Wednesday, June 30, 2010

Is ten-year AY schedule reasonable? Judge puts ESDC on the defensive as Development Agreement is scrutinized in 75-minute reargument

In an unusual reargument of a case that was argued January 19 and decided March 10, a lawyer for the Empire State Development Corporation (ESDC) was put on the defensive yesterday, forced to acknowledge that there are far fewer penalties for delays in completing the Atlantic Yards project as a whole than those for the first phase, which includes the arena and three towers.

Will it make a difference? It’s hard to predict a yes, given that courts generally defer to agencies like the ESDC.

But the fact of the reargument itself--and the uncomfortable facts in the belatedly-released Atlantic Yards Development Agreement--suggest that, at the least, New York County Supreme Court Justice Marcy Friedman will chastise the agency, if not order a Supplemental Environmental Impact Statement (SEIS) or otherwise throw a wrench into the project.

After all, in her March 10 ruling Friedman criticized the ESDC’s “deplorable lack of transparency” and acknowledged that the ESDC’s use of a ten-year timeframe for the project buildout in the Modified General Project Plan (MGPP) was supported “only minimally.”

The MGPP, approved last September, was amplified and modified by the Development Agreement, signed in December but released in January. And yesterday Friedman steadily put ESDC lawyer Philip Karmel through a careful cross-examination.

75-minute hearing

At the outset of the hearing, Friedman said she’d allow only 40 minutes of argument, but she spent 75 minutes listening to and questioning Karmel and lawyers for two groups of community petitioners. The latter had asked her to reconsider the ruling that the project's ten-year timeline was legitimate and that an SEIS was not necessary.

Key to the motion for reargument is the Development Agreement, which was not released until about a week after the oral argument in January--despite a pledge to release it earlier--and which Friedman had refused to add to the case.

Though Atlantic Yards may seem like a done deal--eminent domain was approved months ago and (perhaps not coincidentally) Forest City Ratner announced yesterday that concrete had been poured for the Atlantic Yards arena--attorneys for the ESDC and FCR evinced some tension, a sign that the courts remain a wild card.

The courtroom was less than one-third full, and even some of the people in the audience on the clock treated it like Casual Tuesday, a not unwise choice, given that the room had the barest of air conditioning.

FCR General Counsel David Berliner wore a blazer but no tie. ESDC Counsel Joe Petillo didn’t wear a suit or a jacket. (Neither did most of us not on the clock.) Friedman herself took off her robe fairly quickly to cool down.

But she was ready to drill down into the multiple sub-clauses of the maddeningly complex Development Agreement, so she and the lawyers batted around citations to “17.1(m)” and “17.2(a)(vi)” while they periodically paged through voluminous stacks of paper. (See documents embedded below.)

Friedman is an engaged judge; neither flamboyant nor warm and fuzzy, she maintains a default mien of skepticism and minor sourness, as if her morning cup of coffee had been brewed by incompetents. More so than in previous arguments, she yesterday pursed her lips frequently.

An interview with Jeff Baker

After the hearing, I interviewed Jeff Baker, attorney for Develop Don't Destroy Brooklyn and allied groups. He explained his contention that there are no significant damages for delays.

As for the general clause that the ESDC claims could impose penalties up to $10,000 a day Baker said that "only would apply to the section that they have to use commercially reasonable efforts. So it stretches the imagination to believe that ESDC at any point in the relatively near future could bring an action and say you’re not using commercially reasonable efforts."

Beyond that, he noted, "it is a minor amount of penalties, in comparison to the size of the project, and the size of the liquidated damages provision, which apply to Phase 1."

As for the claim that no SEIS is necessary, Baker noted that the ESDC's Technical Memorandum "only looked at a few year delay." (It was five years.) "It did not into account the blighting impacts [of a delayed project]... You can’t say they took a hard look at the issues, when they didn’t identify the issue.... and then finally, they didn’t consider the fact that, are they really alleviating blight?"

What happens if the petitioners are successful? "If she does that, she annuls the resolution, the question is, what happens in the meantime if they go back to reconsider it?" Baker said in the interview, musing aloud. "Might they have a legal basis to claim that the arena can go forward, that Phase 1 can go forward?... All the determinations by ESDC based on the purported benefits of this project were for the whole thing. They never divided this project and said, we’ll just do an arena."

"We’re encouraged that she granted us this hearing," he said. "Obviously the judge had concerns the Development Agreement does not on its face provide the assurances that she was led to believe were there. We’re cautiously optimistic that she’ll agree that... she felt they barely met the legal standard before--they’ve now lost one of the legs of their argument--and now it’s not enough."

Leading off

Baker, leading off in court, reminded Friedman that she based her ruling on three separate factors: a study of the housing market by the consultant KPMG, the financial incentives for Forest City Ratner to recoup its investments, and the ESDC’s assurances that the Development Agreement would enforce “commercially reasonable” efforts to move forward.

The Development Agreement, actually, had been signed but not released, and that’s what Baker concentrated on. An attorney based in Albany, Baker’s short with a close-cropped beard and a deep-voiced delivery, a welterweight who, yesterday at least, threw consistent punches.

Phase 1 vs. Phase 2

For the purposes of the hearing, Baker said he’d concede that there are a variety of incentives to complete the arena and three towers of Phase 1, though FCR has 12 years--an outside date that, in itself, casts doubt on the ten-year timetable. “For Phase 2, there are no assurances,” he said.

(Baker did not mention what I consider to be powerful evidence of the ESDC’s obfuscation. While the MGPP included no timetable for the third tower in Phase 1, just "on or before a date certain," the Development Agreement says the third building doesn't have to start for ten years.)

He explained that, under Section 17.1 of the Development Agreement, there are various events of default that trigger “meaningful damages.”

But the developer has 15 years to begin construction of the platform over the Vanderbilt Yard, he said, and faces “no meaningful penalty” other than being unable to proceed with the rest of the project.

Similarly, if the project’s not completed in 25 years, then it can be terminated, without any financial penalties. Even with that, Baker noted, the ESDC has two years to serve the notice of termination.

He also noted that “abandonment” of the project is defined only as abandonment of Phase 1.

Friedman asked about the specific penalties in 17.2(a)(x)--from $1000 to $10,000 a day for default. Baker said it was a “general, catch-all” clause that did not apply to sections where damages and timetables were delineated. “Specific provisions in the contract trump a general term,” he said.

“This agreement flies in the face” of the statement that they expected to require commercially reasonable efforts to complete the project in ten years, he said.

FCR economics

“The whole deal is structured to allow Forest City Ratner to recoup its financial investment in Phase 1,” Baker said, noting that condemnation of the site, once planned in one phase, has been segmented into multiple phases.

Friedman asked him to explain the basis of his statement.

Baker said it was a common-sense analysis of the document. Given that there are no financial penalties for Phase 2, he said, “all they do is lose the right to develop the project.”

“Is it your position that there are no penalties in the Development Agreement if the project is terminated by ESDC?” Friedman asked.

“If it’s terminated after Phase 1, I don’t think so,” Baker replied.

Enter Butzel

Then Al Butzel, attorney for BrooklynSpeaks and allied groups, addressed the impacts of the extended buildout.

Butzel, tall and gray, won the Westway case and has cycled back to such public interest work. He speaks in a low voice, tough to hear in such a cavernous room without amplification, and Friedman had to urge him to speak up.

But he quickly built on Baker’s timetable points, noting that only one building has to be constructed on block 1129.

In sum, he said with a measure of incredulity, “it totally undercuts the reasonableness of the ESDC claim they could rely on a ten-year period.”

He noted that ESDC attorney Karmel had said that the petitioners should have brought the Development Agreement to the judge’s attention, but that’s exactly what they’d done, to no avail.

He said neither the court nor the ESDC directors could have understood the meaning of “commercially reasonable” without having seen the Development Agreement.

At oral argument in January, Butzel pointed out, Karmel had told the court that the ESDC was relying on the Development Agreement to enforce the timetable.

“He didn’t tell us that the platform didn’t have to begin construction for 15 years,” Butzel said. “In many ways, I feel it was suppressed.”

He noted that the unavailability of affordable housing subsidies and the catch-all term “market-financing unavailability” could further delay the timetable.

And he said that a penalty of $1000 a day “doesn’t mean anything in a project of this size.”

Though it is typically not the role of the court to require the ESDC to prepare an SEIS, Butzel said that in this case it was necessary.

Enter Karmel

Tall, and athletic, with a close-cropped red beard and a powerful voice that can verge on grating, Karmel comes off as a supremely confident advocate, at least when he's got the facts on his side.

He began, as if ignoring the opposing lawyers, by stressing that the Development Agreement requires Forest City Ratner to build the project as described in the 2009 MGPP and the 2006 design guidelines.

But he quickly got to the issue of the timetable: “Has the Development Agreement changed the schedule in such a way to require an SEIS?”

His answer was no, that the ESDC, in affirming the MGPP, took a “hard look”--as required under state law--that the ten-year construction schedule was reasonable, and that, if the project were delayed, the environmental impacts would not require an SEIS.

KPMG report

The ESDC’s analysis, he said, was based not on the 25-year outside date but the economics of the housing market, and KPMG said the housing could be absorbed in ten years, given the housing demand and population projections.

The KPMG report, he said, “was probably the most important factor” in the ESDC’s decision, and there’s nothing in the Development Agreement germane to the KPMG report.

Karmel's statement about the KPMG report was questionable, given that it was completed in a cover-your-butt way just weeks before the ESDC meeting last September. Moreover, it’s riddled with errors and lies regarding the current condo market.

Judge drills down

“Now it is true,” Karmel allowed, “that the Development Agreement does contain outside dates” that are considerably extended beyond the official timetable.

After Friedman queried him about the project effective date--when Phase 1 properties are cleared, which should be July 31--she drilled down, putting Karmel on the defensive.

“Do you take the position that there are any liquidated damages either for failure to commence Phase 2 work by the dates provided or the failure to complete Phase 2 by the outside Phase 2 complete date?” Friedman asked.

“Yes, Your Honor,” Karmel responded, his tone becoming more deferential. He cited the sections in 17.1 and 17.2, indicating the potential for penalties of $1000 to $10,000 a day.

“Is this the only provision that covers Phase 2 events of default?” asked the judge.

“It is the only provision relevant to liquidated damages,” Karmel responded.

Are there any other events of default regarding Phase 2 outside 17.1(m), Friedman asked.

“I don’t believe so, Your Honor,” Karmel responded.

She pointed to 17.2(a)(ii), which specifies liquidated damages. “It does not cover 17.1(m), correct?” she asked.

“That is correct, Your Honor,” Karmel responded.

Are there any other provisions in the Development Agreement that provide liquidated damages with respect to Phase 2, she asked

“Yes, Your Honor,” Karmel responded, pointing to 17.2(a)(vi).

“This is termination, not liquidated damages, correct?” Friedman asked.

“Yes,” responded Karmel.

“You agree with Mr. Baker, that with respect to default, termination is a penalty?” Friedman asked.

“It’s one,” Karmel said.

What else?

He pointed to the catch-all clause under 17.2(a)(x), which sets the potential for penalties of $1000 to $10,000 a day if Forest City Ratner does not use commercially reasonable efforts to complete the project.

“Are you also claiming that 17.2(a)(x) covers default under 17.1(m) with respect to Phase 2 work?” Friedman asked.

“I think it would depend on circumstances,” Karmel said, suggesting such penalties might kick in if Forest City Ratner walked away from the project or failed to try to complete it. But if the developer was using commercially reasonable efforts but falling behind, that would not be subject to penalties.

(Given that the Development Agreement allows delays for subsidy and market financing unavailability, that seems to be a lot of wiggle room.)

Friedman asked about the $1000 a day penalty under 17.2(a)(x).

“$10,000 a day is the basic penalty,” Karmel responded, but can go down to $1000 a day “if the default is trivial.”

If Forest City Ratner has walked away, and thus had “a material adverse effect on the value of or the use of the Project Site”--language in the Development Agreement--it would be $10,000 a day.

Friedman asked how that might work.

“It depends on facts and circumstance,” Karmel said, adding that “ESDC is closely monitoring the project,” a statement that drew some raised eyebrows from those in attendance.

He insisted that the outside dates were independent of the requirement that commercially reasonable efforts be used. And, he noted that, beyond the penalties, ESDC could go to court to obtain other relief, such as specific performance in the contract.

What the ESDC knew

Friedman asked what exactly the ESDC board knew when it voted last September. Did the MGPP mention the Development Agreement?

No, said Karmel, indicating that it did include the project lease abstracts, which gave up to 25 years to build and thus match up with the Development Agreement.

Friedman rubbed her eyes.

“So, what we have, in the Development Agreement, from a contractual standpoint,” Karmel said, “is a schedule and outside dates.”

Environmental impact and need for an SEIS

Karmel switched gears and gained momentum as he addressed the question of whether the ESDC had taken a “hard look” at environmental impacts from a delay.

In Chapter 17 of the 2006 Final Environmental Impact Statement, the ESDC--via its environmental consultant, the ubiquitous AKRF--examined construction impacts, in a 113-page chapter.

Then a Technical Memorandum last year provided an independent basis for the ESDC to decide not to prepare an SEIS, he said.

Karmel said there would be quantitative and qualitative impacts and that the peak impacts of such things as noise and air quality would not increase over a longer buildout.

As for impacts on such things as historic buildings and neighborhood character, he said, the impact was disclosed and mitigated to the extent possible.

“These conclusions would not change if the construction took longer than ten years,” he insisted, suggesting a localized impact of individual buildings would be low.

(The ESDC, in court papers, likened the Atlantic Yards site, to Battery Park City, which is an enormous stretch, given that the latter is more than four times larger.)

Actually, the Technical Memorandum is pretty fuzzy, since it only looks at a Build Year delayed until 2024, not 2035. The latter date was simply not studied.

And, Karmel insisted, the petitioners had not specified the what environmental analysis the ESDC was supposed to do.

Beyond that, the preparation of an SEIS is discretionary, he noted, even if significant environmental impacts had been identified.

FCR: project's moving along

Forest City Ratner attorney Jeffrey Braun, who’d been sitting at the table with colleague Richard Leland taking notes and taking in the entire argument, rose for a brief contribution.

Braun, tall and balding, can have a pit-bull-like intensity, but he carefully dialed it back in front of Friedman.

The project, he noted, has continued to progress since the parties had been in court in January: not only have there been a decision and settlements in the eminent domain case, construction has begun, demolitions have occurred, the MTA deal has closed, and steel for the arena has been ordered and is under fabrication.

“We have not been stagnant in any way,” he said, respectful but precise. “We’re not where we were in January. We’re much farther along.”

Of course had FCR released the Development Agreement before that January hearing, things might have been more complicated.

He also noted that the petitioners had not gone to the court to ask for a stay--which has been denied in previous cases.

(See Baker’s not-quite-comfortable answer on video, essentially acknowledging he felt that was a lost cause but arguing that there's still time to change or stop the project. )


Butzel got back up for rebuttal. The ESDC, in its Construction Impacts chapter, he noted, studied only a ten-year buildout.

As for Karmel’s complaints about the lack of specificity in the petitioners’ charges, Butzel responded with a sense of grievance: “the length of construction itself” as an impact.

Baker got the final opportunity to counter-punch. “I think it was evident [Karmel’s] admitted there are no financial penalties for failure to commence Phase 2 and complete Phase 2,” Baker said, contending that 17.2(a)(x) is not applicable.

The ESDC was not fully informed of the details of the modified deal with the MTA, much less the provisions of the yet-to-be finished Development Agreement, he said. Had the board known of the timetable, they would’ve been obligated to take it into account.

Blight and remedies

Moreover, Baker said, the extended timetable calls into doubt one of the fundamental justifications for the project--the elimination of blight--given the continuation of interim surface parking and construction staging over what could be 25 years.

As for Braun’s statement that the project is already moving ahead, Baker said most of the investments are for general utility work, or could be used for a revised project, one that is smaller and does not have as many community impacts.

(The irony is that Forest City Ratner got the project approved based on a certain size that projected affordable housing and tax revenue, but already has permission to build a smaller project.)

Should Friedman rule for the petitioners, he said, she should hold another hearing on what work should be enjoined, whether it be the arena or Phase 1.

“The fact that they purchased steel is not a vested rights claim,” he said.

And that was it.

Bottom line

Give Friedman a few weeks or months to decide.

As I wrote in May, Friedman, in her earlier ruling, said the horse had essentially left the barn, and that any relief regarding Atlantic Yards should rest with the political process.

So it's doubtful she's going to stop the arena. And an SEIS is an open question. But it's not unlikely she'll have something to say about the Development Agreement.

Atlantic Yards Development Agreement Section 17.1

Atlantic Yards Development Agreement 17.2

Tuesday, June 29, 2010

Was there an "appeal" to the Appellate Division in the Columbia eminent domain case? The Court of Appeals gets it wrong

After watching the oral argument June 1 in the eminent domain case involving the Columbia University expansion, I suggested that Court of Appeals Chief Judge Jonathan Lippman was being either incredibly ignorant or faux-naive when he asked if there is "statutorily-provided discovery in this kind of situation."

The answer, of course, is no, and that's why the law favors condemnors more than in any other state.

Deference, and new law

The court's decision last week offered deference to the Empire State Development Corporation's (ESDC) blight findings.

Also, as attorneys at ESDC co-counsel Sive, Paget & Riesel admit, it created new law by "holding that 'civic projects' under the UDC [Urban Development Corporation] Act are not limited to public institutions, and may in fact include projects proposed by private educational institutions."

(What about trade schools and Shoot the Freak?)

Actual ignorance

It also included a line that was not faux-naive but rather incredibly ignorant: There's no appeal to the Appellate Division in eminent domain cases.

Under the Eminent Domain Procedure Law, that's where cases start, which is why there's no "statutorily-provided discovery." They should've gotten that right.

Oral argument today in motion to reargue Atlantic Yards timetable case

I wrote on June 23 about the effort to get the belatedly-released Development Agreement to be considered as part of the record.

Here are the messages from Develop Don't Destroy Brooklyn and BrooklynSpeaks, both of which organized petitioners.

DDDB said:
If, as the Court ruled, the ESDC's rationale was "only minimally" supported before, it would seem that that minimal support erodes entirely due to the facts subsequently revealed in the Atlantic Yards Development Agreement.
BrooklynSpeaks said:
Judge Friedman's decision to proceed with oral arguments on the sponsors' motion to reconsider represents an important opportunity to put before the court new information from the development agreement indicating the 2009 MGPP failed to address impacts of the Atlantic Yards project that ESDC knew were not only possible, but likely. Members of the community are encouraged to join us for the June 29 hearing.

Monday, June 28, 2010

Flashback: Kidd, Gehry, and more on the old Atlantic Yards homepage animation

This was the animation on the old Atlantic Yards web site, now defunct.

Can you guess how many Nets, project designers, and even buildings are no longer part of the scene?

Here's my list (but I may have missed a few):
  • Jason Kidd
  • Richard Jefferson
  • Vince Carter
  • Frank Gehry
  • Laurie Olin
  • Nenad Kristic
  • Bostjan Nachbar
  • Miss Brooklyn

Sunday, June 27, 2010

In softball interview with hometown paper, Forest City Enterprises CEO Chuck Ratner stresses integrity, openness, and candor

The Cleveland Plain Dealer, hometown paper of Forest City Enterprises, today offers a Q&A headlined Charles Ratner, president and CEO of Forest City Enterprises Inc.: Talk With the Boss.

The relevant section for Atlantic Yards watchers, is this:
The Question: What other key lessons have you learned?

The Answer: Perhaps the lessons that I've learned are best described by the core values that we have worked to develop and celebrate at our company. First among those is integrity. I guess what I've learned, as much as anything, is what goes around comes around, as they say. It's extremely important to conduct yourself with a sense of your own integrity, and then make sure that there's organizational integrity, institutional integrity.

The second is openness and candor. I think much of what we've seen recently, in the world both of public and private enterprise, is that that openness is often compromised. People are afraid to deliver bad news. There are always challenges there, and you need to know about them if you hope to deal with them.

Earlier this week, in a friendly profile in the New York Times, his cousin Bruce Ratner sounded a little more defensive:
“There’s a bittersweet feeling in having a majority owner in Brooklyn not be us,” he said, acknowledging his many critics will scoff because “when a developer speaks it’s not always believed.”
Maybe there's good reason for that, as I wrote.

As for openness and candor, there's DDDB's list of 20 times Forest City Ratner chose the opposite tack.

Greg David of Crain's: Deputy Mayor Dan Doctoroff "orchestrated" Atlantic Yards

Within a 25th anniversary retrospective headlined New York City: Then & Now: Whether in a real estate boom or fiscal bust, NYC revolves around Wall Street's siren song, Greg David of Crain's New York Business offers a section about former Deputy Mayor for Economic Development Dan Doctoroff, with a paragraph about Atlantic Yards:
Even without the Olympics as a rationale, he made remarkable progress. At the end of 2006, he conceived of a way for the city to finance a subway-line extension to Hudson Yards on the West Side, where he envisioned a multibillion-dollar residential and commercial neighborhood. Behind the scenes, he orchestrated the approval of a massive mixed-used project at Atlantic Yards in Brooklyn, anchored by an arena for the New Jersey Nets basketball team.
Well, he helped orchestrate the approval--it's a state project, not a city one--and, more likely, orchestrated the package of city subsidies and the city's unswerving commitment to the project.

Note how David concludes that Atlantic Yards is and was a place, not a project.

Federal corruption investigation reportedly involves Senator Carl Kruger, whose attorney says he's "not a target"

Southern Brooklyn State Senator Carl Kruger, he of the big political war chest and questionable allegiances (e.g., the "Three Amigos" insurrection in Albany), has long carried Forest City Ratner's water on Atlantic Yards.

And while a reported federal corruption investigation of Kruger does not apparently touch on Atlantic Yards, it suggests some more dubious behavior on the part of the Senator--though parties involved say that's not so.

In an article yesterday headline Brooklyn Senator a Focus of Federal Corruption Inquiry, the Times reported:
Federal investigators are examining whether Senator Carl Kruger, one of the State Legislature’s most powerful members, sought campaign contributions in exchange for political favors, according to court filings and people briefed on the case.

Mr. Kruger, a Democrat from Brooklyn who has amassed the Senate’s largest campaign account, declined to comment on the investigation.

But a Senate Democratic spokesman confirmed Friday that the F.B.I. and the United States attorney’s office in Brooklyn were reviewing allegations that Mr. Kruger helped businessmen with bureaucratic hurdles, with the expectation that they would hold fund-raisers for him.

One of Mr. Kruger’s campaign donors, Michael Levitis, who is suspected of serving as an intermediary between the senator and those seeking favors, has been arrested in the case and accused of lying to investigators.

In court filings, Mr. Levitis is described as soliciting payments from a confidential informant who posed as a businessman looking for help with an inspection.
The Daily News reported yesterday:
Levitis' lawyer Jeffrey Lichtman insisted there was no quid pro quo when his client agreed to host a fund-raiser for the senator at his Brighton Beach restaurant.

"Like any constituent across the country, Mr. Levitis contacted his local politician when he had a problem which affected his business," Lichtman said yesterday.

"Sen. Kruger assisted him because that is what politicians are supposed to do," Lichtman added. "At no time did Kruger demand money or a fund-raiser in exchange for his help."
"Not a target"

Kruger's attorney said the magic words associated with Forest City Ratner and the Ridge Hill investigation:
Attorney Benjamin Brafman said he was told by the U.S. Attorney in Brooklyn that Kruger is no longer a target of an inquiry that began in 2008.

“There was never any proof whatsoever that Kruger ever took anything from anybody to do anything,” Brafman said. “I’ve been told by the U.S. Attorney of the Eastern District of New York that he is not a target, and I do not expect him to face charges.”
Kruger and AY

Who can forget how, at a 5/29/09 oversight hearing, he criticized the Metropolitan Transportation Authority (MTA) for "foot-dragging in developing a dialogue” that could advance the project and also cited the MTA's “apparent refusal to move forward on a project that is critical to New York City’s economic future.”

Kruger represents another district tied to the Thomas Jefferson Democratic Club, , part of the southern Brooklyn zone from which Forest City Ratner executive Bruce Bender sprung (as noted by Matthew Schuerman in the Observer).

Kruger endorsed the $6 billion lie; he received $4000 from Bruce Ratner's brother and sister-in-law; and, though a Democrat, he campaigned for Republican Martin Golden in return for new district boundaries that protected his seat, as recounted by Seymour Lachman in Three Men in a Room.

And, lest we forget, Kruger has emerged as a dubious player in the debate over Coney Island, using that considerable campaign war chest to gin up public opposition to the city plan and support for Joe Sitt. (DDDB called it The Unbearable Lightness of Kruger's NIMBYism.)

As I wrote 4/10/08, the Village Voice's Tom Robbins described Kruger as a poster child countering "good-government types." The piece was headlined Living the Political Life Fantastic, with the subtitle "Surf, turf, and doughnuts: A state senator dines out on his campaign war chest."

Saturday, June 26, 2010

Catching up on AY-related campaign contributions to Andrew Cuomo, and reasons to expect little reform when it comes to developers

As with Attorney General-turned-Governor Eliot Spitzer, it's unwise to expect Attorney General Andrew Cuomo, the gubernatorial front-runner, to enact fundamental reforms when it comes to developers.

The campaign finance system is just too entrenched.

And while Cuomo has said nothing about Atlantic Yards, and taken campaign contributions from those associated with the project, he--assuming he's elected--would have a significant role in overseeing the project via the Empire State Development Corporation (ESDC) and the proposed (and yet undesigned) governance entity.

His lengthy campaign platform does not discuss reform of the ESDC when it comes to projects like Atlantic Yards. Nor does it address reforms regarding eminent domain, even though New York is an outlier among states that have tightened their laws in the last five years.

Even without following the advice of libertarians like the Institute for Justice, Cuomo might conclude that cases like that regarding the expansion of Columbia University show that the eminent domain system needs a second look.

Spitzer flashback

Once upon a time a powerful New York State Attorney General was a shoo-in for the governorship. "Day One, Everything Changes," was Spitzer's slogan.

Now Spitzer did push for certain reforms, before he was done in by his own recklessness and hubris, but in the case of Atlantic Yards, he was comfortable with business as usual.

In October 2006, when he was the campaign frontrunner, the uninformed Spitzer said that he considered a promised 8% reduction in the Atlantic Yards project a "reasonable compromise," thus suggesting he had no idea that the cutback would bring the project back to the square footage originally proposed.

In December 2006, when groups like the Citizens Union and Regional Plan Association--clearly not opponents of Atlantic Yards but supporters of good government--asked for a delay in the vote by the Public Authorities Control Board (PACB), Spitzer was silent.

Enter Cuomo

As Attorney General, Cuomo has remained singularly uninterested in Atlantic Yards. State Senator Bill Perkins last December asked Cuomo for a written opinion regarding the Atlantic Yards bond deal, focusing on the absence of a PACB review.

As far as I know, no formal response was issued.

The money rolls in

On June 24, in an article headlined Cuomo Accepts Millions From Interests He Assails, the New York Times reported:
Attorney General Andrew M. Cuomo, declaring his candidacy for governor of New York, could not have been clearer.

“The influence of lobbyists and their special interests must be drastically reduced with new contribution limits,” Mr. Cuomo said last month. “We will be taking on very powerful special interests which have much to lose. We must change systems and cultures long in the making.”

But as he delivered his announcement, Mr. Cuomo was sitting on millions in campaign cash from the very special interests whose influence he said he wanted to limit.

An analysis by The New York Times shows that of the estimated $7.1 million that the Cuomo campaign has received from political action committees, associations, limited liability corporations and other entities, more than half has come from the biggest players in Albany: organized labor, the real estate and related industries like construction, the health care sector and lobbying firms
Unmentioned, a $5000 contribution from Bruce Ratner (once a campaign contribution "refusenik").

I suggested in February that, if Cuomo has the strictest policy in the state on such gifts, he should give it back. (This was without even mentioning questions raised about the Ridge Hill indictments, in which Forest City Ratner is enmeshed but not included.)

One AY connection

The Times article did mention one Atlantic Yards connection:
Kenneth L. Shapiro, managing partner of the Albany office of the law firm Wilson Elser Moskowitz Edelman & Dicker L.L.P., is also not put off by Mr. Cuomo’s remarks.

...A political action committee of Mr. Shapiro’s firm and the partnership itself — whose clients have included the Atlantic Yards Development Company, Consolidated Edison, the New York State Hospitality and Tourism Association and numerous hospitals — has contributed about $59,200 to the Cuomo campaign.
The firm got $36,000 last year from the Atlantic Yards Development Company, not nearly the largest AY contract, but enough to keep some powerful lobbyists on retainer.

Friday, June 25, 2010

City provides $32.5M cash for project infrastructure, claims total subsidy to Ratner is lower than previously stated; reasons for skepticism

Yesterday, the Empire State Development Corporation amended the State Funding Agreement for Atlantic Yards so it could pass along an additional $32.5 million in city funding to Forest City Ratner for project-related infrastructure.

From one perspective, it seems like a significant increase in city subsidies for Atlantic Yards, given that the Forest City Ratner will have directly received $171.5 million.

That's far more than the initial $100 million pledged in 2005.

City subsidy actually down?

However, representatives of the ESDC and New York City Economic Development Corporation (NYC EDC) both stated yesterday that the city's commitment to Atlantic Yards was well below the $205 million figure that has been reported for three years. (With $100 million from the state, that would be $305 million.)

I distrust that explanation, as I will explain below. After all, Forest City Ratner itself counted $205 million in city funds, as noted in the screenshot at right from the former Atlantic Yards web site.

Rather, the evidence suggests that NYC EDC is taking a very narrow view of subsidy--cash delivered directly to the developer--and excluding other infrastructure work that is related to the project but paid for directly by the city.

If so, that means that the administration of Mayor Mike Bloomberg has been willing to increase the city's commitment to a private-public project like Atlantic Yards, while proposing cuts to quintessential public services like libraries by $75 million. (The City Council just restored many of the library cuts.)

It all deserves a closer look, perhaps in an oversight hearing.

At the meeting

At about 40 minutes into the meeting (webcast) yesterday, ESDC Senior Counsel Steve Matlin, the closest to an Atlantic Yards point person at the agency, updated the board members on the project.

He noted that the city would provide $8.5 million for Atlantic Avenue infrastructure work, and $24 million of the $40 million needed for Carlton Avenue Bridge related infrastructure work.

Matlin commented that, while the press has "often talked about a city investment of $205 million... I’m not sure that’s a real number. " (As noted above, it's not just the press.)

In a similar vein, he said of the funding announced yesterday, "It’s not new funds. These are funds that were anticipated. We’re now putting in place the mechanism to get the funds to Forest City to make these improvements."

From the audience, Noticing New York blogger Michael D.D. White, a lawyer and urban planner, took the opportunity for public comment: "I acknowledge that I am not up to speed with exactly what you are proposing. I became aware less than 24 hours ago... It seems to me it’s generally a safe assumption that when you are acting on Atlantic Yards, it’s not going to be something good.... There’s nothing that you can do to redeem the project from its essentially despicable nature and despicable origins."

Looking more closely

According to the document distributed to the board (embedded below), the Modified General Project Plan included $100 million from the state/ESDC and $131 million from the City/New York City Economic Development Corporation (NYC EDC), reimbursing Forest City Ratner for land purchases.

(Remember, initially the city's $100 million was supposed to go to infrastructure, but could also be used for land. It was all used for land, and then some.)

The document stated:
Additional public infrastructure improvements will be made in connection with the development of the Project. These improvements would typically be funded by the municipality. To ensure the timely and efficient completion of the public infrastructure improvements, it is expected that such work will be performed by Forest City and funded, in part, by New York City. City funds will flow through ESDC.
The Atlantic Avenue infrastructure work consists of the replacement of a 36 inch cast iron water main the the bed of Atlantic Avenue with a 48 inch high pressure trunk main.

Doing the math

This was my initial offhand calculation regarding city support:
  • $100 million initially for land
  • $105 million for infrastructure
  • ($31 million of that was shifted to land)
  • $32.5 million for infrastructure.
Total = $237.5 million in city funds.

I ran that by representatives of the state and the city, who said it was off.

ESDC spokesman Warner Johnston said he thought that was wrong, but "it it would be best for the City to characterize their commitment as they deem appropriate. The only City funds that have–or will come through the City and that are reflected in the project documents are the $131 [million] for acquisition and the $32.5 [million] that Steve [Matlin] described in the materials. "

Querying NYC EDC

I had several rounds of questions with a city spokesman who would be quoted only on background, stating:
The funds allocated today are part of the City’s previous $105 million commitment to infrastructure. The total City commitment is actually less than $205 million.

ACTUALLY GIVEN/FUNDING NOW: $131 million for land + $8 million for City work + $32.5 million for infrastructure (in today’s ESDC board item) = $171.5 million total
I asked about the itemization in an August 2008 letter I got from the city and asked whether individual expenditures noted in the letter (right; click to enlarge) 1) were made (or plan to be made) and 2) are related to Atlantic Yards?

The response:
When the $205 million was originally contemplated, there were estimates on what the City would pay for and what FCR would pay for. Now that we’re actually at the point of building, we have a better idea of the actual work each party will do, and the total City contribution is $171.5 million. Other than that funding, Forest City is contractually obligated to undertake the necessary infrastructure work to complete the project.
Looking more closely

My response:
Thanks, but to be clear, the $30M in water main improvements previously contemplated--that was paid for or will be paid for by FCR?

Same for $5M in MTA infrastructure?
The response:
The city's infrastructure expenditure includes monies for the water main and as I said Forest City is contractually obligated to undertake the necessary infrastructure work to complete the project.
So the city is putting in $30 million for the water main. I didn't get an answer for the MTA spending.

City itemization

As suggested above, it looks like the city is excluding from its total all Atlantic Yards-related infrastructure spending that is not directly passed on to the developer.

When, in August 2008, the city provided an itemized list of capital and infrastructure projects that were part of the additional $105 million, the mayor's office said that the sum "represents capital projects to support infrastructure and other capital needs in the area, some of which are independent of, but in the area of the planned Atlantic Yards project."

As I wrote, most of those capital projects did not seem independent of Atlantic Yards .

What percentage is appropriate to assign? The New York City Independent Budget Office (IBO) tried to make an estimate. According to the IBO's September 2009 report:
When questioned at the time, the Bloomberg Administration explained that it was also counting infrastructure projects such as rebuilding and expanding water and sewer capacity and street upgrades at or near the site. In some cases these projects are needed in order to handle the demands on municipal infrastructure resulting from a project on the scale of Atlantic Yards. In other cases, there were infrastructure projects in the Atlantic Yards vicinity that would have been necessary sooner or later whether the project was built or not.

Because a portion of the additional $105 million in city capital contributions cited by the Mayor would likely have occurred in the absence of the project, IBO counts about half of this addition—$50 million—as part of the city’s capital contribution for the project.
That's still more than the $40 million or so the city counts in direct infrastructure subsidy right now.

And, given the increase in the costs for the Carlton Avenue Bridge, there's reason to believe overall infrastructure-related costs for Atlantic Yards have gone up.

So a better estimate is needed.

Questions remain

Regarding the water main spending noted above, left unclear is whether it serves Atlantic Yards, or just the neighborhood, or--quite likely--both.

Similarly, that original letter detailed more than $40 million in work on Atlantic Avenue. Is only the $8.5 million passed on to FCR related to Atlantic Yards? Is the rest of the money being spent?

One expenditure in that letter--$7 million for the Sixth Avenue Overpass--is almost surely off the table, since there are no longer plans to demolish it.

However, the city originally allotted only $7 million for the Carlton Avenue Overpass. Now the sum is $24 million, which may or may not encompass other components of the infrastructure project. So the costs seem to have gone up.

It deserves a closer look.

Future infrastructure costs

If Forest City Ratner will be bearing additional infrastructure costs, it surely will seek government assistance.

Remember, at one point the Brooklyn Arena Local Development Corporation (BALDC)--a creation of the ESDC alter ego Job Development Authority--was authorized to issue $400 million in tax-exempt infrastructure bonds, but last year said that plan was off the table.

ESDC Atlantic Yards Funding Amendment 062410

Thursday, June 24, 2010

Court of Appeals, citing precedent in Atlantic Yards case, overturns lower court ruling blocking eminent domain for Columbia expansion

In less than four weeks after a contentious oral argument, the state Court of Appeals brought an unsurprising end to the Cinderella story that was the Columbia University eminent domain case, ruling unanimously--though with a very reluctant concurrence--that the courts should defer to the Empire State Development Corporation in its finding of blight.

As I reported after watching the oral argument in Kaur v. N.Y.S. Urban Development Corp., the judges--including Atlantic Yards dissenter Robert Smith--felt bound by their decision in the Atlantic Yards case last November, a decision that was glaringly ignored by the two-judge plurality who shortly afterward ruled against the ESDC in the Columbia case.

Wrote Smith:
I concur in the result on constraint of Matter of Goldstein v New York State Urban Dev. Corp. The finding of "blight" in this case seems to me strained and pretextual, but it is no more so than the comparable finding in Goldstein. Accepting Goldstein as I must, I agree in substance with all but section VI of the majority opinion.
The decision, I wrote, would hinge on how seriously the court took allegations of bad faith by the ESDC and biased methodology by its consultants. Answer: not much.

The court ignored a memo from an ESDC lawyer, as cited by property owners' attorney Norman Siegel, that stated, We are going to manufacture support for condemnation.

Nor did the court look at Justice Anthony Kennedy's concurrence in the U.S. Supreme Court's 2005 Kelo v. New London decision, which set out guidelines--such as when a sweetheart deal was indicated--for when courts should apply greater scrutiny.

Appeal coming

According to the Observer, Nick Sprayregen, who owns Tuck-It-Away storage company and has spent more than $2 million on legal cases--more than twice as much as has been spent in the Atlantic Yards cases--vowed to appeal.

"This decision, if not overturned, will allow eminent domain abuse in New York to become even worse than it is now," he wrote. "In effect, this court is sending a clear signal that a blight designation, even is caused by the very developer seeking the use of eminent domain, is acceptable."

Dana Berliner, a senior attorney at the libertarian Institute for Justice (IJ), stated, “The sad truth is that, in New York, the government not only can hand your property over to private developers for no better reason than that it likes them more than it likes you, but it does so on an alarmingly regular basis.”

The IJ, which brought the controversial Kelo v. New London case to the Supreme Court in 2005, this week singled out the Goldstein case and New York as outliers in the national trend to tighten eminent domain laws.

Variable coverage

The oral argument in the case got little coverage.

Today, among articles I checked, only the Associated Press's Michael Virtanen, WNYC's Matthew Schuerman, and New York Observer's Eliot Brown got it right, explaining that Smith's concurrence was compelled by the decision he disagreed with in the Atlantic Yards case.

The New York Times reported simply that "Smith agreed that the state had the power to decide what constituted blight." The New York Law Journal similarly reported that Smith "agreed with all of the Court's ruling except the part" regarding a civic project.

Crain's New York Business ignored Smith's concurrence.

A mistaken AY mention

The opinion of the court, written by Judge Carmen Beauchamp Ciparick, contained a erroneous reference to the AY case:
Most recently, in determining that the area in downtown Brooklyn, known as the Atlantic Yards, was blighted, ESDC relied upon an AKRF neighborhood conditions study (see Matter of Goldstein, 13 NY3d at 518).
It's not downtown, and it's not known as "the Atlantic Yards." But Forest City Ratner's clever branding, teamed with shorthand, leads to errors.

Fundamental deference to ESDC

Wrote Ciparick:
In Matter of Goldstein, we reaffirmed the longstanding doctrine that the role of the Judiciary is limited in reviewing findings of blight in eminent domain proceedings (see id. At 526). Because the determinations of blight and public purpose are the province of the Legislature, and are entitled to deference by the Judiciary...

Here, the two reports prepared by ESDC consultants -- consisting of a voluminous compilation of documents and photographs of property conditions -- arrive at the conclusion that the area of the Project site is blighted. Just as in Matter of Goldstein, "all that is at issue is a reasonable difference of opinion as to whether the area in question is in fact substandard and insanitary," which is "not a sufficient predicate . . . to supplant [ESDC's] determination" (13 NY3d at 528).
Blight standards too vague?

Ciparick also dismissed a challenge to the state's blight standards:
In addition to attacking the neighborhood blight studies and ESDC's determination based on those studies, petitioners also challenge the constitutionality of the statutory term "substandard or insanitary area" (see Uncons Laws §§ 6253 [12] and 6260 [c] [1]). They argue that we should find this term void for vagueness. This contention is likewise unpersuasive.

Not only has this Court, but the Supreme Court has consistently held that blight is an elastic concept that does not call for an inflexible, one-size-fits-all definition (see Berman v Parker, [1954]). Rather, blight or "substandard or insanitary areas," as we held in Matter of Goldstein and Yonkers Community Dev. Agency, must be viewed on a case-by-case basis. Accordingly, because the UDC Act provides adequate meaning to the term "substandard or insanitary area," we reject petitioners' argument that the statute is unconstitutionally vague on its face.
Earlier study legit?

Though the ESDC relied on a blight study conducted by consultant AKRF, which was also working for Columbia, Ciparck noted that another study, but the New York City Economic Development Corporation, was made at a time when Columbia was only beginning to purchase property:
Indeed, the Urbitran study unequivocally concluded that there was "ample evidence of deterioration of the building stock in the study area" and that "substandard and unsanitary conditions were detected in the area."
The legitimacy of that study was at issue, given that, according to the property owners' brief, that study was abandoned after an eleven-page draft text with no individual building reports.

(The ESDC defended the Urbitran study but did not, according to my reading, address whether it had been abandoned.)

Civic project?

Ciparick also ruled that the project was also a civic project--which does not require a blight finding and is defined as "[a] project or that portion of a multi-purpose project designed and intended for the purpose of providing facilities for educational, cultural, recreational, community, municipal, public service or other civic purposes."

Siegel had argued that a private university didn't deserve deference, and ESDC attorney John Casolaro was forced to agree that, under the state's reasoning, even a trade school would qualify as a beneficiary of eminent domain.

Ciparick cited another case in the Atlantic Yards litigation:
Indeed, there is nothing in the statutory language limiting a proposed educational project to public educational institutions. Moreover, consonant with the policy articulated in the UDC Act, ESDC has a history of participation in civic projects involving private entities. The most recent example of a civic project is the Atlantic Yards project, which authorized a private entity to construct and operate an arena for the Nets professional basketball franchise.

The proposed Project here is at least as compelling in its civic dimension as the private development in Matter of Develop Don't Destroy (Brooklyn). Unlike the Nets basketball franchise, Columbia University, though private, operates as a non-profit educational corporation. Thus, the concern that a private enterprise will be profiting through eminent domain is not present. Rather, the purpose of the Project is unquestionably to promote education and academic research while providing public benefits to the local community.
Boundaries of a civic project

How far could it go? Smith warned:
The majority seems to read this definition as broadly as its literal language permits. It implies that any public or private activity that can fairly be called educational -- or, by implication, cultural or recreational and so forth -- will qualify a project as "civic." Surely this approach will, in some imaginable cases, cause the statute to be unconstitutional as applied: would anyone seriously suggest, for example, that private tennis camps or karate schools ("educational" uses), or private casinos or adult video stores ("recreational" uses), qualify as "public" uses in the constitutional sense?
Ciparick responded in a footnote:
Since the constitutionality of the UDC Act pertaining to "civic projects" is not challenged by petitioners, we respectfully disagree with our concurring colleague that it should be addressed here. Moreover, we do not believe that anything in our opinion could reasonably be construed to mean that "private tennis camps or karate schools" or "private casinos or adult video stores" would qualify as a "civic project" within the meaning of the UDC Act.
It's a good question. After all, Supreme Court Justice Joan Madden, in deciding that the Atlantic Yards arena was a civic project, went to the dictionary.

As I noted in January 2008, because sports spectatorship is a form of amusement, which is one definition of "recreational," Madden wrote, the arena qualifies as a facility designed and intended for "recreational purposes," and as such constitutes a "civic project" as defined under the UDCA.

To me, Shoot the Freak at Coney Island would also qualify.

Jeffries on Atlantic Yards governance bill: optimistic, but "significant negotiation" still required

I caught up today with Brooklyn Assemblyman Hakeem Jeffries, lead sponsor of the new version of the Atlantic Yards governance bill, to ask what's different this year, with the Empire State Development Corporation apparently on board.

"We have been working closely together over the last several months to convince the agency of the need to create a governance structure to improve transparency and accountability related to the project moving forward," he said. "In order for ESDC to create a subsidiary, we need to legislatively authorize that action, which is why Senator [Velmanette] Montgomery and I have introduced the bill."

Negotiations coming

Why is the ESDC more receptive? "I think agencies are generally more receptive when legislation is less proscriptive, as it relates to the manner in which they are expected to conduct themselves," he said. "The bill, as written, still requires significant negotiation between elected officials, community leaders and ESDC as to the precise nature of the governance structure moving forward."

That may be an interesting discussion; the legislation last year had clear roles for local appointees, while the structure right now is vague.

"The conversations with ESDC are ongoing," Jeffries said. "I have expressed the sentiment that the framework laid out in the governance legislation should be viewed as a working document for an agreement, in the future. Similarly, the subsidiary structure that currently exists with respect to Moynihan Station, Queens West, and Brooklyn Bridge Park provides an extremely useful model."

Support and questions

What does Assembly Speaker Sheldon Silver, an Atlantic Yards supporter, think?

"I have not had a detailed conversation with him on this issue, thought I do hope to do so within the next several days," said Jeffries, noting that Silver's been busy with the budget.

Assemblyman Richard Brodsky, who chairs the corporations committee, has been supportive. The committee reported out the bill this week with only a couple of "no" votes out of about 15 members.

The concern expressed, Jeffries noted, was not related to Atlantic Yards but to the proliferation of corporations and authorities. (Indeed, Brodsky's been trying to close down many of them.)

In this case, however, the ESDC already has jurisdiction over Atlantic Yards, Jeffries noted, so governance would consolidated within a subsidiary corporation..

He said he expected some hurdles in the Senate, but trusted Montgomery's leadership.

Atlantic Yards governance bill, round two; new version aims to establish ESDC subsidiary to enhance accountability (& ESDC is supportive)

Update: Here's Jeffries' take, noting that more negotiation will be necessary.

A new bill establishing a different version of a governance entity to oversee Atlantic Yards and make it more accountable has been introduced in the state Assembly by Assemblyman Hakeem Jeffries. It's already passed the Corporations, Authorities and Commissions Committee.

(A companion bill has been introduced in the state Senate by Senator Velmanette Montgomery.)

It may mean a different fate than the bill that died last year.

Empire State Development Corporation (ESDC) spokesman Warner Johnston stated, "We are aware and have been working with Assemblyman Jeffries and other electeds on elements of this bill. We are extremely supportive of what this bill will mean for the future of the Atlantic Yards project. More details will be forthcoming at a later date."

I'm waiting to learn whether powerful Assembly Speaker Sheldon Silver has expressed any opinion on the bill.

The rationale and the structure

The essential argument, pushed by BrooklynSpeaks in the summer of 2007, is that projects like Atlantic Yards can change enormously over decades, which is why all other major projects, from Brooklyn Bridge Park to Battery Park City, have their own governance entities and are more accountable to the public.

A lack of such a governance entity leaves more power in the staffers of the ESDC, who have multiple responsibilities and (ultimately) will leave, and thus in developer Forest City Ratner.

The entity would oversee implementation of the design guidelines, coordinate the involvement of state and city agencies responsible for the environmental impact mitigations, coordinate policies regarding transportation, and approve changes to the General Project Plan.

(Today, the Empire State Development Corporation board is expected to approve changes to the Atlantic Yards state and city funding agreements, but those changes have not been made public in anticipation of the vote.)

The big change in the new bill is that, rather than set up a new public benefit corporation, it directs the ESDC to establish a subsidiary corporation for planning and oversight of Atlantic Yards.

Also, unlike the previous Atlantic Yards Governance Act, it does not specify how members of that corporation are appointed, but leaves that to be resolved later. That may be part of why the ESDC is supportive.

BrooklynSpeaks comments

“Today, we are beginning a public campaign to see that the legislation passes both the Assembly and the State Senate and becomes law. For the last three years, BrooklynSpeaks sponsors have advocated for transparency with respect to project governance, as well as for the involvement of the public in the decision-making process. This legislation is an important first step towards those goals,” said Jo Anne Simon, District Leader of the 52nd Assembly District, who pointed to an online petition supporting the legislation."

“Atlantic Yards is still the only State project with no formal oversight or meaningful public representation in decision-making. It is long past time that the special treatment enjoyed by this developer end, and Atlantic Yards is brought onto the same platform as other large ESDC projects,” said Gib Veconi, of the Prospect Heights Neighborhood Development Council.

Bill details

A 11431 (the same as S 8193) authorizes the Urban Development Corporation (aka ESDC) to create a subsidiary corporation for the purpose of the further planning, design, and oversight of the Atlantic Yards land use improvement and civic project.

It was introduced on June 14 and passed a first committee vote on June 22.

The bill states:
TITLE OF BILL: An act to amend the public authorities law, in relation to creating a subsidiary corporation for the planning and oversight of the Atlantic yards project

PURPOSE OR GENERAL IDEA OF BILL: The purpose of this bill is to establish a project oversight entity, to supervise the Atlantic Yards Project in order to create increased accountability and oversight in the project's governance.

SUMMARY OF PROVISIONS: Section 2827-a of the public authorities law is amended by adding a new subdivision 8 to read as follows: Creation of a subsidiary corporation, in 'accordance with section twelve of New York state urban development corporation act, for the purpose of the further planning, design and oversight of the Atlantic Yards land use improvement and civic project.

JUSTIFICATION: New York State projects in New York City are typically governed in one of two ways. The State can pass specific legislation relating to the project, as it did with Battery Park City and Hudson River Park. Alternatively, the State can govern projects under the powers granted to it by the UDC Act of 1968, which it does with Brooklyn Bridge Park, Queens West, Moynihan Station, and other projects. In many cases, the Empire State Development Corporation (ESDC) has established subsidiaries to formally involve the city and local elected officials in the governance of these projects.

However, they are not obliged to do so by law and, unique among the large state projects in New York City, there is no project subsidiary for Atlantic Yards. The result is that the project is governed in a less transparent, less accountable manner than comparable projects, and without any vehicle for coordinating the city and state agencies involved in the proposed development, or involving local elected officials and the relevant community boards. Further, changes in administration in State government, as well as changes in the ESOC's internal organization, pose risks to the continuity of project oversight which may threaten the realization of Atlantic Yards' stated goals.

To address this, the proposed legislation would establish a subsidiary corporation for the oversight of the Atlantic Yards project. The entity would be created to undertake four primary responsibilities.

First, oversee the implementation of the design guidelines for the architecture of the project. Second, coordinate the involvement of state and city agencies responsible for the environmental impact mitigations. Third, coordinate the development of policy surrounding the project, including transportation concerns. Lastly, approve changes to the general project plan.

Section 1. Section 2827-a of the public authorities law is amended by adding a new subdivision 8 to read as follows:

S 2. This act shall take effect immediately, provided that the subsidiary corporation authorized in section one of this act must be created within 60 days of such authorization.
Subdivision One

For the record, here's Section 2827-a of the public authorities law, and the Subdivision One referenced in the bill:
§ 2827-a. Subsidiaries of public authorities. 1. Notwithstanding any law to the contrary, no state authority shall hereafter have the power to organize any subsidiary corporation unless the legislature shall have enacted a law granting such state authority such power for the organization of a specific corporation, provided, however, that a state authority may organize a subsidiary corporation pursuant to the following requirements:
a. the purpose for which the subsidiary corporation shall be organized shall be for a project or projects which the state authority has the power to pursue pursuant to its corporate purposes;
b. the primary reason for which the subsidiary corporation shall be organized shall be to limit the potential liability impact of the subsidiary's project or projects on the authority or because state or federal law requires that the purpose of a subsidiary be undertaken through a specific corporate structure;
and c. the subsidiary corporation shall make the reports and other disclosures as are required of state authorities, unless the subsidiary corporation's operations and finances are consolidated with those of the authority of which it is a subsidiary.

Last year's bill

Here are details on last year's bill, A09012, the Atlantic Yards Governance Act:
PURPOSE OR GENERAL IDEA OF BILL: The purpose of this bill is to establish a project oversight entity known as the Atlantic Yards Development Trust, to supervise the Atlantic Yards Project in order to create increased accountability and oversight in the project's governance.

SUMMARY OF PROVISIONS: Article B of the public authorities law is amended by adding a new title 5 to read as follows: (1701) Creation of the Atlantic Yards development trust. 1. There is hereby created the Atlantic Yards development trust which shall be a body corporate and politic, constituting a public benefit corporation. The trust shall come into existence upon the thirtieth day following the appointment of not fewer than eight members of its board as herein provided, and the trust as its corporate existence shall continue until terminated by the legislature.

2. The members of the board of the Atlantic Yards development trust shall be residents of the city of New York and shall be appointed as follows:
(a) Eight members shall be appointed by and serve at the pleasure of the governor, at least one of whom shall be a representative of a not-for-profit, non-governmental or civic organization.
(b) Two members shall be appointed by the speaker of the assembly, in consultation with the member of the assembly that represents the district or districts in which the project is located.
(c) Two members shall be appointed by the temporary president of the senate, in consultation with the senator that represents the district or districts in which the project is located.
(d) Two members shall be appointed by and serve at the pleasure of the mayor of the city of New York.
(e) One member shall be appointed by and serve at the pleasure of the borough president of the borough of Brooklyn, appointed in consultation with Brooklyn community boards two, six and eight.
(f) One non-voting member shall be appointed by the stakeholder council as provided in section seventeen hundred eight of this title.
(g) Each appointing authority, with the exception of the Brooklyn borough president and stakeholder council, may appoint no more than half their members as a city or state employees.
(1703) Powers of the Atlantic Yards development trust. 1. To fulfill its purpose under this title, the trust shall have the following powers, functions, duties and authority subject to the limitations set forth in this title:
(a) to plan, design, develop, construct, operate, and maintain the project;
(b) to implement the general project plan for the project;
(c) to oversee implementation of the design guidelines for the project;
(d) to establish a stakeholder council as provided in section seventeen hundred eight of this title;
(e) to approve changes to the general project plan in consultation with the stakeholder council;
(f) to oversee policies to mitigate environmental impact of the project and coordinate the implementation of these policies with the relevant city and state agencies;
(g) when necessary, to develop additional policy to mitigate anticipated environmental impacts of the projects;
(h) to adopt rules of the procedure for the consultation with the stakeholder council, established pursuant to section seventeen hundred eight of this title;
(i) to provide for the health, safety and welfare of the public using facilities under its jurisdiction;
(j) to exercise the following general corporate powers:
(i) to make and alter by-laws for its organization and internal management

Wednesday, June 23, 2010

In Philadelphia, naming rights for transit station near sports facilities is worth three times more (per year) than MTA/FCR deal for Brooklyn's hub

Here's some more evidence that Forest City Ratner (on behalf of Barclays) got a very nice deal from the Metropolitan Transportation Authority on naming rights for the Atlantic Avenue/Pacific Street station.

For a similar deal in Philadelphia, the local transit authority is about to get three times as much: $600,000 a year, vs. $200,000 a year.

(The deal must be approved tomorrow. Here's a tough editorial from the Philadelphia Daily News warning that "taking corporate money in this way leads to less, not more, public commitment to the so-called social contract.")

The deals aren't directly comparable. In Philadelphia, the AT&T Station deal with SEPTA lasts only five years, worth $3 million, while the deal with the MTA is $4 million over 20 years.

MTA opacity

How did the MTA set a price? The agency's then-CFO Gary Dellaverson had said, "We've never successfully completed a naming rights before.... I don't have a nifty little spreadsheet to show you how we came up with $200,000. Our real estate division did review some naming rights that had been done by transportation and other entities. But y'know, we kinda felt our way into it."

I asked for information about that review, but my Freedom of Information Law (FOIL) request was stonewalled, as I wrote last July.

(Here's Michael D.D. White's thorough critique of the MTA decision, explaining that $4 million is not a "goodly sum," as the New York Times opined.)

More teams in Philadelphia

There's at least one reason why the Philadelphia naming rights opportunity might be more coveted than the one in Brooklyn. The station in Philadelphia, at the end of the line, serves three separate sports facilities housing four teams (hockey, basketball, baseball, football), so presumably would get more sports media coverage.

There would be only one team at the Barclays Center. But it's in the media capital of the world, and there will be lots of other highly-publicized events.

More transit in Brooklyn

But the volume of station use is almost certainly higher in Brooklyn. The current Pattison Avenue station in Philadelphia has only four tracks, and serves only one subway line.

The Atlantic Avenue/Pacific Street station in Brooklyn has ten tracks and serves ten subway lines--as well as the Long Island Rail Road.

Name erased in Philadelphia

Benjamin Kabak, in his Second Avenue Sagas blog, warns that the Philadelphia example is in one way worse--SEPTA is willing to jettison the station's geographic identifier.

Court of Appeals' Atlantic Yards decision gets singled out in IJ's post-Kelo report

The libertarian Institute for Justice has issued a report titled Five Years After Kelo: The Sweeping Backlash Against One of the Supreme Court’s Most-Despised Decisions.

And, not surprisingly, New York is singled out as not having made any reforms, with the November 2009 Atlantic Yards case, Goldstein vs. Empire State Development Corporation, singled out:
There is one significant exception to this good news for property owners in state courts—New York. The Court of Appeals (New York’s highest court) seems stuck in the days when courts routinely ignored evidence of eminent domain abuse, refusing to give the facts any real scrutiny at all. This latest ruling from the court, which completely ignores the fundamental role of the courts in properly interpreting essential constitutional rights, tells the whole story:

It may be that the bar has now been set too low—that what will now pass as “blight,” as that expression has come to be understood and used by political appointees to public corporations relying upon studies paid for by developers, should not be permitted to constitute a predicate for the invasion of property rights and the razing of homes and businesses. But any such limitation upon the sovereign power of eminent domain as it has come to be defined in the urban renewal context is a matter for the Legislature, not the courts.

The Court of Appeals does have a chance to redeem itself in another challenge to a completely trumped-up claim of blight, combined with concealment of relevant evidence, in another case currently pending before it. New Yorkers can only hope the Court of Appeals will remove its head from the sand before reaching its final decision.
The latter is the case involving the Columbia University expansion; a decision is expected in a few weeks.

At ESDC board meeting Thursday, another amendment to the funding agreements on the agenda

One item on the 22-item agenda for tomorrow's board meeting of the Empire State Development Corporation (ESDC) involves Atlantic Yards.

The agenda states:
7. New York (Kings County) – Atlantic Yards Land Use Improvement and Civic Project – Authorization to Amend Funding Agreements; Authorization to Take Related Actions
What exactly that means is to be determined, but previous amendments--as noted last September--relaxed rules or timetables to ease Forest City Ratner's cash flow.


Empire State Development
37th Floor Conference Room
633 Third Avenue
New York, New York 10017

The meeting will be webcast.

Due to 633 Third Avenue building procedures, those attending in New York City must RSVP by 5:00 pm. on Wednesday, June 23, 2010. Members of the public should call (212) 803-3794.

Public comment

According to ESDC rules, public comment is welcomed:
To ensure maximum opportunity for participation, speakers representing themselves may speak for up to 2 minutes each, and those representing groups may speak for up to 4 minutes (1 speaker per group). Speakers’ comments may address only items considered at today’s meeting.

Charter Revision Commission hearing Thursday on land use

The New York City Charter Revision Commission meets tomorrow night, June 24, to hear testimony on whether land use reform should be part of the charter revision on the ballot later this year.

It will begin at 6 pm at the Flushing Branch, Queens Borough Public Library, 41-17 Main Street, Flushing.

As with previous hearings, it will begin with expert testimony but later accept brief public testimony (with time limits). The hearing will be streamed and archived.

Many commentators have suggested that the commission--which, despite outreach, has been pretty much under the radar--stick to very simple proposals, such as term limits, given the complexity of such issues as land use.

Justice Friedman schedules motion for reargument in case challenging ten-year timeline; Development Agreement should get its day in court

The belatedly-released Atlantic Yards Development Agreement should get its day in court, after all. A hearing in the effort to reopen the case challenging the Modified General Project Plan--essentially the legitimacy of the ten-year timeline--will be held on Tuesday, June 29.

It will be held before state Supreme Court Justice Marcy Friedman at 60 Centre Street, Room 335, at 11 am.

Chance of success

Given general judicial deference to the Empire State Development Corporation (ESDC) and other agencies, it's a long shot to expect a ruling in favor of the petitioners, community groups organized by Develop Don't Destroy Brooklyn (DDDB) and BrooklynSpeaks.

However, the petitioners have some inconvenient facts to air in court regarding the dubiousness of the official ten-year project timeline.

If the case is successful, it could severely slow the project--at least the non-arena portion--by requiring new analyses of the project's environmental impact.

One case out, one in

Yes, Manhattan (New York County) Supreme Court Justice Friedman refused to hear a separate case charging that the belatedly-released agreement--which contrasts with the 2009 Modified General Project Plan--diminished the project's benefits so much a new Determination & Findings for the use of eminent domain should be issued.

Instead, she sent it to Kings County Justice Abraham Gerges, who handles condemnations, and likely will dismiss it.

However, Friedman is now willing to hear two groups of community petitioners ask her to reconsider her ruling March 10 that the project's ten-year timeline was legitimate and that a Supplemental Environmental Impact Statement was not necessary.

Development Agreement under wraps

Key to the motion for reargument is the Development Agreement, which was not released until about a week after the oral argument in January--despite a pledge to release it earlier--and which Friedman refused to add to the case.

It amplifies the more general language in the Modified General Project Plan (MGPP), approved in September 2009, that developer Forest City Ratner would be required to use "commercially reasonable" efforts to complete the project in a decade.

Given that the Development Agreement sets a 25-year outside date for project completion, that suggests that the ten-year timeline is tenuous, especially since the developer has ten years to start the third of 16 planned towers before penalties kick in. (That timetable was not in the MGPP.)

However, Forest City Ratner and the Empire State Development Corporation claim that a vague provision--that could cost $10,000 a day or, more likely, $1000 a day--would be used to enforce the official timeline.

Previous skepticism

Friedman in her March ruling offered some skepticism of the ESDC:
Under the limited standard of SEQRA (State Environmental Quality Review Act) review, the court is constrained to hold that ESDC's elaboration of its reasons for using the 10 year build-out was supported — albeit, in this court's opinion, only minimally — by the factors articulated by ESDC.
Given that the Development Agreement offers further reason to doubt the legitimacy of the ten-year buildout, DDDB notes that "it would seem that that minimal support erodes entirely due to the facts subsequently revealed in the Atlantic Yards Development Agreement."

Possible relief

A successful suit could throw a wrench into plans, at least, for the project beyond the arena.

The community groups organized by DDDB and by BrooklynSpeaks filed essentially similar suits, but have somewhat different goals.

As I wrote in May, Friedman, in her earlier ruling, said the horse had essentially left the barn, and that any relief regarding Atlantic Yards should rest with the political process.

In legal papers, FCR and the ESDC argue that the project has advanced even further, given the settlements reached with several occupants of the project site, and that nullification of the 2009 MGPP would "severely disrupt the project."

DDDB attorney Jeff Baker, who asked the court to consider whether enjoining future work was possible, noted that a significant portion of funds expended would be useful regardless of the nature of future development.

(That's likely regarding land purchases, demolition, and railyard work, though much if not most of the utility work and recent foundation work is clearly arena-specific.)

BrooklynSpeaks attorney Al Butzel, who pointed out that much of the investment has been of public funds, wrote that the defenses by ESDC and the judge--large expenditures and the role of the political process--do not, "in the Petitioners' view, justify condoning an illegal action."

While his clients would prefer to see all work stopped, he wrote, their greatest concern regards the parts not yet begun and the ensuing disruption. That sets up a scenario in which work on the arena would be tolerated if future work was enjoined.

Baker, by contrast, wrote that the arena shouldn't be allowed to proceed as a standalone project, given that it had never been considered by itself.

Both Baker and Butzel asked for a hearing, with sworn testimony to clearly establish whether 2019 was a reasonable date. That means there could be another hearing--but the hearing June 29 is essentially the reargument itself.