New York City's Shadow Government

NY Newsday 12/27/99

Public Office, Private Funds / Little-known entity gives private money to mayor's projects

By Dan Janison

When Mayor Rudolph Giuliani collaborated on a children's book last year, the giant investment firm Goldman Sachs & Co. kicked in $25,000 toward its publication.

When Giuliani proposed a critical study of the City University of New York, the John M. Olin Foundation, which promotes conservative causes, donated $25,000.

And when the mayor wanted money for celebrations after New Year's, which will help keep him in the spotlight during next year's U.S. Senate race, he turned again to corporate donations-with more than $2 million raised so far.

All those funds were funneled through a little-known entity called New York City Public-Private Initiatives Inc., based in a city office and run by Tamra Lhota, a longtime political fund raiser for Giuliani who worked in his 1989, 1993 and 1997 campaigns.

As its name suggests, the corporation falls into a fuzzy area among the government, the business and the philanthropic worlds, where city officials can arrange private financing for pet projects without directly soliciting funds, which would be illegal.

It creates a government version of what's known in party politics as "soft money," effectively allowing City Hall to control extra funds without the constraints that apply to either public budgets or private campaigns.

You won't find PPI listed in the phone book, or in the city directory, or even the lobby directory of the building at 10 Church St. where it leases space, with phones and office equipment, inside the Mayor's Office of Operations on the 20th floor.

Yet, boosted by $374,000 last year from city taxpayers-in a contract signed and currently overseen by Deputy Mayor Randy Levine-PPI has raised and committed more than $6 million for 32 favored mayoral causes since its creation in 1994.

It is a registered charity with a full-time staff of four. It also has more than 7 board members, mostly from the city's real estate, financial, media and entertainment elite. The list, filed in April with the Internal Revenue Service, included former Secretary of State Henry Kissinger, financier David Rockefeller, businessman Roland Betts, singer Carly Simon, Daily News publisher Mortimer Zuckerman, former New York Post publisher Martin Singerman, Queens developer Joseph Mattone and retired corporate magnate Preston Tisch.

Not surprisingly, many of Giuliani's campaign contributors also are PPI's benefactors. Thirty-three board members contributed a total $185,050 to the mayor's 1997 re-election campaign, many of them donating the legal maximum for individuals, or $7,700, records show.

But the corporation attracts other contributors as well-notably, bond firms that, as underwriters of city debt, are barred from supporting candidates in municipal elections.

Four firms with leading roles in issuing city bonds-Paine Webber, Merrill Lynch, Goldman Sachs and Morgan Stanley-had donated a combined $295,000 to five PPI efforts as of June, according to the corporation.

PPI has "done a lot of good things," Levine said. Backers cite contributions to children's funds and efforts against domestic violence among the beneficiaries.

But critics see potential problems.

"This is shadow government," said Peter Bienstock, a lawyer who led a state integrity probe about a decade ago that criticized the proliferation of off-budget entities that