Wednesday, September 17, 2008

In appeal of case challenging AY environmental review, some justices skeptical of state’s blight claim

Was it déjà vu? As with the May 2007 oral argument in the state lawsuit challenging the Atlantic Yards environmental review, the plaintiffs in the appeal yesterday exited optimistically, with a sense that the court—in this case, at least two of five appellate judges—was sympathetic toward their argument. Again, representatives of developer Forest City Ratner and the Empire State Development Corporation (ESDC), along with their clutch of attorneys, exited looking none too cheery. [They've been happier on other occasions.]

Notably, when a judge skeptical of the blight claim asked whether environmental consultant AKRF had ever not found blight when asked to look for it, the ESDC attorney sidestepped the question.

Then again, state Supreme Court Justice Joan Madden, when it came time to rule last January, came out squarely on the side of the defendants, so the questions in court hardly predict a final ruling. Still, even a 3-2 decision upholding Madden means an automatic appeal to the Court of Appeals, the state’s highest court, potentially stringing out the case even longer.

Blight the focus

While the lawsuit covers an enormous area of ground, including the definition of a “civic project,” whether a ten-year project buildout was realistic, and whether the ESDC properly studied terrorism, among other issues, the final round of appeal papers focused mainly on blight.

Indeed, the argument yesterday--which lasted less than 30 minutes at the Appellate Division, First Department, located at Madison Avenue and 25th Street--centered exclusively on blight. (The judges had allotted only 15 minutes, so they were clearly interested in the issue.)

(Photo from NYC web site.)

Jeff Baker, attorney for the 26 neighborhood and civic groups on longtime environmental counsel to Develop Don’t Destroy Brooklyn (et al.) v. Empire State Development Corporation (et al.), began by describing how the ESDC has “extraordinary powers” to override zoning, but Justice John Sweeny cut him off, saying that the panel understood the background.

“I think everyone agrees” that the three blocks—actually 2 1/3 blocks—below the railyard aren’t blighted, Sweeny said, indicating that the argument should address the scope of the blight claim. (He’s an appointee of former Gov. George Pataki.)

“I appreciate you” saying that, responded Baker (right), obviously not considering it his role to clarify that the ESDC did declare those blocks blighted.

Sweeny noted that condo conversions had been occurring on the blocks at issue. “Are we not bound by the fact they are entitled to consider the entire project area?”

Baker said he wanted to make an important but narrow distinction: that in a land use improvement project, under the law establishing the ESDC, the area has to be “substandard and insanitary.”

There were three recent condo conversions on the block “facing the supposed blighting influence,” he said, indicating the Atlantic Arts building on Pacific Street between Fifth and Sixth avenues, the Spalding Building at Pacific Street and Sixth Avenue, and the Newswalk condo on Pacific Street between Sixth and Carlton avenues. (The latter actually was excluded from the project footprint.)

(At right, the ESDC's blight map.)

What’s the test?

“Are you saying it’s dispositive,” asked the presiding justice, Jonathan Lippman, that the presence of the three condos takes the site out of consideration.

“It’s certainly indicative,” Baker responded.

“What’s the test?” queried Lippman, another Pataki appointee, who came up through the system with ties to both parties.

Sweeny pointed out that Madden’s decision agreed the site as a whole was substandard.

Baker said that state law required that a “substandard and insanitary” area has another test, that it “tends to impair redevelopment.”

(The official text: “the area in which the Project is to be located is a substandard or insanitary area, or is in danger of becoming a substandard or insanitary area and tends to impair or arrest the sound growth and development of the municipality.”)

Lippman asked if that was the case.

“The problem is: they never analyzed it,” Baker responded, gathering steam, hearkening back to an argument he made in court before Madden, an argument buttressed by the recent surfacing of a document (a Contract Scope for the Blight Study) that suggested that consultant AKRF planned to study market trends around the project site, but either did not do so or never revealed the details.

“You don’t think they considered those three?” Lippman asked.

“There was no substantive analysis,” Baker said, noting that the environmental review stated that, because the Vanderbilt Yards had a blighting influence, the project site can’t be limited to the railyard, since that would leave the southern blocks blighted.

Effect of a reversal

Justice Luis A. Gonzalez asked a practical question: “if we were to determine it wasn’t blighted,” then what?

The ESDC would then have to fix the errors in its analysis, Baker said. Ultimately, he suggested, “we’d come up with a project better suited” to the neighborhood, limited to the Vanderbilt Yard.

“What if it does meet the definition of blight?” Gonzalez asked.

Then the project goes forward, Baker said. “We submit they can’t" make the determination of blight, he said, noting that the ESDC "never included the market study.” (The judges did not say anything about the ESDC's contention that inclusion of the AKRF Contract Scope in the record was improper, so more likely than not it passed muster.)

Lippman suggested that in cases challenging an environmental review, reasonable minds could disagree. “You think they acted arbitrarily?”

Baker said yes, that the project sponsors predetermined the site, with no mention of blight, and the Blight Study never looked beyond the project footprint. Why was part of Block 1128 included—100 feet east of Sixth Avenue (right), between Dean and Pacific streets? Because the developer needed it, he said.

“That was not reasonable minds disagreeing,” Baker said. He added that, in legal papers, FCR and the ESDC could not even agree on what was blighted. Yes, he said, the Blight Study was, “per se, irrational and arbitrary.”

“We disagree strongly” with many of the determinations made by the ESDC, he said, but acknowledged to the judges that such decisions are tough to challenge as arbitrary. The blight issue, he said, was different.

ESDC response

ESDC attorney Philip Karmel (right) started aggressively, pointing to Baker’s statement that there was no mention of blighting conditions on the three blocks; he said that was “totally false,” noting that pages 311-483 of the record specify description of the lots.

(I’m not sure that’s a precise characterization of Baker’s remarks, but my notes are fuzzy.)

Lippman intervened. “What about [Baker’s] argument that you can’t possibly” find blight, given the three condo projects, he asked.

“There are 50 lots in those three blocks,” Karmel responded. The condo buildings account for two of those lots.

“So what,” Lippmann said dismissively.

It’s “a relatively small area,” Karmel responded.

Judicial skepticism

Justice James Catterson intervened skeptically, asking if it was possible to “measure where an area is blighted by mere reference to area?” What, he asked about issues like value or the sites’ characteristics?

Karmel said the decision was at the discretion of the agency.

“Has AKRF ever studied an area it didn’t find to be blighted?” Catterson asked, drawing muted titters from the audience. (He’s another Republican appointee of former Gov. George Pataki.)

Karmel didn’t answer the question directly, but said, “We are relying on cold hard facts.”

Catterson wasn’t buying it: “If there’s all of a sudden new development in a poor neighborhood, why would we characterize it as blighted?”

Karmel tried to point to the blight characteristics found in the study. Catterson, who wrote the majority opinion upholding a judge’s decision that found a conflict of interest in AKRF’s relationship to Columbia University, said that “Columbia has hired the same consultant” and found the “same blight.”

“The facts in the blight study are objective,” Karmel insisted.

“You don’t seriously argue that the blight study is solely an objective conclusion?” Catterson asked.

“The facts in the study are objective,” Karmel repeated. “The decision goes to the agency’s discretion.”

“You argue the fact that we have three [condo buildings] is not dispositive,” Lippman said, summarizing the argument. “You’re saying it’s within your discretion and not arbitrary.”

Karmel clarified that the largest of the three condo conversions, Newswalk, is not within the project footprint. (At right, the Spalding building.)

“But the bottom line,” Lippman said, is that “you took into account those new buildings and still found it blighted,” while Baker argues that “vibrant commercial development” is ongoing.

Gonzalez asked whether failing to take account of two of 50 lots could constitute abuse of discretion.

“It’s clearly not an abuse of discretion,” Karmel responded. “The agency has the discretion to look at the area as a whole.” He noted that the record acknowledged the presence of the condos.

“You’re saying you just came to a different conclusion,” Lippman said. “The other argument is you acted arbitrarily.”

Timing and momentum

When, asked Gonzalez, were the two condos converted.

Fairly recently, Karmel allowed.

Gonzalez wondered whether it was reasonable to conclude that the development would continue.

“Your honor, it’s not reasonable,” Karmel insisted.

“Experience shows us, that’s the start of momentum,” mused Gonzalez, a resident of the Bronx. “In essence, the area is not being given a fair chance to demonstrate” how it’s improving.

The buildings, Karmel said in a not-particularly-helpful clarification, were “not new condos, just conversions” of old buildings. (They were new housing units; the buildings previously were industrial or warehouses.)

“It’s improving,” Gonzalez said.

What’s the burden?

The legal point, Karmel said, is that the area is substandard or unsanitary. “It is not part of the burden to prove, but for ESDC’s intervention, the area would remain” the same.

Actually, in the Response to Comments Chapter of the Final Environmental Impact Statement, the ESDC insisted that the area would be stagnant:
The project site is not anticipated to experience substantial change in the future without the proposed project by 2016 due to the existence of the open rail yard and the low-density industrial zoning regulations.

Rebuttal

On rebuttal, Baker noted that the condo conversions occurred in 2001 and 2002, and that the announcement of the project in 2003 froze development around the project site, even though a project had been proposed for Block 1129, the block with the Ward Bakery, bounded by Carlton and Vanderbilt avenues and Pacific and Dean streets.

Baker said that the petitioners disputed many of the individual designations of blight made by the ESDC, such as “underutilization or specious building code violations.” The gas station at Dean Street and Flatbush Avenue, he said, was considered blighted because of underutilization, but “you don’t take underutilization without context.”

“This is the only gas station in Prospect Heights,” he said. (That’s incorrect, given another gas station at the other end of the project footprint.)

Clarifying the issue

Lippman, trying to clarify Baker’s argument, suggested that the petitioners are charging that the ESDC’s analysis was arbitrary and lacked any analysis.

Baker easily followed up, saying the state had an obligation to look at market trends. “The reason you alleviate blight,” he said, is “because it’s infringing on the marketplace.”

Gonzalez asked if the ESDC took into account proposals for further development.


There’s no indication they evaluated it, Baker responded.

“Is it your view that the blight designation,” Lippmann asked, “becomes a self-fulfilling prophecy,” given that development stops?

Yes, Baker said; such comments had been made in the record.

With that, time ran out, and the post-mortems began.

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