Friday, May 02, 2008

Thompson says other developers might join AY; “I’m not sure what that project is any longer”

Atlantic Yards was the most contentious element of a panel discussion Wednesday at the New School’s Center for New York City Affairs titled Maintaining Momentum: Can New York’s Ambitious Development Agenda Survive an Economic Downturn?

Moderator Greg David, editor of Crain’s New York Business, and City Comptroller (and mayoral candidate) William Thompson urged that the project proceed, while Julia Vitullo-Martin of the Manhattan Institute (who called the project "corporate socialism") and Brad Lander of the Pratt Center for Community Development endorsed a rethink, albeit for somewhat different reasons.

Still, Thompson acknowledged, “I’m not sure what that project is any longer” and even dangled the hint that it might be revived by bringing in additional developers, as the city comes to the belated realization that single-developer projects pose certain dangers. He also agreed that most projects should go through ULURP, the city’s Uniform Land Use Review Procedure, rather than state review.

In other words, Thompson gave AY critics and opponents an opportunity for a “told-you-so,” to quote the New York Times’s recent coverage, just as David pressed his own “told-you-so,” nearly taunting Lander for opposing a project [corrected] that has steadily survived court challenges.

The panel received coverage only in Metro, which briefly described the discussion about Moynihan Station.

City perspective

The event began with Robert Lieber, deputy mayor for Economic Development, who gave a standard-issue explanation of the city’s rebirth over 30 years and post-9/11 recover. He noted that, by 1975, the city’s 1961 zoning resolution was already “functionally obsolete” and that the Bloomberg administration had rezoned more than one-sixth of the city’s area since 2002, a larger swath than all the rezonings under the prior six administrations combined.

“We want to use the rezonings and investments in public infrastructure to make the areas attractive to private development,” he said, a noncontroversial explanation that omits how the city proceeded with Atlantic Yards. After all, the investments in public infrastructure did not precede the selection of the developer--and the developer still seeks more subsidies.

“The hallmark, I think, of this administration, is that we run the city like a business, and think about long-term, to the extent that you can, and you try and plan accordingly,” he said. “When times were good...we didn’t spend everything that we had,” which means there’s money put aside to fund projects even through down cycles in the economy.

“In fact, when you look at the budgeting process and the projections for the different projects that are under way, we try and model economic downturns, and the cyclical nature of the markets for the life cycle of these long-term projects.” The projects under discussion, he said, would not take two or three years, “they could be two or three decades.”

He went on to list them, outside the Midtown Manhattan core, and AY was conspicuous in its absence. He cited rezonings for “areas like Hudson Yards, Jamaica, Long Island City, and Downtown Brooklyn.” He pointed to the city’s wish to build around areas with transit infrastructure--”one of the best examples is Hudson Yards,” which would extend Midtown Manhattan to the west.

He said he didn’t want to be pollyannish, acknowledging that some projects have hit snags. He cited the Javits Convention Center expansion and the complicated, mutating plans to build Moynihan Station. The timetable for Hudson Yards factored in the economic downturn, assuming relatively little commercial development until the Number 7 subway line is extended.

He said the city was also looking at underutilized parcels for development. Just last week, he noted, the city’s Uniform Land Use Review Procedure (ULURP) began for two projects, Willets Point, “if you want to define blight,” and Hunters Point South.

He said that PlaNYC 2030, the mayor’s sustainability agenda, aims to help the city grow. The city has been making investments to diversify its economy beyond wall Street, in industries ranging from film to biosciences.

He acknowledged that the administration was “not necessarily going to complete every project” but wanted to created conditions to foster growth over the following decades and to “get these projects to a critical enough phase so they are self-sustaining.”

Full speed ahead?

Leading off the discussion, David asked the panelists whether they’d pursue the “all aboard, full speed, no matter what’s happening in the economy” mantra of the Bloomberg administration.

Much of the current situation does not depend on the mayor, pointed out Gregory Heym, executive vice president and chief economist at Terra Holdings. “We saw that with Atlantic Yards; it’s a funding issue.” (Later, he called Atlantic Yards “probably the poster child” for a project that couldn’t get financing.)

Vitullo-Martin said that the advantage of the downturn “does give us an opportunity to pause and think about what we’re doing.” She noted that Bloomberg plans a new book, titled “Do the Hard Things First,” and suggested “that would be Willets Point.”

Instead, she said, the administration should consider the easiest things first, concentrating on the Penn Station area and going slow on some of the big projects.

“I personally would like to see them try to truly rethink the huge Atlantic Yards development, which I think has always been too big, too subsidized, too ugly, too aggressive,” she said. “Here’s the time for us to really think about this: Do we want to pour hundreds of millions of dollars into that project?”

(The current direct subsidies total $305 million, not including housing subsidies and numerous tax breaks and other special benefits.)

Lander prefaced his remarks by pointing out that the free-market-oriented Vitullo-Martin and he are often posed as antagonists on panels, but usually agree more than disagree and, in this case, “certainly do that there is value in using this as a moment to pause, that there are some projects that it’s really worth moving forward on and there are some where [it’s worth], as people are saying in my neighborhood, ‘taking a time out’. Certainly Brooklyn Atlantic Yards tops that list.”

“I have a lot of questions about the administration’s Willets Point development and approach,” he added, suggesting it ignored well-entrenched companies beyond the “chop shops” Lieber disparaged as blight, “just as its wrong to dismiss the million-dollar co-ops and Freddy’s Bar in my neighborhood as blight.”

(Note that the state hasn’t called the latter blighted but has suggested that only this project can remove the blight nearby. Also note that Lander is running for Bill de Blasio’s City Council seat, which includes parts of Park Slope, reasonably near the AY footprint, which is represented by Council Member Letitia James. He has been steadily critical of Atlantic Yards, but far closer to the BrooklynSpeaks “mend-it-don’t-end-it” agenda than Develop Don’t Destroy Brooklyn’s staunch opposition.)

Lander said some things should move forward, noting that the plan on the West Side of Manhattan had been revised, called the plan for Public Place in Gowanus “brilliant,” and praised some PlaNYC initiatives.

Thompson’s AY defense

Thompson said, “I guess I’m going to come from the center.” He agreed that Moynihan Station should move forward. He expressed objections to Lieber’s characterization of Willets Point.

“The one thing that I think this slowdown... does,” he said. “It challenges the way we look at projects and look at megaprojects... We need to start to look at them in stages. And if a project makes sense in 2007, it probably makes sense five years and ten years later.”

That raises the question--what if the project, as with AY, was sold on the basis of delivering certain benefits in a decade, rather than interim surface parking?

“And how we start to plan a new rollout of those, in up and down cycles. So I wouldn’t say that it is full speed ahead.,” he said. “But we need to continue to plan for the future. And the megaprojects--a lot of the larger projects that make sense now, they will make sense in ten years. We need to begin that rollout, that staging, in up and down cycles... Government’s contribution, in so many ways, to these projects, is infrastructure,” he said, citing both infrastructure improvement and mass transit. ”We need to continue that through up and down cycles.”

Community frustration

One flaw in Bloomberg’s approach, Lander suggested, is that it provokes reaction in neighborhoods, when they don’t see the quality of life around them being improved, or the local infrastructure being strengthened. “I do think there is some value in slowing down and getting some of those things right.”

“I think if you poll New Yorkers about their feelings about growth and development in their neighborhoods,” Lander suggested, “they’re overwhelmingly frustrated.”

David was skeptical: “Do you think that will be the same, a year and a half from now, after we lose 150,000 jobs? Don’t you think that will change the way people feel about it? The fact that... unemployment in the construction trade could soar to 20 or 30 percent?”

Lander backed up only slightly. “I say all of that as someone who believes we want to see growth, and we want to see development, and we want to encourage projects... but at the same same time, no, I think we have not done a particularly good job of” engaging communities. Yes, he said, some of that may change when more people are out of work, but likely not significantly outside of the construction trades and the real estate sector.

He suggested that the city take some money it’s not putting into the mega-projects and make counter-cyclical investments.

“We’ll come back to that,” David said.

Vitullo-Martin suggested the administration might look at some smaller projects, like the redevelopment of Sherman Creek in Upper Manhattan.

Thompson said, “The reality is, speaking to large developers, they’ve been honest, the money just isn’t there right now, ‘We don’t have access to credit to move forward.’... It isn’t a question of, are these projects going to move forward? A lot of them aren’t right now. That’s the simple reality. How we use that time, how we reassess things, and look to move forward--we’re going to have time anyway. A lot of these projects aren’t going to move. And that is the simple reality of the lack of access to credit. And it’s not just for the small developers, it is for the large ones.”

Heym suggested that it’s much harder for developers to get equity investments. “They may have to give up 25 percent of their profits for ten percent equity,” he suggested. (And that may be a reason to sit on a project rather than move forward.)

Building downturn

There were different interpretations of the decline in building permits recently reported by Crain’s. Heym suggested that many developers in Brooklyn rushed to get their permits to take advantage of the 421-a tax break, which expires as of July (but at one point was expected to expire at the end of 2007).

Given the current economic situation, he suggested, “the timing of [the phase-out] is inopportune.”

“I wanted the rules changed five years ago,” said Lander citing “several billions” in revenue that the city lost by providing incentives for market-rate development in already thriving neighborhoods. Now, he suggested, the “incremental value of 421-a” was less important to developers than the state of the market, interest rates, and the cost of construction.

“Refighting old battles”

David challenged Lander and Vitullo-Martin on AY: “I get the feeling that you’re refighting old battles, that you’re using the economic downturn to refight issues that have already been decided.” He brought up the example of a New York Times article that gave voice recently to everyone who had opposed the Hudson Yards project.

“Actually, I think that’s sort of a strange question,” Vitullo-Martin said. “It’s certainly true that we’ve been arguing about these issues for... a number of years, but, on the big projects, the truth is, they’re not decided yet.”

She suggested the administration rethink some infrastructure issues during the pause. While she supported 90 percent of the rezonings, the Brooklyn waterfront rezoning in Greenpoint and Williamsburg “should have light rail” to move people who are otherwise distant from subways.

Lander suggested the city could use its resources to invest in bus rapid transit, or BRT. He suggested that a great countercyclical investment could be “significant residential retrofit” to make buildings sustainable. “We will save money and energy over the long term, but it’s not easy to align the people who need to take action and the people who need to make investments, and the state.”

“On Atlantic Yards,” he continued, “it’s not refighting, it’s continuing to fight an old battle. A lot of us didn’t like that plan when they proposed it, didn’t like it when the Empire State Development Corporation and the Public Authorities Control Board voted--”

David interrupted skeptically: “You’re going to hold out until the U.S. Supreme Court rejects the case.”

“Well,” Lander began.

“Lost in every court decision, over and over and over again,” David declared, in a mocking, told-you-so way.

After David over-talked Lander one more time, it was Thompson’s turn.

Additional developers?

He said the market was affecting projects. “The greatest example is Atlantic Yards. You are going to see a rethinking of that in one form or another, only because that project--a project that I supported--I’m not sure what that project is any longer. That is a problem. It has morphed and changed, gone through ups and downs. Right now, the financing side of that--they’re not going to be able to move forward right now. I still think that--it was a good idea two years ago, it will be a good idea in five years and in ten years.”

Of course, he was ignoring the fact that the good idea was premised on a certain timetable and a certain amount of public funding.

“It may be a slightly different project," he continued, "and we may need to bring additional developers--and that’s one of the things I think you’ll see also, it’s no longer relying on one developer on megaprojects, you will look at multiple developers in different stages, so it all doesn’t fall on one person’s shoulders.”

(The alternative UNITY plan is premised on dividing the railyards into parcels for multiple developers.)

David asked “the fundamental, immediate question”: would Thompson proceed with the arena, as Bruce Ratner intends?

Yes, Thompson said.


(Keep in mind that, in 2001, his campaign received $22,500 from five people associated with developer Bruce Ratner. Still, as readers point out, there are other reasons for him to support the project, just as there are other reasons to be critical of Thompson.)

Listen to the community?

During the Q&A, after Lander endorsed the notion of community-driven plans, such as that in the South Bronx to replace the Sheridan Expressway.

David countered that the community’s response to Columbia University’s expansion effort “would have crippled” the plan, and asked if that was not more typical.

Lander acknowledged that “it would still be a fight,” but noted that Manhattan Community Board 9 would have given Columbia 60 percent of what it wanted, and that a better process would make things go a little easier.

Vitullo-Martin said the Downtown Brooklyn rezoning “slipped through” before activists organized and got affordable housing as part of the Brooklyn waterfront rezoning. “I think right now we have a pretty good system of community participation,” she added. “I think community boards often improve projects.”

City vs. state review

From the audience, a member of Manhattan Community Board 4, on the West Side, suggested that some projects, like Moynihan Station, involve so many agencies outside the city that “we don’t have a leadership position.”

David tossed the question to Thompson, suggesting that one opponent in the mayoral election, Rep. Anthony Weiner, “is going to make this a major issue.”

Thompson argued for home rule. “The truth is, in the long run, if it had gone through the city process, you might have had a [West Side] stadium....I think, in a lot of ways, the city has to take leadership on these issues. You don’t want to always give these to other entities just for the sake of moving them a little quicker, or not going through a review process and including people from the city, and city entities. I’d like to see these projects go through city processes, go through a process that involves community boards, that involves other development entities in the city of New York. I just think it makes sense. Most of your major projects in the last few years have gone out of the city review process to other entities. I think it makes sense to have most of them go through the city process.”

“Mr. Lander,” David said “We’ll take that as a given. Actually Dan Doctoroff now says that not putting Atlantic Yards through ULURP was his biggest mistake. But having said that--we could’ve put Atlantic Yards through ULURP, we could’ve put the stadium to a City Council vote--is there really going to be any change in the great scheme of things, where the state is a controlling factor on many of our redevelopment projects, where the only entity with money for Moynihan Station is the Port Authority...?”

Lander responded, “I think it is worth distinguishing those projects that are genuinely multi-jurisdictional, and need the funding--the Port Authority plays an important role, and we need it. Atlantic Yards is not a bi-state project. It should’ve gone through ULURP.”

At least one of the configurations of Moynihan Station, Lander said, needed state leadership. “We don’t want to go back to a Bob Moses having control,” he said.

David said the “state has enormously more flexible authority,” hence the decision to turn to the state after September 11.

“Corporate socialism”

Vitullo-Martin brought up AY again: “One of the reasons I dislike the Ratner development... Comptroller Thompson said we’re not even sure what it is anymore. What we do know is humongous public subsidies are going into that development, so it’s sort of a form of corporate socialism, in my opinion. And I’d like to see in New York more distinction between clear market development and highly subsidized development. We’re going in the direction of highly subsidized market development, which I think is unfortunate.”

David challenged her: “You’ve been a big critic of Atlantic Yards here. But if we’re going to get 600,000 more people or 800,000 more people... why shouldn’t we be building on great transit hubs to accommodate them?”

“We should,” Vitullo-Martin agreed. “Absolutely.”

“So, fundamentally, we should be building on Atlantic Yards,” David said, conflating a marketing term with a place.

“Absolutely,” Vitullo-Martin agreed.

(The argument is not over dense development, but how dense.)

“And your objection therefore is?” he continued.

“It’s to this project, this amount of subsidies, and this amount of vagueness about what we’re actually getting now,” she said, pausing.

Lander joined in: “This particularly urban design, which cuts communities off from each other.” It would be the densest census tract in the country, by a factor of two. (Well, it wouldn’t be its own census tract, but the New York Observer gave the numbers.)

The private market

“I also think,” Vitullo-Martin said, “that this particular neighborhood was one in which the private market had already started to invest. That’s clear--those marvelous buildings that had been empty had been converted... The developer, after all, could’ve taken his own property and redeveloped his own property instead of using eminent domain to take other people’s property. And yes, I’d like to see the project, but... actually I’d prefer that it was market development there, because I think the neighborhood would’ve taken it... And I don’t think we have to put our precious subsidy dollars” into this project.


Vitullo-Martin’s free-market bent would run into political difficulty in Brooklyn, where there’s consensus that there should be affordable housing no matter what project is built at the railyards; affordable housing advocates like City Council Member Bill de Blasio argue that it’s more costly to build at certain sites, but the income mix is important.

Thompson took up that issue. “As one who lived in that neighborhood, I think if you look at some of the development... I think that the inclusion and initial design that brought about a large number of affordable units was important.” While market forces do drive development, he said, the decking of the yards “would never have happened,” he contended, ignoring the possibility of a simple rezoning or RFP.

“The scale of it--it was the largest thing that Brooklyn had ever seen,” he said. “Perhaps there were questions about scale, but the project itself and the use of subsidies made sense.”

The project's configuration was essentially a privately-negotiated affordable housing bonus. A smaller scale would mean fewer affordable apartments.

David asked panelists how the city should prioritize subsidies.

Thompson repeated, “What was good two years ago, three years ago... you’re looking at projects like Atlantic Yards. I thought the inclusion of subsidies to be able to drive affordability on part of the housing.... made sense. I thought the inclusion of senior housing made sense.”

(The $305 million in direct subsidies do not go to affordable housing, and the senior housing would be a subset of the affordable housing, not an addition.)

“I wouldn’t just want to see it as market-rate, because that starts to push others out of that neighborhood. It’s always been a very mixed neighborhood.... I thought that was one of the great lures and great attractions of Atlantic Yards.”

And if the housing takes 30 years rather than a decade? Note that there's evidence that Atlantic Yards would contribute to gentrification rather than alleviate it.

Bloomy right?

“Isn’t the Bloomberg administration right?” David asked in conclusion. Even if the economy turns down, “we should get as much decided for the future as possible,” so when the economy improves, we’ll be ready to take advantage of it. He pointed out that, in past economic downturns, jobs had left the city, and there wasn’t enough space when they returned.

(Atlantic Yards, however, is not so much about jobs, since the initial plan for four office towers around the arena was scrapped.)

Heym, Thompson and fellow panelist Rafael Salaberrios, president of the Bronx Overall Economic Development Corporation, gave unequivocal yeses. Vitullo-Martin offered, “Yes, but we need that light rail.”

Lander said, “Better to get it right than to do it quickly,” noting that infrastructure issues are now on the table and pointing out that, with Hudson Yards, “they got it right the second time.”

Not everyone on the West Side agrees, but in Brooklyn, a review of Atlantic Yards might at least get the issues out in the open.

What’s next?

I caught up with Thompson afterward. Given that the project was approved under the assumption that the benefits would arrive in ten years, rather than two or three decades, I asked whether he thought it deserved a new review, as some in Brooklyn contend.

“The first thing, we’d like to define it and fully understand it,” he replied. “What is the project going to be over the next two, three, five, ten years? I think that’s the course that we’d like to do. People would like to go back and re-trigger things and look at it again--I don’t know that we should do that.”

So what’s the process to define it, I asked.

“Government has an obligation,” he said, “to fully make sure” what the short- and long-term goals of the project are and make them public.

That, I pointed out, might be complicated by the news I’d reported that morning that the developer had the city’s permission to build a much smaller Phase 1 than previously anticipated, and over 12 years.

Yesterday, Bruce Ratner said in a statement denying rumors about talks with New Jersey investors, "We are focused on breaking ground on the Barclays Center in Brooklyn later this year and building all of Atlantic Yards, nothing else."

Expect him to be asked to define what "all of Atlantic Yards" actually means.

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