Hudson Spends Other People's Money on Other People's Housing

Who checks the cost of a project in Hudson when the money arrives from Albany and Washington today, and local taxpayers tomorrow?

Image remixed creatively from The Economist Magazine.

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The Briefing Box:

The Remark: At the Common Council’s special meeting on the 24th of April, 2024, Jeffrey Dodson called a prospective $2 million Restore NY grant “free money”. The Common Council was deciding whether to support the application, not whether to approve the wider redevelopment. His comment demonstrates a mindset.
The Concession: An official who could defend the program would defend the program on merit. Instead they deflect, assuming a resident cares less because the dollars are federal, not municipal. The deflection is the concession.
The Mechanism: When decision-makers spend other people’s money on other people, neither price nor quality is naturally disciplined by the spender’s own interests. Friedman identified that incentive risk in 1980. We call it the “Fourth Quadrant of Waste”.
The Cost: An earlier 315-unit Bliss concept was publicly estimated at $220 million. The current preliminary plan is approximately 250 units, but HHA has not published an updated total cost. The Housing Justice Director position was created through a $1 million grant from Enterprise Community Partners in partnership with the New York Attorney General’s office. Why is the Housing Justice Director paid more than the Mayor, Common Council President and Treasurer, even when she fails?
The Reform: The taxpayer is the floor only because the cost keeps moving. Refusing to be the floor is a start, reforming the City Charter is the cure. </aside>

Why did an HHA official describe a state grant as “free money”?

The Curious Deflection Concedes the Systemic Failure and Waste of Public Funding

Mostly we watch the Welfare Brokers, or as they call themselves, the “housing professionals” and “community organizers,” from afar and online as they field questions from residents, taxpayers, and Common Council members. On rare occasions they engage us and we engage them, in the comment threads or with an offer to talk. Or they unwittingly engage our readers and contributors. However the exchange starts, it ends the same way: it’s not your money, it’s state, it’s federal, it’s Homes and Community Renewal, so why do you care? The exchange always arrives at the same place. Press on whether a program works, and the reply comes back about who paid for it. The words arrive before the thought, the way a hand pulls off a stove. We asked whether the spending works. The answer was about who paid for it. Those are different questions, and the switch is the whole story.

"You're sitting there right now concerned about how much money is going to come out of the taxpayers pocket, so why not help assist us to get free money.” ~ Jeffrey Dodson, Hudson Housing Authority, Hudson Common Council special meeting, 24th of April, 2024

If Dodson is telling Hudson that state and federal money is free, is he also telling the state and the federal government that Hudson money is free? The same taxpayer, you, funds both ends of the exchange. Nothing is free. There is only money taken from one pocket and moved to another, often with with a fee extracted along the way.

An official confident in a program defends the program. One who changes the subject to the funding source has told you the results cannot bear scrutiny. The deflection is not a defense. It is an admission dressed as one. Watch for it once and you cannot stop seeing it. A budget hearing, a grant announcement, a board meeting: the money is always someone else's, and the questions are always out of order, or “pseudo intellectual kinda nimby hiding behind numbers," aesthetics are "a dog whistle," and you're "kinda cowardly and sort of sad.”

Picture a backyard cookout. You bite into the burger and say it is dry. The grill master does not argue that it is juicy. He says, “What do you care? You are not the one who paid for the meat.” He agrees the burger is bad. He would like you to stop talking about it. What he has forgotten is where the money for the meat came from. You handed it to him an hour ago, when you chipped in for the groceries. It was always your beef. Hudson’s housing officials run the same play. The meat is federal. The money was always yours.

Why Public Money Can Lose Cost Discipline

None of this is unique to Hudson. In 1980, Milton and Rose Friedman set out four ways to spend money in Free to Choose. Their fourth category describes someone spending another person’s money on a third person, with little natural incentive to control either price or quality.[1] We call this incentive risk the Fourth Quadrant of Waste. The label is an editorial test, not a finding that every publicly funded project is wasteful.

Quadrant 4: someone else’s money spent on someone else. Bliss 2.0 tests whether Hudson’s safeguards are strong enough.

Walk the four boxes with a Hudson house. In the first, you buy your own house with your own money. You haggle over every dollar and inspect the roof: the cost and the quality are both yours. In the second, you buy a house for someone else with your own money. You still watch the price, but you fuss slightly less over whether the buyer wanted that particular kitchen. In the third, you buy your own house on someone else’s dime: the quality had better suit you, but the cost is no longer your problem. Then the fourth: someone else’s money spent on someone else. Public housing can fall into this quadrant when decision-makers allocate public money for beneficiaries who do not control the purchase or have to maintain it. That creates an incentive risk. It does not prove that a particular project is wasteful. Bliss should therefore be tested against transparent costs, comparable projects, procurement discipline and measurable outcomes. The tenant is not the flaw in this picture. The incentive structure is. Scrutiny belongs on the officials, developers, consultants and public bodies that design, finance, approve and procure the project.[3]

Washington’s grants are financed through federal revenue and borrowing. Hudson residents contribute through federal taxes today, while federal borrowing shifts part of the cost forward. The collection point is upstream. The money is not free. A Hudsonian who scrutinizes municipal spending has the same right to scrutinize state and federal spending.[5] A Hudson resident told that a grant is “not local” still contributes to state and federal revenue and has every right to ask whether the money produces value.