Monday, January 08, 2007

In court papers, eminent domain fight gets feisty about blight

A fierce set of arguments has been launched in federal court, with the Empire State Development Corporation, Forest City Ratner, and city and state officials named as defendants in the Atlantic Yards eminent domain case calling for the lawsuit to be dismissed because, among other things, the courts grant broad discretion to governmental bodies determining blight.

In response, the 13 plaintiffs (property owners and renters) organized by Develop Don’t Destroy Brooklyn argue that the Supreme Court’s 2005 Kelo vs. New London decision suggests such deference is legitimate only if the properties to be taken for development were identified before a developer is chosen—which didn’t happen with the Atlantic Yards project.

This is a clash over a motion to dismiss, not the resolution of the case itself, and the plaintiffs argue that defendants’ motive or intent “is the issue” and must be determined in court.

The defendants will get a chance to respond in legal papers by Friday, with oral argument in the case scheduled for January 19 in federal court in Brooklyn.

Case premature?

The ESDC, in legal papers filed 12/15/06, argues that “the road to a final taking in eminent domain proceedings generally, and under New York law in particular, is positively fraught with contingencies,” citing, among other things, that the project had yet to be voted on by the Public Authorities Control Board (PACB).

The ESDC calls the lawsuit “a patently premature action.” The plaintiffs respond with sarcasm: “Undeterred by reality, defendants claim that the ‘process is in its embryonic stages,’” but the project was approved by the PACB on 12/20/06.

Public purpose & blight

The ESDC “has identified a number of public purposes that will be served by the Project,” noting that the chief one “is the elimination of blighted conditions within the Project site.” The others include the provision of an arena; the stimulation of new economic activity; the supply of “critically needed affordable and market-rate housing;” the provision of new Long Island Rail Road facilities and mass transit improvements; the provision of publicly accessible open space; and cause environmental remediation on the Project Site.

But the case really rests on the claims of blight throughout the 22-acre site, including the area north of the Pacific Street boundary, which is part of the longstanding Atlantic Terminal Urban Renewal Area (ATURA), and area between Pacific and Dean streets, where all the plaintiffs live or own property, described in court papers as “the takings area.”

The Supreme Court, the ESDC notes, has endorsed the role of the legislature “and its authorized agencies” to exercise eminent domain, even over properties that are not blighted.

Boundary lines

The ESDC cites the 1954 Supreme Court case Berman v. Parker, emphasizing a passage in which the Court explained that “[i]t is not for the courts to oversee the choice of the boundary line nor to sit in review on the size of a particular project area. Once the question of the public purpose has been decided, the amount and character of land to be taken for the project and the need for a particular tract to complete the integrated plan rests in the discretion of the legislative branch.” That has been backed up by a 1985 case, Rosenthal & Rosenthal Inc. v. New York State Urban Development Corp.

Kelo on point?

The plaintiffs are citing Kelo, but the ESDC considers that unfounded, because that case doesn't touch on blight. Justice Anthony Kennedy’s concurrence, which suggested the courts should look askance at projects that seem like sweetheart deals, isn’t relevant, the agency argues, with an edge: “Whatever the meaning of Justice Kennedy’s concurrence, it has bearing only for those cases, like Kelo itself, in which the sole justification offered for the redevelopment plan is economic development.”

“Even if plaintiffs are correct that the Atlantic Yards Project was conceived by (and motivated by a desire to confer a benefit on) a private developer, and that their own properties are not blighted, those ‘facts’ do not affect the analysis under Berman and Rosenthal,” the ESDC argues.

Plaintiffs respond

In their 1/5/07 response, the plaintiffs say the defendants miss the point. Though courts “owe substantial deference to legislative judgment regarding the geographic location and reach of areas slated for condemnation,” there’s a big difference here, they argue.

“Those same cases, however, establish that such deference is warranted only where the legislature first concludes that developing a given area will benefit the public, then identifies the specific properties to be seized to advance that predetermined purpose, and then engages in a fair and open bidding process with prospective developers to select the beneficiaries of the seizures."

However, with Atlantic Yards, FCR identified the property and got government support, the memo argues. “[T]hen the process concludes with the government magically declaring (after a supposedly thorough analysis) that it has determined that the public good will be served by seizing the very same private properties that were pre-selected by the developer and giving them to the very same developer without so much as considering an alternative beneficiary for this government largess.”

“Defendants’ decision to take plaintiffs’ properties serves only one purpose: to allow Ratner to build a Project of unprecedented size, and thus to reap a profit that defendants, tellingly, have thus far refused to disclose,” the plaintiffs argue, adding “Insofar as the public derives any benefit from the taking of plaintiffs’ properties, it is secondary and incidental to the benefit that inures to FCRC.”

Blight a pretext?

As for the blight claims, the plaintiffs call it a pretext, saying that blight was neither mentioned in 2003 when the project was announced nor in two Memoranda of Understanding signed on 2/18/05 between the developer, city, and state.

Alternative

The plaintiffs suggest that there are alternatives. “A large mixed-use residential and commercial complex could be built without taking a single piece of private property by eminent domain,” the memo states.

However, the memo doesn’t contend that an arena could fit over the MTA’s Vanderbilt Yard itself.

Railyard bid

While Forest City had been discussing rights to the railyard for more than two years, the MTA’s RFP gave bidders 42 days to generate proposals. Forest City, unlike rival bidder Extell, failed to submit profit and loss statements, according to the memorandum.

The response does not address the defendants’ assertion that the improvements to the railyard made Forest City Ratner’s $100 million cash bid more valuable than Extell's $150 million bid; the complaint states that the MTA refused to answer technical questions from Extell; it's unclear whether that developer was able to present a complete package regarding railyard imporvements.

ESDC as legislative body?

So, can the ESDC qualify as a legislative body deciding on eminent domain in the same way the City Council of New London did in Kelo?

Even though eminent domain law prescribes deference to legislative wisdom, the plaintiffs argue, that “does not apply where, as here, the Legislature has not defined what constitute a legitimate ‘public use,’ and where the task of deciding whether the ‘public use’ requirement has been satisfied has been left entirely to the unbridled discretion of an unelected administrative agency.”

Further, the plaintiffs’ memo describes the ESDC as “operating pursuant to a delegation of power that is entirely uncabined.”

The ESDC cites a case that describes as “a state public benefit corporation to which the New York legislature has delegated the power” of eminent domain. The memorandum on behalf of then-Governor Pataki describes the ESDC as “the entity created by the State Legislature” to “promote large-scale real estate projects.”

It also denies that the ESDC is “wholly controlled” by the governor, noting that appointees are subject to Senate’s advice and consent and citing previous case law that says public authorities are independent of the state. In response, the plaintiffs argue that, given the governor holds one of three controlling votes on the PACB, the governor can veto ESDC actions.

FCR arguments

Forest City Ratner’s memorandum of law offers its own feisty rhetoric: "The complaint is larded with conclusory rhetoric and mischaracterizations of public documents, but plaintiffs cannot avoid the fact that the Atlantic Yards project furthers numerous substantial public purposes."

The memo adds the argument that the project “enjoys broad support”—which, actually, is hard to prove—takes aim at “diehard opponents,” and characterizes the ESDC board as among the “public officials who were legally entrusted with the responsibility for making the necessary decisions.”

Other contested issues come up in the characterization of the ESDC’s Blight Study. The developer argues, in response to plaintiffs’ claims that Forest City was responsible for the blight, five deteriorated properties demolished last year exhibited longstanding conditions.

The memo cites a plot bordering Sixth Avenue “overgrown with weeds, enclosed by a chain-link fence, and occupied by several parked cars, many of which appear to be abandoned.” (Unmentioned: it also was for sale for $2.25 million.)

FCR also cites the alleged high crime rate in the project footprint.

"Affordable" vs. "low-income"

FCR, objecting to the plaintiffs’ argument that nearly half of the 2250 affordable units at Atlantic Yards are slated for households with incomes between $71,000 and $113,000, says the objection “is meant to create a misleading inference that ‘affordable’ housing is synonymous with ‘low-income’ housing and that the comprehensive affordable housing component of this project somehow was invented by ESDC and the Forest City Ratner defendants.”

Rather, the memo argues, the city and state have long offered incentives for below-market (“affordable”) housing for middle-income residents.

That’s true, but the rhetoric is a bit of an inversion, because Forest City has used the term “affordable” as a synonym for “low-income” before using it more broadly.

Also, the affordable housing agreement was signed by ACORN, whose prime constituency is low-income residents; many of the people who attended an FCR/ACORN affordable housing information session thought most of the rentals would be too expensive for them.

Who started it?

Did Atlantic Yards come from Forest City Ratner, or Borough President Marty Markowitz? FCR's memo adds, “The complaint seeks to bolster plaintiffs’ claim of favoritism by asserting that the FCR defendants initiated the project. However, even were this assertion to be true (which it is not), standing by itself it would not be enough to create a viable claim. It would be bad public policy for the courts to create a rule that would discourage private enterprise from approaching responsible government agencies with creative proposal for addressing public needs.”

The memo points out that Forest City has a history of development in Brooklyn and thus was a logical choice.

If the developer didn't initiate the project, credit apparently must go to Markowitz. Then again, it depends on how “project” is defined. Markowitz told the New Yorker how he asked Ratner to buy the Nets and bring them to Brooklyn. However, he didn’t suggest a 17-building project nor its outline.

So, would a ruling against the use of eminent domain here "discourage private enterprise" from approaching government, or would it simply stop certain kinds of deals?

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