The mayor also announced that Monahan would be joining his office, naming him Senior Advisor for Recovery and Safety Planning.
"This role is so important. It is about answering one of the central questions everyone needs answered: keeping this city safe," de Blasio said.
In his new role, the mayor said Monahan will lead the City's public safety recovery strategy in partnership with Recovery Czar Lorraine Grillo.
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Monahan joined the NYPD in 1982 and was named Chief of Department in January 2018.
Monahan spearheaded the department's neighborhood coordination officer program, but recently came under fire for his aggressive tactics in dealing with protesters last summer during the demonstrations following George Floyd's death.
At one point, he took a knee with protesters to indicate the NYPD's solidarity.
Mayor de Blasio said Monahan would still appear before the Civilian Complaint Review Board next week to answer questions about the department's response.
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Despite the criticism, the nearly 40 year veteran of the department is widely respected among his peers.
"He has been a leader since he joined the department at the age of 20. Terry's dedication and spirit was felt by everyone around him. The NYPD's loss is the Mayor's gain. I am certain that Terry's natural confidence and capabilities will be felt as he helps New York City move towards recovery," Police Commissioner Dermot Shea said.
Monahan said "leaving the NYPD is probably the toughest decision I've ever made in my life," adding he was already jealous because he was in a suit now and Harrison was still in his police uniform.
"Rodney is a great friend of mine, we've worked together many many years, back to our time in the Bronx. Without a doubt, he is the right man for the job," Monahan said.
It was an unexpected birthday present for Harrison who was emotional at times as he recounted growing up in Rochdale Village in Jamaica, Queens, where said he would have never dreamed of joining law enforcement.
"There was a time when I was stopped by a police officer that was extremely unprofessional and I said to myself, 'all cops can't be like this. How could I make a difference and how could I make a change?' That's why I took that application and came on this job, to make a change," Harrison said.
A release from the mayor's office says he is the first African American to hold this position in the Department's 175-year history.
Mayor de Blasio said in his new position, Harrison will be tasked with working to strengthen the City's neighborhood policing strategy and deepen the bonds between community and police.
Following the announcement, Patrick Lynch, the President of the Police Benevolent Association of the City of New York, released a statement congratulating Harrison.
"He's exactly the type of well-qualified leader we need: he knows our job, he knows the current reality on our streets, and he know what it will take to turn the ship around. We look forward to continuing to work with him as Chief of Department," Lynch said.
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