Wednesday, February 28, 2007

After Brennan's lawsuit, ESDC poised to release Ratner’s profit projections

Brooklyn Assemblyman Jim Brennan, joined by State Senator Velmanette Montgomery, has gone to court in an attempt to force the Empire State Development Corporation (ESDC) to answer his Freedom of Information Law (FOIL) request to see the projected costs, revenues, and profits for Forest City Ratner’s Atlantic Yards plan--a prelude to arguing for a reduction in the project’s size.

While Brennan's effort had been rejected by the ESDC under the administration of Gov. George Pataki, the New York Sun reports today that new Gov. Eliot Spitzer's administration has indicated that it's willing to comply--and the documents should be released shortly.

The ESDC, two months before it approved the Atlantic Yards project, last October rejected Brennan's FOIL request, though the ESDC later released a different fiscal document, regarding the plan’s projected fiscal impact, meaning the net new tax revenues to the city and state. (That number dropped dramatically in December.)

Brennan (right) last year sponsored an unsuccessful bill in the State Legislature to decrease the size of the project by 34% while adding affordable housing subsidies. The lawsuit, filed in state Supreme Court, states, “The purpose of the Requests is to enable the public to evaluate fully the relationship between such financial and business plans and the size of the Project, and whether the Project’s size and density could be reduced without endangering its economic viability.”

He said last October, “So that is a critical public question: how much money do they think they’re going to make on their market-rate housing, and how much money do they think the arena is going to make? How much money does the affordable housing need and where are they going to get it? Without that information, the public is shortchanged.”

What might the numbers say?

The question arises: Would the numbers support a downsizing? (Examining the plan before a recent 8 percent reduction in square footage, New York Magazine estimated Ratner's profits at up to $1 billion, or 25 percent.)

Or would they suggest that the “extreme density,” enabled by the state’s override of zoning, is necessary to a viable project? (If so, then should the city and state have punted on zoning--or made civic investments to ensure a more reasonably scaled project?)

[An interesting comment from developer Shahn Anderson on Brownstoner:
Forget about the big number that they will make (I'd estimate it at around a billion dollars), what is their real return on investment when they have been given atleast $300 million dollars up front from various city and state agencies to do the deal? Even if they end up spending $50 or a $100 million of their own equity outside of financing, at the end of the day, they will make 1000% to 2000% ROI from what they actually invested. ]

Legal requirements

Develop Don’t Destroy Brooklyn (DDDB) in September 2005 requested such a document of the Metropolitan Transportation Authority (MTA), noting that the agency, in its Request For Proposals for the Vanderbilt Yard, required that pro forma cash-flow statements, with documentation of fiscal assumptions for a 20-year period, be included as part of the bid. However, the MTA did not comply.

In rejecting Brennan's request, the ESDC stated that, according to the law, it may deny access to records or portions thereof that "are inter-agency or intra-agency materials which are not... statistical or factual tabulations or data." So the ESDC's rationale, Brennan said last year, must be that the business plan is not a statistical or factual tabulation.

The lawsuit reveals that Brennan’s internal appeal to the ESDC was denied, with an additional justification attached: the agency believed that the information could either impair ongoing negotiations or reveal trade secrets.

Given the “enormous socioeconomic impacts” on local constituents, the lawsuit states, “it strains credibility” that the requests would be exempt under FOIL, given that the law was enacted to support “the people’s right to know the process of governmental decisionmaking.”

Brennan has long called for a reduction in the project's size, along with several other Brooklyn Assemblymembers. Montgomery, along with City Council Member Letitia James, has more directly opposed the project.

FCR's defense

Last July, Forest City Ratner executive Jim Stuckey, speaking on the Brian Lehrer Show, was hit with a similar request, from Develop Don't Destroy Brooklyn spokesman Daniel Goldstein, and stood his ground.

He declared, “We’re not going to discuss the profit on a project that hasn’t gone through a public approval process yet. We’re a public company. We have annual reports…In order to get whatever profit we ultimately do make, we also have to spend a tremendous amount of money on infrastructure that the government isn’t paying for, and no one else has stepped up to the table to pay for, for many many years.

Actually, the project has since received public approval, by the ESDC and then the Public Authorities Control Board last December.

Stuckey, however, added another caveat, “At the end of the day, until this project is approved, until we see what the ultimate cost of the infrastructure will be, it’s very hard to make these determinations.”

Given the elastic cost of infrastructure, that day could be far off--unless the state (or a court) intervenes.

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