Adams admin sticking with for-profit $565M migrant shelter contracts amid NYC budget crisis

The Adams administration will stick with its plan to give several for-profit companies migrant shelter contracts worth more than $560 million, but plans to make it a priority to enter into cheaper deals with nonprofit providers going forward, according to a New York City Hall spokesman.

The revelation came hours after New York Mayor Eric Adams’ top budget chief Jacques Jiha testified under oath Monday that City Hall was reconsidering awarding the for-profit contracts. The City Hall spokesman later told the Daily News that Jiha’s comments only apply to “future contracts” and that the administration actually has no second thoughts about the deals in question.

“The budget director’s comments were forward-looking, referring to plans for future contracts. There are no changes to the contracts you are referring to,” said the spokesman, who would only speak on condition that his name not be used.

Jiha, the director of Adams’ Office of Management and Budget, touched on the for-profit contract issue during a marathon City Council hearing examining the mayor’s budget cuts presented in his so-called November plan.

The plan, which can be blocked by the Council, would drastically cut spending at all city agencies, hampering everything from NYPD hiring to trash pickups, library hours and after-school programs. Adams says the cuts are necessary to offset the millions of dollars the city’s spending every week to house and provide services for newly-arrived migrants.

Council Democrats argued in Monday’s hearing that the belt-tightening is needlessly extreme and that much of it could be avoided if the administration becomes more fiscally responsible in how it hires contractors to provide services for asylum seekers. Several members also called for agencies like the NYPD to take bigger budget hits in order to reduce the impact on social services.

Going into the hearing, a key concern for Council Democrats was the administration’s decision to rely on a number of for-profit companies for migrant services, as such entities are typically more expensive for the city to contract with as compared to nonprofits.

Just last week, the finance committee of Health + Hospitals, the city’s public hospital system, voted unanimously to award contracts worth as much as $565 million to 13 mostly for-profit companies to provide catering, laundry and case management services at the Adams administration’s 16 largest migrant shelters, as first reported by the The News. The finance committee vote moved the matter along for final approval from H + H’s full board.

In his since-clarified testimony before the Council, Jiha suggested the administration would reconsider the for-profit contracts and reopen bidding on them “to see if we can get more non-for-profits to respond” with new proposals. Jiha said the reason the administration’s interested in doing that is because “it would serve the city’s interests to award these contracts to not-for-profits, because as you can imagine, the services are cheaper than for-profit providers.”

Jiha added that the administration “will do our outreach as best as we can” to get non-profits involved.

The Adams spokesman who walked back Jiha’s remarks would not say if there are any particular migrant crisis-related contracts in the pipeline that will be impacted by the new focus on non-profits.

The company green-lighted by H + H’s finance committee for new contracts that stirred the most controversy was DocGo, a health care firm that has since earlier this year provided case management services at city migrant shelters and spearheaded the administration’s program to relocate asylum seekers to other parts of the state. The company came under investigation by State Attorney General Letitia James’ office this fall amid allegations that its staff misled and mistreated migrants as part of the relocation program.

“I’d love to see DocGo go away,” Manhattan Councilwoman Gale Brewer said while grilling Jiha at Monday’s hearing.

Beyond the hubbub over the new H + H contracts, Jiha testified that the administration is looking in general to move away from for-profit contracting models as it relates to migrant services.

One particular area Jiha highlighted is letting nonprofits take over providing services at some of the city’s “smaller” emergency shelters for migrants. He said doing so will be key to achieving Adams’ stated goal of reducing projected spending on migrant services by 20% in the current 2024 Fiscal Year, which runs through June 30. Jiha testified that another front in achieving that big spending cut is reducing staffing levels at migrant shelters.

An issue Council members and Jiha repeatedly butted heads over during Monday’s hearing was projected tax revenue in the city.

The Council’s economists released a report over the weekend projecting the city will take in $1.2 billion more in revenue this fiscal year as compared to what’s predicted by the mayor’s office. Council Democrats argued that projected windfall should allow the administration to cancel plenty of the cuts the mayor floated in his November plan.

“There is no need for cuts in [Fiscal Year 2024],” Brooklyn Councilman Lincoln Restler, a progressive Democrat, told Jiha, citing the new Council revenue projections.

Jiha pushed back by saying his office predicts a massive $7 billion budget deficit for Fiscal Year 2025, which starts July 1. By law, Adams’ team has to find a way to fill that hole by mid-January, when his first draft of the 2025 fiscal year budget is due.

With little hope of receiving more migrant-related aid from the federal government any time soon, Jiha said serious cost-cutting must be implemented right away to address the looming deficit.

“We face very difficult and grim decisions about how to fund this national humanitarian crisis,” he said.