiving DOB approvals and inconsistent standards imposed across the department’s operations.

“The problem is that they’re slow—they’re always behind,” one Brooklyn developer, a principal at a firm focused on residential development who did not want to be named, said of dealing with the DOB. He cited a recent example where, after a fallen fence at one of his construction sites led to a full stop-work order, “it took us five weeks to get another appointment” with the agency to lift the order and resume work on the property.

“When I spoke to [DOB] about it, I said, ‘Forget about me; what about the guys making $120 a day who are working on the site?’ ” the developer said. “It doesn’t just hurt rich developers. It hurts the guys on the sites—the contractors who sit at home for five weeks because of a fence.”

It is a state of affairs echoed by other industry players who rely on the DOB’s services, and one widely attributed to the issue of chronic understaffing at the department—a problem now exacerbated at a time when New York City has experienced an unprecedented building boom.

That same boom has also forced the DOB to confront an alarming rise in construction accidents, injuries and fatalities in recent years, with roughly three dozen workers having died on construction sites around the city since 2015. (Not to mention some extremely high-profile falling and dangling cranes, which fed tabloid news coverage of the DOB’s shortcomings.)

The agency’s bandwidth was particularly tested around 2015, prior to the expiration of the 421a tax abatement, which led to a slowdown in new project filings across the five boroughs. With 421a now reincarnated as the Affordable New York Housing Plan and the city seeing a 10-year high in new residential permits approved in the first quarter of this year, it is a strain that shows no sign of abating.

“People don’t realize that there are thousands of decisions made every hour at the department,” one former senior DOB official, who asked not to be named, told CO. “Think about how many employees, how many applications—the volume is huge.”

Gary LaBarbera, the president of the Building and Construction Trades Council of Greater New York, told Commercial Observer that the DOB’s staffing of inspectors has failed to keep up with the latest surge in development across the five boroughs. The labor leader referenced industry statistics showing that investment and employment in construction are now set to exceed their previous 2007 peaks.

“We’re in the busiest time period that we’ve ever been in in decades,” LaBarbera said. “And I don’t believe that the capacity within the Department of Buildings has expanded at the rate that the industry has expanded.”

It is a sentiment echoed even by LaBarbera’s nonunion construction industry counterparts.

“We’ve got the most active construction market in the country [but] have a Department of Buildings that’s a bit underfunded and could use more resources, especially compared to other large cities,” said Joshua Reap, the vice president of public affairs for the Empire State chapter of Associated Builders & Contractors.

“If DOB had more resources to get the inspectors and infrastructure they need, you would probably have a more streamlined process and more transparency,” Reap added. “They’re doing the best they can, but you’ve had so many more projects going on in the past decade, I don’t think the bandwidth has caught up.”

Rick Chandler, NYC DOB Commissioner
Rick Chandler, Commissioner of the NYC Department of Buildings, in his office in December 2014. Photo: Michael Nagle/for Commercial Observer

While the agency has earned a reputation over the years for being undermanned and underfunded, it has taken steps to expand its capabilities. The DOB, for its part, has pointed to a sizable growth in staff and a steady uptick in funding as factors that have alleviated operational issues.

The department had nearly 1,500 employees on its books as of April, up from just under 1,100 workers three years ago, and has an allocated headcount of 1,664 employees for the 2018 fiscal year, according to the city’s Executive Budget. The DOB’s own budget for fiscal 2018 is $184 million—an increase from $172 million in 2017, though still behind other, less active city agencies and well under the $327 million in revenue the DOB is projected to generate for the city next year (mostly through the issuance of construction permits).

“We have been given unprecedented resources by this administration, more than we’ve seen in a generation,” DOB Commissioner Rick Chandler, appointed to the post by Mayor Bill de Blasio in July 2014, told CO.

Chandler said the agency “very rigorously” tracks the time associated with its reviews and approvals and has seen a marked improvement in many operations. While acknowledging that the DOB “struggled a bit” with the “heavy volume of filings” that arrived in 2015 and early 2016, he said the department is “now totally able to meet that demand.”

“Major alterations are being reviewed within five days of submission; at this time in 2015, it was [taking] 16 days,” Chandler said. “The smaller jobs are being done in a day, which is a significant improvement from before.” The commissioner noted that construction site inspections are generally “taking around four days” to complete and that the department is “seeing historical lows” in the time associated with elevator and boiler inspections.

“When things aren’t going well for an applicant or the people affiliated with an application, the Department of Buildings can be an easy foil for them to say, ‘This is a problem,’ ” Chandler said—although, he added that he would not claim “there is no proof of the department causing delays” for applicants.

To grow the agency’s talent pool of inspectors and employees, the DOB has supported proposed legislation that would reduce, to two years, the current five years of construction experience required for inspectors, while also opening the role to applicants with engineering or architecture degrees. The New York City Council is due to vote on the bill this month.

Chandler said the department has “been hamstrung for a number of years” by qualification standards that have impacted its ability to attract new employees. Multiple sources also pointed to the DOB’s struggle in retaining its existing talent base amid the lure of more lucrative job opportunities in the private sector.

“I’m not generally a fan of reducing qualifications, but they don’t have much of a choice,” said Louis Coletti, the president and chief executive officer of the Building Trades Employers’ Association. Coletti added that the DOB “has done a good job with respect to improving the training of inspectors” in-house but has had “trouble recruiting people” in the numbers required in part “because the salary levels are inadequate.”

It is a view shared by other observers, and particularly notable given the cloud of financially motivated corruption that has hung over the agency in recent years.

“If you look at the revenues that they bring in and the enforcement penalties that they bring in, they far outweigh the money they are being given to fund the agency,” the former senior DOB official said. “You have to get people to want to work there. You have to get them to be respected in the industry, and once that happens, people will come to you.”

Yet industry qualms with the DOB extend beyond staffing and timeliness. The nature and consistency of the department’s standards on everything from site inspections to contractor licensing is up for criticism among those in the real estate and construction industries.

One developer, a principal at a Manhattan-based firm, provided an example of when DOB inspectors issued a stop-work order at one of the firm’s construction sites after deeming the foundation underpinning as dangerous. After holding up work for two weeks, inspectors lifted the order on the site without demanding “any changes” at all—an essentially pointless disruption to the firm’s plans, the developer said.

“With inspectors, it’s true that there are varying levels of consistency on a job,” said another source, who works as a site safety manager on dozens of construction sites across the city. “One inspector will walk on, see something he doesn’t like and issue a full stop-work order, while another will say it’s fine.”

Chandler acknowledged that the DOB hears of such concerns about inconsistent standards “frequently,” describing them as “one of our challenges” and “something the mayor asked us to address from the beginning.”

“Our goal is to constantly monitor ourselves so we can hold ourselves accountable,” the commissioner said. “Inspectors are a different challenge because they have to be out there [in the field] and interpret what they see.”

508770882 After Years of Graft and Inefficiency, Can the DOB Turn Things Around?
The February 2016 collapse of a construction crane on Worth Street in Lower Manhattan killed one person and injured several others. Photo: Pacific Press/LightRocket via Getty Images

He also acknowledged another sticking point among developers: the DOB’s prioritization of filings related to affordable housing development, which are expedited quicker than others. “We have an affordable housing unit, and we move them as quickly as we can,” said Chandler, who added that while the agency “take[s] pride” in that policy, it’s “not at the expense of other [non-affordable housing] applications.”

The DOB’s efforts toward more closely overseeing its operations are led by its DOB NOW initiative, announced last August. The program, backed by $120 million in additional funding by the de Blasio administration, seeks to modernize the DOB through an online platform, integrating numerous services—from the filing of building and construction permits (including real-time tracking of applications and where they stand) to scheduling meetings with DOB staff.

“One of the things we’ve started in recent years is a more robust analytics movement,” Chandler said. “We want people to have the ability to predict their time frame with us. We want as much certainty as possible, because uncertainty is the enemy of growth and movement in the construction industry.”

DOB NOW, which the department has begun gradually rolling out, would represent a sizable, if not belated, step toward upgrading the agency’s capabilities. Chandler said the impact will be felt across every aspect of the DOB as the platform will bring “an enormous amount of transparency” to the department’s operations. That, in turn, could help address concerns over issues ranging from expediency of service to the decisions being made by inspectors.

“We’ll be able to measure ourselves and hold ourselves accountable to the kinds of objections being raised,” the commissioner said.

That would include the specter of employee misconduct. “This is a challenge always, especially for an agency that regulates a $43 billion industry,” Chandler said. He noted that the indictments handed out as part of the Manhattan DA and DOI’s investigation pertained to crimes committed before he took charge of the agency and that the probe itself “originated with our own staff pointing out to [the Department of] Investigations that something was amiss.”

“We’re thinking of ways to be transparent and have multiple eyes on various processes,” he added, citing DOB NOW’s capacity for tracking actions carried out by department employees. “We think, with the culture here, almost everyone knows they need to report something if they see something.”

The DOB’s response on the matter of construction safety has also shown promise. Despite a worrying rise in incidents in recent years—including a fatality earlier this month, when a construction worker named Roger Vail fell to his death while working at Hudson Yards—measures taken by the de Blasio administration appear to be having an effect. The city announced an aggressive ramp-up in its enforcement of construction safety regulations in February 2016—quadrupling penalties for safety violations, sweeping through roughly 1,500 job sites across the city and announcing plans to hire 100 new DOB safety enforcement inspectors.

That same month, a crane collapse in Tribeca left one person dead and several injured, prompting the de Blasio administration to launch a crane safety task force whose recommendations the DOB subsequently implemented last summer.

When construction worker Jose Cruz died in April after sustaining a fall at a Times Square job site—the first worker fatality of 2017—Chandler delivered a forceful rebuttal of the site contractor’s practices in issuing a full stop-work order on the project, describing the incident as “completely preventable” and saying the site in question would “be shut down for some time.”

“It was tragic, but if there’s any upside, we’re certainly at a lower pace [of construction deaths] this year,” Chandler said of the April fatality. He added that he believes the city’s quadrupling of fines for safety violations “is having an impact” on construction practices and said the increased focus on safety regulations means the DOB is “able to more quickly and efficiently sweep [sites] as quickly as possible.”

The agency is also “improving our relationship with the district attorneys and the Attorney General,” Chandler said, enabling authorities to do “a better job of prosecuting” those who commit safety lapses.

Should Chandler’s vision for DOB NOW and the modernization of the department’s operations—coupled with its renewed commitment to construction safety—bear fruit, it could go some way toward condemning to the past the various issues that for years have hurt its reputation. A better, more efficient DOB, in turn, would almost certainly be good news for the real estate and construction industries that are subject to the agency’s oversight in nearly every facet of their business.

With additional reporting provided by Will Bredderman.