Will DOJ’s Anarchist Jurisdictions Impact Commercial Real Estate?
Posted on 09/21/2020
After months of protests and riots, the U.S. Department of Justice (DOJ) has labeled Portland, Oregon; Seattle, and New York City as jurisdictions that permit violence and the destruction of property. Institutional investors, such as pensions and sovereign funds, own offices, retail, hotels, apartments in New York and other West Coast cities. With the COVID-19 lock down impacting institutional real estate, will this add “fire” to the flames of depressed properties? Yes, some building owners have insurance, but will the damage caused by looting and destruction increase rates for owners?
Costliest U.S. Civil Disorders (USD millions)
| Rank | Dates | Area | Estimated Loss at Occurrence in USD (1) | Estimated Loss at 2020 dollars in USD (1)(3) | Notes |
|---|---|---|---|---|---|
| 1 | May. 26 – June 8, 2020 | 20 states across U.S. (New York, Seattle, etc,) | 2,000,000,000 | 2,000,000,000 | Estimates range from 1 billion USD to 2 billion USD. |
| 2 | Apr. 29-May 4, 1992 | Los Angeles, CA | 775,000,000 | 1,422,000,000 | Rodney King Riots |
| 3 | Aug. 11-17, 1965 | Los Angeles, CA | 44,000,000 | 357,000,000 | Watts Riots in Los Angeles |
| 4 | Jul. 23, 1967 | Detroit, MI | 42,000,000 | 322,000,000 | |
| 5 | May 17-19, 1980 | Miami, Fl | 65,000,000 | 204,000,000 | |
| 6 | Apr. 4-9, 1968 | Washington, DC | 24,000,000 | 179,000,000 | |
| 7 | Jul. 13-14, 1977 | New York, NY | 28,000,000 | 118,000,000 | Great New York City Blackout of 1977 |
| 8 | Jul. 12. 1967 | Newark, NJ | 15,000,000 | 115,000,000 | |
| 9 | Apr. 6-9, 1968 | Baltimore, MD | 14,000,000 | 104,000,000 | |
| 10 | Apr. 4-11, 1968 | Chicago, IL | 13,000,000 | 97,000,000 | |
| 11 | Apr. 4-11, 1968 | New York, NY | 4,000,000 | 30,000,000 |
Source: The Property Claim Services® (PCS®) unit of ISO®, a Verisk Analytics® company, U.S. Bureau of Labor Statistics, Insurance Information Institute.
(1) Includes riots and civil disorders causing insured losses to the insurance industry of at least $1 million up to 1992; $5 million from 1992 to 1996 and $25 million thereafter.
(2) Ranked on estimated insured losses in 2020 dollars.
(3) Adjusted to 2020 dollars by the Insurance Information Institute using the Bureau of Labor Statistics CPI Inflation Calculator.
Note: The Baltimore riots of April 27-28, 2015 was an event that was not designated a catastrophe by PCS. The final estimate did not exceed $25 million.
“When state and local leaders impede their own law enforcement officers and agencies from doing their jobs, it endangers innocent citizens who deserve to be protected, including those who are trying to peacefully assemble and protest,” said U.S. Attorney General William P. Barr in a DOJ press release. “We cannot allow federal tax dollars to be wasted when the safety of the citizenry hangs in the balance. It is my hope that the cities identified by the Department of Justice today will reverse course and become serious about performing the basic function of government and start protecting their own citizens.”
The DOJ has established criteria for evaluating each city is below:
Whether a jurisdiction forbids the police force from intervening to restore order amid widespread or sustained violence or destruction.
Whether a jurisdiction has withdrawn law enforcement protection from a geographical area or structure that law enforcement officers are lawfully entitled to access but have been officially prevented from accessing or permitted to access only in exceptional circumstances, except when law enforcement officers are briefly withheld as a tactical decision intended to resolve safely and expeditiously a specific and ongoing unlawful incident posing an imminent threat to the safety of individuals or law enforcement officers.
Whether a jurisdiction disempowers or defunds police departments.
Whether a jurisdiction unreasonably refuses to accept offers of law enforcement assistance from the Federal Government.
Any other related factors the Attorney General deems appropriate.
From the DOJ:
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New York City
Shootings in New York City have been on the rise since looting and protests began on or about May 28, 2020. For July 2020, shootings increased from 88 to 244, an increase of 177% over July 2019. In August 2020, shootings increased from 91 to 242, a 166% increase over August 2019.
While the city faced increased unrest, gun violence, and property damage, the New York City Council cut $1 billion from NYPD’s FY21 budget.
The budget resulted in the cancellation of the new police recruiting class, cuts to overtime spending, and the transfer of certain police functions, including school safety, out of the NYPD.
Meanwhile, the Manhattan and Brooklyn District Attorneys have declined to prosecute charges of disorderly conduct and unlawful assembly arising from the protests, and the District Attorneys in Queens and the Bronx have declined to prosecute other protest-related charges.
Both Mayor de Blasio and Governor Cuomo have forcefully rejected federal law enforcement support.
Portland, Oregon
This month, Portland marked 100 consecutive nights of protests marred by vandalism, chaos, and even killing.
Those bent on violence regularly started fires, threw projectiles at law enforcement officers, and destroyed property. Numerous law enforcement officers, among others, suffered injury.
Shootings increased by more than 140% in June and July 2020 compared to the same period last year.
In the midst of this violence, the Portland City Council cut $15 million from the police bureau, eliminating 84 positions. Crucially, the cuts included the Gun Violence Reduction Team, which investigates shootings, and several positions from the police team that responds to emergency incidents.
In August, Portland Mayor Wheeler sent a letter to President Trump expressly rejecting the Administration’s offer of federal law enforcement to stop the violent protests.
Seattle, Washington
For nearly a month, starting in June, the City of Seattle permitted anarchists and activists to seize six square blocks of the city’s Capitol Hill neighborhood, naming their new enclave the “Capitol Hill Autonomous Zone” (CHAZ) and then the “Capitol Hill Occupied Protest” (CHOP).
Law enforcement and fire fighters were precluded from entering the territory. The Seattle Police Department was ordered to abandon their precinct within the CHOP.
Person-related crime in the CHOP increased 525% from the same period of time in the same area the year before, including by Mayor Durkan’s own count “two additional homicides, 6 additional robberies, and 16 additional aggravated assaults (to include 2 additional non-fatal shootings).”
The CHOP was allowed to stand for nearly a month, during which time two teenagers were shot and killed in the zone.
The Seattle City Council, Mayor Durkan, and Washington Governor Jay Inslee publicly rejected federal involvement in law enforcement activities within the city of Seattle.
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According to the New York City Council, in regards to the city’s budget which is already deeply impacted by COVID-19, “By Fiscal 2017, federal categorical grants totaled $7.7 billion (9 percent of the budget) and State categorical grants totaled almost $14 billion (17 percent). The portion of the budget funded directly by the City has increased much more, from over $19 billion (69 percent) in Fiscal 1991 to over $62 billion (74 percent of the total) in Fiscal 2017.” The DOJ is working to identify jurisdictions that meet the criteria set out in U.S. President’s Memorandum and will periodically update the list of selected jurisdictions as required therein.