Skip to main content

Forest City Ratner admits lie (well, "mistaken") about inflated AY revenue claim

They thought they could get away with it. Three times.

In three legal documents in the lawsuit challenging the Atlantic Yards environmental review, two Forest City Ratner officials and an FCR lawyer claimed that the Atlantic Yards project would generate $5.6 billion in new revenues and/or $4.4 billion in total revenues. They attributed those highly speculative estimates to the Empire State Development Corporation (ESDC).

However, no such figures appear in the ESDC's Final Environmental Impact Statement (FEIS), as claimed.

The first claim came in a 4/16/07 sworn affidavit from then-FCR executive Jim Stuckey, who asserted:
Furthermore, the Project will serve as a powerful engine of economic growth in other respects as well.
The Final Environmental Impact Statement (the "FEIS")... also estimates that the Project will generate $5.6 billion in new tax revenues — and $4.4 billion in net tax revenues — for the City and the State over the next 30 years.


(Graphics by Abby Weissman; click to enlarge.)

Last April, I called the claim a lie. It was ignored.

After the claim was repeated twice more, petitioners' attorney Jeffrey Baker, using slightly more diplomatic language in a legal document, last week called it "completely disingenuous."

In response, on Monday FCR lawyer Jeffrey Braun belatedly admitted his statement was "mistaken," acknowledging that the projection comes not from a government-commissioned analysis but from Andrew Zimbalist, a consultant paid by the developer.

That's a big difference.

Anything goes?

It seems that Forest City Ratner is willing to practice a "scorched earth policy of anything goes"--a policy FCR's Bruce Bender attributed to project opponents.

Whether or not state officials have been co-opted or corrupted, as alleged in the lawsuit over eminent domain, the failure of anyone at the ESDC to correct the developer on this basic fact clearly suggests favoritism--or negligence.

Two years ago, I questioned whether the ESDC could "be expected to do a fair job in both promoting economic development and evaluating the environmental impact of the proposed Atlantic Yards development." I concluded that "ESDC Chairman Charles Gargano gives little cause for confidence."

Even with a new administration, things haven't changed enough.

The lie, redux

Stuckey's successor, MaryAnne Gilmartin, in her 1/17/08 sworn affidavit, essentially repeated Stuckey's claim:
In addition to the direct public benefits that the Project will create, the Project also is a powerful engine of economic growth. The Final Environmental Impact Statement (the "FEIS")... also estimates that the Project will generate $5.6 billion in new tax revenues — and $4.4 billion in net tax revenues — for the City and the State over the next 30 years.

FCR attorney Jeffrey Braun, a 1/25/08 affirmation, which he "affirm[ed] under penalty of perjury," repeated a variant of the claim:
In addition to the foregoing public benefits, the project will be a powerful engine of economic growth. The environmental impact statement for the project estimates that the project will create... as $4.4 billion in net tax revenues for the City and the State over 30 years.

The response

Baker responded in his 1/31/08 affirmation:
Nor should the court be affected in any way on Mr. Braun's completely disingenuous statement that the "environmental impact statement for the project estimates that the project will create... $4.4 billion in net tax revenues for the City and the State over 30 years." There is simply no projection at all regarding the net tax revenues contained in the EIS.

The admission

In a footnote to an affirmation issued Monday, Braun acknowledged a mistake:
Mr. Baker correctly points out that my statement in my prior affirmation that the "environmental impact statement for the project estimates that the project will create ... $4.4 billion in net tax revenues for the City and the State over 30 years" is mistaken, because "[t]here is simply no projection at all regarding the net tax revenues contained in the EIS". The $4.4 billion figure is in the report of a consultant who had been retained by FCRC and does not appear in the FEIS. It remains true, however, that the Atlantic Yards project has been approved by ESDC and the other involved agencies on the basis of the significant public benefits that it is expected to generate, which include substantial additional tax revenues. The General Project Plan that ESDC adopted concluded that, "[o]n a present value basis, the Project will generate $652.3 million of City tax revenues and $745.3 million of State tax revenues," and that "the project will generate $944.2 million in net tax revenues in excess of the public contribution to the Project."

There's a big difference between "present value" and the much larger 30-year cumulative value. Also, there's a big difference between the ESDC's methodology and the consultant's methodology, though both are flawed in their ways.

(The Zimbalist report on Forest City Ratner's web site provides different totals, including both the 30-year cumulative numbers ($6.02 billion before costs)--never used by government analysts--as well as present value. The net fiscal benefit, according to Zimbalist, would be $1.55 billion in present value, which is more than 50% higher than the state analysis. Zimbalist's report was based on a somewhat different configuration of the project, so the $5.6 billion figure touted by FCR officials is presumably based on an updated analysis not publicly delineated.)

Flawed analyses

The report by Zimbalist is full of holes, as I wrote. It's a "promotional study."

And the ESDC's estimates, while they do factor in the direct subsidies, make no attempt to account for the public costs that the project would incur. In other words, the net benefit promised by the state can't be trusted because the analysis is inadequate.

Comments

Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…

Former ESDC CEO Lago returns to NYC to head City Planning Commission

Carl Weisbrod, Mayor Bill de Blasio's City Planning Commission Chairman and Director of the Department of City Planning, is resigning,

And he's being replaced by Marisa Lago, currently a federal official, but who Atlantic Yards-ologists remember as the short-term Empire State Development Corporation CEO who, in an impolitic but candid 2009 statement, acknowledged that the project would take "decades."

Still, Lago not long after that played the good soldier at a May 2009 Senate oversight hearing, justifying changes in the project but claiming the public benefits remained the same.

By returning to City Planning, Lago will join former ESDC General Counsel Anita Laremont, who after retiring from the state (and taking a pension) got the job with the city.

Back at planning

Lago, a lawyer, in 1983 began work as an aide to City Planning Chairman Herb Sturz, and later served as the General Counsel to the president of the NYC Economic Development Corporation, Weisbrod himself.