Testimony before the Finance Committee
New York City Council

Intro 389
Affirmative Claims Legislation

Delivered by:
Eduardo Castell; Deputy Comptroller, External Relations
Heriberto Barbot; Deputy Comptroller, Claims & Adjudications

May 28, 2003

Good morning, Chairman Weprin and members of the Finance Committee.

Thank you for the opportunity to testify in support of Intro. 389. At the outset, we would like to apologize on behalf of the Comptroller who, due to a scheduling conflict, is unable to testify today. We would also like to commend Councilman Avella and his staff for their work on this legislation.

This Committee and members of the City Council know, better than most, that these are very challenging financial times. Intro 389 would allow the Comptroller to more effectively and efficiently recover monies for the City of New York for damage caused to New York City property by the negligence or malfeasance of individuals or private companies.

The NYC Charter already empowers the Comptroller to settle and/or adjust all of the City's claims. Agencies are required by the Charter to obtain approval from the Comptroller's Office prior to settling any of their agencies' affirmative claims. At present, the various city agencies individually pursue their own affirmative claims, and then contact the Comptroller's Office for approval only when they are about to compromise a claim. This process has not only created staffing and procedural redundancies that can be eliminated, but has hindered efforts to create a more effective and cohesive approach to maximizing collections on behalf of the City. In fact, a 1997 study by Price Waterhouse concluded that the current process is inefficient and should be replaced by the centralization of affirmative claims.

Indeed, a recent analysis by the Independent Budget Office shows that the Comptroller collected an average of $3,515 per claim. In contrast, the Department of Citywide Administrative Services recovered on average $1,149 per claim; the Department of Transportation recovered $1,158 per claim; and the Fire Department recovered $1,375 per claim. The Law Department, the City's Corporation Counsel, recovered an average of $644 per claim through its own internal operation, while the collection agency to which it outsources netted $3,022 per claim after fees and disbursements were deducted. According to the IBO, the entity with the next best collection average to the Comptroller is an outside private collection agency. This is not to slight the efforts of the various agencies, but to recognize that they can be more effective by focusing on their core mission and responsibilities, and leaving the collection of claims to an agency better suited to do so.

The Comptroller's Affirmative Claims Division is headed by an attorney and consists of two claim adjusters (one of whom is a licensed New York State General Adjuster), who bring not only a combined total of over 25 years of experience in claims adjusting but, more importantly, an expertise in computing comparative negligence and negotiating settlements, primarily with property and casualty insurance companies.

Since starting this division in January of this year, the results have been very rewarding. As you can see by the enclosed chart, in five months the Comptroller's Affirmative Claims Division has collected nearly $328,000, with collections ranging from $38,000 to a high of $103,000 for this month.

While our efforts, historically, have been focused on NYPD claims, our Office has now broadened its scope. For example, the Department of Parks and Recreation has begun to collaborate with us on collections efforts. Parks recently notified our office about an incident in which someone, while taking driving lessons, drove into the Queens Museum. Parks supplied our Office with the accident report, an estimate for damages, and a contact person at the Queens Museum. With their cooperation we are now in the process of recovering damages of approximately $8,400. Parks should be commended for this collaboration.

As another example, in discussions with the Department of Environmental Protection regarding its affirmative claims recovery efforts we discovered that it does not have staff to handle these claims. Last month, our Director collected $1,200 on what we believe to be the first-ever hydrant claim, which is property managed by DEP. DEP is willing to cooperate with our staff and have the Comptroller's Affirmative Division handle those claims. Again, we commend DEP for their cooperative efforts on behalf of New York City taxpayers.

This bill further proposes, quite creatively, that a portion of the recovered amounts be shared with the agency submitting the affirmative claim. The City's General Revenue Fund will receive 80% of the collections, while 20% will be reserved or credited to the agencies that identify and report affirmative claim opportunities to the Comptroller. This bill recognizes that an incentive will encourage agencies to aggressively identify affirmative claims opportunities. This section is also important because it requires that the agency use any money recovered for risk management purposes, as determined by the agency head.

The ingenuity of this incentive provision should not be easily dismissed by those who may raise objections because of its originality. We need to be creative, to develop incentives and to reward desired behavior.

At a time when we should only be concerned with maximizing the City's revenues, this legislation would eliminate duplication of efforts Citywide, and provide for a more effective deployment of personnel within their agencies. In addition, since our Office handles claims against the City as well, we are in the best position to identify all counterclaims at an early stage in the settlement process, thereby taking advantage of another opportunity for further savings.

By centralizing all affirmative claims into one office, Intro 389 would increase the City's total collections, create an incentive for agencies to identify affirmative claims, and give agency heads additional funds to dedicate to risk management purposes.

In conclusion, this legislation makes fiscal sense, is a good management tool and deserves your support. Thank you.