Tuesday, September 30, 2008

Star-Ledger: Goldman Sachs mum on AY arena financing

From the Newark Star-Ledger tonight:
Four months ago, Goldman Sachs assured all financing would be in place for a $950 million professional basketball arena in Brooklyn by today.

Bruce Ratner, owner of the New Jersey Nets and developer of the ambitious, $4 billion Atlantic Yards project, said he was "inches away from completing the deal."

That was before prestigious investment firms started to fall and credit markets went into full-scale panic, triggering a financial crisis on Wall Street unseen since the Great Depression.

Tuesday, a spokesman for Goldman Sachs offered only a "no comment" when asked about the financing for the nearly $950 million arena, fueling persistent doubts about the viability of Ratner's plan, which has been systematically downscaled and delayed since it was first rolled out more than four years ago.

Tax-exempt bonds?

But the big question, as a lawyer quoted by the newspaper says, is whether tax-exempt financing will be available, since it remains attractive in this investment climate. The Internal Revenue Service has been asked by the city and state to grandfather in arena financing under more lenient rules than proposed; an IRS official said regulations would be issued "soon."

Meanwhile, Rep. Dennis Kucinich (D-OH), chair of the Domestic Policy Subcommittee of the Oversight and Government Reform Committee, has asked the IRS and Treasury Department to desist from approving any more sports facility deals based on PILOTs (payments in lieu of taxes), pending further clarification of their policies, a subject of an ongoing subcommittee investigation.

Arena, 2012? The Nets likely have four more seasons in New Jersey

Bruce Ratner admitted yesterday that a state appeals court decision not to dismiss the pending eminent domain lawsuit "may" delay an announced December groundbreaking for the Atlantic Yards arena by six months. It almost certainly will do so--and could delay it even longer.

That means that the long-promised 2010 arena opening, already discredited by Ratner's own words (after promises of openings in previous years went by the wayside), is impossible.

Also, though Ratner previously told investors the arena would open in 2011, it's highly unlikely the arena would open that year. An early 2012 opening seems more likely. Given the difficulty of moving a team in mid-season, that suggests, in the best-case scenario, that the New Jersey Nets would not become the Brooklyn Nets until the fall of 2012.

That means four more seasons in the creaky Meadowlands--2008-09, 2009-10, 2010-11, and 2011-12--unless there's a move, say, to Newark.

Looking at the timetable

Let's do the math. An oral argument in the eminent domain case next March means a decision, perhaps, by May. If the plaintiffs lose, they will try to appeal, which, even if denied, would add--I speculate--another month.

Keep in mind that the pending case involving the project's environmental review might linger, and/or that other legal challenges would emerge. However, let's assume that all lawsuits would be wrapped up in the six months Ratner mentioned, by the end of June 2009.

That would leave just 28 months to build an arena to open (late) by November 2011.

Yes, arenas often take 24 months to construct, as noted yesterday in the Bergen Record.

Not this one. Ratner told investors in June that "it will be about two and a half years to build our arena." That suggests, in a best-case scenario, an arena opening in January 2012.

But even Ratner's 30-month scenario may be too optimistic. As I wrote last month, Chapter 17 (Construction Impacts) of the Final Environmental Impact Statement (FEIS) indicates that the arena would take "less than three years" to build or, by my calculations, 32 months.

That would bring us to March 2012, nearly to the end of the 2011-12 season. Maybe the Nets' four-year deal with Vonage Holdings at the Izod Center really will go the distance.

Barclays claims support

As noted in the Times report (published only online), Barclays Capital reaffirmed its sponsorship and naming rights deal for the arena, which has been reported as $20 million a year over 20 years--money the developer needs to repay the arena bonds, should the IRS give the go-ahead for tax-exempt bonds.

Only one news outlet (the Post) pressed Barclays on whether it would renew or modify its contract with Forest City Ratner, which requires financing to be closed by the end of November. (The answer: Barclays skirted the question.) It's highly unlikely that a financing deal could close while court cases are pending.

Could Barclays, which bought part of Lehman Brothers for a song, have leverage to renegotiate a deal with Forest City Ratner? If so, that might leave the developer asking public agencies for even more money to support what Brooklyn Borough President Marty Markowitz again called an "economic engine."

Monday, September 29, 2008

Groundbreaking, 2008? Eminent domain case survives motion to dismiss; hearing no sooner than March

The chances for anything more than a faux Atlantic Yards groundbreaking in 2008 have now plummeted, after an attempt by the Empire State Development Corporation (ESDC) to short-circuit the pending state eminent domain case has been denied by an appellate court. That means an oral argument would occur no sooner than March, with a decision some months after that.

The decision denying the ESDC's motion to dismiss, apparently on procedural grounds, doesn’t give the plaintiffs the edge in a long-shot case similar to the one that already failed in federal court, which was seen as more hospitable to such a challenge. But it does undermine the unrealistic timetable regularly promoted by developer Forest City Ratner and complicates the arena naming rights deal with Barclays Capital.

FCR has pledged multiple times that a groundbreaking would take place in November or December, notwithstanding the likelihood that pending legal cases and the unavailability so far of tax-exempt bonds would jeopardize the project.

FCR could still hold a groundbreaking on land it already owns, but it can’t raise funds to build the arena until the lawsuits are cleared. The pledge of a 2008 groundbreaking likely was keyed to the requirement that the $400 million Barclays deal requires arena financing to be closed by November--seemingly an impossibility now.

Two court cases

To make the groundbreaking more legitimate, the developer may have been betting that favorable court decisions in two major cases, even if they could be appealed, would indicate more certainty about the project's future.

In an appeal of a judge's decision dismissing a case challenging the project's environmental review, a panel of the Appellate Division, First Department, heard an oral argument on September 17. A decision might emerge before the end of the year. At least two of five justices expressed skepticism in court, and even a 3-2 victory by the defendant ESDC would guarantee an appeal; then again, comments from the bench do not necessarily signal a result.

In the case challenging eminent domain, which begins in appellate court, the ESDC tried to short-circuit the result by filing a motion to dismiss rather than a motion in opposition, which would presage a further exchange of legal papers and then an oral argument.

Last week, in a decision dated September 25, a four-judge panel of the Appellate Division, Second Department, unanimously and without explanation denied the motion, meaning that there will be oral argument--and ensuring more legitimacy to the result than had the case been dismissed on motions alone.

"The seizure of my clients' homes and businesses is unconstitutional. We are pleased that the Court has recognized the merit of our case and will now hear the arguments in full," said lead attorney Matthew Brinckerhoff. (Here's a press release from Develop Don't Destroy Brooklyn, which has organized and funded both major lawsuits.)

New timetable

That moves back the timetable for this case. The ESDC must file its response by October 15, leaving the petitioners--9 residential and commercial tenants and property owners--until January 15 to file their brief, The ESDC would have until February 15 to file its answer, and petitioners would have to file the final legal papers by February 25. Oral argument would be conducted sometime after that.

The court dismissed the ESDC's motion without prejudice, meaning that the same arguments can be raised in legal briefs that are discussed in court.

Given that most of the plaintiffs' case was dismissed in federal court, and the main new claim has never been tested in court, the defense has the edge. The arguments over the motion to dismiss described below engage the crux of the case.

Note that the ESDC filed two motions and the petitioners one, so the state has the last word so far in arguing about the case details.

Filed too late?

The ESDC, in its motion to dismiss, argued that the plaintiffs were a year and a half late, given that state law requires challenges to eminent domain be filed within 30 days after the project was approved--meaning January 11, 2007. The ESDC noted that a separate case challenging the Eminent Domain Procedure Law (EDPL), involving 13 tenants in the Atlantic Yards footprint, had already been dismissed in state court.

“After striking out in federal court, Petitioners brazenly seek to have this Court review once again the previously confirmed Determination and Findings,” the ESDC contended. “This Court should not countenance Petitioners’ transparent attempt to further delay this important public project.” The ESDC says that the EDPL was intended “to have a single exclusive and expedited judicial review.”

(Critics of the EDPL want to modify it, pointing at a State Senate hearing earlier this month that the limited amount of time for an argument in court and the inability to call witnesses effectively denies condemnees a fair fight.)

”[I]f Petitioners are allowed to proceed in this Court at this time, it will create the precedent for all future challengers of public projects to first bring their EDPL challenge in federal court, and then, if unsuccessful there, to later bring the challenge in the Appellate Division," the ESDC argued. "Public projects will routinely be delayed for years.”

(Whether AY is a “public project" is a matter of debate.)

The ESDC noted that the initial federal court complaint, filed in October 2006, asserted only violations of federal constitutional rights, but an amended complaint, filed 1/5/07, added a fourth cause of action, against ESDC under state law. A federal judge dismissed the federal claims with prejudice and the state claim without prejudice.

The petitioners, in their legal response, charged--successfully, it seems--that the ESDC’s motion was out of order: “ESDC’s new tack is to unilaterally grant itself a preference and accelerate the determination of the merits of this action.” They reminded the court that the state law claim had been dismissed without prejudice.

Public purpose

"[T]he federal district court determined that numerous public purposes undeniably would be achieved by the Project,” the ESDC said in its motion, citing tax revenues, job creation, blight removal, affordable housing, transit improvements, and a sports arena.

The new lawsuit, it should be noted, adds additional evidence regarding the sequence of the project and the city’s willingness to accept the proposal from a private developer rather than market valuable property.

The petitioners’ response pointed out that the state appellate court review requires reviewing the record, including the hearing transcript and briefs, and will conduct oral argument. Unmentioned, though perhaps implied, is that this would differ somewhat from the evidence and argument presented in the federal case.

Given that the takings and public use provisions of the state constitution mirror that public use clause of the Fifth Amendment, the package of claims, the ESDC argued, should be barred by the doctrine of collateral estoppel, which precludes re-litigation of an issue clearly raised in a prior action, no matter the tribunal.

In response, the petitioners said that's wrong, because the case contains state claims not addressed in federal court. They made an important semantic argument: "Contrary to Respondent’s intimations, the federal court did not 'find' that the Project’s purpose is public, which would be the only legitimate basis for even arguing that collateral estoppel might apply. There was no fact-finding of any kind. It did not have to be that way. If Respondent were as eager for an expeditious ruling on the merits as it now claims to be, it could have sought a merits based ruling..."

(Federal Judge Nicholas Garaufis wrote, “Because Plaintiffs concede that the Project will create large quantities of housing and office space, as well as a sports arena, in an area that is mostly blighted, Plaintiffs’ allegations, if proven, would not permit a reasonable juror to conclude that the 'sole purpose' of the Project is to confer a private benefit. Neither would those allegations permit a reasonable juror to conclude that the purposes offered in support of the Project are 'mere pretexts' for an actual purpose to confer a private benefit on FCRC.”

So while he didn’t find a public purpose, he did find that the plaintiffs hadn’t raised a sufficient claim to argue that the purpose was private. Then again, his conclusions could be challenged, as I wrote.)

Disagreeing the the ESDC, the petitioners argued that the state constitution is in fact more protective of property rights than its federal counterpart, and that was never presented to the federal court.

(That begs the question: why file first in federal court? Because there was the potential opportunity to gather documents via discovery and question witnesses on the stand--both unavailable in state court. Though the plaintiffs did not get to discovery, hearings before Garaufis and Magistrate Judge Robert M. Levy likely allowed more discussion of the merits of the complaint than would be available before the State Appellate Division.)

The ESDC argued, "If Petitioners are permitted a second bite at the apple under these circumstances, they must at the very least be bound by the adverse determinations the federal court (Petitioners’ own preferred adjudicative body) made on issues dispositive to their constitutional claims--claims which, even as re-crafted under the New York Constitution, are materially identical to those presented in the prior federal litigation."

Article 18 debate

The petitioners’ additional and novel claim turns on Article 18, section 6 of the State Constitution, which deals with housing and slum clearance, which provides that no loan or subsidy shall be made to aid any project unless the project contains a plan for the remediation of blight and the “occupancy of any such project shall be restricted to persons of low income as defined by law and preference shall be given to persons who live or shall have lived in such area or areas.”

The defense, however, says Article 18 must be understood as a whole, and that section 1 addresses housing “for persons of low income as defined by law, or for the clearance, replanning, reconstruction and rehabilitation of substandard and insanitary areas, or for both such purposes.”
(Emphasis in ESDC papers)

“Since the powers are separate and distinct, the Legislature may exercise one power (blight eradication) without simultaneously exercising the other (low rent housing for persons of low income),” the ESDC argued.

Section 6 addresses financial aid for a project and, while the word “project” is undefined in Article 18, it must, says the ESDC, apply to a low rent housing project rather than a project like Atlantic Yards, which serves multiple purposes. Should the petitioners’ argument prevail, the ESDC contends, all sorts of urban renewal projects receiving state funds would have to be low income housing projects, an interpretation that “would lead to absurd results.”

The petitioners pointed out that a “land use improvement project,” as the ESDC has designated Atlantic Yards, must be in accordance with Article 18. They argue that section 6 ties together the goals of eradicating blight and constructing low-income housing. They cited the language of one drafter at the state’s 1938 Constitution Convention: “the purpose is to tie up slum clearance and housing projects.”

The debate rests on different interpretations of Article 18, which can seem murky. As the ESDC points out, the first section, section 1, addresses low-income housing or slum clearance, suggesting different tracks. By contrast, the petitioners cite the final section, section 10, which seems more limiting; it states that “nothing in this article contained shall be deemed to authorize or empower the state, or any city, town, village or public corporation to engage in any private business or enterprise other than the building and operation of low rent dwelling houses for persons of low income...”

If the petitioners prevail, however, it would imply that some previous ESDC projects were invalid. A law professor interviewed by the Brooklyn Paper thought that was unlikely.

Indeed, the ESDC argued that section 6 “has no bearing on the Atlantic Yards development, since that development is not a low rent housing project,” adding, “By reading section 6 without regard to any other provision in Article 18, petitioners have come up with an interpretation that effectuates one purpose (the provision of housing for persons of low income) while frustrating the other (the eradication of blight)."

In fact, stated the ESDC, under this interpretation “all seven thousand [actually 6430, though 6860 when the lawsuit was first filed] residential units in the Atlantic Yards development would have to be set aside for persons of low income.” The “absurd “ consequence would strip the State of its power to fund projects on blighted property.

Finally, the ESDC charged that the petitioners “cherry pick” quotes from Constitutional Convention delegates, without recognizing that the delegates referred to a “project” as low-rent housing for former slum dwellers--not any development in a blighted area.

Low-income housing

The petitioners charge, not so accurately, that the project “does not provide housing for ‘persons of low income’ at all, much less a preference for the persons of low income displaced by the project.”

Some 900 of the 2250 housing units would be designated as low-income (under 50% of Area Median Income, though the area encompasses wealthy suburbs). Then again, their delivery is hardly assured. Some of those displaced, as long as they sign an agreement that might leave them vulnerable should the project not be built, would be guaranteed places in the project.

As for the ESDC’s claim that the petitioners’ argument leads to absurd results, the petitioners responded, “The results are only absurd in Respondent’s bizarre world where the area condemned for the Project as 'blighted' has no actual 'blight,' and 'affordable housing' is not affordable to low-income people.” (This is apparently a reference to the fact that, as noted by BrooklynSpeaks, though “the proposed project will displace families earning less than $21,000 annually, none of the affordable units currently proposed are affordable to those families.”)

In the response, the ESDC stated, “Petitioners ignore the fact that affected residents can be protected without transforming all state-funded projects within blighted areas into low-rent housing project. In fact, the Atlantic Yards development fully provides for the suitable relocation of all persons living within the development footprint. This is the precise issue previously litigated in this Court.”

(The term “fully provides” is debatable. The Court found there was a “feasible” relocation plan for rent-stabilized tenants who lose their homes, but, as their attorney pointed out, the services of a real estate broker, moving assistance, and a $5000 payment would hardly guarantee similarly affordable housing in today's real estate market.)

Expect all these arguments to be amplified as the case moves toward its day in court.

Sunday, September 28, 2008

"Economic engine"? Markowitz repeats AY boilerplate, fails to check facts

It was inevitable, wasn’t it, that Atlantic Yards boosters like Brooklyn Borough President Marty Markowitz would promote the project as a solution to the current economic downturn. It’s not inevitable, however, to take their rhetoric at face value.

(No Land Grab's Lumi Rolley suggests Markowitz is channeling "Drill baby drill" into "Build baby build.")

The Courier-Life reported this week, in an article headlined, not without wit, "The market be damned!":
"The recent drop in the stock market and weakening of the American economy underscores the importance of moving ahead with projects like Atlantic Yards-which will not only create union jobs and affordable housing in Downtown Brooklyn, but also represents the kind of investment magnet that Brooklyn and New York City need right now," said Markowitz.
"It is critical that in the next few years, we plan for Brooklyn and New York City's future, and a catalyst for job creation and growth like Atlantic Yards can be the kind of economic engine that will power our borough through lean times," he added.

Markowitz’s “economic engine” quote comes from the Atlantic Yards web site and, while it’s true that any project creates temporary construction jobs--Atlantic Yards would be 1500 a year, but note that the choice is not between AY and nothing--and a growth in residents creates retail demand, the economic benefits of the project, compared to costs, are extremely murky.

We know the arena might be a loss. We know that Forest City Ratner's "economic engine" quote is attached to the dubious Ratner-commissioned study by sports economist Andrew Zimbalist, who counts taxes from residents of new housing, while more legitimate studies--including all those by government agencies, however flawed--count taxes not from residents but from new jobs.

(Click on graphics to enlarge)

Moreover, the most significant factor driving tax revenues is commercial space--remember, a drop in planned commercial space cut projected AY tax revenues by nearly one-third. Meanwhile, as Forest City Ratner cold-calls to find an anchor for the unscheduled Building 1 office tower, the commercial office market in New York has tanked.

As Michael Stoler wrote September 25 in the New York Sun:
An owner of downtown office buildings, who prefers not to be identified, said, "Leasing had dried up over the past four months. Today, the market is dead with little or no activity." If AIG consolidates its offices in Lower Manhattan, a vast amount of space will join the inventory of available space.

Jeffries and James

The Courier-Life checked in with Assemblyman Hakeem Jeffries, always cagey in his measured support for the project, and City Council Member Letitia James, a project opponent. The article quotes Jeffries:
"It [the project] obviously is important for projects that will create jobs and housing for working- and middle-class folks to move forward in these difficult economic times. However, everyone is going to have to sacrifice as state government deals with a ballooning budget deficit and that includes multi-million-dollar development companies," said Jeffries.
"My focus continues to be in making sure the developer's commitment to building affordable housing remains firm and that the state government assists in making that commitment a reality," he added.

So if Forest City Ratner has to sacrifice, that would suggest no additional subsidies, as the developer has indicated it “needs.” Then again, Jeffries’s use of the term “state government assists” rather than “assures” hints at a willingness to direct subsidies.

The newspaper quoted James:
"You can have both [economic development] and do a project consistent with the community wishes and also provide jobs," said James. "It's not an either/or proposition."
James said she remains a supporter of the Unity Plan, which her office provided some funding to create. The plan calls for a smaller, mainly residential project over the Vanderbilt Yards without an arena.
James said there was no developer in place for the plan, but developers could be found
through a competitive request for proposals [RFP] process.

There’s certainly an argument that a smaller project, cut into multiple parcels, could move forward faster, and thus deliver the benefits of housing, retail, and community space, even if the quantity is lower than that projected (but not guaranteed) in AY.

But economic development would more likely be manufacturing than housing. The former Pfizer factory in Williamsburg, closed last year, is slated to become housing, including affordable housing. Markowitz isn't calling it an economic engine.

BUILD president speaks

The Courier-Life's Stephen Witt returns to one of his favorite sources, Brooklyn United for Innovative Local Development’s (BUILD) president James Caldwell, who, perhaps most notably, in an August 2005 article blamed Develop Don’t Destroy Brooklyn spokesman Daniel Goldstein for not having his organization solve the homeless problem at the MTA’s Vanderbilt Yard. (Here’s Goldstein’s deft response.)

That article quoting Caldwell, in a stroke that can only be described as brutally weird, was the only newspaper article--no hearsay articles about market trends, of course--included in the Empire State Development Corporation’s dubious Blight Study.

Caldwell is quoted in the current article as saying the project will bring tourists to the area and will help t-shirt vendors--essentially trickle-down:
"Even before the economy went down, people from our community were having a very tough time," said Caldwell. "The CBA will play a beneficial role to helping our people get some of these positions stemming from the Atlantic Yards project," said Caldwell.
Caldwell said many people in the area did not even know about the Unity Plan, let alone be behind it.
"It [Unity Plan] will not create as many jobs and it was minus an arena. All they had was architects that put together models and had no money lined up," said Caldwell.

“All they had was architects that put together models and had no money lined up.” Sounds a bit like Building 1.

The last word: FCR

In the article, the last word goes to the developer's paid flack:
Meanwhile, Forest City Ratner officials last week reiterated that the company remains steadfast that it can close on, get financing for and break ground on Atlantic Yards by year's end.
"We've said for sometime that it's obviously a tough market to build in, but FCRC has been very aggressive and successful in raising capital for projects, and remains completely confident about Atlantic Yards," said FCRC spokesperson Joe DePlasco.
DePlasco said among the remaining obstacles are two more appeals to court cases to stop the project, and an expected United States Treasury Department ruling on whether tax-exempt bonds can be used to finance the $950 million Barclay's Center Arena. "It is a significant investment in Brooklyn and the city, and in an [economic] environment like this it is even more important," said DePlasco.

An investment “in Brooklyn”? If “Brooklyn” were the owner, maybe--otherwise the private developer reaps most of the benefits.

DePlasco’s confidence should be taken with a large grain of salt. Remember, he said in 2004, “There’s no reason to think the team is not moving to Brooklyn for the 2007 season."

Saturday, September 27, 2008

In tale of Giuliani influence, insight into the flexibility in size of affordable housing units

Yesterday, the New York Times reported on a new blog, Rudy Veritas, by Rudy Giuliani's ex-aide, Russell Harding, who ran the New York City Housing Development Corporation (HDC) and just happens to be a felon (embezzlement, child porn) recently released from prison.

One of the tales, which so far can't be independently verified, regards Harding's role in getting Judith Nathan, the girlfriend and future wife of the still-married Giuliani, an Upper East Side apartment at below-market rent. Harding's post is interesting not merely because of the favor offered, but in the insight into how much flexibility the city allows regarding the size of apartments designated as affordable housing.

Market-rate units are bigger

Harding's tale involves the 80/20 program, involving 80% market-rate units and 20% low-income units, which more closely resembles Forest City Ratner's project at 80 DeKalb Avenue, rather than the Atlantic Yards project, for which the rental towers--though not the ones containing condos--would contain 50% market-rate, 30% middle- or moderate-income units, and 20% low-income units.

As I wrote, though the state Housing Finance Agency requires that 20% of the units be affordable, it requires that only 18% of the floor area be devoted to those units, thus allowing for somewhat smaller units. For 80 DeKalb, FCR plans to devote 18.6% of the floor area to affordable units.

For an earlier incarnation of Atlantic Yards, as I wrote 7/15/06, the affordable units, at an average of 675 square feet, would represent about 33% of the total number of units but only 22% of the housing square footage. Now, the 2250 units would represent 35% of the 6430 total units, and, at 675 sf, they'd represent about 24% of the 6.79 million square feet of housing.

Now that doesn't necessarily mean that the market-rate housing would make up the entirety of the remaining housing square footage--it's not clear to me how common spaces are treated.

Still, it strongly suggests that market-rate housing take up a disproportionate share. And, as Harding's tale shows, government officials may have some impact on the amount of that share. In other words, it's negotiable--an issue worth watching if and when the HDC provides bonds for the first affordable housing tower the developer plans.

Now, the Bloomberg administration appointee running the HDC, Marc Jahr, is a professional in the field, rather than a political appointee like Harding. On the other hand, Jahr, at least in one press report, seemed curiously unconcerned about the potential shortfall in housing bonds for Atlantic Yards. That suggests that AY would be a political priority.

The negotiable size of apartments

Harding writes on his blog:
The person I reached out to was Jeff Blau, President of the Related Companies. HDC and Related had together produced a number of buildings as part of the federal government’s 80/20 housing program.

In exchange for receiving lucrative triple tax-exempt financing, the developer of an 80/20 sets aside 20% of his newly constructed luxury building’s units for low-income tenants. Manhattan is dotted with these buildings and almost no market-rate tenant knows that their neighbor is low-income and is paying a fraction of their market-rate rent.

I placed a call to Jeff and explained what I needed and where the request had come from within the parameters I had promised [Giuliani aide] Tony [Carbonetti]...

The difficulty for me with her living arrangement was that she had probably wound up living in a Related 80/20 building possibly financed with HDC bonds and even likely with a mortgage held by HDC. I never asked the address of where she lived just in case a reporter ever questioned any possible HDC connection. I could honestly say I had no idea where Judith Nathan lived. Having the Mayor’s girlfriend living in a government-sponsored building paid for with triple tax-exempt bonds, at a sub, sub market rate rent, having been negotiated by his appointee, would have been a scandal.

The further difficulty for me was that HDC was constantly involved in negotiating new 80/20 projects with Related. The inherent conflict in any 80/20 relationship is that the developer wants to devote as little of his building to the low-income tenants as possible. While the law states that 20% of the building’s units must be dedicated to low-income tenants, the developer can design the floor plans of the apartments to give the market-rate tenants, say 85% of the square footage, while the low-income tenants receive 15%. That is exactly what Jeff Blau was trying to do. The law is silent on that point. It is perfectly legal as long as 20% of the total units are dedicated low-income even if they are shoeboxes. That is of course if I were stupid enough to sign off on such plans.

Related was the most aggressive developer in trying to minimize square footage for low- income tenants.
It was getting harder and harder to drive bargains with Related while they were playing landlord to the Mayor’s girlfriend. I knew if Blau went to Carbonetti, a friendship I had subsequently brokered, I would lose.

Fortunately, we stuck by our guns on all matters. We never caved on any square footage issues and always made sure that the amenities in Related’s 80/20 properties were up to the same standards as our other developers. Nevertheless, I always knew we could lose the battle should Blau or Related’s Chairman, Steve Ross, decide to pick up the phone. Rudy would never, ever side with us over Judy’s landlord.

(Emphasis added)

Friday, September 26, 2008

Does AY "exist"? State judge dismisses lawsuit that challenged AY deadline and sought new hearing

A “smaller” lawsuit involving the Atlantic Yards project has been dismissed by a State Supreme Court justice, who rejected charges by tenants in two AY footprint buildings that the Empire State Development Corporation (ESDC) is violating a provision of state law that requires disposition of properties within a decade and should hold another hearing because the project has changed considerably.

As I wrote, during a hearing on the case in June, Justice Jane Solomon seemed skeptical of the main thrust of the argument made by attorney George Locker, who has filed two previous (and unsuccessful) cases on behalf of the 13 tenants, who live in two Forest City Ratner-owned buildings on Dean and Pacific streets. Her five-page decision (PDF) gave no credence to the petitioners’ claims, despite significant public doubts about the project’s timetables. Locker said an appeal would be filed.

(Develop Don’t Destroy Brooklyn has organized and largely funded two other pending cases, one challenging the use of eminent domain and the other challenging the legitimacy of the environmental review.)

Main goal of the case

The petitioners sought to annul the State Funding Agreement signed September 12, 2007 to the extent it permits the acquired property to remain undeveloped for a period of more than ten years--twelve years, actually, before penalties--and it to the extent it “purports to give [ESDC] the option to reacquire such property as remains undeveloped for four years,” according to the decision. This issue had not been raised in any previous case.

No standing

The ESDC, however, argued that the petitioners lack standing and failed to state a claim. Solomon noted that, in a prior case involving Locker’s clients, the Appellate Division did agree that petitioners had standing under Section 103 of the Eminent Domain Procedure Law (EDPL), which defines a “condemnee” as “the holder of any right, title, interest, lien, charge or encumbrance in real property subject to an acquisition or proposed acquisition.” However, the section of the EDPL at issue in this case (406), makes reference only to “fee owners” but not to “condemnees” or tenants, she wrote.

During the court hearing in June, Philip Karmel, the attorney for the ESDC, pointed out that the law says the condemnor would have to sell the property back to “the original fee owner”--which would not include the petitioners.

Abandonment questions

Does the language in the funding agreement violate EDPL 406? Solomon wrote:
The statute is focused on abandonment of the project, and subsequent disposition of the property to a private owner. There simply are neither allegations nor proof in petitioners' papers that the project is or will be abandoned, that the property will not be timely improved or that it is intended to be conveyed to a private user without giving the fee owner a right of first refusal.

In court, Karmel argued that the law applied only to projects in which the condemnor announced plans to acquire property in multiple stages. Regarding Atlantic Yards, ESDC “intends to acquire all property at once,” he said.

Has project changed enough for hearing?

The petitioners also wanted the court to require another public hearing, based on the law establishing the ESDC, because the project has changed significantly. Though Atlantic Yards, when approved in December 2006, was anticipated to take a decade, there’s no start date for Phase 1, and that the developer has 12 years from the delivery of property to complete that phase without penalty, and there’s no timetable for Phase 2, which would included 11 of 16 towers. “The bulk of the Atlantic Yards project, as far as the operative contracts are concerned, does not exist,” Locker argued in court.

Solomon, despite expressing surprise in the court hearing that eminent domain had not commenced despite “all of this publicity” about the project, dispatched the petitioners’ argument in one sentence:
Similarly, as argued by Respondent, there is no evidence that the challenged agreement is not consistent with the contemplated project and existing general project plan so as to bring into play the need for a public hearing.

In court, ESDC lawyer Karmel had said that further documentation would emerge, requiring the developer to use “commercially reasonable efforts” to move forward.

Solomon took no notice of the statement in court by ESDC co-counsel Charles Webb that condemnations would begin “in October or November of ’08,” a date that seemed unrealistic--and now seems even more unrealistic, given pending legal cases.

The "elephant in the room"

Locker commented yesterday, “There is an elephant in the room. It is a project that does not exist. Choose to see the elephant, and the legal reasoning follows. Choose to ignore the elephant, and you have Judge Solomon's decision.”

He added, “In a prior but unrelated decision, the Appellate Division ordered ESDC to hold a hearing when the project that it had proposed was changed. Judge Solomon avoided the hearing issue entirely by saying it's the same project. How come Bruce Ratner won't contractually commit to a ten year project, Phase II has no time limit, but Judge Solomon finds there's no evidence it's not the same project?”

“So we will appeal to the Appellate Division, and see whether the Appellate Division chooses to see the elephant in the room. Maybe by then, the Court will have decided that the area is not blighted,” he said, referring to the September 16 argument in the case challenging the AY environmental review. “We will also give the Appellate Division the opportunity to decide whether the project exists at all."

Locker also questioned whether the judge was correct regarding whether his clients have standing in the case, which is more of a stretch--and could preclude the appeals court from even considering whether the project exists.

The Brooklyn Paper says Markowitz "doth protest too much"

The Brooklyn Paper, following up on my article about Borough President Marty Markowitz's grievances about press coverage, editorializes that the BP "doth protest too much." Indeed, the Paper makes a strong case--even more than I did--challenging Markowitz's claims that the press has been too hard on him.

The newspaper cites four recent contracts to his “Best of Brooklyn” charity and that "conveniently amount to $24,999 each"--just short of triggering city oversight. Also cited is Markowitz's receipt of $900,000 from the mayor's office for his concert series and his receipt of donations from Atlantic Yards developer Forest City Ratner.

The Brooklyn Paper also asks why Markowitz won't discuss "the inner workings of the deal he has with the Courier-Life newspaper chain to publish his “Brooklyn!!” promotional publication. A Brooklyn Paper review discovered that publicity and printing are a huge part of Borough Hall’s discretionary budget — costs that could be a payback to the Courier-Life chain for its consistently positive coverage of Markowitz."

The editorial closes:
Markowitz can decry the press all he wants, but until he offers explanations, people will see him for what he really is: A man who hopes that the booming voice he uses to champion Brooklyn will drown out questions about what he’s actually doing and whom he actually serves.

Thursday, September 25, 2008

The Jane Jacobs Medals, Robert Moses, and the view beyond “Death and Life”

The awarding of the second annual Jane Jacobs Medals on September 8, sponsored by the Rockefeller Foundation, along with guest speaker Robert Caro, author of The Power Broker, prompted another inevitable round of blinkered debate--see the New York Times's CityRoom blog--about whether the stereotypical Jacobs approach or the Robert Moses approach is the solution to the city’s problems.

That dichotomy was echoed in a Times City Section profile the following Sunday about author Arthur Nersesian, who describes his conflict with his girlfriend:
“On the one hand, I see the great phallic master builder and she’s like, ‘No, it’s all about Jane Jacobs, the low-scale community builder,’” he said. “Maybe it really is a boy-girl thing. I don’t know.”

In comments on the CityRoom blog, some suggested we need a Moses to cut through NIMBYism. However, as Benjamin Hemric, a prolific commentator on Jacobs (including on this blog) observed, Jacobs’ work was much more about understanding cities and economies as systems, how they grow and thrive, what creates urban and economic stagnation and decline and what can be done to revive those cities and those economies that fail to thrive.

And Jacobs' concerns show up in even more stark relief this week, when we see the pitfalls of relying on an economy based on value more ephemeral than real.

Hemric also pointed out that Moses opposed the type of transportation projects for which some now seek a “Power Broker”:
When people say we can’t build big anymore, I think it’s important to look at the specifics: what big projects are people actually talking about and what is accounting for the delay (if any)? Many times the projects that are mentioned seem to be anti-city boondoggles or projects that are better left to the private sector, and the cry that “we can’t build big anymore” seems to be a red herring.

Caro’s cautions

Caro, in his remarks at the presentation of the Jacobs Medals, focused on the issue of the public sector: "Obviously it is the fundamental dichotomy the city faces. I wrote in The Power Broker, 'While Robert Moses may have bent the democratic processes of the city to his own end to build public works, left to themselves, these processes proved unequal to the building required. The problem of constructing large scale public works in a crowded urban setting when such works impinge on the lives of thousands of voters, is one which democracy has not yet solved.'"

"Today, 34 years after that book was published, democracy has still not solved that problem," Caro continued. "Can the city build great public works, the great public works that a modern city requires? And to this day, when we look back almost a century, only a single man, Robert Moses, with his overarching vision and his savage will, only that single man has been able to build such works, Can the city build such public works and still preserve and protect and create environments that will foster in the future the atmosphere of neighborhood, of community, that Jane Jacobs understood was so vital? Well, we’re going to be able to see for ourselves, in this current era of huge new construction, we will be seeing it rather soon, I think."

Yes, and no. The stalled Moynihan Station would qualify as a public work, as would the slowly-revived Second Avenue subway. So might a direct rail link to the two airports in Queens.

Atlantic Yards would not, since it is a public-private partnership with the private sector wielding enormous power, and, many would argue, qualifies under Hemric’s rubric of “anti-city boondoggles or projects that are better left to the private sector.”

Jacobs' The Economy of Cities

I was a guest at the event last year and this year; while in 2007 attendees received a copy of The Death and Life of Great American Cities, Jacobs’ first and best-known book, this year we received a copy of her second book, The Economy of Cities, which discusses how some cities grow and others stagnate.

Jacobs, in fact, considered that book her masterwork, according to a June 2001 interview with the libertarian magazine Reason: "If I were to be remembered as a really important thinker of the century, the most important thing I've contributed is my discussion of what makes economic expansion happen. This is something that has puzzled people always. I think I've figured out what it is."

"Expansion and development are two different things," she continued. "Development is differentiation of what already existed. Practically every new thing that happens is a differentiation of a previous thing, from a new shoe sole to changes in legal codes. Expansion is an actual growth in size or volume of activity. That is a different thing."

"I've gone at it two different ways. Way back when I wrote The Economy of Cities, I wrote about import replacing and how that expands, not just the economy of the place where it occurs, but economic life altogether. As a city replaces imports, it shifts its imports. It doesn't import less. And yet it has everything it had before."

What about Detroit?

In the book, published in 1969, Jacobs points to Detroit as an example of a city that has stagnated economically because it hasn’t diversified economically. New York, while clearly overdependent on the financial sector and without having accommodated the green manufacturing it will need, remains far from Detroit's fate.

So consider Jacobs a rebuttal to the statements, nearly 40 years later, from former Forest City Ratner executive Jim Stuckey, defending Atlantic Yards, in a book of oral history: "Unless the city steps up, unless the people step up and do this, then this city is a goner, it’s dead. It will become the next Detroit or Pittsburgh or Buffalo or other cities where people see there is no growth and decide to leave. If companies don’t have workers who can live in the city they are going to go to cities where they can get cheap labor."

As I pointed out, New York has no chance of becoming the next Detroit, a city based on one industry, with no public transportation, and which is not exactly the country’s cultural and financial capital.

Indeed, a new report report from the Fiscal Policy Institute, projects that Brooklyn will lose about 6,000 private-sector jobs through the first half of next year, according to the Times. However, Chamber of Commerce President Carl Hum didn't call megaprojects the solution, but rather sought Jacobsian diversity:
Mr. Hum said the chamber would use the findings to try to persuade city officials and banks to support the continued diversification of Brooklyn’s economy, especially by fostering the expansion of food makers and other specialty manufacturing. Although the manufacturing sector continued to shrink through the city’s strong recovery that began in 2003, about one-fourth of all the manufacturing jobs in Brooklyn are in niches, like baking and wood and metal working, that are adding jobs.

The question of where to place “workforce housing” is a pressing one, but it's a citywide challenge. As I pointed out, Jacobs wrote Death and Life in a time when the city was threatened by shrinkage, the auto, and wholesale clearance, so her book didn't anticipate accommodating growth fostered by the city’s revival and, not insignificantly, the decline in the dollars that makes a Manhattan apartment a potential second-home for so many of the world’s wealthy.

Not-so-welcome growth

There’s little in The Economy of Cities about the street ballet Jacobs described in Death and Life, but there’s one tart observation that has resonance in the Atlantic Yards debate:
Nor is the process by which one thing leads to another confined to profit-making enterprises... Nor is it, as we notice from the papers, confined to useful, legal, or innocuous work... some city-planning departments take to scouting out and processing profitable deals for favored real-estate operators and also to organizing and running fraudulent “citizens’ organizations” to help overcome public opposition.

Jacobs and city officials today?

At the awards ceremony, which also garnered coverage in the Times Sunday Styles section (right), Rockefeller Foundation President Judith Rodin paid tribute to some public and elected officials in the audience: Robert Leiber, deputy mayor for economic development; State Senator Liz Krueger; Amanda Burden, chairperson of the City Planning Commission; Janette Sadik-Khan, director of the Department of Transportation; and Robert Tierney, chairman of the Landmarks Preservation Commission. (The Times's CityRoom blog also mentioned the presence of Shaun Donovan, director of the Department of Housing, Preservation, and Development.)

Given the convivial atmosphere, it may seem churlish to point out the inevitable tension between the legacy of Jacobs, as expressed via this years winners of the Jacobs Medals, and the legacy of Moses at least partly represented by the city.

After all, Jacobs opposed the Williamsburg-Greenpoint rezoning that Burden championed. (One scholar has argued the Burden’s Department of City Planning is Jacobs’s heir; I’m not so sure. Michael D.D. White offers some more criticism of Burden.)

Lieber’s predecessor, Dan Doctoroff, was seen as a Moses-aspirant by some antagonists, notably Majora Carter, founder of Sustainable South Bronx, who surely would’ve won a Jacobs Medal had she not previously been garlanded with a MacArthur Foundation “genius” award.

Then again, Sadik-Khan’s willingness to experiment boldly with street closings and to hire as deputies representatives of groups that had previously clashed with the Department of Transportation represents a striking and welcome flexibility. As if in salute to Sadik-Khan's efforts, the Rockefeller Foundation-distributed Jacobs Medal t-shirts featured a nifty graphic of people walking and biking, reclaiming the streets--which, though fitting, do not (and could not) encompass Jacobs’ entire vision.

(Graphic by Abbott Miller, Pentagram)

That does comport, however, with the foundation’s new initiative on transportation. Said Rodin at the ceremony, “No longer does our system of highways suffice. High speed and light rail, rapid and mass transit, especially in cities, and in the best tradition of Jane Jacobs, policymakers must place new emphasis on preserving walkable, bikeable streets."

Caro on Jacobs

In her introduction of Caro, the Rockefeller Foundation's Rodin noted that the published version of Caro’s book omitted a chapter, included in the original manuscript, on the relationship between Jacobs and Moses. (That missing chapter was first reported by AYR last October.) Though Rodin said Caro would "talk about what he uncovered," his reflections were more general.

Jacobs' Death and Life, Caro reflected (transcript), was a revelation, because she questioned and explained the values of neighborhood, of community. And while so many of the books on land use planning used the phrase “human cost,” they never explained what that actually meant. That, Caro said, is why he wrote in such detail about neighborhoods like East Tremont in the Bronx, and found himself thinking back on Jacobs’ line, “This is not the rebuilding of cities. This is the sacking of cities.”

He said he only met Jacobs once. They had a lot to talk about: she wanted to know what it was like to meet Moses. And he wanted to know what it was like to beat him.

The Jacobs Medal winners

This year’s winners of the Jacobs Medals were Peggy Shepard, executive director and co-founder of West Harlem Environmental Action (WE ACT), for lifetime activism, and Alexie Torres-Fleming, executive director of the South Bronx-based Youth Ministries for Peace and Justice (YMPJ), for new ideas and activism.

Their Jacobsian spirit means they aren't necessarily in sync with some of the public officials attending the ceremony. Consider the letter from Shepard’s WE ACT on the 125th Street rezoning:
We are deeply disappointed to find that despite a three-year public collaborative process to develop a rezoning plan the Department of City Planning (“DCP”) promised would meet the both the development and economic needs of the Harlem community, DCP has gone forward with a plan that not only ignores the community’s expressed needs but that would have such profoundly significant negative impacts on every aspect of life and the environment in Harlem.

Or this comment on the initial plan for the Columbia University expansion:
Columbia’s only recently revealed plan lands the expansion campus squarely in the middle of the Manhattanville revitalization zone and will physically come between the community and the waterfront park residents had fought for so long and hard to build.... Columbia cannot be allowed to continue along its path of secrecy and exclusion.
(More from this New York Times Magazine article.)

Shepard (right), in her remarks, noted that the Jacobs medal “salutes a New York state of mind” and that the environmental justice movement “has redefined environment to embrace all habitats,” insuring a justice and equity perspective and including community-based approaches to planning. Besides being a watchdog, it’s important to be proactive, she said, citing her organization’s work establishing the Harlem Pier.

In the Bronx

YMPJ’s work is varied, but its effort, as part of a community plan, to decommission the unfinished, Moses-spurred 1.25 Sheridan Expressway to create parks, affordable housing, and community facilities represents a very Jacobsian solution. (The Congress for a New Urbanism lists the Sheridan as the second in a Top Ten list of highways in the country deserving demolition.

Torres-Fleming (right), in a sense echoing Carter’s remarks last year in a debate with Doctoroff about the need to “really listen,” talked about how important it was to hear the voices of people like her humbly-born parents and their neighbors in the South Bronx.

Working in corporate America, she reflected, she “was taught a certain type of power,” one that neglected people in her community. But “one beautiful day, after my church had been torched, as a result of work we had been doing against drugs, I came out to march,” she remembered, “there were a sea of people lining the streets, ready to march... they weren’t the people I’d been taught who were powerful... in that moment, there was a voice inside me that said, ‘Alexie, forget what you learned about power.’.. Coming together in dignity, and in love and struggling for justice in that community... my understanding about power fundamentally changed.”

Perhaps Jacobs should get the last word, as quoted by Rodin: “Cities have the capability of providing something for everyone only because and only when they are created by everybody.”

In an era of megaprojects shepherded by unelected and unchecked authorities, Jacobs's words remain more aspirational than actual. And "created by everybody", of course, may mean some messy process. But some people, as the Jacobs Medals attest, are trying to get the right balance.

Wednesday, September 24, 2008

Markowitz's grievance against the press, his questionable charity, and the real failure of the BP's office

At the end of 2006, Brooklyn Borough President Marty Markowitz sat down for a memorable interview with the Brooklyn Paper and, as I wrote, was sometimes pensive and prideful about Atlantic Yards but more frequently combative and strident.

The thin-skinned BP has had even more reason to be exercised in recent months, as the New York Post has challenged the legitimacy of the borough presidency and the New York Daily News has uncovered Markowitz’s dubious practice of relying on an in-house charity to raise funds from supporters--including developer Forest City Ratner--who otherwise wouldn’t be able to contribute such sums to his office or campaign. The Brooklyn Paper uncovered further evidence of how six-figure FCR contributions fuel Markowitz's popular concert series.

(Photo of Markowitz welcoming NASA Astronaut Garrett Reisman, a Houston resident who has relatives in Brooklyn, to Borough Hall.)

Markowitz and defenders have cited the civic nature of the programs supported by his Best of Brooklyn charity. And the BP, in a notably aggrieved public lament two Sundays ago, attacked the press for suggesting that elected officials are corrupt. “And that's too bad, it's just too bad,” he soliloquized, during a Brooklyn Book Festival appearance. “Because, like I said, the only thing elected officials have is trust. That's all we got.”

Well, let’s put aside Markowitz’s polarizing support for Atlantic Yards, which probably will define his legacy. Let’s take Markowitz at his word that programs like the book festival and his summer concert series and his teen summer jobs program are genuine efforts, however funded, to serve his constituency. Let’s take supporters of the borough presidencies at their word when they say that the offices, however politically impotent, serve as a counterweight to a strong mayor.

Markowitz’s failure

Granting all that--and there are many caveats about Markowitz’s performance, as I’ll detail--I think that Markowitz has not used his office to empower Brooklynites to participate in democratic self-governance, especially regarding land use issues. He has a staffer to write proclamations but won’t answer tough but serious press questions about Atlantic Yards, such as the follow-up I sought regarding his traffic recommendations.

Rather than beef up community boards with training on land use issues, as has the office of Manhattan Borough President Scott Stringer, Markowitz has played politics with appointments, targeting members who didn't support Atlantic Yards. (Had Markowitz taken land-use issues more seriously, how might the AY proposal have evolved?)

And he has not used his budget or bully pulpit to highlight best practices of community boards, ones that make their work more accessible to the public. (Why can’t all CBs learn from Craig Hammerman, District Manager of Brooklyn CB 6, and post their documents online?)

Markowitz may be “on the block,” as his promotional Brooklyn!! publication regularly proclaims. And Markowitz may indeed remain politically popular. But Brooklyn is not a cult of personality.

The Post on the BP budgets

The latest round of criticism began two months ago. A 7/20/08 New York Post article headlined BEEPS' BIG SIS-BOOM-BUCKS: BOROUGH 'CHEERLEADERS' GET MILLION$ FOR DRIVERS, AIDES & AIDES' AIDES, slammed the BPs’ offices:
The city's five borough presidents get tens of millions in taxpayer dollars for chauffeurs, staffs of up to about 80 and discretionary spending - all so they can meet a whirlwind schedule that includes ribbon-cuttings, graduation speeches, community meetings and honorary breakfasts, a Post investigation found.

Called "glorified cheerleaders" by critics, the presidents' roles have become questionable to the point that the Charter Revision Commission is expected to explore changing - or even abolishing - the five offices when it convenes this year, sources told The Post.

Former City Councilman Kenneth Fisher, who once ran for borough president, said, "They either have to be made stronger or weaker."

...Gene Russianoff, of the New York Public Interest Research Group, said: "They can be very effective. They are a connection between the people and the government."

Markowitz, the Post reported, has the most staffers of all the boroughs, with 84 staffers as of May. (He has fewer working on land use than in Stringer’s office, however.)

As the Post noted, until 1999, when the Board of Estimate was found unconstitutional and dissolved, the borough presidents lost their capacity to weigh in on land use issues. In 2002, they lost their ability to appoint members of the Board of Education. The Post also pointed to the launch of Mayor Mike Bloomberg’s 311 hot line as reducing the ombudsman role of the BP offices.

So what do the BPs do? Two top roles are the appointment of community board members and the issuance of advisory opinions on land-use matters--the kind of things that don’t make it into his publication Brooklyn!! (And let's not forget Markowitz's one appointment to the City Planning Commission; his appointee, real estate executive--and political contributor--Dolly Williams, had to resign over an Atlantic Yards-related ethics violation, albeit three years after the complaint was filed.)

The Post editorial

An 7/22/08 editorial, headlined NIX THE BEEPS, the Post argued:
What's overpaid, underworked and goes "Beep! Beep!"?

New York City's borough presidents - five jokes who might actually be funny, if they weren't so ridiculously expensive.

The borough presidencies, once positions of real power, were dramatically degraded 20 years ago by charter "reform."

Today, they are impotent anachronisms.

While the Post called for the next Charter Revision Commission to ditch them, it acknowledged that won’t happen. But there is a legitimate question of what they could and should do.

The Post follow-up

An 8/25/08 New York Post article headlined BEEP PROJECTS REAP BIZ BUCKS revealed that both Markowitz and Stringer “operate nonprofits that solicit cash from big companies” in excess of what they could contribute politically.

Markowitz’s Best of Brooklyn raised $1.2 million in 2007 for projects like sending kids to summer camp and the Brooklyn Book Festival. "BPs have no legislative role whatsoever, and The Post should applaud the fact that our office encourages public-private partnerships for the public good," Markowitz told the newspaper.

As the Post pointed out, the Nets and Forest City Ratner, both donors, have benefited “from Markowitz's cheerleading” for the Atlantic Yards, giving between $5,000 and $20,000, according to documents filed with the Conflicts of Interest Board (COIB).

Meeting over issues

On September 8, Markowitz hosted a luncheon at Junior’s that served as the semi-annual meeting of the borough presidents to discuss issues of mutual importance.

Agenda items, according to a Markowitz press release, discussed included keeping or doing away with term limits, the City budget, mayoral control over public schools and budget cuts at the Department for the Aging (DFTA).

Markowitz, as we know, wants to get rid of term limits and serve a third term. I thought it was disingenuous for the publisher of Brooklyn!! to declare that elections are the equivalent of term limits.

The schedules

A September 14 Post article, headlined BIG BEEPING DEAL: DAY IN LIFE OF BOROUGH BIGS 'PACKED' WITH THE SMALL STUFF, detailed the seemingly skimpy schedules of the city's $160,000-a-year borough presidents.

Given that the schedules for a week in early August were probably lighter than usual, the Post wasn’t being quite fair. Markowitz told the newspaper: "I enjoy making the role of borough president relevant by attending and hosting many events and having a presence in the lives of fellow Brooklynites."

And the Post offered this conclusion, attributed to anonymous critics:
But critics wonder if the whirlwind of ribbon-cutting and cheerleading is worth the tens of millions of taxpayer dollars allotted to the five pols for supplies, chauffeurs, dozens of vaguely described staff slots, and discretionary money. Some hope the upcoming Charter Revision Commission retools their roles or does away with them altogether.

The Markowitz aggrievement

Markowitz’s complaints at the press were aired that day at a Brooklyn Book Festival panel, where he was supposed to introduce legendary writers Jimmy Breslin (left) and Pete Hamill. The former was late, so Markowitz and Hamill were talking to fill time. Hamill asked Markowitz “what's the most surprising thing you learned... just about the nature of the job, the nature of Brooklyn?”

“There was a time, when I started out as a Senator in 1979, when press would call, I would be thrilled to speak with them, and I would share with them ideas and what we're doing,” Markowitz replied. “Today, when press calls, we put them on hold and I ask my staff, did I say something, did I do something wrong, did anyone mess up, are we doing...”

He revved up: “Because 99% of the time, 99%, they only call for one reason, because they think evil exists and they automatically assume that every elected official is a bum. Period. A bum. Every elected official is corrupt. I'm sorry to share that. Every elected office, they do things underhanded, undercover. It's unbelievable.”

“And even when you try to defend--you show them what it is that you've done, when they make the inquiry, I have to tell you, they've already written the end of their story, they just go through the motions of asking you, so that they fill in a little bit,” Markowitz continued to criticize the Post article for being unbalanced--and he had a point, though his protests seem a little precious, given what later emerged.

Then he complained how hard it was to get the press to write about positive projects like the book festival. “And it's worked out beautifully. Would they cover this? No. Not a word,” he said in a stage whisper. “In the New York Post, not a word. And in the Daily News, they gave us a little story about it beforehand, will there be anything afterwards? Guarantee there won't be.”

He was right, but the Book Festival did get a lot of press, including from the New York Times and Village Voice, and was well-attended and successful, so maybe the BP protested a bit much.

Then Markowitz went on to assert that the tabloid editors drive their reporters to invent issues. I think he’s partly right, but, on the other hand, all sorts of legitimate issues are ignored by the tabloids, including aspects of Atlantic Yards.

I should add that Markowitz did draw healthy applause when he declared that “most folks in Brooklyn, they know me, they know me. I'm all right. I'm fine.”

Then he went off on his riff on how “the only thing elected officials have is trust. That's all we got. If you can't trust people like me then this stuff is not working,” he said, faster and more frenzied. “That's how I feel. It could be working better. Don't get me wrong. It could be working better.” He recovered a bit, pulling out a non sequitur applause line: “And that'll happen in 130-odd days when Mr. Bush goes back to Crawford.”

Except the demise of George W. Bush won’t solve some of the knotty problems in Brooklyn.

The Daily News scoop

Two days later, on September 16, the Daily News reported, in an article headlined Marty Markowitz steers big bucks to nonprofit without city scrutiny, that Markowitz distributed $680,496 in taxpayer dollars to his own organization, Best of Brooklyn, without competitive bidding or approval from other city agencies or boards.

Dick Dadey of the Citizens Union told the newspaper, “If it's not illegal, it certainly raises some very serious ethical questions and it should be banned." Particularly questionable is that four of the 18 no-bid contracts were for $24,999, just a dollar less than the total that would trigger review by the city controller. Markowitz claimed the numbers were coincidental (doubtful), and that it would take too long to bid out contracts (maybe).

Three of the charity’s seven board members are on Markowitz's staff, the Daily News reported, and Markowitz got a waiver from the Conflicts of Interest Board to allow his staffers to work for Best of Brooklyn on government time.

The next day follow-up

The next day, the Daily News offered an article headlined Marty Markowitz: $680G is legit,
not adding much beyond some quotes from Markowitz:
"This is a matter of public trust and I take this compliance very seriously," Markowitz said. "I'm thrilled that it has received the public and private support it has - and proud of what we've been able to accomplish."

The editorial

The Daily News didn’t buy the explanation, editorializing on September 17, Marty helps himself:
Brooklyn Borough President Marty Markowitz lets nothing stand between him and the glory of Kings County - and, more important, the greater glory of Marty Markowitz.

Obstacles like procurement rules and public disclosure? As he would say, Fuhgeddaboudit.

...This is yet another case for the Department of Investigation, and it should prompt the enactment of a new regulation aimed at officials, like Markowitz, who should know better:

You can't give city money to yourself. For any reason. Least of all to buy political goodwill.

The next follow-up

On September 18, the Daily News reported, in an article headlined Brooklyn president Marty Markowitz's no-bid contracts eyed by controller:
:No-bid contracts issued by Brooklyn Borough President Marty Markowitz's office look like an attempt to skirt the law - and may warrant law enforcement scrutiny, Controller William Thompson told the Daily News Thursday.

"I'm not sure if we would take a look and dig into this one, or if an agency like the Department of Investigation might not take a look," Thompson said.

That’s faily noncommittal, but at least kept the story alive.

The Brooklyn Paper finds Ratner funds

A September 18 Brooklyn Paper article, headlined Marty’$ borough haul, added to the story with a bit of a scoop:
But the line between government responsibilities and charity work is blurry. Markowitz, a longtime supporter of Bruce Ratner’s Atlantic Yards project, received $200,000–$350,000 from Ratner’s company last year for his concert series. And Markowitz’s Best of Brooklyn also received contributions of $15,000–$60,000 from Forest City Ratner Companies, a Ratner executive and a subsidiary.

That sum--$200,000 to $350,000--is significant. I'm told by the Brooklyn Paper the the numbers come from the Conflict of Interest Board. Note that Mayor Mike Bloomberg steered $900,000 of city funds to the concert series, as well.

Blasts from the past

Over 15 years, apparently, there's been sporadic discussion about the role of the borough presidents. In the wake of the elimination of the Board of Estimate, the Times, in a 2/24/93 article headlined Borough Presidents Seek Stronger Role in City, reported:
Borough President Howard Golden of Brooklyn yesterday called on the State Legislature to study ways of giving the five boroughs renewed influence in New York City's government. His plan won immediate support from the other borough presidents.

Mr. Golden proposed the creation of a Commission on Borough Governance to examine ways to streamline the city bureaucracy and give the boroughs a stronger role in service delivery, planning and budgeting. His proposition is an effort to reclaim the power lost in the sweeping overhaul of municipal government that eliminated the Board of Estimate.

In a 12/23/93 follow-up, headlined Giuliani Weighs Return of Control Over Some Services to 5 Boroughs, the Times reported:
Mayor-elect Rudolph W. Giuliani suggested yesterday that he was willing to return to the five boroughs some of City Hall's control over service delivery, and said he had asked the borough presidents to draft plans for an experiment in such decentralization.

Mr. Giuliani said he would consider decentralization in areas like sanitation, road maintenance and repair, parks and environmental protection, and he pointed out that the Parks Department already has borough-level commanders.

I’m not sure any of this ever occurred. So it’s time for some public discussion and professional analysis of the role of the BPs.

Tuesday, September 23, 2008

Reducing Noticing New York’s Amanda Burden post to a Tweet

Noticing New York's Should a Teardrop be Shed- Considering the Burden? clocks in at 6663 words, which makes AYR, by comparison, seem concise.

Michael D.D. White's analysis of City Planning Commission Chairperson Amanda Burden is worth a read, but if you don't have the time, consider that the microblogging service Twitter limits posts (aka Tweets) to 140 characters.

A. Burden. Worked on BPC. Worried about BPC teardrop park, based on superblock. Park < AY superblock. Burden likes AY. Sincere? Prob. not.

Is AY a game of charades, as per DDDB? Maybe, but the game isn't over

Announcing Atlantic Yards: The $4 Billion Game of Charades, Develop Don't Destroy Brooklyn has a good array of reasons to argue that Atlantic Yards "isn't gonna happen." I'd agree that it certainly won't happen in the way promised, but that doesn't mean that the project can't move forward in some way.

DDDB says the planned "ground breaking" in December is "absurd, and impossible, unless they plan some nonsense ribbon cutting kabuki of shovels and fanfare signifying nothing meaningful about actually constructing their arena and skyscrapers." Yes, there's an outside chance current legal challenges will be dismissed by then, but other cases could be filed.

Other factors cited by DDDB, including the current financial crisis, credit market, and office vacancy rate, certainly cast a shadow over parts of the project, notably the planned office tower. An "extremely skeptical State Court judicial panel" included two of five judges clearly skeptical, so it's not clear how many of their fellow judges are on board--though even a 3-2 loss for the plaintiffs means an automatic appeal.

Yes, construction costs are escalating and plans for the arena are delayed. And, yes, Phase 2 is no longer pictured in the project renderings. (I'd add that there's new skepticism about the exercise of eminent domain, as well.)

Yes, there's new scrutiny of federal tax-exempt bonds for sports facilities. And City Comptroller and mayoral candidate Bill Thompson has said he "doesn't even know what that project is any longer."

Do the dots connect?

However, the dots don't necessarily connect. Three top officials, Governor David Paterson, new Empire State Development Corporation (ESDC) CEO/President Marisa Lago, and Mayor Mike Bloomberg, speaking generally, have expressed caution and skepticism about governmental overreach, without citing Atlantic Yards.

The project has been approved by the ESDC and the state Public Authorities Control Board. To such officials, that indicates a certain amount of momentum and inevitability, not to mention the institutional investment in the project within the state and city governments.

Questions pending

Several questions arise:
  • what is the project?
  • what is the timeline?
  • how much would the project cost?
  • will the city commit to not providing additional subsidies?
  • what are the factors regarding the building of affordable housing?
  • has the project (and timetable) changed so much it merits another round of environmental review?
Even as lawsuits and rules regarding federal tax-exempt bonds remain unresolved, the backers of the project in state and city government should be prepared to answer those questions.

Brodsky: "nothing like professional sports to make public people nutty"

Probably the money quote at the Congressional hearing held last Thursday by Rep. Dennis Kucinich (D-OH) on Yankee Stadium financing came from Assemblyman Richard Brodsky (D-Westchester), who last week issued a tough report on the stadium deal.

"[T]here is nothing like professional sports to make public people nutty," Brodsky declared, aiming to explain why private sports teams get tax breaks and subsidies they don't deserve.

(Given that far more ink has been devoted to gushing over last days of the current Yankee Stadium than the apparent shenanigans behind its replacement, I'd say that the press is just as "nutty.")

A threat to leave?

The Domestic Policy Subcommittee of the Oversight and Government Reform Committee, chaired by Kucinich, held a hearing called “Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York”. Brodsky was questioned by Rep. Elijah Cummings (D-MD), who reflected "we built two stadiums" in Baltimore because of a genuine concern that the baseball and football teams would move. Was that the key in New York?

"We established that was the legal reason the city of New York gave even though it could not substantiate it," Brodsky replied.

"So you don’t believe that to be true," Cummings queried.

"I don’t know," Brodsky said. "But I do know that the obligation of the public officials in charge of the public fisc is to check it out. I do know [Yankees owner] Mr. [George] Steinbrenner had said at some point they would not leave. Whether they would leave and the Mets would leave and the New York Nets [sic] would leave, I believe that would be a political impossibility."

(He must've meant the New York Knicks, a current team, rather than the Nets, now in New Jersey but aimed for a Brooklyn move.)

What's the benefit?

Cummings (right) mused about what benefit was coming to the city: "I couldn’t figure it out. It seemed like everything was going to the owners and, it was--I tell ya... so I kind of concluded that this was a rah-rah kind of thing, in other words, let’s do it for the good of the city, that is, having a cohesive element. There’s not a lot to bring people together, but teams seem to be able to do that, it was attractive for tourists, maybe, maybe."

He noticed Brad R. Humphreys, Associate Professor, Department of Economics, University of Alberta, shaking his head.

Humphreys, a former Baltimore resident, replied, "Your point is exactly right. The benefit is all intangible, according to the research evidence. It’s a sense of community. It allows people like me and you to bond about the Orioles or something like that, which other things in society can’t do. But the tangible economic benefits associated with tourism aren’t there, even if they’re claimed, so I think you’re exactly right."

Brodsky's formulation

Brodsky intervened. "If I may, Congressman, there is nothing like professional sports to make public people nutty. If you’ll recall the introduction by Justice [Harry] Blackmun in his decision on the Curt Flood case: unlike any case I’ve ever read, the entire first portion is a recitation of who his favorite baseball players are," Brodsky said.

"Now this was a distinguished jurist, and a figure of national legal repute," he continued. "When you start talking about sports in the context of government, you finally found something that we as public officials don’t have to force on the public and say be interested. They care. And that level I think of political and voter interest makes us do things we would do for no other enterprise in our society.

(Brodsky was referring to the 1972 case known as Flood v. Kuhn.)

Cummings asked, "Do you see any reason why we should have this type of situation, where they can take advantage of this tax exemption?

Brodsky said no.

New York University law professor Clayton Gillette (right) commented, "Congressman, I want to be a little more reluctant than my colleagues on the dais up here and say, it depends on who the ‘we’ is. That is, a particular municipality or municipal officials going through a process that reflects the true preference of their constituents, decides that the absence of economic benefits notwithstanding, the kinds of more ephemeral benefits that Assemblyman Brodsky and Professor Humprheys are referring to, warrant a particular use of public money, then I, a fan of local autonomy, say that’s just fine, but--that public money should be the municipality's public money, if that’s a municipal decision."

"So if you mean by ‘we’ is the municipality actually internalizing all the economic effects of the decision, I have less difficulty, even though I might disagree," he continued. "What I do disagree with is the notion that, simply because a municipality says, we believe that as local residents that this is in our local interest, that that necessarily entails the use of a federal tax exemption so that nonresidents of that municipality are required to subsidize the local decision. Again, I’m a huge fan of local autonomy... But I see nothing in our federalism, certainly nothing constitutionally, that says that, simply because a locality has decided to pursue a particular project it has a call on the federal treasury as well as the municipal treasury."

Humphreys (right) continued, "Your question, sir, is: should we allow tax-exempt bonds to be used to finance these projects? That means there's a subsidy coming from every federal, every United States taxpayer and I think that’s inappropriate, because you’re asking the entire country to subsidize the individual preferences of whatever the municipality is to build their palace of a sports stadium. That’s bad policy, any way you look at it. As Professor Gillette has pointed out, it should be the locals who should pay. If we’re talking about federal tax dollars, I don’t see any justification for it whatsoever."

What about integrity?

Cummings followed up. "Even in the scenario that you just gave, there’s something called integrity that you gotta have there," he commented. "And I think sometimes there's some smoke being blown all over the place. And when the smoke clears, maybe, just maybe the folks are believing that there may be some benefit other than the rah-rah effect.... I’m just curious, do you know of any situations where you think it was appropriate, in other words, where there was integrity with regard to what the taxpayers were getting out of it?"

"In my earlier testimony, Congressman, I did point out that New York exports revenues to the federal government to the tune of about 80 billion dollars a year," Brodsky noted. "There is an argument that says that anything that keeps the money back in New York is a good thing. So, to the extent we exclude the revenue export context and ask the simple question you ask, which is: is there any benefit that you see from these public expenditures, my answer is no, I do not."

Humphreys acknowledged, "I think there have been instances where taxpayers got their fair share. Those have been these instances where there was a referendum, it was on an increase in local taxes to pay for stadium improvements... Green Bay [Wisconsin] is a classic example of this... The residents of Green Bay voted themselves a tax increase that was about a thousand dollars a year in order to renovate Lambeau Field. I think that was a clear expression of local interests They were willing to pay, through higher taxes, and got a renovated Lambeau Field. Those instances are few and far between, though."

Gillette offered the bigger picture: "I think the way to ensure what you refer to as integrity is through fiscal transparency at the local level so that, if what are being used are taxes that flow through the normal budgetary appropriations process of the municipality... there I think you have the greatest likelihood that expenditures are going to be monitored by local residents to ensure that the expenditures is made in a manner consistent with local preferences. The problem with PILOTs is they are not necessarily funneled through that appropriations process. They may, as in the case of Yankee Stadium. be treated as off budget, essentially tax expenditures, where they're far less susceptible to monitoring. Therefore it’s by no means clear that it’s what residents want done with the tax dollars or with the opportunity costs of tax dollars."

At that point Kucinich (right) asked about the wildly divergent tax assessments Brodsky discovered regarding the land for Yankee Stadium, and Brodsky replied that Department of Finance personnel, when questioned about them, "literally fell silent."