PREVENTING LEAD POISONING IN CHILDREN

FISCAL IMPACT OF INTRO. 205, A LEGISLATIVE ALTERNATIVE
TO LOCAL LAW 1

April 28, 1999

In the absence of alternative legislation, the city is currently under a court order to begin implementation of Local Law 1 on April 30. At the request of Councilmember Stanley E. Michels, the Independent Budget Office (IBO) has analyzed one such alternative, known as Intro. 205. Intro. 205 is intended to lower the Local Law 1 "lead-free" remediation standard in housing to a standard of "lead-safe," in exchange for higher future enforcement requirements. The bill also mandates lead-paint reduction in schools, day-care centers, and playgrounds, and sets targets for blood-lead level screening of children.

IBO's cost estimates are the additional costs the city would incur over and above the costs of continuing with current practice. If Local Law 1 is taken as the baseline, however, Intro. 205 would result in savings to the city.

• IBO estimates that, in aggregate, the annual costs of Intro. 205 would be $2 million to $4 million above current practice if it were implemented beginning in fiscal year 2000, reaching a maximum of $5 million to $10 million annually in 2004.
• Local Law 1, in contrast would cost the city $7 million to $10 million in the first year, and $10 million to $14 million in 2004.
• If Local Law 1 is taken as the baseline, then Intro. 205 would actually result in savings to the city of $5 million to $7 million in 2000, and slightly less in 2004.

Intro. 205, a bill introduced in the City Council last year, seeks to address the health hazards to children posed by the presence of lead-based paint. It is a legislative remedy to a court order requiring the city to implement Local Law 1.

Local Law 1, enacted in 1982, requires landlords (including the city) to fully remove or cover all lead-based paint in any dwelling unit occupied by a child six years old or younger. The law established a presumption of lead-based paint in units built prior to 1960 (the year in which the city banned the use of lead paint inside dwelling units). Although Local Law 1 (LL 1) has been on the books since 1982, the city has regularly been sued for non-enforcement. A law suit brought by the New York City Coalition to End Lead Poisoning (NYCCELP) resulted in a court order in 1997¹ requiring the city to begin implementation of LL 1. As a result, both the Departments of Health (DOH) and of Housing Preservation and Develoment (HPD) wrote regulations which were published in early 1999. The court issued a stay, however, on implementation of the regulations until April 30, 1999, to give the City Council time to devise a legislative alternative.

Intro. 205 is one such alternative. The bill proposes a lead paint hazard reduction standard of "lead-safe," requiring a lower level of remediation than under Local Law 1's "lead-free" standard. In return for lowering the remediation standard, Intro. 205 sets higher requirements for inspection and enforcement in the future, to ensure that units remain lead-safe. In addition, Intro. 205 mandates removal of lead-based paint in public school buildings, in day-care centers, and from playground equipment. The bill also sets voluntary targets for blood screening of children.

Costs to the city under Intro. 205 would be incurred in the following ways:

• HPD would spend up to $1 million annualy for lead-paint remediation in its in-rem units, emergency repairs in private units, and associated relocation costs.
• HPD and DOH would incur costs of about $1 million per year for training of certified lead-paint inspectors and additional inspection requirements.
• City property tax collections would fall by between $4 million and $10 million annually by 2004 as private landlords avail themselves of J-51 tax abatements for work performed to meet the law's requirements.

Intro. 205 also mandates lead-paint removal in classrooms, day-care centers, and playgrounds by the Board of Education and other city agencies. We anticipate no additional city costs for this, because the work has largely been performed or is currently programmed.

Finally, although costs to the Human Resources Administration resulting from targeting more children for blood-lead level testing (and treatment where necessary) cannot be attributed directly to the bill, the city could incur some additional health-related costs as a result of meeting the blood-lead level screening targets in the bill.

Three observations concerning IBO's estimates:

• Some of the actions mandated by Intro. 205 overlap with current law, regulation, or policy, so that the incremental costs to the city as a direct result of Intro. 205 are relatively small. We include only those costs we believe the city would incur exclusively as a result of Intro. 205.
• In the absence of alternative legislation, the city is currently under a court order to begin fully implementing Local Law 1 on April 30, 1999. The cost estimates below are the additional costs the city would incur over and above the costs of continuing with the current partial implementation of Local Law 1. We estimate that, in aggregate, the annual costs of Intro. 205 are above current practice, but below the costs of full implementation of Local Law 1. If a fully-implemented Local Law 1 is taken as the baseline, then Intro. 205 would result in savings to the city. The cost estimates below for Local Law 1 are for full implementation.
• In his request to IBO for this analysis, Councilmember Michels noted that he interprets section 27-2056.8 of Intro. 205 as not requiring the city to make emergency repairs in vacant units. IBO, however, interprets this provision to require lead-paint hazard reduction in all pre-1960 dwelling units upon vacancy, which could greatly increase the city's potential costs. In this analysis, we have estimated the costs under both interpretations. Councilmember Michels has indicated his intention to clarify this language before the bill is finalized.

The figure on the following page summarizes IBO's cost estimates of Intro. 205 and Local Law 1. A more detailed description of the analysis is available in a methodological appendix.

With respect to costs incurred by HPD for lead-paint hazard reduction in housing, we found that Intro 205, as interpreted by its prime sponsor, would not impose substantial direct costs on the city beyond those already budgeted and programmed under existing city programs. The city's additional costs for lead-paint hazard reduction in its in-rem units, and for emergency repairs in private units, would total up to about $1 million annually. This conclusion rests on two assumptions: (1) currently scheduled rehabilitation work in the city's in-rem units will meet at least 95 percent of the requirements of Intro. 205 for lead-paint hazard reduction, and (2) the city's capital program for lead-paint remediation will help prevent all but a handful of private owners from failing to comply with the law, thereby reducing costs to the city of emergency repairs.

In contrast, we estimate that the city's costs under Local Law 1 could be as high as $6 million to $9 million annually, depending on three factors: (1) the extent of additional work required in city-owned units; (2) the number of units in which the city would be obliged to perform emergency repairs as a result of lead-paint violations; and (3) the rate at which the city is able to recover its emergency repair costs.

Intro. 205 would impose new inspection requirements on HPD. The bill requires that every inspection in response to any complaint of a code violation include an inspection for lead-based paint if a child under the age of 6 resides in the unit. In addition, HPD must perform regular periodic inspections of "at risk" buildings, and reinspect all units where a violation was issued.

The provision for a lead-paint inspection when a child under the age of 6 is found would tend to add to the length of time necessary for each inspection, and thus somewhat reduce the total number of inspections each HPD inspection team would perform each year for a given level of enforcement resources. This assumes that all housing inspectors will be EPA-certified to conduct a lead paint inspection, a requirement of federal law beginning August 31, 1999. If this is not the case, then some lead-paint inspections would require a separate trip by a qualified inspector, further reducing the level of non-lead-paint Housing Maintenance Code (HMC) enforcement.

We estimate that the cost of enforcing the lead-paint provisions of Intro. 205 without sacrificing other HMC code enforcement would be the equivalent of 13 to 18 additional housing inspectors, at an annual cost of between $550,000 and $750,000, including training. This does not include other code enforcement support personnel. Without additional budgetary resources for code enforcement, this cost may be viewed as the opportunity cost of foregone enforcement of other parts of the Housing Maintenance Code.²

The incremental costs of lead-paint reduction in schools, day-care centers, and playgrounds is likely to be negligible, since such work is already covered under BOE and Health Code regulations and New York state law. The Board of Education currently conducts an annual survey of its facilities for lead-paint hazards, and makes any necessary repairs during school breaks and vacations, targeting facilities used by children 6 and under (kindergarten, pre-K, first-grade, and day-care facilities) and special education students. In its most recent capital plan, BOE reports having remedied lead conditions in 5,000 classrooms. We believe that BOE's current program will meet the requirements set out in Intro. 205 for lead-paint removal in school facilities, and that BOE will not incur any additional costs as a result of Intro. 205.³

It is difficult to estimate the revenues that would be realized from proposed section 27-2115 (1)(5), imposing fines for false owner certification of repairs for lead-paint violations. On the one hand, HPD has acknowledged that as many as 30 percent to 40 percent of owner self-certifications are false. On the other hand, the provision of the bill mandating re-inspection by HPD seems likely to deter false self-certification-but by how much, it is impossible to say. In any event, the fines imposed by this section combined with the knowledge that HPD must re-inspect lead paint violations should provide a substantial deterrent to false self-certifications.

Either bill would also result in lower city property tax revenues to the extent that owners were to take tax abatements and exemptions for rehabilitation work carried out under the law. Property owners are eligible for J-51 tax benefits for certain kinds of rehabilitation work, including lead-paint remediation.⁴

We found that J-51 benefits are disproportionately taken by larger buildings, and rarely taken by smaller, so-called "capped" buildings,⁵ perhaps because larger buildings have lower per-unit rehabilitation costs, higher operating funds, and better access to financing. However, units with lead-paint hazards and occupied by a child under 6 are disproportionately in smaller buildings. A geographic analysis reveals that they are also generally in the city's poorer neighborhoods. Assuming that HPD targets its lead-paint capital funds toward capped buildings, and that the historical pattern of use of J-51 benefits continues, we estimate that property tax revenues would be lower by between $4.2 million and $8.4 million by the end of fiscal year 2004. If HPD were to more aggressively market the availability of the tax benefits, particularly to smaller buildings, the property tax revenue loss would be greater. If capped buildings took advantage of the J-51 benefits at the same rate as larger buildings, for example, the total reduction in property taxes could reach $10 million by 2004. This would represent a 6 percent increase in the current annual $160 million tax expenditure on J-51 benefits.

In contrast, we estimate that lost property tax revenues as a result of Local Law 1 could rise to as much as $20 million per year.

Intro. 205 sets recommended targets for higher rates of blood-lead screening among children under 6, but does not directly require any action by the city to meet these targets. In this sense, the bill does not impose any medical-related costs on the city. In particular, nothing in the bill would require DOH or any other city agency to actually perform screening, diagnosis, or treatment.

Nevertheless, the bill's intention is clearly to increase the number of children screened above current levels (41 percent as of 1996, according to DOH figures) and identify those with elevated blood levels in need of further monitoring or treatment.⁶ We have estimated the costs the city would incur if the bill's screening targets-75% of children under 6 in the first two years of implementation and 90% thereafter-were met.

The additional costs would arise as a result of the city's 25 percent cost share of Medicaid reimbursements and for the uninsured. Over half of children under 6 in New York city are enrolled in Medicaid.⁷ A Columbia University survey estimated another 10 percent to be uninsured, for whom the city bears approximately 13 percent of medical costs. If some of these children are not now being screened, and more were screened as a result of efforts by DOH to meet the Intro. 205 targets, then these additional screening tests would be partially reimbursable by the city, at an estimated cost of $300,000 to $400,000. In addition, some number of the newly-screened children would likely have elevated blood-lead levels requiring treatment, and again these costs would be reimbursable, at a total estimated annual cost of $100,000 to $200,000. Over time, as the incidence of lead-poisoning declines due to lead-paint hazard reduction mandated by this bill and other efforts, these costs should come down.