Whoever succeeds Shola Olatoye as the permanent chief executive of the New York City Housing Authority will inherit a full plate of problems.

They include a roughly $20 billion capital-needs backlog, federal aid cutbacks, angry political and tenants groups, a worsening public perception and a running crossfire between Mayor Bill de Blasio and Gov. Andrew Cuomo.

NYCHA Chair Shola Olatoye testifies during a New York City council meeting on March 14, 2018
John McCarten/NYC Council

"This is a real challenge for the city," Howard Cure, director of municipal bond research at Evercore Wealth Management, said Wednesday, one day after Olatoye resigned under pressure from a job she held for four years.

NYCHA's latest physical needs assessment, which determines funding requests, is overdue.

Olatoye, whose job will expire in April, came under fire the past few months amid reports of poor living conditions and a report from the city's Department of Investigation that accused Olatoye and her staff of falsely certifying lead-paint and mold statistics to federal regulators.

"If we're talking about $20 billion, that's a significant hit," said Cure. "Will it come out of operations or will the city issue more debt? What worries me is not the current debt level, but between mass transit and housing, the city may have to issue more debt."

Gov. Andrew Cuomo late last month declared a state of emergency at NYCHA, after residents in up to 80% of the authority's 176,000 units went continually without heat this past winter. Cuomo also committed an additional $250 million for the agency on top of $300 million he committed two years ago but has yet to release.

According to Cuomo, design-build project delivery, which the state General Assembly approved for limited city use, the city could waive the authority’s procurement requirements and speed up critical repairs to equipment such as boilers by more than a year.

"Failing boilers are only one of the many major infrastructure issues that NYCHA will face in the next few years," said the nonpartisan Independent Budget Office.

Cure, however, said state intervention could add layers of bureaucracy that could impede any possible efficiencies from privatization.

"Adding to the difficulty is that we have another spat between the mayor and the governor, with the governor inserting himself," said Cure.

"So you have federal scrutiny, you have state scrutiny and you have the falsified records that led to Shola's resignation. With 400,000 people, it's such an exhaustive system. It's also a matter of health between the lead paint and the faltering heating and air conditioning."

Mayor Bill de Blasio appointed Stanley Brezenoff as interim chief.

"This is one of the toughest jobs in America," said Brezenoff, 80, a Mr. Fix-It who is no stranger to steep challenges. He oversaw the troubled city hospitals system during the mid-1980s and was its interim CEO last year during an administrative turnover.

In addition, Brezenoff was first deputy mayor under Ed Koch and is a former executive director of the Port Authority of New York and New Jersey.

The City Council, meanwhile, called on de Blasio's administration to provide $2.45 billion in capital funds to NYCHA to meet ongoing critical needs and invest in housing development on NYCHA land. This would include $950 million for boiler repairs and heating equipment technology, $500 million toward the development of senior housing at NYCHA, and $1 billion annually for ongoing capital needs.

Council Speaker Corey Johnson said Tuesday the council’s response was “reasonable” given the problems at the authority the past few years.

De Blasio is scheduled to present his fiscal 2019 executive budget later this month.

The mayor, who defended Olatoye for several months as criticism mounted, defended her Tuesday even as he accepted her resignation.

"When I asked Shola to step into this role, she knew full well what the challenges were," de Blasio said at the Ocean Bay Bayside Apartments in Far Rockaway, Queens. "She understood there had been decades of disinvestment. She understood the physical plant of NYCHA was in very, very painful shape."

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.
Paul Burton

Paul Burton

Paul Burton is the Northeast Regional Editor for The Bond Buyer and the author of the book "Tales from the Newsrooms." He is a sought-after public speaker and has appeared on radio and TV shows, including former CBS News White House correspondent Sharyl Attkisson’s public-affairs program, “Full Measure.”