Thursday, May 29, 2008

AY ten-year timetable realistic or p.r. scheme? ESDC, residents battle in court

The Empire State Development Corporation (ESDC) has filed legal papers asking for a state court to dismiss the lawsuit filed April 30 that charges that the ESDC’s willingness to give developer Forest City Ratner 12+ years to build Phase 1 of Atlantic Yards violates a provision of the Eminent Domain Procedure Law (EDPL). The suit also requests a new public hearing to evaluate the benefits of the amended project.

In arguing against the lawsuit, filed by 13 residential tenants in two buildings within the project footprint, the ESDC curiously claims that the courts should view Bruce Ratner’s May 4 Daily News op-ed asserting a 2018 completion date as more credible than his interview in the March 21 New York Times regarding the project’s stall, and that the penalties facing the developer for delaying the project are “draconian.”

Ten-year timetable realistic?

While the lawsuit, filed on behalf of petitioners who have lost two other suits filed by attorney George Locker, attempts to break new legal ground and thus must be seen as an uphill effort, it brings an important public policy issue to the legal arena. At essence is whether the project approved by the ESDC in December 2006, with a ten-year “anticipated” timetable for an arena, 16 towers, eight acres of open space and more, remains realistic.

The ESDC says it is: “Petitioners cite an exhibit to the [State] Funding Agreement that describes the draconian contractual remedies that would be available to ESDC if FCRC fails to complete established Project milestones by certain outside dates. The fact that ESDC could bring to bear certain contractual remedies in such circumstances does not change the Project approved by ESDC on December 8, 2006. Moreover, a change in the construction schedule would not be the type of significant change in public use that would require a new EDPL public hearing.”

However, the funding agreement does not address a starting or ending date for the 11 towers of Phase 2, instead leaving that to be resolved in yet-unfinished “Project Documentation.” The petitioners thus contend that the ten-year project “that was studied and approved by ESDC in December 2006, as having sufficient public purpose and public benefit, ceased to exist on September 12, 2007, when by agreement AYP [Atlantic Yards Project] became an uncertain project of an unspecified duration.” The petitioners charge that the agreement “was kept hidden from petitioners and from the public for six months.”

While the deadlines may be a “contractual remedy,” Locker’s legal affirmation states, “these descriptions are public relations jargon, not legal analysis. By agreement, a ten-year AYP has become an amended-AYP of unlimited duration.” Moreover, “The amendments represent an enormous loss of the Project’s stated public benefits--most of the housing, open-space, and construction job/years--and portend decades of developer blight, vacant lots, and ever-mounting public costs.”

The project, as approved, “might have been financially unrealistic from its inception,” Locker states. "Respondent’s 10-year [project] is a public relations and marketing scheme; it does not exist in a legally enforceable form.”

ESDC: under negotiation

An affirmation by ESDC lawyer Philip Karmel explains that “Project Documentation” has not been finalized and remains under negotiation; the term refers “to the real estate, financing, construction and other contracts involving ESDC, FCRC, and the City of New York that are required to effectuate the [General Project Plan].”

While Locker included as an exhibit the March 21 Times article headlined Slow Economy Likely to Stall Atlantic Yards, the ESDC objected to the article’s admission because “the purported quotations from Bruce Ratner are pure hearsay as to ESDC,” the statements do not represent ESDC policy, and the article post-dates the September 2007 Funding Agreement challenged in the lawsuit.

“If and to the extent that [the article] is considered,” Karmel adds, “however, it should be noted that Mr. Ratner has made other recent statements concerning the Project--most notably, in his recent article in the Daily News--that shed light on the statements he is quoted as having made to the New York Times.”

In other words, an op-ed from Ratner trumps an interview.

ESDC: claims fall short

In a legal memorandum, the ESDC argues that Locker’s lawsuit fails to state a cause of action because the provision of the EDPL at issue applies only when the condemnor has already acquired the property by eminent domain, the project has been abandoned, and the condemnor seeks to sell the property within ten years of its acquisition. None have occurred.

Further, the EDPL requires that the property be “materially improved” within a decade after acquisition, and the ESDC states there’s no assertion that it wouldn’t be improved, since the term does not require completion of a project.

Further, the response argues that the petitioners do not have any ownership rights and thus lack standing to sue--a claim that raises questions about a previous lawsuit. Locker responds, “ESDC is walking on thin ethical ice by arguing that petitioners, who were determined to be condemnees at ESDC’s legal urging in a previous action, possess standing to assert rights under EDPL section 207, but lack standing to assert the rights accorded to all condemnees under EDPL section 406."

New public hearing?

The petitioners in the latest case also claimed that the EDPL requires a new public hearing “because the Funding Agreement allegedly changed the GPP [General Project Plan] construction schedule,” the ESDC response states. “The Funding Agreement, however, explicitly requires FCRC to use commercially reasonable efforts to achieve the GPP construction schedule.”

Even if the Funding Agreement had modified the construction schedule, the ESDC argues, construction delays on complex public projects are “hardly uncommon,” so if every delay were to require a new public hearing, eminent domain “would cease to serve the role intended by the legislature when the statute was enacted.”

Indeed, the ESDC cites a case involving Times Square redevelopment in which the Court of Appeals rejected the idea that new hearings were required “because the passage of time had rendered stale the data upon which ESDC had relied to make its blight and environmental findings for the project.” Only when there’s a significant change in public purpose is a second public hearing “potentially required,” the ESDC states, and there’s been no such change in public purpose alleged.

In response, the petitioners include an affidavit by Tom Angotti, professor in the Hunter College Department of Urban Affairs & Planning, who notes that Atlantic Yards was always presented as a ten-year project, with the financial, environmental, and infrastructural, analyes predicated on that timetable. Given that there is no stated commencement date nor completion date for the 11 buildings of Phase 2, which would contain an estimated “70% of the affordable housing units, 100% of the open space, and 75% of the construction job/years,” the ESDC should precisely describe the project and hold a public hearing where the public can comment on the “costs and benefits of the amended project,” Angotti states.

"Draconian" remedies?


The ESDC, in its legal papers, calls the contractual remedies cited in the lawsuit “draconian.” The term is doubly curious because the State Funding Agreement cited in the lawsuit describes the penalties incompletely, leaving any analysis inconclusive without a look at the separate City Funding Agreement. That agreement, released later after a Freedom of Information Law request, spells out some provisions that, to my mind, don't seem very draconian, given that the developer need build only 1.5 million square feet over 12 years to escape penalties.

Beyond those remedies, the ESDC states, “it is expected that the Project Documentation will provide for additional remedies available to ESDC in other circumstances.” The contractual remedies, the agency claims, “do not modify the Project schedule.”

Moving ahead

The ESDC further argues that the State Funding Agreement, rather than retard the project, accelerates infrastructure work because it allows work to proceed before Project Documentation is finalized. Even if the developer defaults completely, that would not mean abandonment by ESDC, which could continue the project with another developer. In other words, the ESDC contends, it’s the condemning agency, not the developer, that must abandon the project.

If the motion to dismiss is denied, the ESDC argues that, if the schedule-related provisions of the Funding Agreement were determined to violate the EDPL, the court should annul specific provisions rather than annulling the Funding Agreement as a whole or requiring a public hearing.

The petitioners respond, “ESDC wisely contemplates losing the instant motion and asks this Court to ‘annul any offending portion’ rather than order a hearing, etc. It is unclear how this Court may alter the completion dates of a $4 billion construction project when one of the parties to the agreement is not even before the court and there is every reason to believe that FCRC could not comply. If ESDC wishes to have a ten-year AYP construction deadline imposed on FCRC, as law requires, ESDC should do so on its own.”

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