Tuesday, July 31, 2007

Would FCR's development fee match its investment? A few clues

How much money would developer Forest City Ratner put up to build Atlantic Yards? We don't know, but there are hints, not previously reported, that suggest that a good portion of the developer's investment might be covered by its developer fee alone.

The 7/1/07 New York Times article on Atlantic Yards financials reported:
Forest City itself would earn a development fee of 5 percent of the project’s total cost: roughly $200 million if the entire project is built as planned. Most of that, company executives said, would go toward recovering the company’s internal costs. They also said that Forest City owns a significant share of the project, in addition to being the developer.

That leaves a lot of slack, since "much" of that $200 million could still go to recoup any investment and, once that's recouped, the "significant share" could generate gravy.

Private equity

FCR's contribution would come under the category of "private equity," which would account for $926.2 million out of the $4 billion project cost, according to this memo prepared by the Empire State Development Corporation.

This was released to the Public Authorities Control Board (PACB), but not to the public. It came to light as part of the lawsuit challenging the Atlantic Yards environmental review.

Looking at the MTA bid

How much of that private equity would come from FCR? We get some clues, if not a solid accounting, on p. 45 of this PDF, which was part of the developer's 2005 bid to the Metropolitan Transportation Authority for the Vanderbilt Yard.

(Corrected: I had written that the document was public, but not online until the lawsuit. Actually, it was already online.)

Given that the total project cost was then $3.5 billion, the document points to a about $100 million less than currently announced in private equity:
It is expected that approximately $820 million in total equity will be required to fund the Project. This equity requirement will be funded by net equity from Forest City and outside investors, as well as by cash flow and sales proceeds generated and reinvested from the early phases of the project.
(Emphasis added)

Could be a fraction

So it's quite possible that Forest City will invest only a fraction of the now $926.2 million figure. Add outside investors. Add cash flow from the Barclays sponsorship--say $20 million a year. Add profits from condos. Of course there are many question marks, but it could be a very sweet deal.

So the documents prepared by FCR and by KPMG, which indicate an Internal Rate of Return (IRR) of 7.7% on the arena and 9.6% on the rest of the project, refers just to the return on the various flows of money, not the developer's investment, as the Times failed to explicate.

Forest City Ratner's payday, which would include not just the development fee but a segment of other revenues, could be much, much larger. So it's not implausible that the development fee could, in itself, cover a significant portion of the FCR's investment.

True, developers typically get rewarded for putting together a complicated deal. The question is how much. And Forest City sure hasn't come clean. We don't know how much they're putting in, and it's not clear that any public agencies know either.

The not-so-natural process of Williamsburg gentrification

So, how well did the Greenpoint-Williamsburg rezoning work in terms of providing affordable housing? How far along is gentrification? Some sobering observations, if not a full statistical analysis, emerge from an analysis by graduate students at the Bloustein School of Planning and Public Policy at Rutgers University. The report, Gentrification and Rezoning, Williamsburg-Greenpoint, was produced in conjunction with The New York City Community Council. (Link to full 18MB report.)

For example, the study concludes that inclusionary zoning—which provides increased development rights in exchange for including affordable housing—has worked well on waterfront parcels, where there is both public land to be used and sufficient space to build back.

However, on smaller upland parcels where there’s less room to build bigger overall, “the inclusionary program does not appear to be enough of an incentive to encourage the development of affordable housing.” Instead, developers have taken advantage of the existing 421-a tax exemption, which, until reforms go into effect next year, does not require affordable units in exchange.

Though the city committed “to facilitating construction of 3,548 affordable units” through multiple programs, the city’s March 2007 estimate that it was 57% complete toward the goal “may be a bit optimistic,” according to the study.
(Photo by Bob Guskind/Curbed)

Decline and rise

The area suffered disinvestments in the 1960s and 1970s, after the Brooklyn-Queens Expressway put a gash between neighborhoods and waste transfer sites and other noxious uses came to the waterfront. Deindustrialization continued. However, the neighborhood’s proximity to the East Village, one stop on the L train, and copious vacant warehouse/industrial space, drew artists.

Government (in)action helped: Illegal residential conversion and weak zoning enforcement contributed to, as well as was a symptom of, the hot housing market.

In the wake of the influx of hipsters came bars, “boutique clothing stores, upscale restaurants, dance clubs, yoga studios,” all the better to sell luxury condos.

Most of the new development in Williamsburg involves smaller units “for upper-income single or couple households,” geared to Manhattan transplants, selling a certain version of the good life. They’re “a far cry from the needs of many of the neighborhood’s existing residents.”


Displacement is caused by several factors, not merely rising housing costs. The study also cites “demolition, structural damage to existing buildings caused by new construction, and harassment.”

While no neighborhood statistics on displacement were evident, “[a]necdotal evidence suggests that doubling up is a growing trend that is not fully captured by the [citywide] Housing and Vacancy Survey." Elderly residents of smaller rental properties--which are not regulated--are being increasingly displaced when new owners jack up rents, so the tenants wind up moving in with other family members. This particularly affects the Hispanic and Asian communities on the South Side.

Besides the elderly and immigrants, the study also points to displacement among the Hasidic community—though the information is sketchy—and among the artists who gave Williamsburg its identity.

A cruel paradox

The study notes that those who own homes may see their properties rise in value on paper but find it hard to pay increasing taxes. While unmentioned is the possibility of tapping home equity, the study points out a cruel paradox:
As homeowners struggle to pay taxes, they can peer out of their backyards at the looming new luxury buildings and their new neighbors who may not pay property taxes at all.

Trading jobs for housing

One of the most provocative sections involves the intersection between loss of manufacturing/industrial jobs and the increase in luxury housing:
Between 1991 and 2002 Greenpoint lost 628 manufacturing jobs and 630 industrial jobs; Williamsburg lost 2,802 manufacturing jobs and 2,353 industrial jobs (NYC DCP “G-W Land Use and Waterfront Plan”). While this would be a significant finding on its own, it is even more telling that no other nearby North Brooklyn neighborhood experienced the same kind of loss. This suggests that the industrial sector overall was stable and that something specific was happening in Greenpoint-Williamsburg. The culprit was the strong housing market putting pressure on Greenpoint-Williamsburg.

I’m not completely convinced that it all had to do with housing—we’d have to see statistics about deindustrialization in adjacent neighborhoods—but the argument is potent: manufacturers who owned their buildings made a lot of money selling their properties to residential developers. With a stroke of a pen, the rezoning vastly increased land values, so it was easy to sell to speculators.

However, as the study notes, it’s not a win-win:
The loss of industry has meant a loss of employment opportunities for lower wage employees and a loss of the ‘walk to work’ culture of the neighborhood.

Bottom line

While gentrification and rezoning have led to new stores, goods and services, and a more vibrant street life, “there is also a significant disservice to existing residents in the decrease in affordability of goods, and long-term businesses being displaced by businesses to serve the newer population.” Williamsburg still lacks a “full-service grocery store”—though, unmentioned, arguably Tops on N. Sixth Street qualifies.

Commercial gentrification means that there’s less space for shops selling affordable products and poorer residents must pay more or travel to find lower cost goods. So, in the end, the difference between the bodega and the cheese store, the laundromat and the “urban spa,” might be seen as emblematic of a divided community:
The Williamsburg that has been home to these residents contrasts with the Williamsburg that is being marketed to new residents. Williamsburg is a diverse neighborhood and has served many different ethnic, racial and other communities for many years. However, interviews with longterm residents, our commercial study and our research on residential displacement suggest that Williamsburg is beginning to disproportionately serve new, upper-income residents.

A gentrification process may seem natural, but, as the study suggests, policies, explicit and implicit, make a difference. Had the city fully considered the effect of its housing policies on jobs, it might have done more to keep areas zoned for manufacturing, an issue resonating today with the plans for the New Domino.

Had the 421-a tax break, long overdue for reform, been changed earlier, it would have driven more affordable housing and fostered more economic diversity. And, as with Prospect Heights and Atlantic Yards, the city might not have to rely on megaprojects (with a privately negotiated affordable housing bonus) to deliver affordable housing but instead would have recognized that the tax system was already producing market distortions.

Monday, July 30, 2007

Some AY echoes in Williamsburg's New Domino plan (& hype)

The next megaproject plan has arrived, this time at the former Domino Sugar factory site in Williamsburg, and, just as Atlantic Yards has evolved, the focus is on affordable housing.

The press release (not online) issued last week sure sounded good:
Plans for the New Domino Set Goal of 30% of Units for Affordable Housing in Mixed-Income Community on the Brooklyn Waterfront
Former Industrial Site Will Mirror the City’s Economic and Cultural Diversity and Preserve Historic Architecture in Williamsburg

An equally skewed, though likely not inaccurate, press release might have stated:
Plans for the New Domino Include 1540 Million-Dollar Condos on Brooklyn’s Waterfront
Four Tall Towers, Minimal Historic Preservation Needed To Achieve Profits for Much-Criticized Silent Partner; Significant Government Subsidies and Rezoning Sought

So, as with Atlantic Yards, it all depends on how you frame it. The New Domino would contain 2200 residential units, 660 of them affordable, 1540 of them market-rate, in up to 15 buildings constructed over an eight-year span. A billion dollars spent on 2.86 million (corrected) square feet of development. An enormous change for a former industrial site.

Furious gentrification/overdevelopment, driven by a profit-hungry investor? Or inevitable development with a very respectable segment of affordable housing, led by a developer with a strong track record in the latter?

The major opponents include historic preservationists like the Waterfront Preservation Alliance who want to save more of the historic factory buildings (the Adant House and the Processing House, not just the main refinery structure, which is actually three buildings) and neighborhood residents who think the project would be too dense. The response, for which the developer has significant grassroots support, is that only a plan of a certain magnitude would deliver the affordable housing. Sound familiar?

I can’t evaluate whether the New Domino plan is worthwhile or not—more details need to emerge, and some significant local players, among them Community Board 1 and Phil DePaolo's New York Community Council, have yet to weigh in. A public hearing on the Draft Scope, the first step to a Draft Environmental Impact Statement and potential approval of the project next year, will be held from 2 to 5 pm and 6 to 8:45 pm tomorrow at the Department of City Planning (DCP) in Lower Manhattan. (Will the room be big enough?)

But it's clear the plan deserves more scrutiny beyond the hype, especially given some parallels with the AY promotion effort.

The big rezoning

While the Domino developers are apparently not asking for direct subsidies, as with Atlantic Yards, there is a fundamental parallel: will public agencies, in this case DCP and then the City Council—as opposed to the less accountable Empire State Development Corporation, which reviewed/approved AY—approve a rezoning to vastly increase the value of land bought by investors? (Or are they speculators?)

The Domino plan, beginning just north of the Williamsburg Bridge and spanning five blocks, would fill in much of the waterfront density between the Schaefer Landing project to the south and the Palmer's Dock/Northside Piers project to the north. (Graphic from Gentrification and Rezoning, Williamsburg-Greenpoint, by the Bloustein School of Planning and Public Policy at Rutgers University in conjunction with The New York City Community Council.)

The rezoning requested for the most part would not be inconsistent with the density and height limits set in the 2005 rezoning of Greenpoint and Williamsburg, which offered a bonus for affordable housing, but did not include the Domino site.

(Note comment below on the belief that the site should remain zoned for manufacturing.)

Without such a bonus, the change in the zoning map from manufacturing to residential (R8 on the waterfront parcel), would limit building heights to 210 feet (see p. 48 of this PDF). The New Domino would include two 300-foot towers and two 400-foot ones on the waterfront, hence a request for special permits that would mirror the height limits allowed elsewhere on the waterfront.

Building bigger across the street

The developers, however, seek significantly increased development rights for the one-block parcel east of Kent Avenue. They want to transfer 190,000 square feet of development rights--a good-sized tower--from the waterfront site to the upland site, and to allow taller buildings there. The upland site would have a floor area ratio (FAR) of 6.0, significantly higher than the 3.6 FAR allowed via the rezoning for R6 upland districts.

Also, the Draft Scope says the developers seek to "permit the building on the upland parcel to exceed the maximum building height of 110 feet to between 120 and 140 feet for buildings."

Double the neighbors

The New Domino would join, and ultimately dwarf, some big neighbors. The tallest Schaefer Landing building is 25 stories, part of a 345-unit project, according to the Rutgers report. The first Northside Piers building (right) is 29 stories, part of a project including more than 1000 units. The Edge will include one 30-story and one 40-story building, among others, for a total approaching 900 units.

Other than the upland site, the New Domino would not be inconsistent in scale, just much larger overall, nearly double the size of the other three projects. So it would add density previously not considered when the neighborhood was rezoned.

So a New York Post article last week missed the point, inaccurately stating that the project “was made possible by a massive rezoning of Greenpoint/Williamsburg by the city in 2005.”

$600K in lobbying

In this case, the 11.2-acre site, sold in 2004 by the American Sugar Refining shortly before the complex closed, cost the investors just $56 million. Historic preservation/conversion, site planning, and construction would cost much, much more. But the biggest variable may be getting the rules changed.

Perhaps that’s why the developer of the New Domino, Refinery LLC, [updated] spent nearly $600,000 in 2005 and 2006 lobbying (search on "Refinery") the Department of City Planning (DCP) before going public, as it did in recent weeks, with its plans, even though the Community Board 1 in June 2006 was rebuffed when it asked the developer for details, as the Brooklyn Rail reported. While that's not atypical developer behavior, it's reason enough for some skepticism.

After all, if condos average 1100 square feet each and sell for $900 a square foot--not unreasonable over the eight-year life of the project--the 1540 market-rate condos would each be worth about $1 million. That might mean a very nice return, depending how much the investors put in.

High density

And 2200 units over 11 acres would be quite dense, about 200 units/acre--if not Atlantic Yards "extreme density" (now 6430 units over 22 acres, or 292 units/acre, but actually more dense because of the arena)--it would be more dense than Battery Park City or Peter Cooper Village/Stuyvesant Town. (The Extell plan proposed for the MTA's Vanderbilt Yard would have been more dense than the New Domino.)

The Post reported:
"The density is outrageous, it is just adding to the gentrification of the area and there is no way the infrastructure is going to be able to accommodate all these new people," said Stephanie Eisenberg, who lives across the street in a building where a 50-by-100-foot "SAVE DOMINO" sign hangs.

It's worth a look at night. (Eisenberg's not just a resident, but the building's developer, as the Brooklyn Rail noted.)

Interestingly, the project has already been scaled down a bit, apparently. The Draft Scope, a prelude to the environmental review issued at the beginning of July by the Department of City Planning indicates 2400 residential units, not 2200.

AY parallels

So to get there, there are some interesting parallels with Atlantic Yards plan. The Domino plan would cover about half the Atlantic Yards footprint with about one-third the square footage; the $1 billion-plus cost would be about one-fourth the AY tab, but there's no arena or rail platform to build.

The New Domino would offer, like AY:
--significant density
--a starchitect (in this case Rafael Viñoly)
--an emphasis on affordable housing (30 percent), requiring significant (but unstated) public subsidies
--plans for “park space,” in the developer’s words, that’s actually “public open space,” according to DCP (4 acres)
--a questionable solution for transit (shuttles to the distant subway, plus a water taxi)
--endorsement by grassroots neighborhood advocates (El Puente, Churches United)
--a fast-track plan in the summer (hearing July 31)
--a considerable amount of parking (1450 spaces)
--a partner-developer with a not so beloved track record (The Katan Group)

Significant differences

There are some significant differences, besides the city review and no request for direct subsidy. AY would include no historic preservation, despite calls to save the Ward Bakery. Perhaps most notably, Refinery LLC is run by managing partner CPC Resources (CPCR), the for-profit subsidiary of Community Preservation Corporation (CPC), which has a 30-year history of financing affordable housing throughout New York.

CPCR "intervenes directly to save vital community properties, and invests to catalyze development in up and coming neighborhoods" and partners with local developers, among others, which may be a reason for the for-profit status. (A major accomplishment: rehabbing the Parkchester complex in the Bronx.)

Williamsburg sure doesn't need a catalyst, and the refinery building was on the path to landmarking. So in this case CPCR's main goal may be simply to maximize the affordable housing on the site. A worthy goal, but the tradeoffs should be calculated as well.

Unlike with Atlantic Yards, where the affordable housing group ACORN signed on formally after 18 months and brought no equity to the table—though it sure brought grassroots fervor—the New Domino comes with a community-oriented group out front. CPC seems to have a pretty good reputation. And they’ve replied cordially, if not quite completely, to the questions I posed.

On the other hand, the New Domino appears to be a major stretch for CPC/CPCR, which is sponsored by 80 prominent banks and insurance companies. Consider that this $1 billion-plus project would create 2200 apartments, while CPC in its history “has provided more than $6 billion in financing to renovate and build more than 140,000 apartments and homes.”

The New Domino would cost more than $400,000 per apartment (though the cost of the project also includes retail and community facilities). The other projects average out to about $43,000 per unit.

As for CPCR, it has constructed more than 1100 units in 30 development projects. How many market-rate units? Susan M. Pollock, CPCR Senior VP responded that CPCR “has completed new construction market rate housing developments in south Park Slope and in Harlem, and is in construction on two projects in Prospect Heights.”

The Park Slope project is two buildings on 16th Street between Fifth and Sixth Avenues with eight apartments each. CPCR calls it “a unique Infill Housing Model--an efficient, cost effective prototype for affordable housing throughout the City.”

That may be so, but it's on a different scale from the New Domino.

Site boundaries

The project would be on two sites. The main site, the waterfront site, is bounded by the East River on the west, Kent Avenue on the east, South 5th Street on the south and Grand Street on the north.

An upland site, east of Kent Avenue in a former parking lot, is bounded by Kent Avenue on the west, Wythe Avenue on the east, South 4th Street on the south and South 3rd Street on the north.

It is now an industrial and warehouse area, with just the barest sign of gentrification--a dance studio along with grittier neighbors on Kent Avenue, which is the closest thing to a truck route in the neighborhood.

Affordable housing

The 30% affordable goal is admirable--it aims to produce housing for a lower-income range than that at Atlantic Yards and many other projects--but it also should be seen in context. Under the emerging revision of the 421-a tax break, 20% affordable housing would be required. And the developer gets a density bonus for providing affordable housing, as well.

CPC’s Michael Lappin said, “We intend to provide more affordable housing than is required by the Greenpoint-Williamsburg Rezoning regulations, and we will build it throughout the complex on both the upland and waterfront parcels.” So that counts for greater responsiveness to community needs.

Pollock explained, “We estimate that approximately 100 units would be for families who are making as little as $21,000 per year [30% of Area Median Income, or AMI]; approximately 100 units would be for seniors making 50 percent of AMI; approximately 100 units would be available to middle-income homeowners [$90,000 according to the New York Sun], and the balance would be set aside for households earning about $42,000 per year [60% of AMI].”

That would mean 500+ units, at least 75% of the affordable housing, for those at 60% of AMI or less; of the Atlantic Yards affordable housing, by contrast, 40% would be for households at 60% of AMI or less. (Then again, Atlantic Yards would be 35% affordable housing if you take 2250 rentals out of 6430 units. If you add the promised 200 affordable for-sale units, promised but not memorialized in any document, nor with any AMI attached, the percentage would go up to 38%.)

But with affordable housing, the devil is in the details. Where’s the money coming from? “CPCR's intention is to finance the affordable units using widely available subsidies and incentives,” Pollock stated.

CPC has also said it would build the affordable housing first--another contrast to Atlantic Yards, where the bulk would come later in the project, and could face significant delays.

But the fundamental question, one city regulators have been loath to examine, is this: how much subsidy would be provided for each affordable unit, and how does that compare to other projects? What's the bang for the buck?

Last best hope?

El Puente’s Luis Garden Acosta said, according to the Sun, that while some were unhappy with the project’s density, CPC "really has demonstrated a keen sensitivity that I haven't found often in people who are only interested in market development."

"It is the last, best hope for affordable housing in our community," he said.

So that sensitivity may be to creating affordable housing that is truly affordable. But what’s the tradeoff for the "last, best hope"?

One tradeoff might be indirect residential displacement--people who currently live in unregulated apartments nearby who get forced out by rising rents. It's a decent bet that the environmental review will draw the same conclusions as did the review for Atlantic Yards, that the gentrification process is ongoing so it's wrong to blame gentrification on this project.

(Note the significant rent burden on the nearby South Side, which has a large Latino population and many old tenements but has been punctuated by new luxury construction. Graphic from Gentrification and Rezoning.)

Job creation

The development would create about 550 permanent jobs in the retail and commercial sectors, and in building operations, according to the developer's press release.

Interestingly, the developer has not promised a specific number of construction-related jobs, even though there surely would be many. Perhaps that’s because they haven’t promised union jobs.

While I couldn't find anything on CPCR's record, Katan has a track record of using non-union labor. (Forest City Ratner uses union labor.)

The Katan Group

With CPCR in the lead, there's been little mention of co-investor Isaac Katan and The Katan Group, which has built several projects on Fourth Avenue and in the South Slope, and not endeared itself to the neighborhood. Last year, the Brooklyn Downtown Star reported:
Harris was speaking only about the property on 184 15th Street, a site where the notorious and well-reviled developer Isaac Katan is proposing to construct a 12-story luxury condominium tower.

That building was rebuffed, but a ten-story building under construction at 162 16th Street just west of Fifth Avenue (right), based on development rights from several lots before the neighborhood was downzoned, stands out like, well, a Williamsburg "finger building."

(More vitriol here. DCP, in the rezoning, stated, As market demand for housing within the desirable Park Slope neighborhood extends farther south, however, several out-of-scale nine to fourteen-story tower developments have been proposed that would be inconsistent with the neighborhood’s low-rise, rowhouse character.)

Whether or not the criticism of Katan is deserved, it’s interesting, at least, that CPCR has allied with Katan. I asked what percentage of the money Katan put up. Pollock responded with a non-answer: “The Katan Group is an equity partner in Refinery LLC. CPCR has sole decision making responsibility.”

Still, it raises an issue: a for-profit subsidiary of a nonprofit, like CPCR, may have lower profit goals than an investor trying to maximize return. So there may be pressure to build more units and build taller to deliver the (unannounced) return the investor needs, even if the decisions are being made by CPCR.

“Community Preservation Corporation doesn’t care about this community,” Eisenberg told the Brooklyn Rail. “I believe they are using their non-profit status to further their for-profit venture.” That's unclear, but the CPC/Katan deal deserves more scrutiny.

Preservation issues

The 11-story main Domino refinery (1883) will be preserved (and likely landmarked), requiring extensive structural changes to transform it into retail, housing, and community/cultural facilities, the developer has balked at keeping two other buildings preservationists value, the Adant House (right; photo by Bob Guskind/Gowanus Lounge) and has made no promises yet regarding the famous Domino Sugar sign.

That portends a battle before the Landmarks Preservation Commission, with affordable housing advocates opposing any measure that would reduce affordable housing. It's an understandable impulse, but surely the area's infrastructure capacity--how many people can fit on the increasingly-crowded L train?--should be considered as well.

The Waterfront Preservation Alliance commented:
In both cases, these very historic structures could be incorporated into the design without compromising bulk, density or housing units (affordable or otherwise), and with only minimal impact on the proposed public open space. The plan as proposed now would leave the refinery as a relic of the past, completely unintegrated into the new development.

Perhaps, but including the historic structures surely would cost more. Pollock told NY 1: "We think most of it is impossible to be used adaptively for any economically feasible benefit." Will a closer look at the costs emerge?

Open space promise

From the press release:
A five-block waterfront esplanade will open the river to all, with welcoming streetscapes and a connection to Grand Ferry Park. Attractive view corridors and public connections to the waterfront will be created at all five currently blocked-off streets leading from the community to the waterfront. Mr. Lappin said, “The New Domino is expected to become Williamsburg’s central public gathering place with views of Manhattan and New York Harbor.”

After visiting the site for a press conference, Dennis Holt pointed out in the Brooklyn Eagle:
One thing that became clear is that the Domino site is the most prominent part of the Williamsburg waterfront. Looking north and south from the site, the waterfront fades out of sight, clear proof if ever needed that the East River is anything but straight.

However, because the site is on the south side of Williamsburg, the "central public gathering place" claim is arguable, given the recent opening of the 7.5-acre East River State Park, nearly twice as large and closer to the neighborhood's population and retail/nightlife center (though increasing density likely will expand street life).

Also, the main segment of open space would be directly behind the refinery rather than extending to the street, as with the state park. Then again, if the historic building incorporates community facilities, it might be the gateway to open space rather than a barrier. (Regarding AY, BrooklynSpeaks points out the open space would feel private.)

(Note comment below on how the open space is appropriately sited.)

The press release also states:
The conceptual design by Rafael Viñoly Architects PC restores visual and physical access to the waterfront along each of the upland streets leading to the River – access which had been closed off to the public for more than a century – and offers a spectacular addition to the Brooklyn skyline.

The access had been closed off because Brooklyn had a sugar industry for more than a century—a reasonable tradeoff.

DCP unaware?

A 7/1/04 New York Times article headlined Developers Known for Residential Work Buy Domino Sugar Plant on Brooklyn Waterfront, pointed toward the property’s likely fate but found DCP not yet on board:
In August, city officials said they were committed to finding an industrial reuse for the site. ''We're not contemplating a rezoning for this site,'' Regina Myer, the Brooklyn director for the Planning Department, said yesterday. ''We're focusing all of our efforts on the rezoning to the north.''

Things sure have changed.

Goals and objectives

According to the Draft Scope, the project goals are not about profits--or tradeoffs:
Consistent with the abovementioned recently adopted zoning changes in the area of the Williamsburg waterfront and in keeping with the mission of CPC Resources, the proposed project seeks to meet the following objectives:
• Creation of a substantial amount of affordable housing with a high quality design;
• Redevelopment of a former waterfront industrial site into an economically integrated mix of residential, retail/commercial, and community facility uses consistent with the redevelopment of nearby waterfront sites to the north and south and complementary to the existing neighborhood;
• Creation of physical and visual access to the waterfront, including a substantial amount of public open space and a linkage to the existing Grand Ferry Park to the north of the project site; and
• Reuse of the three buildings comprising the structure known as the Refinery building.

The developers also request that one nearby block and portions of two blocks (designated by light dotted line) be rezoned from heavy industrial use to light industrial and commercial uses, more compatible with adjoining residential districts.

The Draft Scope states:
For example, M1-2 districts require that industrial activity be enclosed, which is appropriate for industrial areas in proximity to residential uses. New industrial uses permitted under the proposed M1-2 zoning would be compatible with the nearby residences and noxious uses would be prevented from located on these blocks.

Two of the current lots are waste transfer stations; it's understandable that a developer selling million-dollar condos might not want to have more noxious neighbors. But it's a sign of the tension between historical manufacturing/industrial uses and the seemingly inexhaustible (but ultimately fickle?) market for high-end housing.

In the Eagle, Holt writes:
The fact that the developers expect to spend more than one billion dollars to get all this done is an indication that this isn’t going to be a haphazard piece of work.

That's an echo of Mayor Mike Bloomberg's 1/23/04 statement that Atlantic Yards developer Bruce Ratner had to raise $2.5 billion.

The developers in Williamsburg might spend more than a billion bucks, but how much would they put up themselves? How much would come from the public coffers, and would that be a good deal, given the tradeoffs? More details surely will emerge.

Sunday, July 29, 2007

The Times’s continued blind spots in its eminent domain coverage

Today, the New York Times takes a long look at eminent domain in New York, New Jersey, and Connecticut. The article’s a competent round-up, portraying some victims of eminent domain abuse sympathetically while giving advocates, who consider it an important tool in the redevelopment toolbox, their due.

If you live in New York City, however, the article doesn't come in your print edition. Rather, it's appears only in the Times's Sunday regional sections (Westchester, Long Island, New Jersey, Connecticut), headlined Now You Own It, Soon You Don’t?. The cover story in the City section, available to purchasers in New York City, concerns explorers of abandoned places like tunnels.

A way out?

Maybe the placement of the article made it easier for the Times to fail to acknowledge that its parent company is a beneficiary of eminent domain, for the new Times Tower in Manhattan. Or to mention the eminent domain donnybrook concerning Atlantic Yards in Brooklyn and developer Forest City Ratner, the same developer that has partnered with the Times Company in building the Times Tower.

Sure, reporters have to pick and choose, but the Times does point out how, in the wake of legislative inaction in all three states, in New Jersey, the courts have stepped in, assisted by the state’s Public Advocate, overruling the designation that “unproductive” properties—as in, not built out to full zoning rights—are blighted. That’s further stopped a major development plan in Newark. As I’ve written, were Atlantic Yards in New Jersey, the new rules might stymie the project.

And the Times, of course, never covered the May 3 court hearing in the suit challenging the Atlantic Yards environmental review, during which Supreme Court Justice Joan Madden expressed skepticism about the designation of blight.

The pattern is dismaying. In a front-page round-up article on eminent domain in February 2006, the Times similarly failed to mention Atlantic Yards or the Times Tower. However, three months later, when Mayor Mike Bloomberg defended eminent domain as a priority, the Times in its coverage acknowledged the newspaper company's own history.

Region trailing

In today's article, the Times quotes an opponent of eminent domain abuse:
“New Jersey and New York are among the worst states in the country for eminent domain abuses — New Jersey is really awful,” said Dana Berliner, a senior lawyer at the Institute for Justice in Arlington, Va., which represents residential and business owners facing condemnation. “What’s interesting is that New York, New Jersey and Connecticut are some of the few states that have not managed to pass any decent legislation.”

The Institute for Justice has criticized the use of eminent domain for Atlantic Yards.

Effect in Brooklyn

And what have others done? The Times reports:
Other states have instituted more precise definitions of blight, set minimum compensation levels above market value for the owners of seized properties and restricted eminent domain to more traditional public projects like schools and roads. The legislative changes have been driven by an unusual alliance of conservative Republican property-rights advocates and liberals interested in the rights of lower-income people.

A more precise definition of blight and a limitation to "traditional public projects" would certainly have slowed, if not stymied, eminent domain for Atlantic Yards.

The Times reports on changes in Connecticut:
The law that [Gov. Jodi]. Rell signed requires that municipal legislative bodies approve eminent domain seizures by a two-thirds majority and that property owners be reimbursed at 125 percent of fair market value. It also built in other protective measures for property owners.

And were those changes transposed to New York, eminent domain for Atlantic Yards would not have been decided by four unelected and not-so-informed board members of the Empire State Development Corporation, but instead a supermajority of elected officials.

A window on the Times-Ratner relationship, from the top? Not til 2050

The New York Times Company announced last week that it will donate its vast archives, which date back to 1851, to The New York Public Library, but the key elements for Atlantic Yards watchers probably won't be available until 2050.

The library announced that the collection contains more than 700,000 pages:
The archives contain the correspondence of each publisher of The New York Times, including the letters they exchanged with United States Presidents and other heads of state. Other highlights include select papers of Henry J. Raymond and George Jones, founders of The Times; documents relating to the critical news stories from around the world for the last century and a half; and files from both the business and editorial departments of the paper that provide a window into the day-to-day workings of The New York Times.

However, as the Times reported on Wednesday, in an article headlined For Public Library, a Trove of New York Times Records, only the papers of the earlier publishers will be released first:
William Stingone, the library’s curator of manuscripts, said the [Adolph S.] Ochs [who bought the Times in 1896] papers should be available to researchers within the year, and those of Ochs’s son-in-law and successor, Arthur Hays Sulzberger, shortly after that. The library is still negotiating with Arthur Ochs Sulzberger, nicknamed Punch, who was the publisher from 1963 to 1992, about a release date. The papers of the current publisher, Arthur Sulzberger Jr., will not be available until 2050.
(Emphasis added)

The Times and AY

Has Sulzberger, concerned about the parent company's relationship with Atlantic Yards developer Forest City Ratner, the newspaper company's partner on the new Times Tower, influenced the Times's editorial policy on Atlantic Yards? I suspect so, as in the newspaper's conflicted silence prior to the Atlantic Yards approval last December by the Public Authorities Control Board.

After all, the Times was willing to guarantee a loan to the developer. As I've written before, I don't think the business relationship means Times reporters are in the tank, though I believe the newspaper has an obligation to be exacting in its coverage, and has not fulfilled that obligation.

Sulzberger's role

Staffers at the Times and the Wall Street Journal have been sniping at each other, in print and in interviews regarding the influence of publishers on the contents of the newspaper.

As the New York Observer reported, in a 6/12/07 article headlined After Journal ‘Insult,’ Times Editorializes: They’re ‘Balanced and Trustworthy’, the Journal, facing a potential purchase by mogul Rupert Murdoch, responded to the Times in an editorial:
"Everyone knows that the influence of Times Publisher and C.E.O. Arthur Sulzberger, Jr. extends to selecting not merely the editorial page editor but columnists, political endorsements and, as far as we can tell, even news coverage priorities," wrote The Journal."We don't see how this differs from most of what Mr. Murdoch is accused of doing with his newspapers."

Times editorial-page editor Andrew Rosenthal told the Observer that it was "absurd" to say Sulzberger "directs the news coverage."

As for the editorial page, however, the answer was more ambiguous:
Mr. Rosenthal said that Mr. Sulzberger is aware of some editorials in advance, but not others; however, he would not confirm whether the publisher laid eyes on this particular one [regarding the Journal] before going to press, or had any input

So we can safely assume that Sulzberger, at the least, is "aware" of the Times's editorial policy toward Atlantic Yards.

Last word?

The Times's feature article on the archives concluded with this charmingly self-referential paragraph:
In most of the complaints randomly picked from files, the newsroom seemed to get the last word. In 1903, George W. Daniels of the New York Central and Hudson River Rail Road Company threatened to pull display advertising because of the series of “mean articles” by F. C. Mortimer. Mr. Mortimer responded, “As for the number of ‘mean attacks’ mentioned by the amiable Mr. Daniels, they have appeared, perhaps, twice for every three times that the train service at the Grand Central Station has utterly broken down.”

But those were the days of print. In the era of the Internet, even if the Times doesn't listen, it may not get the last word.

Saturday, July 28, 2007

On complex land-use choices and "land monopoly"

Sociologist Robert Fitch's bracing 1993 book (updated 2002), The Assassination of New York, considers Robert Moses far less responsible for urban outcomes in the city than the FIRE (Finance Insurance Real Estate) elite, notably the Rockefeller family, expressing its wishes through the work of the Regional Plan Association.

Fitch's single-focus analysis meant critics in even the left-wing Nation and Monthly Review found the book's explanations--for example, of the decline in manufacturing or the city's struggles--incomplete. But they also found the book valuable, and there are some passages of particular resonance today.

Beyond Jane Jacobs

Hence this pointed observation, which substitutes a Rockefeller for the usual culprit, Moses, and raises a larger point about current land-use battles in Brooklyn and beyond:
When David Rockefeller tried to run the Lower Manhattan Expressway through Washington Square Park, you didn't have to have a degree in planning from MIT to know it was destructive. Jane Jacobs led the charge and miraculously sent the establishmentarians back to their Westchester redoubts. But land-use choices involving housing vs. jobs; the mix of income in a housing project; the question of which jobs are really viable in an urban setting; what's the best location for manufacturing--these issues don't lend themselves to such clear-cut resistance. Everyone grasps that it is people who decide where highways go. But the notion that strictly objective force, like technology and markets, the "logic of capital," determine factory and office locations is disarming. Ideas count.

(Emphasis added)

Indeed. And the issue is also the way incentives shape markets; why, for example, has Downtown Brooklyn become a home for housing, when that was not anticipated in the Downtown Brooklyn rezoning? Because tax breaks make the projects that much more attractive.

Urban planning?

Elsewhere, Fitch offers an indictment of urban planning:
To assert that the principle of disjunctive development is fundamental to urban planning helps to define its nature. Urban planning is the coordination of land monopoly. It is to the higher real estate interests what the Judge Gary dinners were to steel manufacturers. Both steel makers and FIRE folk seek to maximize their return on investment. Not to achieve growth in steel production or office building production per se.

(Emphasis in original)

City Planning

Fitch also indicts several public agencies:
[I]n the eighties it was public officials--from City Planning, the Public Development Corporation, the Port Authority, the Urban Development Corporation, Battery Park City Authority--all jostling each other in an effort to stuff builders' pockets with subsidies... It was City Planning that devised the real borough buster, midtown development plan. Or, more accurately, it was City Planning that re-tooled, simplified and carried out the Second Regional Plan's goal of swinging development from the east to the west side.

[Note: the Public Development Corporation, headed by Jim Stuckey before he went to Forest City Ratner, is now the New York City Economic Development Corporation and the Urban Development Corporation is now the Empire State Development Corporation. Both are Atlantic Yards backers.]

Fitch continues:
New York's City Planning Commission bears no resemblance to Tokyo's MITI. It has none of Daniel Burnham's soaring spirit. City Planning makes no plans--big or little. The master plan for New York that was the stated reason for creating the Commission has never materialized. Its role is to validate and legalize the plans and initiatives conceived by the city's private real estate interests.
(Emphasis added)

You can't say that's true today, if you consider City Planning's responsiveness to some neighborhood requests for downzoning and contextual zoning. But what was City Planning's letter regarding Atlantic Yards but a validation of a plan privately presented to it months earlier?

Friday, July 27, 2007

IBO official confirms (sort of) that the city would lose $ on arena

The Brooklyn Paper picked up my article estimating that the city's new commitment to Atlantic Yards seemingly upends the Independent Budget Office's (IBO) prediction that the Atlantic Yards arena would be a net gain in terms of the city revenues.

And the Paper got an IBO official to agree, sort of.

The Paper article suggests that I conducted a "study" even though all I did was something obvious: plug new numbers into an old chart.

The Paper reports:
The city rift with Ratner comes after a new financial analysis of Atlantic Yards revealed that the Frank Gehry-designed basketball arena at its center will actually be a money-loser for the city.

But the new study by the Atlantic Yards Report, a Web site, reveals that the arena will instead cost taxpayers $77 million over 30 years, according to the analysis.

The amount of direct subsidy that the city will give Ratner to build the arena has more than doubled — jumping from $100 million to $205 million — in the two years since the city’s Independent Budget Office said the arena create “a modest” net gain of $107 million in tax revenue.

IBO Deputy Director George Sweeting said the new numbers came as a little surprise to him.

“Because the size of the city contribution has grown, the gain from the arena is certainly less than $30 million and it could be a loss,” said Sweeting, adding that the organization had no plans to do the math again.

Actually, the additional $105 million wouldn't all go to the arena block, but even if a minimum of $28.5 million were directed to the arena block--and that's likely--the city tab turns into a loss. Too bad IBO won't take another look.

Real Deal on Prospect Heights: new condos, fluctuating prices

An article in the July issue of The Real Deal, headlined Mixed prospects for Prospect Heights' new developments: Atlantic Yards plan attracted new condos, but sales at some falter, offers a mixed report on the "Atlantic Yards effect."

There may not be enough demand as of now for all the condos and a landmark designation in the neighborhood may "limit future projects."

Over the 17 months ending May 31 of this year, the magazine report, developers annouced plans for 230 new condo units in 11 Prospect Heights projects. Prices have been steadily rising, but may have peaked.

Then again, as with other neighborhoods, boundaries stretch. The magazine reports:
"I noticed restaurants opening on Vanderbilt, and I began working with more buyers in the neighborhood," said Florence Clutch, a sales associate with Halstead who lives on the border of Crown Heights and Prospect Heights. "Addresses now being called Prospect Heights until last year were called Crown Heights."

AY comparison

At Richard Meier's On Prospect Park, 25 of about 100 units have been sold, at $1200 per square foot. At other buildings, luxury units--once at $800 per square foot--are now closer to $675 per square foot.

So, would the Frank Gehry-designed Atlantic Yards be more like the Meier building, or the others? The New York Times raised questions July 1 whether condos in the flagship Miss Brooklyn, projected at $889 per square foot in 2009, were priced realistically. In 2015, condos would sell for $1069 a square foot.

There's an argument that people would pay more for an apartment by a marquee architect. Then again, it might also depend on what it would be like to live in Atlantic Yards.

Thursday, July 26, 2007

Behind closed doors, a "compromise" on the Ratner clause

A Daily News article today headlined Pols slash tax-break on Atlantic Yards could just as easily have said "Ratner keeps two-thirds of Atlantic Yards tax break" or "Atlantic Yards still gets special tax break."

Because the gist of the exclusive, published unaccountably in the newspaper's Brooklyn section--is this not of citywide interest?--is that the "Atlantic Yards carve-out" would be reduced from $300 million to $200 million because the 1930 condos would get tax exemptions for 15 years rather than 25 years.

But that still means special treatment, since any other condos in the same neighborhood would be required to provide 20% on-site affordable housing in exchange for the 421-a tax break.

So it would still be "economic segregation," in the words of Assemblyman Hakeem Jeffries, who was not quoted in the story. Rather, we hear from the unelected developer:
"As far as we're concerned, the issue has been resolved," said Forest City Ratner spokesman Loren Riegelhaupt.

And we hear from the organized opposition to Atlantic Yards:
"The city and state have already moved heaven and Earth to favor this developer, with $300 million in subsidies, with other tax breaks, with the right to use eminent domain and the private rezoning," said Daniel Goldstein of the anti-Yards group Develop, Don't Destroy. "That's enough."

Missing is the voice of any neutral analyst, but surely such person could point out that, while Forest City Ratner did expect to get tax breaks for all-condo buildings before the law changed, the justification for treating this development differently is hard to get past the average citizen, as noted Tuesday by Jeffries' constituency.

Larger deal

While city officials wouldn't provide details, apparently the Ratner "compromise" is part of a larger package of changes to the 421-a law that the city requested.

The New York Post, in a more vague "exclusive" headlined RATNER-CITY DEAL NEAR ON HOUSING, reported:
While the Bloomberg administration has concerns about Atlantic Yards, the bigger issue appears to be how the legislation would rip into the mayor's plans to build more housing for middle-income families.

It would directly kill the construction of 10,000 subsidized units citywide for which middle-income families could qualify.

Not necessarily--it would change the income requirements for eligibility for such units and affordable housing, as we know, is all in the details.

Crain's: suites at new NYC-area sports facilities should sell well

Though sports teams around the country are ripping out luxury suites, the New York-area market is an anomaly, and an article in this week's Crain's New York Business, headlined New arenas' suite deals, suggests that the planned suite-intensive Barclays Center at Atlantic Yards might do pretty well, even if it arrives later in the cycle.

Sports marketing executive Todd Parker told Crain's that the New York area has only 250 or so luxury boxes in all of its sports facilities combined, but with six new facilities expected to be completed in the three years, the total would leap to 900.

While "the competition for buyers could get intense" among the Devils, Nets, Mets, Jets, Giants, Yankees and Red Bulls, Crain's observes:
However, experts believe that the luxury-box market is in a unique position, since the city has been "starved" for corporate entertainment options but flush with cash from banks, hedge funds and law firms.

Too many events?

Crain's suggests:
Red Bull Park, Barclays Center and Prudential Center promise 250 to 300 events per year, which means competition for other types of entertainment will be fierce.

While Crain's doesn't connect the dots, sports economist Andrew Zimbalist, hired to assess new tax revenues from the Atlantic Yards project, assumed "no new arena in Newark," though the Prudential Center will open this year, at least two years before the Barclays Center. So competition would be fierce.

The Devils have already sold three-quarters of the 76 luxury boxes at the new Prudential Center. And the Prudential Center remains an interim option if Atlantic Yards remains delayed and the team owners want to escape the doldrums of the Meadowlands.

Barclays an icon?

Crain's waxes rhapsodically about the Brooklyn arena, though it fails to mention that the construction would likely go beyond 2009, and may be jeopardized completely by lawsuits:
The Nets' Barclays Center in Brooklyn, designed by architect Frank Gehry, promises to be an icon in sports. Though the arena's full design has yet to be revealed, and it is not scheduled to be completed for another two seasons, Nets Chief Executive Brett Yormark says he's already received countless requests for luxury boxes.

"The suites are all about high design and next-generation access," say Mr. Yormark, using terms like high-def, Wi-Fi and VIP in the same breath. Mr. Gehry will design all 118 suites individually, in his signature style, which features curved walls and odd angles. The average price will be about $275,000 per year.

Crain's acknowledges some risks for the Nets, ramping up from 29 current boxes in the current Continental Airlines Arena to some 170 suites in Brooklyn. And some Manhattan-based corporations might be deterred by Brooklyn. (Unmentioned: they'd really be deterred by an arena in Coney Island, which Atlantic Yards critics have suggested as an alternative, at least not without express subway service.)

However, Nets uber-marketer Yormark told Crain's he'd target Brooklyn businesses and "downtown Manhattan finance, fashion, law and construction firms." And, unmentioned by Crain's in this article, there's that sales office opening up this fall at the new Times Tower.

Number of suites

While Crain's reports that there would be 118 luxury suites, according to a Forest City Ratner document, Brooklyn Arena/Nets Financial Projections (p. 15 of PDF), released thanks to a lawsuit filed by Assemblyman Jim Brennan and State Senator Velmanette Montgomery, there would be 124 luxury suites, four party suites, and 40 loge boxes.

Wednesday, July 25, 2007

Jeffries calls AY carve-out "offensive"--and his base agrees

As a candidate last year, Hakeem Jeffries was a qualified supporter of Atlantic Yards. And as a freshman member of the State Assembly, he still welcomes the project’s affordable housing.

But Jeffries' posture has gotten tougher lately, and last night he delivered an eloquent criticism of the project, declaring that promised affordable housing was easily matched by government support for developer Forest City Ratner and that the “Atlantic Yards carve-out,” a tax break available only to the developer, was “offensive” because it promoted “economic segregation.” And his audience, responding to the notion of special treatment, seemed to agree.

(While the "carve-out" would treat the project differently, it also would preserve the project configuration as approved last year before revision of the tax break. So it’s a matter of perspective.)

Jeffries’ Town Hall meeting last night, "My First Six Months Serving You," was actually less about Atlantic Yards than about bread-and-butter constituent service. Jeffries, wielding the power of his position, brought officials from state housing and health agencies, and the city education department to the Brown Memorial Baptist Church in Clinton Hill to address his base.

And while Jeffries, a local guy done good, may be a former corporate lawyer who wears cufflinks, that base, at least from the 100-person crowd last night, is mostly working- and middle-class black folk. The yuppies (of whatever color) who’ve bought the luxury condos popping up in Clinton Hill, Prospect Heights, and environs were in scarce supply.

The AY issue

But it didn’t take Daniel Goldstein of Develop Don’t Destroy Brooklyn, one of the few Atlantic Yards activists in the audience, to raise the Atlantic Yards issue. It was a black woman of a certain age, who, speaking with dismay more than outrage, crystallized the issues that have emerged in the interregnum since the project was approved last December.

“Bruce Ratner has gotten lots and lots of money from the city and the state, with no guarantee that there will be affordable housing,” she said, also questioning whether “he’s going to ameliorate the congestion that is bound to be caused by that many people coming into the community. It’s a real concern… Can you update us on that?”

421-a changes

Jeffries never got to the congestion issue but instead offered a primer on the 421-a tax break, enacted to jump-start housing in areas where construction was moribund, now anachronistic in “hot” neighborhoods like Clinton Hill, where empty lots sprout luxury condos, some landlords of unregulated apartments jack up rents, and churches like Brown Memorial see their congregations thin as residents disperse for cheaper housing.

The state’s 421-a reform would require 20% low-income housing in each building that got the tax break, except for Ratner’s Atlantic Yards. The “Atlantic Yards carve-out” would allow condo buildings in the project without affordable housing to get the tax break. It also would nudge higher the allowable incomes for the affordable housing.

Jeffries explain how the law was changed, and would require that any properties that get the tax break “in our community” would require, in exchange, 20% of the units affordable to households at 60% of the Area Median Income (AMI), or about $42,000 for a family of four. The audience clapped. He added that the legislation would require that half the affordable units be reserved for people within the local Community Board. That also drew claps.

Amended on the sly

Then Jeffries got to the Atlantic Yards "carve-out," deeming the episode “one of those things you find out when you’re in Albany.” He noted: “I don’t really find out until the law has been amended, this provision has been negotiated to treat Atlantic Yards differently than any other project in New York City. I finally found out about five or ten minutes before the reporters started calling.”

“Of course I’m a little bit annoyed. I voted against that particular bill, 9293, the carve-out provision, because I’m of the view, consistent with your question, that enough subsidy has already been given to this developer. There’s absolutely no reason to treat this project any more favorably than any other project that’s being built. So subsequent to voting against this, we [he and State Senator Velmanette Montgomery] sent a letter to the developer, saying ‘you need to comply with the law as it applies to everybody else."

"'And anything short of you complying with the law—Bruce Ratner, Forest City Ratner—anything short of you doing that, means to me, that the government should review completely the entire merits of this project.’ Because the project was sold to us in large part as one that would bring needed affordable housing to our community. But you can’t on the one hand sell it to us as a project that’s going to bring affordable housing to the community and on the other hand, at the eleventh hour, negotiate a special provision where you get treated differently than everyone else in the city.”

“And how is he being treated differently? The most offensive way, to me—to his credit, the developer has agreed, as it relates to the rental units, to do 50% of the rental units affordable. He should be credited with that. What they said to me was, ‘We have this dramatic rental agreement, so that should be enough. We shouldn’t really have to comply with the law as it relates to the luxury condominiums.’”

Honing in

Then Jeffries took it up a notch, if not to the passionate level of Council Member Letitia James (a project opponent who endorsed Jeffries’ opponent, Bill Batson, but was in the audience last night), but with a definite edge.

“And my view was, yeah, this is an extraordinary thing, that you made 50% of the units affordable. But there were extraordinary steps that were taken by government to make this project happen,” he declared. The audience began murmuring call-and-response agreement.

“The state gave $100 million. The city gave $200 million. They waived the ULURP process. You don’t have to comply with the zoning requirements, so you can build ten, 15, 20 stories higher than anybody else, making additional money. And beyond all that, you have the ability to use the extraordinary power of eminent domain. So, your 50/50 deal is extraordinary, and there were extraordinary things that the government did in return. So as far as I’m concerned, that deal is done, signed, sealed, and delivered, let’s deal with the future.”

Several people clapped.

(Note that the 50/50 program, more precisely a 50/30/20 program of market, middle- and low-income housing, is a city subsidy program available to other developers, and other developers who participate don’t get the private rezoning and extra subsidies that Forest City Ratner has been promised for Atlantic Yards.)

“And as far as I’m concerned, you can’t have a condominium building going up in the Atlantic Yards project where, if it went up in any other part of the 57th Assembly District, that developer would have to build 20% of those units affordable to people in the community. But because of the Atlantic Yards carve-out, he doesn’t have to do that. And I just think that that’s wrong. And so I’m fightin’ it. The city and Mayor Bloomberg, to his credit—he’s been a big supporter of this project--is working closely with me and has said to the developer, ‘If you don’t comply with the law, we’re holding $100 million of the money that we promised to you back.’” More claps.

Jeffries identified the tax break as being worth up to $175 million, as initially reported; city officials have also said the value is closer to the $300 million.

Economic segregation?

“On the one hand, the developer sold to us the notion, as it relates to the 50/50 housing, that there would be no economic segregation. That’s a good thing," he pointed out. "In the law, they negotiated a provision that would allow them to have all luxury condominiums and still get the tax break.”

Forest City Ratner and project supporters must feel some frustration, since the rules got changed on them. The “Atlantic Yards carve-out” would preserve the Atlantic Yards plan as approved last December, even as the city and state began tightening the tax break. On the other hand, the "carve-out" also comes after the city more than doubled its planned spending on Atlantic Yards.

The project has gone through changes; as proposed in December 2003, only 4500 rental units were publicly announced (though condos were quietly in the cards), but in May 2005, once the Affordable Housing Memorandum of Understanding (MOU) with ACORN was signed, the project changed.

Forest City Ratner added up to 2800 condos, later shaving that back to 1930 condos, apparently necessary, in the company’s calculation, to drive sufficient profit. (A developer doesn’t lose money producing affordable housing, but the profit margins may be lower.)

ACORN’s Bertha Lewis has declared the project would ultimately be a 50/50 plan, in part because of the 600 to 1000 for-sale affordable units, on-site or off-site, that the developer has pledged to “work towards,” though that would bring the affordable percentage to about 40%. But Lewis never charged “economic segregation” because of the condo-only buildings.

The latest conflict comes about because of bad timing, at least from the developer's point of view. The Atlantic Yards approval process took so long that it was delayed until the city and state reformed 421-a. Had Atlantic Yards been approved earlier last year, with no pending lawsuits, Forest City Ratner might have begun construction on the condo buildings and escaped the law’s revision, Jeffries’ scrutiny, and the civic outrage at special treatment.

What next?

Jeffries said that, while Forest City Ratner didn’t respond formally to his letter, he and representatives of the developer had a conversation, and the city has laid out its position. “The Speaker of the Assembly [Sheldon Silver] and [Housing Chair] Vito Lopez have been supportive of efforts to get some changes into the carve-out provision,” he said, using language that suggested potential compromise rather than a full removal of the provision.

“We go back up to Albany on Thursday. I’m hopeful that it will be on the agenda, but certainly we’ll push, legislatively, to amend the law," he said. "Whether they respond or not, Forest City Ratner, it’s not really their choice. They may use the influence they have in Albany, particularly with the Senate, to try and protect the provisions that they have, but we’re bringing everything that we have to bear to get them, legislatively, to comply with the law.” So the issue remains in question.

In his closing remarks, the Rev. Clinton Miller, Senior Pastor of Brown Memorial and a friend and supporter of Jeffries, reminded the audience they needed to hold government and corporate entities responsible, and to adapt to changes so community members “have an option to stay” in the face of gentrification. He also recommended the documentaries Sicko, about health care, and Brooklyn Matters, about Atlantic Yards.

On-site for-sale units

Afterward, I asked Jeffries about the 200 for-sale on-site affordable units promised by Forest City Ratner when the project was approved in December. Nothing has been announced by the state, and he and Montgomery had queried the developer in their letter.

Forest City Ratner had in conversation recommitted to that number, he said, noting that 200 would be only about 10% of the 1930 condos, not 20%, as would be required by the legislation.

The developer had not announced the income ranges for such units; the Affordable Housing MOU contemplates that they would be in the “upper affordable” income tiers. Given that the range goes up to 140% of AMI, it would seem to be tough to conform to the law, which caps affordable units at 60% of AMI. So that issue remains in question.

Beyond AY

Housing was chief among the issues discussed last night. Jeffries told the audience that he and Montgomery want to tie homeowner tax increases to income and ability to pay, a response to rising rates caused by rising area property values, even though some longtime homeowners are on fixed or low incomes. (Presumably, such homeowners might also be able to tap the equity in their increasingly-valuable homes.)

Also, calling Bedford-Stuyvesant, which he represents in part, "ground zero for the subprime lending crisis and predatory loans," Jeffries said that the state, emulating Ohio, is in the process of forming a reserve fund to assist homeowners, and also will push a public education campaign.

Many renters, he said, are being victimized by landlords who harass them or neglect the property in order to empty out the building and raise rents; he brought two officials from the state Department of Housing and Community Renewal to speak to the audience and be available to answer questions.

One of them mentioned how New York is a leader in allowing Section 8 housing subsidies, typically used for rent, to be used as a down payment to buy housing. The number, however, is just 38, and the solution to the city's affordable housing crisis was beyond the scope of the meeting.

Tuesday, July 24, 2007

ESDC: AKRF's work for Ratner was disclosed

The Empire State Development Corporation (ESDC) has offered a statement to the Brooklyn Daily Eagle about the role of environmental consultant AKRF, which, as I reported last week, worked for Atlantic Yards developer Forest City Ratner before beginning an environmental review that has cost nearly $5 million (paid for by the developer via the state).

The ESDC's statement: “AKRF’s limited work for Forest City Ratner was disclosed to the board at the Sept. 2005 board meeting at which AKRF was hired. Once AKRF was hired by ESDC, its work for Forest City Ratner stopped.”

What's the policy?

It remains in question, however, whether the disclosure is sufficient to have confidence that AKRF's work would be in the public interest or in the interest of its former client.

I had asked the ESDC what its policy is; in other words, how "limited" must work be and what's a sufficient time gap? After all, Philip Habib & Associates was a subcontractor for AKRF on the environmental review and apparently did more work for Forest City Ratner; Habib was listed as a consultant in the developer's May 2005 bid for the Metropolitan Transportation Authority's Vanderbilt Yard.

It's also odd that the ESDC didn't see fit to issue any statement to me, given that I asked more than once for comment and gave the agency sufficient lead time.

Last month, Bloomy was offering a boilerplate defense of AY

Mayor Mike Bloomberg seems to be coming to the realization that the Atlantic Yards project shouldn't get a special tax break and is apparently threatening to withdraw some pledged subsidies.

Is that a belated recognition that Atlantic Yards might be a drain on the public coffers or should not get special benefits? Is it part of a larger tactic to resist the state's revision of the 421-a tax break? Or is it something else altogether?

It is clear, however, that until recently, Bloomberg was offering a boilerplate defense of the project. A month ago, after Brooklyn resident Michael D.D. White wrote a thoughtful and pointed letter of complaint to the mayor, he received the following canned response, which he forwarded to me. (The original letter is at bottom.) I've interpolated some commentary.

A token reduction

Dear Mr. White: Thank you for your recent letter about the Atlantic Yards project. Many Brooklyn residents, and especially those who live in the neighborhoods that directly surround the project site, have legitimate concerns about its scale and scope. While our Administration fully supports the Atlantic Yards project, we understand these concerns. That is why the Department of City Planning recently called upon developer Forest City Ratner Companies to reduce the size of the project by eight percent.

However, that reduction would bring the project back to the originally announced square footage, as I've reported, and most of the eight percent was in the cards all along.

Preserving bank views?

The recommendations, which have been incorporated into the developer's plans, include reductions in height of three of the project's buildings to help preserve views of existing landmarks, such as the Williamsburgh Savings Bank building, and an increase in the amount of open space from seven to eight acres.

While the reductions in height may preserve some views of the Williamsburgh Savings Bank, the reduction in the height of the flagship Miss Brooklyn tower would still block views of the bank, despite an a pledge by developer Forest City Ratner, in announcing the plan on 12/10/03, not to do so.

Whose answers?

Of course, there are many other concerns that come with such an ambitious project, and we were glad to see that neighborhood residents had the opportunity to voice their thoughts about this issue during the public hearing and community forums held by the Empire State Development Corporation in last year. The Final Environmental Impact Statement, which can be found at the website
www.empire.state.ny.us/atlanticyards, provides answers to many questions asked at those public hearings, ranging form the project's impact on traffic to concerns about noise.

While the Empire State Development provides answers to many questions, it also punts on some other ones.

"Creating" affordable housing

The Atlantic Yards project is important to the future of the downtown Brooklyn area, creating 2,250 units of affordable housing, an 18,000-seat arena, and publicly accessible open space.

There are no guarantees as of yet that the housing would be produced on any schedule, and Assemblyman Jim Brennan thinks it's in jeopardy.

Fuzzy numbers

Nearly 18,000 jobs and 3.5 billion dollars in private investment will provide the neighborhood with a strong economic boost, improving the quality of life for thousands of residents throughout Brooklyn and our City.

By citing 18,000 jobs, Bloomberg is apparently using statistics provided by developer Forest City Ratner, which counts 15,000 construction jobs. However, those are job-years, or 1500 jobs a year over ten years.

As for $3.5 billion, it's not clear whether Bloomberg is referring to a previous iteration of the plan, which did project a $3.5 billion cost, or whether he's suggesting that the $4 billion plan would include $3.5 billion in private investment. Either way, more than half of the cost of the project would be supported either by direct public subsidies or government-authorized tax-exempt bonds, which give the developer a break.

Working together

Our Administration, the State, and Forest City Ratner Companies are committed to working with Brooklyn's civic and elected leaders to ensure that the project meets the needs of local residents and businesses.
Than you again for writing about this vital issue that will play a critical role in the future of our great City.

Those commitments remain under question.

A pointed letter

White's letter was far more pointed. I've bolded it in part, except for the word "appropriate," which was already emphasized in the original.

He wrote:
As a lawyer who has recently exited more than a quarter century of public service, I fully appreciate your reported impatience with adhering to proper public process and your desire to find developmental shortcuts. Also, as the expression goes when process is sidestepped or technically avoided, “Where there is no harm, there is no foul.” But Atlantic Yards is not in this category: It is a stark example of where the sidestepping of process is the instrument being used to deliver the foul.

When I was in government, we had a standard we looked at as a condition to using the powers of the Urban Development Corporation (aka the Empire State Development Corporation). Though the statutory powers of the Corporation might be virtually unfettered, the standard we considered was that we would never use the powers of the Corporation if using them would result in the legislature subsequently taking those powers away. Ergo, the powers should be used only to do what is clearly good and about which there can be a fair degree of reasonable public consensus.

As a real estate development and public finance professional, I can find no shortage of colleagues who seriously question what you are doing with Atlantic Yards. Few believe you or various other elected officials truly understand how bad the proposed Atlantic Yards project is or the terrifically negative legacy it will represent. The consensus approaches unanimity. Nevertheless, there is a desperate shortage of professionals who are willing to express their extreme concerns directly to you.

To be a good project, the Atlantic Yard project should be high density, but needs to be reduced to an appropriate high density. In other words, it needs to be a much lower density than you propose. It needs to be properly and much more carefully designed. That includes properly orient[ed] green space and avoiding most, if not all of the proposed street closings. (Probably, in addition, additional streets should be opened.) It means that the project should be broken up into many smaller parcels that can be properly and fairly bid upon by developers who feel they are actually free to make such bids. Doing so will almost certainly, and appropriately, mean that the overall development will have multiple builders. Plans for unnecessary and destructive condemnations such as that of the Ward Bakery building should be abandoned. In most respects your model for what should be done here in terms of process and quality of design should be Battery Park City.

My wife and I support you for having been the “business mayor” and there are many things we would like get behind you on like congestion pricing, (about which we have heard Deputy Mayor Doctoroff speak eloquently), sustainability and, in general, building for a bigger and better future city. Nevertheless, in assessing your record, a former boss of mine had an expression: “100 `at-aboys’ are wiped out by only one `Oh sh*t’.” I am afraid that is the territory we are in.

If the Atlantic Yards project is ever built in any version approximate to what you have been promoting, not only will everyone experience its blight in ways they might not now all fully anticipate, but in the future people are likely to say: “After Mayor Bloomberg’s Atlantic Yards was completed, the State Legislature stripped ESDC of its condemnation powers and the city Charter was amended to prevent City investment in huge capital projects that have not been ULURPed.”