Thursday, May 10, 2007

Reading between the lines when ESDC’s Foye discusses Atlantic Yards

Patrick Foye (right), Downstate Chairman of the Empire State Development Corporation (ESDC), is no Charles Gargano, who ran the entire ESDC under former Gov. George Pataki.

Gargano, a construction industry executive who became a Reagan-era ambassador to Trinidad and Tobago and later was Pataki’s lead fund-raiser, is a chatty sort confident in his own charm, a man who sometimes veered into self-sabotage. (Now he may be under more of a cloud.)

Foye, who met Governor-to-be Eliot Spitzer at the white-shoe law firm Skadden, Arps and later revamped the United Way of Long Island, may call himself a “recovering lawyer,” but his training shows; he speaks crisply but carefully, too savvy to undermine himself.

Still, an Atlantic Yards-ologist looking hard between the lines of Foye’s remarks yesterday, at a breakfast sponsored by Crain’s New York Business, might detect some implicit wariness about Atlantic Yards.

Yes, ESDC wants to continue on major projects bequeathed by the Pataki administration, including Atlantic Yards, he said. At the same time, however, ESDC wants to diversify its portfolio and be a force for reform.

Though Foye stressed that the ESDC aims to be judicious and accountable, he wouldn’t take the opportunity to criticize Gargano’s ESDC, even as new oversight the ESDC proposes for Atlantic Yards suggest that the state had planned for inadequate transparency.

The main news for reporters yesterday concerned Foye’s comments on the Javits Center expansion. More than 500 business people paid $60 a head for an hour with Foye.

AY & ED

Foye spoke briefly about the coming Atlantic Yards ombudsperson in his prepared remarks, then answered a few more specific, but hardly tough, Atlantic Yards-related questions from NY1’s Josh Robin and Greg David of Crain’s.

“We intend to vigorously defend” the lawsuits challenging Atlantic Yards, Foye said, suggesting that “at the end of the day they will not pose an obstacle.” He called eminent domain a power that should be examined “case by case and project by project,” and was “something that should be done only as a last resort.

A questioner who’d covered the state court hearing last week regarding the challenge to ESDC's environmental review might have asked Foye to justify the state’s declaration that buildings that do not fulfill 60 percent of their developable volume, or Floor Area Ratio, are blighted and thus eligible for eminent domain.

Congestion pricing

Asked if he supported congestion pricing to relieve some of the potential traffic burden of Atlantic Yards, Foye noted accurately that the state's environmental impact statement, concluded before Mayor Mike Bloomberg proposed congestion pricing as part of PlaNYC 2030, did not address the issue.

He wouldn’t be drawn into the debate, though almost certainly Atlantic Yards backers support congestion pricing because, as Deputy Mayor Dan Doctoroff has said, it would relieve traffic on Flatbush Avenue now using the free bridge connections to Manhattan. “The Spitzer administration is studying” the concept, Foye said diplomatically.

Focus and accountability

Early in his prepared remarks, Foy announced a broad focus for the ESDC:
We’ve also come to the conclusion that economic development is more than major deals with giant corporations. It involves community redevelopment, stronger ties with the philanthropic and not-for-profit communities, strengthening our ties abroad to open up new markets, incorporating sustainability and energy conservation.

Later, in the Q&A period, Foye observed that most ESDC deals are relatively small. “It’s as much by hitting singles,” he said, “that we’re going to help revitalize the state’s economy.” (Atlantic Yards, of course, would be no single; whether it would be a home run for both developer Forest City Ratner and the state remains a question.)

As if channeling Spitzer’s “Day One, Everything Changes” mantra of reform, Foye pledged accountability:
From this perch, we view ourselves as fiscal stewards at a critical turning point in the city and the state’s history. We must take proactive steps to generate economic activity and build the infrastructure to support that activity. We see you as shareholders who should get the best financial and social return on their investment. This theme of a contract with taxpayers runs through everything we do, from our business incentive programs to our development projects.


Yesterday he made reference to the streamlining of the ESDC's much-criticized Empire Zone program of tax breaks. (More on this below.) There's no indication, however, that Foye’s ESDC will revisit the sharply declining financial returns predicted for Atlantic Yards.

Public investment

Foye emphasized the agency's role in priming the pump:
The steps we take have to be part of a cohesive approach to stimulate economic growth from Long Island and Midtown to neglected corners of Upstate. It’s not about a series of individual deals, but focused public investment that sends positive ripples through our economy.

That suggests that, had the Metropolitan Transportation Authority’s Vanderbilt Yard come into focus under the Spitzer administration rather than a few years earlier, the state might have considered investment before a developer expressed interest, rather than afterward.

Corporate welfare

Foye said the state should be judicious in terms of subsidies:
So this, at least in part, is a meeting with a group of shareholders. And one thing we know is that our shareholders don’t want us to give money to companies that don’t create jobs, or to corporations that don’t really need our help.

The ESDC in 2005 promoted 10,000 permanent office jobs at Atlantic Yards and cited fiscal impact figures provided not by an independent analyst but by one paid by the developer; the number of permanent jobs has declined steadily as Forest City Ratner has cut office space, with space projected for 1340 jobs, of which 375 might be new.

Foye followed up:
True, the business community always needs support, but with limited dollars we have to foster growth in the areas that will produce impressive results. Public money should be the catalyst for private investment. Our goal is to expand private investment and to put as few state resources into deals as possible.


The ESDC frames the public investment in Atlantic Yards as a catalyst for private investment. Still, talking about redevelopment around Penn Station, Foye yesterday warned against a deal that had potential lingering downsides:
Also, in a city where taxpayers have seen their pockets depleted by construction overruns that left them on the hook for billions of dollars, we argue that the developers who will benefit from the valuable real estate around this transit hub need to help cover those costs. But before we move forward we want to reach agreement upfront about how to deal with unexpected shortfalls. We know that you, our shareholders, want us to protect your interests and produce strong, sustainable returns.


With Atlantic Yards, however, a memorandum of understanding (MOU) expresses government support for unspecified "extraordinary infrastructure costs," which Develop Don’t Destroy Brooklyn calls a blank check. (So far, the city has apparently more than doubled its pledge; the state has not done so.)

AY ombudsman

In his prepared remarks, Foye addressed the Atlantic Yards issue of the moment:
In Brooklyn, where Forest City Ratner is building an arena for the Nets basketball team along with a housing, commercial and retail complex, with have worked with Ratner to implement new measures to address community concerns about construction and transportation. These steps are in addition to those laid out in our environmental studies. We’re on the verge of appointing an ombudsperson to act as a liaison between the community, elected officials, and various government agencies.


Afterward, when Foye spoke briefly to reporters, I asked why the AY environmental monitor, who was supposed to be on board in March, had taken so long. (An interim monitor has been appointed: AKRF, the firm that conducted the Atlantic Yards environmental review.)

Foye said he didn’t have an answer. Later, ESDC spokesman Errol Cockfield explained, “We got inadequate responses to the RFP [request for proposals] issued in February. We went out again and got better responses and we expect to name an environmental monitor by the end of the month.”

It’s not surprising that some processes don’t work as planned. However, the ESDC has asked for slack on this issue while, as critics have pointed out, offering no such slack regarding the time frame for responses to the Atlantic Yards environmental review.

(Update: The environmental monitor is not the same as the ombudsperson, who will serve as a community representative. I had mistakenly questioned whether the two positions were the same.)

Community role?

On Tuesday, the Council of Brooklyn Neighborhoods (CBN) sent a letter to Foye saying that they were encouraged that the ESDC sought more oversight of Atlantic Yards construction and demolition activities, but wanted more details on the role of the environmental monitor and ombudsman.

Also, CBN asked why representatives from the community haven’t been included on working groups that have been established.

Will the community be considered? “We’ll explore it,” Cockfield said yesterday.

(Update and clarification 5/14/07: Here's the CBN letter, which requests community representatives on "oversight committees." Note that the transportation working group will include community representatives, according to the ESDC letter.)

Visiting the AY site

Foye, who was supposed to visit the Atlantic Yards site in March, hasn’t gotten to do so. “It got put off,” Foye said. “It will be rescheduled.”

More on ineffective tax breaks

On Tuesday, as the Albany Times-Union reported, state legislators savaged the state's Empire Zone economic development program, begun in 1986 and expanded under Pataki, for giving ineffective tax breaks. Foye, who promised reform while speaking before Assemblyman Richard Brodsky’s oversight committee, yesterday reiterated that pledge.

Also on Tuesday, New York Jobs with Justice released a report arguing that the state's industrial development agencies (IDA) also offer ineffective tax breaks. The report, Getting Our Money’s Worth: The Case for IDA Reform in New York State, offered one Brooklyn highlight, regarding a tenant at Forest City Ratner’s MetroTech complex.

The report stated:
JP Morgan Chase has received IDA assistance since 1989 from the New York City IDA, with a total of $211.8 million granted, part of which was for the development of the Chase MetroTech Center built in downtown Brooklyn in 1992. Security guards at MetroTech are agitating for the prevailing industry wage, currently earning as little as $8.50 an hour, $17,680 annually, which is well below the self-sufficiency standard for a single adult in Brooklyn, much less a worker with a family.

Moreover, in 1995 Chase eliminated 5,720 jobs when it merged with Chemical Bank, then it slashed 2,200 more jobs in 1998, and in 1999 it announced that 3,500 additional positions would be relocated to other sites. In 2000, Chase Manhattan Bank acquired JP Morgan to create JP Morgan Chase. JP Morgan Chase subsequently eliminated nearly 2,000 support jobs in New York City when it merged with Bank One in 2004.

JP Morgan Chase thus has the distinction of making one of the largest layoffs in New York City’s history--over 13,000 jobs in five years--and being one of the city’s largest corporate subsidy recipients. JP Morgan Chase continues to receive the IDA subsidy granted in 1989, and the tax exemptions will continue through 2014.

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