Tuesday, March 28, 2006

The $6 billion lie: why Ratner's fiscal claim is Swiss cheese

Would the Atlantic Yards project bring $6 billion in new revenue to the city and state over 30 years? That's developer Forest City Ratner's mantra, in meetings, in the Brooklyn Standard promotional sheet, and now in a letter (right) they're providing to state legislators in an effort to lobby Assembly Speaker Sheldon Silver. The state budget is supposed to be decided by April 1, and the developer seeks the inclusion of $100 million in state aid promised in a 2005 Memorandum of Understanding, even though the project is still in the early stages of review.

The $6 billion is the biggest lie in the whole Atlantic Yards controversy.

OK, syntactically, it's not a lie. The $6 billion has indeed been estimated in a study FCR commissioned, written by sports economist Andrew Zimbalist. But it's not credible. It results from manipulated statistics, an enormous (and methodologically flawed) overestimate of revenues, and an omission (and then an underestimate) of costs.

The study's conclusions--and FCR's manipulation of them--are challenged in reports by two city agencies and two outside analysts, not to mention an application of some economic common sense.

Here are some glaring flaws in the FCR-paid study. It ignores the cost of traffic and transportation improvements. It claims a new arena wouldn't increase police costs and lowballs other public costs. And, in claiming financial benefits, it relies on the dubious theory that building new luxury housing will bring new income tax revenue to New York. If so, any new luxury housing development in the city should be considered an "economic development engine," which is how FCR described the project (above) to City Council last May. (Note that FCR also fudges claims about construction jobs, and the number of office jobs promised has been cut by more than half since the City Council presentation.)

So here are 15 reasons to question the purported $6 billion.

1) The source is the developer's paid consultant.

Andrew Zimbalist's report, Estimated Fiscal Impact of the Atlantic Yards Project on the New York City and New York State Treasuries, was issued in May 2004 and updated in June 2005. (See p. 35 of the updated report.) Any report funded by a developer should be questioned, and tested against reports from government agencies and outside critics. No outside analyst has endorsed Zimbalist's conclusions; in fact, the September 2005 Independent Budget Office (IBO) Fiscal Brief declined to estimate revenues from the non-arena portion of the project, citing "methodological limitations."

FCR VP Jim Stuckey claimed at a 5/4/04 City Council hearing: It is really not our report, it is Professor Zimbalist’s report. But Stuckey’s statement is undermined by Zimbalist’s 2004 acknowledgement that he relied on information supplied by the developer: Many of the numbers used in this report concerning Nets attendance, ticket prices, construction costs and other items come from projections done by or for FCRC. I have discussed these estimates with FCRC and they seem reasonable to me.

Curiously, the acknowledgement in Zimbalist's 2005 update substitutes "Nets" for "Forest City Ratner Companies": Many of the numbers used in this report concerning Nets attendance, ticket prices, construction costs and other items come from projections done by or for the Nets. I have discussed these estimates with the Nets and they seem reasonable to me.
The Nets, however, are not responsible for the project construction--the team is owned by a group with numerous owners who are not part of Forest City Ratner. The change reads like a fig leaf to distance the economist from his patron.

And Zimbalist, who teaches at Smith College in Northampton, MA, hasn't been forthcoming. In their June 2004 critique of Zimbalist's first report, urban planner Jung Kim and anthropologist Gustav Peebles--both of whom have backgrounds in economics--write: Much of Dr. Zimbalist’s data is culled from biased or unsubstantiated sources, including data from consulting firms hired by FCRC or from FCRC itself, as Dr. Zimbalist himself admits throughout the paper. We contacted him several times in order to try to get precise citations for the numbers he produces, but all our efforts were in vain.

2) Zimbalist was working outside of his expertise.

A 2004 FCR flier refers to "respected Smith College economist Andrew Zimbalist." Stuckey told City Council that we retained Professor Zimbalist because we wanted somebody who historically [has] been against doing arenas and stadium[s]. While Zimbalist has a long history of analyzing the fiscal impact of sports facilities, he has no such track record in analyzing broader urban development projects like this one, which concerns not just an arena, but also 16 mostly residential towers. (Zimbalist's long list of consultant jobs refers almost exclusively to sports, though one vaguely cites a “new civic center.”)

Zimbalist offers no indication that asked any other economists for feedback. By contrast, Kim and Peebles, who issued a June 2004 report dissecting Zimbalist's study, did test their conclusions with outside economists.

Referring to Zimbalist's study, "I would never have undertaken this exercise,” Washington State University sports economist Rod Fort told Neil deMause, a journalist specializing in the impact of sports facilities. “In essence, Andy is trying to forecast 33 years hence, and he’s forecasting housing markets, which there are other people spending all their waking moments on. What you see is assumption after assumption after assumption after assumption.”

3) The $6 billion estimate does not incorporate the costs of the project.

Zimbalist estimates those 30-year costs at $1.1 billion, as FCR's Stuckey told (right)City Council last May. (Project opponents Develop Don't Destroy Brooklyn estimate nearly $2 billion--a figure that deserves further discussion.) Notably, a front-page article in the first issue (June 2005) of FCR's Brooklyn Standard promotional sheet said (below): "Expected to generate $6.1 billion over the next 30 years for the city and state...." An FAQ in the second issue (October 2005), on page 5, stated, "The project is expected to generate over $6 billion in new tax revenues for New York City and State over the next 30 years....." Neither of those passages mentioned the costs.

In an affidavit in the recent court case regarding FCR's effort to demolish five properties it owns, FCR's Stuckey did acknowledge the costs: "We also estimate that the Project will generate $6.1 billion in new tax revenues-and $5.0 billion in net tax revenues - for the City and the State over the next 30 years."

As noted, the governmental studies of fiscal impact have major flaws. A New York City Economic Development Corporation (NYCEDC) analysis, dated June 2005 but likely completed months earlier, does not estimate any costs for the project, just revenues. And the IBO report ignores revenues from the considerable non-arena portion of the product. The critique of Zimbalist's first report, by Kim and Peebles, does try to assess the full costs and benefits, and estimates that the taxpayers could lose up to $500 million on the project over 30 years.

An 11/27/05 New York Times editorial attempted to draw a conclusion about the whole project, but failed because it was based on the incomplete IBO report: The Nets arena is not destined to be a cash cow, but the borough deserves a sports team, so long as the price is not too high.

4) Forest City Ratner manipulates statistics.

There are two ways to look at the revenues and costs: the 30-year aggregate or the figure in current dollars, known as net present value. (The aggregate is always significantly larger, since it incorporates interest and other capital costs.) The IBO report and the NYCEDC analysis use present value, as that is the standard for such economic evaluations. Zimbalist mainly uses present value; in the concluding section of his 2004 report, he provides the aggregate as alternative, but in the conclusion of the 2005 update, he leaves out the aggregate.

Forest City Ratner, however, typically ignores the standard and publicizes the 30-year aggregate. Why? Likely because the number is larger and accentuates the ratio between benefits and costs. For benefits, the 30-year total would be $6.1 billion, with a present value of $2.1 billion. For costs, the 30-year total would be $1.1 billion, with a present value of $572.6 million. Thus, the use of the aggregate also exaggerates the ratio between benefits and costs--from 6-to-1 rather than 4-to-1. (However, as noted below, neither set of numbers is reliable.)

5) Zimbalist's report makes a fundamental methodological error.

In its March 2005 analysis, "Slam Dunk or Air Ball?," the Pratt Institute Center for Community and Environmental Development (PICCED) notes that the FCR-sponsored report, and as well as the Kim-Peebles critique, should not have treated housing as a contributor to economic development, because the new taxes paid by residents could also be counted in other economic development plans, such as job-retention efforts. The PICCED report states:
Zimbalist concludes [in his first report, in May 2004] that the FCRC project, after covering publicly-borne capital and operating costs, will produce a net benefit to the City and State treasuries of $812.7 million (present value terms). However, by far, the largest source of projected revenues ($896.6 million, or 57.9% of the total of $1.5 billion in present value revenues), is in personal income and sales taxes based on the incomes of the new residents of the housing component. Without these housing-related tax flows, Zimbalist’s estimates show that the balance of the FCRC project is a money-loser to the City and State treasuries, i.e., the only way the FCRC proposal overall makes fiscal sense is by including tax revenues from the housing component.
Major Flaw in Both Studies
These two studies share a major methodological flaw in that they both count the positive fiscal effect of the income of the residents who will occupy the 4500-unit residential development. While the two studies make different assumptions about the likely income of new residents, (Zimbalist assumes an average income of $80,000; Kim and Peebles assume and average of $50,000 to $60,000) both give the overall project credit for the income of new residents, and for the local and state tax revenues that such incomes would generate.
This is a very problematic assumption, tantamount to assuming that residents bring their own jobs to the City when they move in to a new housing unit. While residents who are new to the City will add to the City’s labor supply, unless they are self- employed, they do not “create” their own jobs. If the City started to give housing projects “credit” for the creation of jobs held by their residents, a double counting problem would result since the city routinely gives businesses “credit” for expanding employment or relocating jobs to NYC and this then often enters into the fiscal “score-keeping” for economic development projects receiving City (and State) subsidies.

(Emphasis added.)

I asked James Parrott of the Fiscal Policy Institute, who worked on the Pratt report, if there was any precedent for Zimbalist's methodology. He responded, "I don't know of any serious cost-benefit analyses of mixed-used economic development projects that count the taxes of residents. That's why we said it was a methodological flaw."

The IBO, as noted, did not analyze the non-arena portion of the plan, citing "the methodological limitations in estimating the fiscal impacts of mixed-use developments."

In his most recent report, Zimbalist estimates (p. 36) $2.1 billion in present value tax revenues and $6 billion in aggregate tax revenues. Nearly half of those new revenues would be attributed to residential income taxes.

6) Even if you accept the "methodological flaw," Zimbalist's assumptions are wrong.

The NYCEDC also estimates revenue from new residents, but uses different statistics, which would significantly lower tax revenues. As I've noted, Zimbalist, in his first report, projects that the average annual income of households in the development would be between $80,000 and $90,000. In his second report, in 2005, he projects that the average annual income would be $94,875. (If he were to do another report, acknowledging the addition of another 1,300 market-rate condos, his estimate undoubtedly would rise.)

But the city economic development agency says you can't count new Atlantic Yards residents as new taxpayers. Rather, the agency assumes that the new units "will represent an equivalent increase in households Citywide, either directly in the project itself or as infill in units vacated by households relocating to the project. Income tax revenue is based on an average income of $45,000, the Citywide average for all industries." Obviously, people earning $45,000 pay less in taxes than those earning more than $90,000, and revenues based on new city residents would be lower.

A comparison of Zimbalist's 2004 report and its 2005 update points out the fallacy of using new residents to estimate economic impact. His initial report estimates a 30-year aggregate of $4.1 billion in new revenue and about $1.3 billion in costs. His update, as noted above, estimates $6.1 billion in revenue and $1.1 billion in costs. The major contributor to this magical 50 percent leap in revenue: more well-off new residents. Based on this rationale, the city should subsidize high-end housing and recruit rich taxpayers. Except the city is now doing the opposite: cutting back on tax breaks for market-rate development.

7) Zimbalist overstates the market for office space.

In his May 2004 report, he writes that the project would eventually create 1.9 million square feet of first-class office space. He makes no mention of a study of Downtown Brooklyn redevelopment issued a month earlier, which estimates a glut of office space in the area just west of the Atlantic Yards footprint. He cites a "housing and commercial office space shortage in Brooklyn and New York City" and offers some questionable statistics: Since 1988, downtown Brooklyn has absorbed an average of 600,000 square feet of new office space per year. As of early April 2004, the vacancy rate of class A office space built in Brooklyn since 1985 was less than one percent.

In their June 2004 critique, Gustav Peebles and Jung Kim point out that Zimbalist fails to calculate a vacancy rate for the new Atlantic Yards office space, and that his observation regarding the Brooklyn vacancy rate requires a huge caveat. Most of the Class A office space in Brooklyn is at Forest City Ratner's MetroTech development, which has relied heavily on subsidies and government tenants to fill the space. (The NYCEDC more soberly calculates a 7% vacancy rate.)

Zimbalist, in his June 2005 updated report, acknowledges changes in FCR's plans that would create either 1.2 million or 259,078 square feet square feet of first-class office space. But he repeats the same decontextualized citations of a low vacancy rate and downtown Brooklyn's capacity to absorb office space even though Forest City Ratner had itself reacted to the market by proposing cuts of 43% to 88% from the originally announced space. Nor does he acknowledge any competing supply of office space from either the Downtown Brooklyn rezoning or from Lower Manhattan.

8) Zimbalist underestimates public safety costs.

Incredibly, Zimbalist doesn't assume additional costs for police coverage of a sports arena and a new development with some 15,000 residents. He writes: Based on conversations with former budget officials, FCRC concludes that the increment in fire and police budgets would be negligible.

Zimbalist doesn't even put that conclusion in his own words--does he believe it? Anyone who has attended a professional sports event knows that additional security is needed for crowd control and public safety. The arena also would be used for other large gatherings, and it would be adjacent to a major transit hub. It would also require monitoring as a potential terrorist target--which would also increase costs.

The IBO, surprisingly, leans toward Zimbalist regarding fire protection, saying that the additional costs "would be relatively low." (The agency, however, doesn't use the term "negligible.") However, the IBO disagrees with Zimbalist on costs for police, asserting that "costs to the city for policing the new Nets arena could be significant."

9) Zimbalist underestimates other public costs.

The IBO tried to estimate some public costs posed by the project as a whole, concluding that new education, sanitation, and police services over 30 years would be $530 million in present value. That's 65 percent more ($208.6 million) more than the $321.4 million estimated by Zimbalist. Such a wide divergence is no rounding error; it's a cry for greater scrutiny of the numbers.

Note that the public costs almost certainly would be even higher, since more housing would be built. The IBO's higher cost prediction was based on an estimated 6,000 housing units, not the 5,850 number used by Zimbalist. However, the developer now plans at least 7,300 units onsite, plus up to 1,000 additional units offsite. More people require more city services.

10) Zimbalist's report ignores significant costs for traffic, transportation, and parking improvements.

So do the other analyses by the IBO, and NYCEDC. Community Consulting estimated a $4 billion cost over nearly a decade for traffic, parking, and transit improvements in the Downtown Brooklyn area at large. Traffic engineer Brian Ketcham of Community Consulting, examining the initial configuration of the Atlantic Yards project, estimated the social costs of traffic alone at $76 million a year, with more than half of that coming from congestion. (The document isn't online.)

Architect Jonathan Cohn points out: If those who are calling for an arena at any cost really cared about doing it right, there would have been a study of a range of possible sites, with pros and cons identified and analyzed.

The PICCED report observes:
The developer has thus far provided no meaningful information on traffic impacts or mitigation plans. Traffic congestion in downtown Brooklyn is already severe and will grow worse in years to come as development in Downtown Brooklyn proceeds (following a recent rezoning). If substantial parts of Brooklyn can expect severe traffic gridlock on a regular basis because of the project, it could be a “no-go” regardless of other benefits. If the project does go forward, FCRC and the City should use this opportunity to engage in “big picture” thinking about Brooklyn’s transit infrastructure – not only traffic calming but also potential light rail, waterfront linkages, and ticket discounts for taking public transit. In any case, the public costs (and ancillary benefits) for mitigating potential traffic impacts from the project should be factored into the fiscal analysis of the project. (Emphasis added.)

11) Zimbalist overestimates the number of workers associated with the Nets who would pay city income taxes.

As noted in Chapter 3 of my report, Zimbalist assumes that 30 percent of the Nets players would live in the five boroughs and pay city and state taxes, while 75 percent of the arena workers would live in the city. However, NYCEDC estimates that 20 percent of the players, 35 percent of the executives and team staff, and 50 percent of the facility staff would reside in New York City. NYCEDC bases its estimates on "figures from other area professional sports teams." Zimbalist gets his estimates from Forest City Ratner.

12) There are unexplained inconsistencies between Zimbalist's two reports.

For example, in his first report, Zimbalist estimates that new income-tax revenues based on Nets players who relocated to New York City or State would be $4.88 million in 2008. In his update, he adjusts that figure to $7.47 million for 2009--a more than 50 percent jump in one year. He estimates similar leaps in income-tax revenues between 2008 and 2009 from Nets executives, staff, and arena workers. In his first report, he assumes arena-worker salaries would total $7.06 million. In his update, he assumes those salaries would total $16.4 million--more than double.

Similarly, in his first report, he estimates that new sales-tax revenue from the arena would be $6.43 million in 2008. In his update, he estimates $9.62 million in revenue for 2009--a nearly 50 percent leap.

In his first report, Zimbalist writes (p. 18), "I also assume that 10 percent of the workforce from among the Atlantic Yards households will work outside of New York City and, hence, not be responsible for paying New York City income taxes." In his update, the Massachusetts-based academic drops that assumption without offering an explanation: he apparently learned that New York City residents must pay city income tax no matter where they work.

13) Zimbalist overestimates the potential for revenues from the Brooklyn arena.

His 2005 report states: The Nets project that the arena will not host an NHL team and that it will host 226 events during the year (assuming the eventual closing of CAA, no new arena in Newark, no NHL and no minor league hockey events at the Atlantic Yards arena).
(Emphasis added; also note that his earlier report, in 2004, instead quotes the developer: "FCRC projects... 224 events.")

By contrast, NYCEDC forecasts a total of 192 events each year at the arena. NYCEDC forecasts an average attendance of 9,476 at events other than NBA basketball games; Zimbalist does not try to estimate the attendance at such events. As for competition, a new arena in Newark is already under construction and would compete for events.

14) Zimbalist's estimate of the number of current Nets fans who would attend games is questionable.

The Nets arena is estimated to offer a relatively small positive fiscal impact, and the revenue is dependent, in part, on retaining current Nets fans from New Jersey. Neil deMause, a journalist specializing in analysis of sports facilities, critiqued the IBO study, which, like Zimbalist's analysis, uses FCR estimates regarding the arena:
First of all, the IBO's conclusions result primarily from assumptions of how many current Nets fans would accompany the team from Jersey to Brooklyn, bringing their sales tax dollars with them - assumptions that, according to the IBO report, were provided by Ratner himself. Ratner's figures assume that "about half of those attending Nets games at the Atlantic Yards arena will be from the ranks of those attending now" - a debatable assumption given that it's quite a shlep from New Jersey to Brooklyn, not to mention that the proposed arena would hold 18,000 fans, and the Nets currently average fewer than 15,000 fans per game. Tweak the assumptions to have only 30% of Nets attendance represent new spending instead of 50%, and the arena would be a net loss.

15) Zimbalist's numbers are out of date.

His updated report assesses plans that would build either 6000 or 6800 dwelling units. Now Forest City Ratner plans 7300 units at the Atlantic Yards site, plus another 6000 to 1000 affordable condos, either onsite or offsite (more likely offsite). An increase in housing, by Zimbalist's lights, would lead to more revenues, and it also would lead to more costs. Still, the project is expected to shrink, as architect Frank Gehry said in January. Either way, all the fiscal reports are stale.

The year of magical thinking

A 2004 FCR flier sent to Brooklynites contained this passage:
Q. How will Atlantic Yards be financed?
A. Primarily through private funds.
…A study by respected Smith College economist Andrew Zimbalist projects that Atlantic Yards will generate $4.1 billion in new tax revenue for the City and the State over the next 30 years. About one-third of that will help pay for construction and operating costs, leaving New York with $2.8 billion we didn’t have before to help fund better schools and safer streets.

A year later, the developer was predicting $6 billion in new tax revenue, a magical 50 percent leap, mainly from the increase in high-end residential units.

Does adding more market-rate housing really provide an economic boost to the city and state? Would the Atlantic Yards project really help fund better schools and safer streets, or would it be a fiscal drain?

We can't be certain, and the studies by government agencies have been inadequate. But we know that $6 billion claim is enormously overstated. It is a 30-year aggregate figure based on a tower of assumptions. It does not include public costs for such services as extra police for arena events and traffic amelioration around the project. It improperly relies on revenues from new residents. (FCR in the excerpt above sent to legislators also fudges claims about jobs.)

Whether it is FCR’s report or "Professor Zimbalist’s report," as Stuckey told the City Council, it is not a sound academic exercise. Rather, it's a tool in a deceptive public relations strategy.

Monday, March 27, 2006

Brewery's Hindy rewrites history on Atlantic Yards jobs claims

In a debate published today in Metro NY over the merits of a boycott of the Brooklyn Brewery by those opposed to the Atlantic Yards project, the Brewery's Steve Hindy states:
When Ratner unveiled his plan to buy the New Jersey Nets and bring them to Brooklyn, we were thrilled. The departure of the Dodgers in 1957 had left a hole in Brooklyn’s heart. We believe that the Nets could give Brooklyn a team to rally around again. And we were very impressed by the housing and commercial development surrounding the arena, designed by Frank Gehry. The development promised to bring 15,000 construction jobs and 3,000 permanent new jobs to Brooklyn, as well as seven acres of new public open space.

However, has been noted numerous times, the 15,000 promised construction jobs would actually be 1500 jobs a year over ten years.

Also, the number of permanent new office jobs unveiled in Ratner's plan was to be 10,000, not 3000; only in 2005, nearly 18 months after plans were announced in December 2003, did Forest City Ratner announce it would reduce office space and add market-rate condos. Actually, the development does not promise 3000 permanent new jobs, unless they're counting jobs in retail, the hotel, or the arena; FCR's Jim Stuckey said in a recent court filing: We estimate that the Project will create 15,000 construction jobs and, eventually, at least 2,500 permanent jobs.

As for the amount of open space, it was initially promised at six acres; the seven acres is a reconfiguration.

Fiscal impact of Atlantic Yards? The city keeps report under wraps

How much in new revenues would Forest City Ratner's Atlantic Yards project bring, and what costs would it pose?

That's the $3.5 billion (and counting) question, but the Bloomberg administration's response is: trust us. The New York City Economic Development Corporation (NYCEDC) won't release the report it's used as a justification for the development.

At some point after 5/4/04--when NYCEDC president Andrew Alper told a City Council committee that the project was expected to have a positive fiscal impact--the agency apparently produced an analysis of the project. A 3/3/05 press release from the mayor's office stated: According to an economic analysis completed earlier this year for the New York City Economic Development Corporation, the net fiscal benefit to the City and State from the Atlantic Yards project is estimated at $1 billion in present value over the next thirty years. (Present value means the value in current dollars.)

The online version of the press release contains a link to the NYCEDC web site, but there's no report to be found.

I queried NYCEDC spokeswoman Janel Patterson: "There's a link to NYCEDC but I couldn't find the analysis on the web site. Can you point me to it, or send me a copy? And, given that the project has changed significantly, has there been, or will there be, a new analysis?"

Her response: "The analysis referred to in the release was an internal analysis and not made public."

Two press releases

Why was a city agency estimating the fiscal impact on the state? As I've pointed out before, there's strong evidence that the mayor's office, in that 3/3/05 press release, wanted to cite an analysis by a government agency rather than rely on one by the developer.

Similar press releases issued virtually simultaneously by the governor's office and the Empire State Development Corporation both relied on Andrew Zimbalist, the developer's paid consultant, for their fiscal projections.

A different NYCEDC analysis?

One analysis by the NYCEDC has surfaced. The document, obtained by Develop Don't Destroy Brooklyn and dated 6/27/05, projected the fiscal impact for the city alone. It calculated a return of $524 million in present value--about half of that $1 billion figure estimated for both the city and state

Despite the date, this analysis had likely been completed several months earlier, since it was based on an earlier configuration of the project. At a City Council hearing 5/26/05, Forest City Ratner announced plans to reduce commercial office space and add market-rate condos. This was not incorporated into the NYCEDC analysis made public.

Did NYCEDC produce a second report, the one Patterson cited as an internal analysis"? Possibly. But the agency might have taken the analysis mentioned above and added calculations regarding the fiscal impact on the state. But that's just speculation until we see the report and its methodology.

Huge flaws

More importantly, the NYCEDC document contains a huge omission: while the agency calculated new tax revenues, it made no attempt to factor in increased costs, such as for public safety, schools, and sanitation. The term "net fiscal benefit" used in the city press release suggests that some costs were acknowledged--maybe they were in the report that's under wraps.

Some costs are calculated in the reports by Zimbalist and one by the Independent Budget Office (IBO), but each of those reports have their flaws. Notably, the 2005 IBO report focused on the arena rather than the project as a whole, citing the "methodological limitations in estimating the fiscal impacts of mixed-use developments."

The Zimbalist reports, issued in 2004 and updated in 2005, have numerous flaws, some of which I've outlined. Tomorrow I'll take a longer look.

Brooklyn’s Barack? Batson declares for Assembly, could block AY project

Bill Batson’s campaign kickoff, during a sunny-turned-cloudy (and back) afternoon on the steps of City Hall yesterday, was a rainbow coalition of Brooklyn’s ethnic groups. Add to them representatives from the Civil Services Employees Association (citing Batson’s work on the Lifespire agreement), the Green Party, the United African Congress (UAC, who helped Batson meet his birth parents), and ACRES—American Civil Rights Education Services, a nonprofit Batson cofounded that takes students on tours of civil rights landmarks.

A duo offered a graceful South African song. Civil liberties stalwart (and unsuccessful Public Advocate candidate) Norman Siegel wore a Brooklyn Dodgers jacket, a sartorial rebuke to those, like Brooklyn Borough President Marty Markowitz, who invoke the departed team to justify the Atlantic Yards project.

And then there was the candidate, aiming to succeed (or is that defeat?) Roger Green in the 57th Assembly District, encompassing Crown Heights, Prospect Heights, and Fort Greene. There’s a whiff of the Barack Obama phenomenon about Batson: the biracial “son of an immigrant from Kenya” (in the words of UAC’s Sidique Wai), who grew up in the 'burbs (Teaneck and Nyack) but has lived in Brooklyn (mostly) since he began studying art at the Pratt Institute in 1979. (He's been in the district for five years.) Behind him, his adoptive mother (black) stood proudly and, off to the side, his girlfriend (white) beamed.

“Bill will build bridges across the racial divide that unfortunately still exist in subtle and sophisticated ways,” declared Siegel, who was referring to Batson's broad civic experience, most recently as head of community relations for Senate Democratic Leader David Paterson. (Batson later cited the need to bridge the gulf between Africans and African-Americans, as well.)

There was no one representing developers and Batson’s candidacy—however broad the issues he addresses—will be seen by some as a referendum on the Atlantic Yards project, which he opposes. That’s why a good handful of the three dozen or so supporters in attendance were from the Develop Don’t Destroy Brooklyn coalition. The issue has salience: Siegel lost big to incumbent Betsy Gotbaum in last year's election, but he won the 57th AD.

Replacing Green's voice on AY?

Batson may be hardly a one-issue candidate, but he's an excellent candidate for one-issue (Atlantic Yards) voters. The officeholder has enormous sway regarding the state’s $100 million contribution to the project. Assembly Speaker Sheldon Silver, who controls one of three votes on the Public Authorities Control Board (PACB; aka "three men in a room")--the agency that shot down the West Side Stadium--generally follows the lead of the local lawmaker. That Assembly member is now Green, a staunch supporter of the project.

Green may be leaving office; he has stated his interest in challenging incumbent Congressional Rep. Ed Towns. Though Green hasn’t formally declared for the Congressional race, Batson said he wasn’t expected Green to run for reelection. “It’s not about the names,” he added, thus avoiding mention of the other declared candidate, attorney Hakeem Jeffries, who ran a strong race against Green in the past and, as of February, had already raised nearly $60,000. (There was no talk yesterday of Batson's war chest.) Jeffries has called for a “principled compromise” regarding the Atlantic Yards plan. Batson’s unequivocally opposed.

Should the PACB have failed to vote by primary day, September 12--and there’s a strong case that a vote at this time, given the lack of a revised project plan, much less a Draft Environmental Impact Statement, is premature--the winner, if Green doesn't gain reelection, could steer Silver's vote. (In this district, as in much of Brooklyn, a win in the Democratic primary is tantamount to election.)

The candidate speaks

The Obama comparison isn't quite fair--the Illinois Senator-to-be was a far more polished speaker when thrust upon the national stage--but Batson took pains to come off as a candidate who was a bit unusual (an artist invoking artists) and, yes, a bridge-builder.

In his speech, Batson invoked a range of examples, each a “tough act to follow”: Joan Maynard, founder of the Weeksville Society; Shirley Chisholm, the Brooklyn Congresswoman and first black female presidential candidate; the Brooklyn Dodgers; and Walt Whitman. Later he cited as inspiring Brooklyn artist-activists Maynard, Whitman, Frederick Law Olmsted, and Spike Lee.

He recalled walking the district as a freshman art student at the Pratt Institute, when he arrived in 1979. “The communities of Fort Greene and Prospect Heights and Crown Heights once held the moral as well as physical high ground,” he said, citing the principles of public space, public participation, and public service.

“Today our community has become brownstone gold in a modern-day land rush," he said, saying our neighborhoods are desirable "not just because of the human scale but because of cultural institutions.”

Equity vs. livability?

In the crude equity vs. livability debate, Batson might seem to favor the latter: “While we welcome anyone who would like to live in Brooklyn, we also will proudly defend the rights of those who made these communities great, so they could stay on, as our neighborhoods get even greater.”

However, he added, “We need to use the power of public subsidies that virtually all these developers seek to ensure that decent affordable housing is built, and that the current housing stock is protected.”

Development on steroids

"Over 40 million square feet of new… development has been approved in Downtown Brooklyn in the absence of a master plan," Batson declared. "As cochair of the special [Community Board 8] subcommittee on Brooklyn Atlantic Yards EIS [Environmental Impact Statement], I have been a student of this wave of development on steroids. Out of context, out of scale development threatens to clog the arteries of the heart of our borough. If you combine the opportunity costs and the funds used in this development bonanza that could be used for schools or keeping hospitals open, with the public costs to mitigate negative impacts, and the ongoing perpetual costs associated with the resulting congestion and clogged traffic arteries, and the public subsidies, we have more development than we can afford.”

Batson then delivered a line that will be a stake in the ground against Jeffries, Green, or any other candidate: "Forest City Ratner's development is only nine million square feet of the problem. I say nine million square feet too much."

“They call it blighted, and then they give away to somebody to come in and build a massive private development because it’s going to help us, to work as service workers there—I don’t think so,” he said, in an ad lib apparently directed at Green, who told the New York Observer, in light of Ratner's shrinking jobs claims, that there would be spinoff jobs not initially touted in the developer's projections.

Fire and other issues

Batson, cochair of Community Board 8’s Fire Safety Committee, cited 18 suspicious fires on Pacific Street in the last 14 months; he has organized block watches and fundraisers. “How do you address the conditions that have left one half our district overdeveloped, while the other half is being burnt down to the ground?” he asked rhetorically.

Arson, he said, was the most pressing issue now, and--though it may seem to be more a city issue than a state one--he said, "There are things the state can be doing, in creating a more stable housing market."

Otherwise, Batson hedged on specifics beyond his stump speech, saying it was premature and that he wanted to talk to the community to build his platform. Not unlike a street photographer snapping shots of unsuspecting passers-by, Batson has made a practice of sketching people he notices on the subway. He'll be spending the next few months getting used to more attention on himself.

Sunday, March 26, 2006

Critic Morrone: urban quality of Brooklyn at stake

Historian and an architecture critic Francis Morrone, speaking to an audience in Brooklyn Heights as part of a 3/23/06 forum on the Atlantic Yards project, declared that "nowhere is the urban quality of Brooklyn so at stake as at the Atlantic Yards" and called for community vigilance toward inappropriate development. He also warned that architect Frank Gehry's "disjunctive esthetic" was inappropriate for the site. [I wasn't at the meeting, sponsored by Develop Don't Destroy Brooklyn, but I listened to a tape.]

His comments echoed the thoughtful criticism he wrote last year for the Spring 2005 issue of the new magazine The Brooklynite, in an article titled Vanishing Vistas: Will the “borough of churches” become a borough of skyscrapers?.

Morrone said he wasn't well-qualified to talk about the political, economic, and legal issues, but said the controversy wasn't primarily about eminent domain, or traffic patterns: "It's about what Brooklyn wants to be....It's inevitably about what Manhattan wants Brooklyn to be. The Bloomberg administration looks at Brooklyn and fantasizes about Jersey City. In just a few years, Jersey City has acquired a skyline vastly more imposing than that of Brooklyn."

"Some people speak of the Manhattanization of Brooklyn. I think it's more correct to speak of the Jersey City-ization of Brooklyn," he said, suggesting that city officials seek to attract the offices moving to Jersey City. (Indeed, that has been true, but the Atlantic Yards project, which once promised 2 million square feet of office space, now would see that cut by more than two-thirds.)

"City officials don't get, don't begin to get, and don't want to get that what Brooklyn that what Brooklynites have made of Brooklyn over the last 20 or 30 years represents the single thing that New York City as a whole should be proud of," Morrone continued. "The painstaking reclamation, with not one iota of assistance from big developers, of neighborhoods that not very long ago were beyond physical or economic redemption."

Worthy of respect

Morrone reminded Brooklynites that the 19th century row house neighborhoods "have no rival in the U.S. and surprisingly few rivals in Europe. To put it as it should be put, these Brooklyn neighborhoods constitute a national treasure as great as the Grand Canyon. And I hope you wouldn't let Bruce Ratner build one of his mega-developments right next to the Grand Canyon."

The challenge, however, is that "the interstices among the landmarked neighborhoods" are unprotected.

Brooklyn scale?

"New Yorkers are blessed to have five boroughs," Morrone said, "each with a unique and remarkable character... Manhattan, with its skyline and tall buildings... but we are blessed also to have Brooklyn, with its low-rise scale and skyline punctuated by church spires and... the Williamsburgh Savings Bank building, the exception that proves the rule. How lovely the building: 512 feet in height, it wouldn't even register on the skyline of Manhattan, but towers mightily over the 'borough of homes and churches.'" (That phrase was coined by the Brooklyn Eagle.)

"All of this would be lost if the Atlantic Yards were to be redeveloped in the way currently envisioned by Forest City Ratner. The continuity and scale would be lost. The Williamsburg Savings Bank building would no longer be the exception that proves the rule. These yards are the crucial pivot of Brownstone Brooklyn. How they are developed will have everything to do with whether this Brooklyn shall remain as a truly great urban environment, or be reduced to a heap of baubles."


Morrone pointed out that growth has prompted inappropriate development throughout Brooklyn. The rezoning in Greenpoint and Williamsburg, he said, will allow buildings of "a truly shocking scale," efforts to preserve landmarks like the Austin-Nichols warehouse [a landmarking decision was overturned by City Council, influenced by City Council member David Yassky] "have met with shockingly cynical dismissals by our politicians," and "gaudy McMansions" plague several neighborhoods like Gravesend and Midwood and Manhattan Beach.

"But nowhere is the urban quality of Brooklyn so at stake as at the Atlantic Yards," Morrone said. ""A further point before I conclude my rant. Bruce Ratner hired Frank Gehry in a transparent attempt to curry favor with the fashionable opinions of Manhattanites...with all due respect to the culture mavens... his works, whatever their virtues may be, are desperately ill-suited to a central site in downtown Brownstone Brooklyn."

Back to the future

Morrone suggested that city leaders and developers have forgotten Brooklyn's virtues: "Make no mistake. The politicians and the developers are getting away with a lot of what they're getting away with because elite cultural opinion has momentarily grown bored with ideas like preservation and human scale. Let us be vigilant that the tragic disfigurement of the Brooklyn Museum not be merely a foretaste of what's in store for Brooklyn as a whole."

"Ultimately, though, it is not about culture, it is about civilization. It's about such things as how we manage change in our environment," he said.

Earlier echoes

Morrone, in his lecture, didn't offer an alternative, but in his article argued for more modest efforts:
Only the crudest short-term cost accounting could possibly justify playing so fast and loose with these treasures of comely urban form.
Incremental redevelopment, of a more modest scale, may lack luster in this age in which many architects and planners have swung back from the influence of Jane Jacobs to reembrace the values of an earlier generation that venerated Le Corbusier and his notions of towers and open spaces sweeping aside the shopworn vestiges of earlier periods of urban development. But for many, incremental redevelopment seems appropriate in Brooklyn—which has fought back from the brink to provide models for urban America, not of vast projects of wholesale transformation, but of rehabilitation and the tender loving care of the sorts of neighborhoods and places that we spent so many years trying to destroy.

That leaves the question of what incremental development means, especially at a site near mass transit: ten stories rather than 40? 12? 20? And it raises questions about how the city can solve its housing shortage. Should increased density be built in other parts of Brooklyn? In other boroughs?

These may not be Morrone's questions to answer--he didn't mention the community-developed UNITY plan for the MTA's Vanderbilt Yard or the Extell bid. But his voice is an important one in the ongoing debate about the appropriate scale for this site and project.

Will lawyer for ESDC remain disqualified? Tough to tell

So I was out of town and missed the state appeals court hearing last Thursday in which the Empire State Development Corporation (ESDC) challenged the disqualification of attorney David Paget because he had worked on the Atlantic Yards project for developer Forest City Ratner before switching to the state agency.

But the press coverage indicated that it was a lively, and inconclusive hearing, with judges offering skeptical reactions to arguments from both the ESDC and the community groups and individuals that sought Paget's disqualification. The New York Observer, handicapping the court, gave the edge to the ESDC, suggesting that two judges leaned in the agency's direction, while the other three were harder to read. The New York Sun, in a 3/24/06 article headlined Judges To Decide if Agency Can Rehire Lawyer Banned From Atlantic Yards Project, noted:
One judge said Mr. Paget’s dual roles gave the appearance of impropriety but on a deeper level might not be a conflict of interest. Another judge said the more appropriate forum for a challenge by opponents would come after the state’s decision.

Inherent problem in statute?

Mary Campbell Gallagher, in her Big Cities Big Boxes blog, interpreted the judges' questions as favoring the ESDC, but concluded that the environmental review process is inherently flawed:
By the close of the oral argument, however, the judges appeared to have worked it out in their own minds. First, the members of the citizens' groups in plaintiff Develop Don't Destroy Brooklyn lack standing to bring the suit. Second, even if they have standing, now is not the time to object to Mr. Paget's dual role. If he influences the state wrongly in its dealings with developer Forest City Ratner, plaintiffs can bring an Article 78 action to challenge the final state determination. Needless to say, plaintiffs' counsel found that suggestion impractical.
I believe, however, that the problem is not with who the plaintiffs in this lawsuit are, nor with when they brought their suit. The real problem is with the environmental statutes, which in effect put the fox-developers in charge of the state environmental henhouse. As counsel for the state pointed out yesterday, the statute permits the developer to draft his own environmental impact statement (EIS). The EIS, however, is what the entire environmental regulatory process must examine. Although counsel for the state would doubtless not put it this way, we have environmental statutes that in their very nature positively require a conflict of interest. To enforce the statutes as drafted means to put the developer in control of the state process that is supposed to regulate him. No wonder, then, that in allowing Mr. Paget and his clients to follow the statute, it sounds to a layperson as though there is a conflict of interest.

New counsel

Meanwhile, the ESDC has hired a “provisional counsel” to work on the environmental review of the project--a Draft Environmental Impact Statement (DEIS) is expected within the next weeks or months.

ESDC attorney Douglas Kraus had contended that "there is the distinct possibility that ESDC will not be able to find substitute counsel equivalent to Mr. Paget, since relatively few such counsel exist, and several of them are already engaged as counsel for other parties in the Atlantic Yards matter." As it turns out, ESDC did find such a lawyer, though the agency affirmed that it wanted the court case resolved, and would rehire Paget: "Mr. Paget remains ESDC's counsel of choice."


The legal papers filed indicate a fierce argument over whether various parties could intervene in the case, with the ESDC resisting such "friend of the court" applications. The filing from Council of Brooklyn Neighborhoods (CBN), which represented 28 community groups, goes to a fundamental question of whether the Paget-supervised environmental review could be fair.

Jim Vogel, the CBN Secretary, noted in an affidavit in support of the CBN's motion to intervene:
To that end, Amicus also asks that the Court permit the addition to the Record of a letter received by several local politicians from the ESDC denying their request for funding for CBN to retain technical experts in order that CBN, on behalf of the affected communities, can engage meaningfully in the environmental review process....
As the court can see, the ESDC refused the request for funding claiming that, because Sive Paget is an “independent firm retained by ESDC and taking direction from ESDC staff, . . . the review process will be unbiased.” In that the ESDC’s decision not to fund community participation in the environmental review, which would have had to be billed back to the developer, occurred during Mr. Paget’s watch, it is another example of the clear conflict between his role as attorney for both FCRC and ESDC which requires his disqualification.

ESDC, however, asserted that CBN failed to disclose that 11 of the 12 community group petitioners already in the case are already members of CBN and that Daniel Goldstein, both an individual petitioner and a spokesman for Develop Don't Destroy Brooklyn, is on the CBN steering committee. ESDC also argued that "CBN's views are already well-represented by petitioners" and "CBN's arguments are virtually identical to those already made by petitioners."

CBN's Vogel responded that the information about Goldstein was incorrect and argued that the council had a broader mission:
Therefore, while CBN’s member organizations may hold a position on the proposed development, CBN is attempting to provide a community voice in the environmental review process. CBN as an organization has but one purpose and one goal – to insure that the community is able to participate significantly and meaningfully in the environmental review process of any proposed project over the Vanderbilt (Atlantic) Railyards. CBN’s role in the process has been recognized and supported by not only the 28 organizations which are its members, but by many elected politicians who have publicly called for funds for CBN to retain experts to review the Draft Environmental Impact Statement, when it is released.
ESDC is correct that CBN does share an interest with the petitioners herein; however, the interest that it shares is the public interest in fairness and transparency of the environmental process, something that ESDC is mandated to effectuate.
...Moreover, not only is CBN not an alternate ego of the petitioners, but CBN considered whether or not to become petitioners in the proceeding below, and decided against it, in large part because of the public perception it could have created that CBN, as an organization, opposes the project. However, once ESDC filed its appeal of a decision in which the lower court held that the involvement of Mr. Paget 'has such a severe crippling appearance of impropriety on a project of such great magnitude”, CBN’s membership felt it was bound by its mission to participate in defending the lower court’s finding in order to protect the integrity of the process in which it is CBN’s mission to participate.

Wednesday, March 22, 2006

Proposed Bronx CBA offers interesting contrasts to Brooklyn CBA

A proposed Community Benefits Agreement (CBA) regarding a new Yankees stadium offers some interesting contrasts to the CBA negotiated for Forest City Ratner's Atlantic Yards project in Brooklyn, notably a local trust fund offering $700,000 a year, and a closer focus on benefits to the borough. Still, local residents critical of the plan have hardly embraced it. (And see more criticism here from Richard Lipsky of the Neighborhood Retail Alliance, who just happens to support the Atlantic Yards project.)

A New York Times article published today, headlined $28 Million for the Bronx in the Yankees' Stadium Plan, reports:
As part of the Yankees' proposal to build a new stadium, the team will contribute $28 million to a trust fund and distribute 15,000 free tickets each season to Bronx groups, according to the draft plan of a community benefits program.
The proposal also calls for the team to pay $100,000 a year to maintain parks around the stadium and distribute $100,000 a year in "equipment and promotional merchandise" to schools and youth groups in New York City. There was no requirement, however, that the $28 million, which would be distributed over a 40-year period, be spent in the South Bronx, the site of the stadium and its replacement.
Stadium opponents observed yesterday that the proposal for a 53,000-seat stadium calls for the trust fund to be administered by "an individual of prominence" appointed by an advisory group that would be selected by elected Bronx officials — who are nearly unanimous in their support of the stadium despite intense neighborhood opposition.
"It would be like the fox guarding the henhouse," said City Councilwoman Helen Diane Foster, one of the few Bronx officials opposing the new stadium.
The proposals, which include a pledge that a quarter of stadium construction jobs would go to Bronx residents, are part of the draft benefits program negotiated between the Yankees and Bronx officials.
The agreement is expected to be completed in a few days and will be part of the stadium package presented to the City Council before it votes on the stadium on April 5.

...It also calls for the Yankees to reserve at least 25 percent of the construction contracts for Bronx-based companies, at least half of which would be run by women or members of minorities. At least 25 percent of the construction and post-construction jobs would also go to Bronx residents. An administrator hired by the Yankees will monitor the team to ensure it is compliant, according to the draft agreement.

Contrasts with Brooklyn

The Atlantic Yards CBA, signed with eight groups, includes job training, a school for construction trades, and a goal to assign 35% of construction jobs to minorities and 10% to women. It also has a goal to assign 15% of retail space to community-based businesses, and specified percentages of preconstruction, construction, and professional services work to minority/women-owned enterprises.

The groups include ACORN, the New York State Association of Minority Contractors, and six smaller, Brooklyn-based groups. The CBA also incorporates the affordable housing agreement signed with ACORN. It also promises a community health center, a senior center, open space, and arena access, among other things.

Despite an emphasis on minority and community-based businesses and hiring, it does not require that jobs go to Brooklyn residents or that contracts go to Brooklyn companies. (The latter, at least might be more logistically difficult.) It does require reporting in which community board workers reside. It does not offer a trust fund. (It's not immediately clear that the signatories to the Bronx agreement represent broader-based groups than those in Brooklyn, but they elected officials are apparently involved.)

Press coverage

And when the Brooklyn CBA was under discussion in June, the New York Times did not emphasize the community opposition as prominently. When the CBA was signed 6/27/05, it got a brief in the Times, which gave one sentence to project critics: Some residents have expressed opposition to the project, saying it would raise rents. Somewhat more extensive coverage elsewhere included a Daily News article that included criticism from an expert on CBAs: But Bettina Damiani of Good Jobs New York, a watchdog group that monitors how government subsidies are spent, said the eight groups that signed off on the deal don't fully represent the community.

A followup Times article in October concerning Forest City Ratner's community outreach also missed some important angles. The Times did cover the housing agreement, signed in May, more prominently.

A thoughtful defense of eminent domain (but would it fit Atlantic Yards?)

The good liberal brownstoners of Brooklyn, and others troubled by the Atlantic Yards project, have some uncomfortable bedfellows in challenging Forest City Ratner and the Empire State Development Corporation on the issue of eminent domain. After all, the leading critics of the Supreme Court's Kelo decision come from the libertarian right (though there is a broad spectrum of critics).

Still, you don't have to be an absolutist on eminent domain to be concerned about eminent domain abuse--and to conclude that even a good defense of eminent domain for urban redevelopment might run aground when addressing Atlantic Yards.

Indeed, a recent article in the Vermont Journal of Environmental Law, titled Public-Private Redevelopment Partnerships and the Supreme Court: Kelo v. City of New London, by Marc B. Mihaly of the Vermont Law School Environmental Law Center, offers a spirited defense of eminent domain in urban redevelopment projects. At the same time, it's difficult to fit the fact pattern of the Atlantic Yards project into Mihaly's description of how redevelopment does and should occur.

Redevelopment, not development

Mihaly begins by quarreling over terms; what the Supreme Court justices, in their spectrum of opinions in the Kelo case, call “economic development” should be considered, he writes, “redevelopment” or “public-private redevelopment,” reflecting the intent of government to correct the failure of the market alone to bring an area back to life after a substantial period of economic decline. The language of the phrase “economic development” implies the dissents’ conclusion, namely a process operating simply to create new forms of economic wealth. This essay employs the more accurate terms.
(Forest City Ratner uses the term development regarding Atlantic Yards, but then again, so do a lot of people.)

Has the market failed to bring the Metropolitan Transportation Authority's Vanderbilt Yard back to life? It never was given the chance. The blocks around it had begun to gentrify; indeed, some old industrial buildings were turned into upscale housing.

Had the market failed to provide affordable housing? Very much so. But that would be an argument for first reforming city rules that provided tax breaks for luxury housing.

Misunderstanding land use?

Mihaly writes: But, without diminishing the success of the political right in framing the debate, more is needed to explain both the popular and judicial response to the Kelo decision. Simple ignorance of the transformed and transforming nature of city-center land-use development lies at the heart of the pervasive popular reaction to the Kelo decision. Redevelopment has failed to make its case. Most Americans enjoy the fruits of revitalized urban cores, but they do not understand how the transformation occurred. Nor do they know that the very nature of land development in the city center has evolved, altering both public and private roles, erasing traditional boundaries between what is a public use and what is a private use, and between what is government owned and what is privately owned.

Kelo an anomaly?

Mihaly writes: Much of the popular reaction to Kelo rests on the specter of Suzette Kelo being forced out of her home, a fact pattern recited in both the majority and dissenting opinions. The majority tells us that petitioner Wilhelmina Dery has lived in her home all her life, and that Suzette Kelo has made extensive improvements to her house and prizes its water view.... It is difficult to imagine more perfect plaintiffs to sound a case against redevelopment. And, that may be why the case reached the high court.

But this is a highly uncommon fact pattern, he says: Most landowners in redevelopment projects either negotiate a sale to the city or redevelopment agency or “participate” in the project, that is they themselves redevelop their properties in a manner consistent with the redevelopment plan, often in partnership with other landowners and with the assistance of public financing. Redevelopment and economic development agencies are reluctant to use condemnation because the total costs of acquisition, including legal fees, run higher than fair market value, generally by about a third.

He adds that residential condemnation is rare. For the Atlantic Yards case, there are several renters and homeowners who have yet to sell, though few may have stories as compelling as those in New London.

Mihaly offers further defense of New London's plan: The opinions do not mention New London’s allocation of ten million dollars for relocation assistance, nor that the plan for redevelopment provides for the construction of eighty new housing units in an new urban neighborhood. And we certainly are not told, even by the majority, that in many states the condemnation could not have proceeded without the likely consent of a committee representing Ms. Kelo and her neighbors.

There's no committee in Brooklyn, is there?

New amenities

Mihaly continues: These public-private redevelopment experiences tell a story different from the facts in Kelo. Yet these are the typical scenes of redevelopment. New public facilities, often in tandem with new affordable housing, rise on vacant or under-utilitized sites, producing uses and amenities that reinvent the urban center.

Could housing, including affordable housing, be built without eminent domain? That's what the community-developed UNITY plan envisaged, as well as the Extell Development Company's bid. Eminent domain may be needed to build the Brooklyn Arena, which would be built over and beyond the railyards, as well as to assemble other pieces of land. New amenities? Does the promised privately-run public space at the Atlantic Yards project qualify?

New London vs. Brooklyn

Mihaly places the Kelo case in context: The majority opinion commences with a recital (albeit characteristically brief and bland) of the facts leading to redevelopment, describing a city designated by a state agency as “distressed” after decades of economic decline, unemployment nearly double the state average, and actual decreases in population. The dissenting Justices do not acknowledge, much less address, these conditions. The truncated factual recitation in Justice O’Connor’s opinion begins with the petitioners and skips directly to the Pfizer development. She does not mention the economic decay, unemployment, or population loss.

Brooklyn is experiencing an economic upsurge, with a growing population faced with gentrification and a decreasing amount of affordable housing. One solution is indeed to build up, to take advantage of density. But the density bonus for affordable housing, for example in the Greenpoint-Williamsburg rezoning, was negotiated publicly. The density bonus for the Atlantic Yards project has been negotiated with ACORN but not the public at large.

How it should work

Mihaly's case for redevelopment suggests a rational planning process:
The typical city, recognizing the reciprocal advantages of a relationship with a private developer, may advertise for a “master developer.” The master developer will assist the city in planning, perform due diligence reviews concerning site issues such as contamination, and assist in the preparation of estimates of the cost of removal of old infrastructure and the cost of new project infrastructure and improvements, as well as eventually find and manage relationships with developers of sub-areas within the project. The request typically asks for experience and financial capability.

Is there a master developer in Brooklyn? There may be a leading developer--Forest City Ratner was prescient and willing to invest in Brooklyn, but the company has not been finding developers for sub-areas.

Public advisory committees often advise the city council on the selection process and the selection itself. Competing development teams make presentations to the council in open session. On the basis of these, the council selects one developer with whom to negotiate the documents that would guide a permanent relationship.

Competing bids in Brooklyn? It took 18 months before the MTA issued an RFP for the Vanderbilt Yard.

The course of each negotiation is different, but, especially for large project areas, the elements are similar. The parties first attempt to reach a mutual understanding of the project economics. They spend many months developing engineering estimates of project costs such as infrastructure and performing market studies to determine the likely revenues from the sale of land and sale or rental of buildings. This effort, when reasonably complete, allows the construction of a hopefully mutually agreed-upon economic model of the development, a spreadsheet commonly called a “pro-forma.”

Project economics? We still don't know.

Rate of profit

Mihaly writes: As they build the pro-forma, the city and the developer negotiate a reasonable rate of profit for the developer, based on the risk associated with the developer’s contributions. That profit is usually measured as the developer’s internal rate of return (IRR). The parties argue about the level of each sort of risk—regulatory risk (which the city asserts it will mitigate through the contract under negotiation), construction risk (the risk of cost overruns can be quite high), market risk (the risk that the rental and sales markets will change), and interest rate risk (the risk that interest rates will change).

If this had been done from the start, there likely would have been more public discussion about the projected number of office jobs and the percentage of affordable housing--and the bait and switch charge might have been averted.

Government as protagonist?

Mihaly suggests that the government is usually the leader: The government typically is the project protagonist, affirmatively pushing the redevelopment to achieve public benefits. This public-benefit package often achieves major public goals such as the production of low-income housing, creation of new jobs for a lower-income community, construction of new parks and recreational facilities, and needed infrastructure. The developer is more of an agent of the public, performing specified tasks for a return which allows it to function and attract the necessary private capital to make the project succeed. In some cases, this agency relationship is formalized such that the developer simply performs its obligations for a negotiated fee. Whatever the form, public gain and private gain intertwine.

If the government were truly the protagonist, it would do a lot better math on the costs and benefits of this project.

Tuesday, March 21, 2006

Ratner to investors: AY approval expected by fall, Nets losses downplayed, 15-year buildout?

Is the Atlantic Yards project on track? Despite delays from the original plan to open the arena in the fall of 2006, Forest City Ratner president and CEO Bruce Ratner told investors in the parent Forest City Enterprises that he expects goverment approval by mid-fall and construction to commence a few months after that. Ratner, sounding jovial and confident, also deflected concerns about losses suffered by the New Jersey Nets, saying he was confident the team would make money when it moved to Brooklyn. (Photo from Forest City Ratner web site.)

Ratner participated in a special investor event on 3/13/06. His portion goes from 1:22 to 1:54, but keep listening for another two minutes for an eminent domain anecdote. An investor conference call is scheduled for March 31.

The Atlantic Yards project, at 9.1 million square feet in its current configuration, would be larger cumulatively than the 37 projects that Forest City Ratner completed in the past 18 years. Those projects involve about 8.5 million square feet, with another 2.5 million square feet "in the development pipeline." Atlantic Yards is not yet in that pipeline, Ratner said, though he was optimistic.

Atlantic Yards

Ratner's discussion of the Atlantic Yards project came after he described several other projects, which I'll mention below. Either pressed for time or spinning for investors, Ratner left out some context: The Atlantic Yards project is 22 acres, it’s a great location, it’s an area that, as I pointed out, if you look across the street, for many years wasn’t developed, no one ever looked at it as a development opportunity. It’s kind of in the middle of various neighborhoods.
(If it wasn't developed, then whose responsibility was that? Also,Ratner is apparently not on board with the Downtown Brooklyn mantra.)

He continued: It’s an area where there’s railyards, older buildings and so on. It will include 4500 rental housing units, 2000 condos, retail, office and hotel. It’s a public-private partnership I would say in a lot of ways. What’s important to the city, which is affordable housing, residential housing, along with the importance of course of doing an arena and getting sports team.
(Has the number of condos been shrunk from 2800 to 2000, or was that just Ratner speaking casually? And what about the 600 to 1000 affordable condo units? If he didn't mention them, are they going offsite?)

Here's what he said about timing: That project is on its way to being entitled. Probably in early fall, middle fall of this year we should have our entitlement and start construction in the next four to five months after that.
(Maybe, but the environmental review process is still in the early phase, and legal challenges, including one over the use of eminent domain, could delay the process. Perhaps that's why Forest City Ratner has been renegotiating the lease on the Continental Airlines Arena, and may stay until 2010.)

Ratner hinted that the project, once launched, might take longer than initially planned: The master plan includes a basketball arena and 16 buildings designed by Frank Gehry. It’s multiphase, over ten to 15 years.
(Initially, a company press release stated: It’s estimated that the full Brooklyn Atlantic Yards development will take approximately 10 years to complete.)

He touted the Community Benefits Agreement: An MOU is a memorandum of understanding in our business, that’s been executed in 05, with a commitment of substantial funds. We signed something, which I think is terrific and extensive and I think will be a model for many other cities and many other developments. The Community Benefits Agreement, CBA, I can’t stress how important that is.
(Others, however, have their doubts.)

We sought it out. When we first announced this project, before any community came to us, I said 50% of rental units will be affordable and middle income, and we stuck to that it and will continue to stay with that.
(Actually, Forest City Ratner and supporters referred to all the residential units, which at that point were rentals.)

He offered a cursory account of the acquisition of the Metropolitan Transportation Authority's Vanderbilt Yard: We won the bid for the competition to purchase the MTA yards, there was one other bidder.
(Omitted was that the rival, Extell, made a higher cash bid, and both were below the appraised value.)

Regarding the Nets

Ratner was recruited to buy the Nets by Brooklyn Borough President Marty Markowitz, and it's well-known he wasn't a longtime hoops fan:We are the principal owner of the Nets basketball team, it’s been a real experience for me firsthand… There’s 41 games, I try to go to every one. It was really the linchpin of this devpment. Without the basketball team and arena, we wouldn’t be able to do this development. It created the opportunity… We very often start our projects with an anchor, in this case it’s an arena and a basketball team. I think both will be very successful.

Is the basketball team making or losing money, Ratner was asked. "It’s losing money," he replied, though he didn't offer specifics. The Star-Ledger reported 3/19/06 that, despite gains in ticket sales, the team will lose between $20 million and $30 million, and Ratner hopes "to sell $60 million of equity in the team to help cover his costs until he can build an arena in Brooklyn and move the team."
(Note that Ratner has required two previous loans in the past two years.)

But Ratner was optimistic:
When it moves to Brooklyn, it should make money… It’s doing actually quite well. We’ve got a 20% increase in ticket sales and revenue…. I think eventually we will break even on the operating side. And I think it’s actually a business you can do decently well with… I look at as a business challenge, I think it’s one we’re really up to.… The arena will be brand new, Frank Gehry, it will do extremely well. The arena’s going to also make money, together with the team, we project a decent amount of cash flow going out in 2009-10.
(Note: Projections by Andrew Zimbalist, the Smith College economist Forest City Ratner paid to provide a report on project benefits, assume revenues from the arena premised on several factors, including no arena in Newark. The latter is already under construction.)

Beginning in Brooklyn

Ratner first described the MetroTech project, the company's first:
I used to start all my presentation, Brooklyn has the best downtown in America. And they laughed. It has great transportation, great housing stock, right across the river from Manhattan. It has a tremendous artists' community.
...Here you see the MetroTech site in 1986. And much like Atlantic Yards site, it was a combination of older buildings, some parking lots, some buildings occupied, some buildings not occupied. And if you look at it today… It was a long hard road, because when we first talked about Brooklyn, people really didn’t believe it could be… It was high crime area…But we capitalized on something very important. We capitalized on the strong economics of New York City.

Atlantic Terminal empty?

He described the project over the transit hub at Atlantic and Flatbush avenues:
Atlantic Terminal retail and office. That was the site that was cleared by Robert Moses in the late 50s, and it was cleared to be housing, at one point, the Dodgers were going to move there. It really was fallow for 40 years.
(Note: the aboveground Long Island Rail Road wasn't demolished until 1990)

He pointed to changes in public safety as spurring changes in retail:
Crimewise, you couldn’t walk around this site ten or 15 years ago… In 1992, I lived in New York, there were 2200 homicides. Last year, there was something like 560 or 570 homicides…. That gives you an idea how New York has changed.

Brooklyn's lost Kmart?

Ratner showed a picture of the Atlantic Terminal mall: So we took a piece of vacant land… I remember this piece of land--it’s probably about six acres… I remember taking Kmart in 1994 to look on the top of the Williamsburgh Savings Bank, I said you could have this whole site if you wanted to put a Kmart on it all…Now this site today has 400,000 square feet of office space and almost 400,000 square feet of retail anchored by Target.
Part of our portfolio includes big box retail… We’ve done 37 projects in the city, and about half of that is retail. It’s all big box retail, nearly all…. We were the first after Home Depot to do big box in New York. That Target is between one and 10 nationally in terms of sales.

(Would there be big boxes at the Atlantic Yards project? The P.C. Richard/Modell's at Site V--currently slated to be demolished for a high-rise--are reviled as anti-urban. Forest City Ratner representatives have said they will encourage local businesses to have retail space at the Atlantic Yards project. Photo from Forest City Ratner web site.)

New developments

Ratner described five projects in the development pipeline, including Ridge Hill in Yonkers, East River Plaza in Harlem ("one of the most important largest retail developments in New York City for big boxes"), and Beekman Tower in Lower Manhattan. That building, which the company describes as "a 1 million square foot luxury condominium and rental building."
(Unlike with Atlantic Yards, there's apparently no affordable housing planned. Maybe company spokesman Joe DePlasco was only referring to Brooklyn when he told the New York Times, "Forest City Ratner Company believes firmly that supporting nonprofits and community groups, and working with them to identify and address needs, is at the foundation of what they do. It's that simple.")

Ratner's comments about the building likely apply to the residential component of the Atlantic Yards project:
We’re entering a very strong rental market. I think the NYC residential rental market, which has been good but relatively slack the last four or five years... as interests rates are going up, people are looking for other alternatives, and most importantly there’s been almost no development in the rental residential arena in New York City in five or six years.

On the Times

Ratner also described the Times Tower, designed by Renzo Piano built in collaboration with the New York Times Company, and expected to open at the beginning of 2007. The Timse will have 26 floors; FCR will rent 22 floors. “They’ve been wonderful partners, it’s a great company,” he said.

Given criticisms by me and others of the New York Times's coverage of Forest City Ratner, some might wonder if he was suggesting that the "wonderful" partnership extends to the pages of the newspaper. But it's clear he was referring to the parent company.

Eminent domain "wonderful"

After Bruce Ratner finished his presentation, a Forest City Enterprises official, apparently Bruce's cousin president/CEO Charles Ratner (I couldn't quite tell), offered an anecdote. “I have one wonderful story to tell you about public-private partnerships," he said. "We need those in order to make these projects competitive."

"As you all know there’s a lot of debate now about eminent domain. Clearly for us, in our business, eminent domain has been a wonderful avenue for development," he continued, noting that Chicago mayor Richard Daley called it the "most important tool" a mayor has to do development. (It wasn't clear if he meant the current mayor, Richard M. Daley, or his father, but it's likely the former, who, along with other big city mayors, signed a resolution supporting the use of eminent domain.)

The story, he said, had been told by Albert Ratner, co-chairman of the company board, when he was honored last year by the Urban Land Institute.

So Albert tells this story. In 1950s, he was in the office, putting his coat on, he was going out of the building. His father, Uncle Leonard, said, "Al, where are you going?"
"I’m going to meet the Ohio Department of Transportation."
"How come?"
"Dad, you know the land we have on Mayfield Road. They’re going to take that and put a highway right through that land."
And Uncle Leonard looked at Albert and said, "That’s going to be terrific for our land. How much do we have to pay them for that?"
Albert said, “No, Dad, you have it mixed up. We don’t pay them, they pay us."
At this point, Uncle Leonard said, “What a country.”

A difference between that exercise of eminent domain and the version that may be exercised for the Atlantic Yards project is that the former was clearly for public use rather than the "public purpose" of economic development, which is how the "public use" doctrine has evolved. Another difference: those who would have to sell their land for the Atlantic Yards project wouldn't be stakeholders in new development stimulated by the project.

The backlash

The backlash to the Supreme Court's Kelo decision, The Next American City suggests, is playing "into the hands of the anti-urban bias of conservatives." But the magazine suggests reforms:
State legislatures considering reducing eminent domain powers should be mindful of the fact that they could create another problem as serious as the one they are trying to solve: if denied the tools necessary to stimulate economic development, distressed municipalities will turn to the state for other forms of assistance. Instead, legislatures could consider requiring strict additional findings before private homes be taken but otherwise allowing eminent domain for economic development to continue.