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.
Tuesday, September 30, 2008
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."
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.
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)
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.
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.
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 c
annot 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.
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.
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:
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?
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."
Monday, September 22, 2008
Sun: eminent domain law reform may be possible (but don't hold your breath)
An article in today's New York Sun, headlined Victorious Senate Democrats Could Target Eminent Domain, takes off from the hearing held by State Sen. Bill Perkins last week:
A Democratic takeover of the Senate in November could result in changes to the state's eminent domain law, possibly complicating several of the city's largest development projects.
State Senator Bill Perkins, a Democrat of Harlem, is calling for a moratorium on the use of eminent domain and said he is willing to push for more restrictions on the use of eminent domain, provided the political climate is right in Albany.
"I don't know of too many other issues where you have such diverse and pervasive outrage," he said yesterday in an interview.
Changes possible?
As the article details, however, neither Assembly Speaker Sheldon Silver nor Gov. David Paterson have expressed support for changes (though Paterson did in 2005, as a State Senator).
Moreover, though the article mentions Atlantic Yards, the Columbia University expansion, and redevelopment at Willets Point, unmentioned is that any new legislation might grandfather in projects already under way.
So I'd bet that a temporary commission, as proposed by the New York State Bar Association, is a more likely first step than new legislation.
Bloomberg's statement
A spokesman for Mayor Mike Bloomberg called eminent domain "an essential mechanism" used only "as a last resort," which is, of course, questionable, given that the threat of eminent domain has led property owners to sell to Columbia and Forest City Ratner, for example.
The role of the Sun
The scrappy, shoestring Sun, which has been published for six years, is facing a deadline for new investors and might close this month, reports the Times. The Sun's free-market and conservative editorial leanings can influence the subjects covered and sometimes the tone; hence the Sun's interest in eminent domain.
Then again, the Sun sometimes covers issues no other daily newspaper addresses; contrast today's article, which, though overoptimistic, covers the bases, with the only other daily coverage of the hearing, by Daily News columnist Errol Louis.
A Democratic takeover of the Senate in November could result in changes to the state's eminent domain law, possibly complicating several of the city's largest development projects.
State Senator Bill Perkins, a Democrat of Harlem, is calling for a moratorium on the use of eminent domain and said he is willing to push for more restrictions on the use of eminent domain, provided the political climate is right in Albany.
"I don't know of too many other issues where you have such diverse and pervasive outrage," he said yesterday in an interview.
Changes possible?
As the article details, however, neither Assembly Speaker Sheldon Silver nor Gov. David Paterson have expressed support for changes (though Paterson did in 2005, as a State Senator).
Moreover, though the article mentions Atlantic Yards, the Columbia University expansion, and redevelopment at Willets Point, unmentioned is that any new legislation might grandfather in projects already under way.
So I'd bet that a temporary commission, as proposed by the New York State Bar Association, is a more likely first step than new legislation.
Bloomberg's statement
A spokesman for Mayor Mike Bloomberg called eminent domain "an essential mechanism" used only "as a last resort," which is, of course, questionable, given that the threat of eminent domain has led property owners to sell to Columbia and Forest City Ratner, for example.
The role of the Sun
The scrappy, shoestring Sun, which has been published for six years, is facing a deadline for new investors and might close this month, reports the Times. The Sun's free-market and conservative editorial leanings can influence the subjects covered and sometimes the tone; hence the Sun's interest in eminent domain.
Then again, the Sun sometimes covers issues no other daily newspaper addresses; contrast today's article, which, though overoptimistic, covers the bases, with the only other daily coverage of the hearing, by Daily News columnist Errol Louis.
At Kucinich hearing, the question arises: why do cities give away naming rights?
Though the Congressional hearing Thursday, “Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York,” (video) focused on Yankee Stadium, the issues raised do apply the planned Atlantic Yards arena, as I wrote.
Atlantic Yards came up exactly once, near the end of the hearing, when Rep. Dennis Kucinich (D-OH), asked a basic but important question about naming rights--and got back an answer that actually underestimated the value of the Barclays Center deal.
Kucinich (right), who chairs the Domestic Policy Subcommittee of the Oversight and Government Reform Committee, addressed his question to Brad R. Humphreys, Associate Professor, Department of Economics, University of Alberta, and a critic of sports facility deals.
Kucinich "mystified"
"Can you explain how cities who build stadiums for teams typically deal with stadium naming rights?" Kucinich asked. "I’ve always been mystified at how cities can make a rather enormous investment of tax dollars, whether it’s local, state or federal, into these facilities, and then have somebody else come along and put their name on it."
"How do these cities who build these stadiums deal with naming rights and, to the extent the teams are typically granted these rights, how much are these rights worth and why are cities willing to grant them to teams?"
Teams have power
"Well, the details of naming rights are hashed out in the negotiations between the teams and the cities when they’re building new facilities," responded Humphreys (right). "The teams always have the upper hand in that negotiation for reasons we’ve talked about in the course of this hearing. You can always threaten to move. There’s all sorts of reasons that teams have this power in negotiating. So they hash those things out."
"It’s, I think, a sort low-cost concession that a city or local government can give to the team: OK, we’ll give you the naming rights, even though they’re incredibly valuable," he said.
Whose cost?
Note that it's a low cost only in that the city does not put forward resources, but, as Humphreys acknowledged, the city is giving up resources.
In the case of Atlantic Yards, naming rights have been granted not in response to a threat to move but as a carrot offered to the team owner.
In January of last year, I asked the Empire State Development Corporation (ESDC), "Given that the arena is publicly-owned, should the Local Development Corporation [set up to own the arena] be in charge of naming rights? Can the LDC pass them on to Forest City Ratner?"
An ESDC spokeswoman responded: "Financing for the stadium comes ultimately from the team. The team has the naming rights. It's the same deal as with the Mets - who also sold naming rights to their new stadium."
Well, there's not much evidence that any deal was negotiated--an argument that the arena financing lacks the democratic accountability and transparency that law professor Clayton Gillette testified gives legitimacy to sports facility deals. Nor would financing come solely from the team, given the significant subsidy--perhaps $165 million--from tax-exempt bonds.
Notably, the city's Independent Budget Office never counted naming rights as a benefit. But surely someone should’ve been on notice, especially given this quote from a 1/23/04 New York Times article, after the Nets were sold to an ownership group led by Bruce Ratner:
Marc Ganis, president of Sportscorp, a sports economic consulting company based in Chicago, said, "It will generate the largest naming-rights fee in the history of professional sports, because it is in New York City and the only other arena, Madison Square Garden, can't change its brand name without losing a lot of cachet."
AY a "classic example"
Humphreys continued his answer: "That’s one of the reasons it’s often given to the team. Now it’s not always given to the team. There are instances where cities have retained the right to name the stadium or have control over the name of the stadium. So I wouldn’t say it’s always given away, but it’s basically because of the power the teams have in these negotiations that awards them that."
"And it’s incredibly lucrative," he added. "It’s tens or hundreds of millions of dollars for these naming rights deals. The Atlantic Yards case in New York is a classic example, right. A bank paid almost $200 million for the naming rights to that facility."
Actually, the Barclays Center deal is for $400 million over 20 years--apparently, even more of a classic example.
Neil deMause's criticism
In July, I published an interview with Field of Schemes co-author Neil deMause, in which I asked him why naming rights aren't counted as a subsidy.
"Because it’s industry standard, don’t you understand?" he replied, in a mocking tone. "That’s the only answer--the teams always said: we always get the money for this, so therefore it’s private money. There’s no reason for this to be private money. If the public is building the stadium, if the public is owning the stadium, why should the team get to slap a name and get the money from it, or consider the money from it that pays off the stadium as paying off their share?"
"Y’know, I rent; if I decide to put a giant billboard on the roof of my house here--if my landlord lets me do it, I really don’t think he could let me keep all the money from it. If I say, I’d like to move into your apartment, but in order to pay my rent, I have to put a big billboard outside, he’s going to look at me as if I had two heads."
How it happened
The process, deMause suggested, started small: "I think what happened was, originally it was not very much money and the teams said, we can sell naming rights and we use that to help raise money and the city says fine. Now, in many cases, especially the Nets, it’s a huge amount of money… The arena will be owned by the state in order for them to use this PILOT dodge and be exempt from property taxes… It’s very odd that the state will own everything about the arena except the part that makes money."
"[I]t’s absolutely a gift," he said. "There’s no reason that the state could not have said: OK, we’re selling the naming rights"... The problem was it wasn’t trying to negotiate an equitable deal, it was about trying to get a deal done."
Atlantic Yards came up exactly once, near the end of the hearing, when Rep. Dennis Kucinich (D-OH), asked a basic but important question about naming rights--and got back an answer that actually underestimated the value of the Barclays Center deal.
Kucinich (right), who chairs the Domestic Policy Subcommittee of the Oversight and Government Reform Committee, addressed his question to Brad R. Humphreys, Associate Professor, Department of Economics, University of Alberta, and a critic of sports facility deals.Kucinich "mystified"
"Can you explain how cities who build stadiums for teams typically deal with stadium naming rights?" Kucinich asked. "I’ve always been mystified at how cities can make a rather enormous investment of tax dollars, whether it’s local, state or federal, into these facilities, and then have somebody else come along and put their name on it."
"How do these cities who build these stadiums deal with naming rights and, to the extent the teams are typically granted these rights, how much are these rights worth and why are cities willing to grant them to teams?"
Teams have power
"Well, the details of naming rights are hashed out in the negotiations between the teams and the cities when they’re building new facilities," responded Humphreys (right). "The teams always have the upper hand in that negotiation for reasons we’ve talked about in the course of this hearing. You can always threaten to move. There’s all sorts of reasons that teams have this power in negotiating. So they hash those things out.""It’s, I think, a sort low-cost concession that a city or local government can give to the team: OK, we’ll give you the naming rights, even though they’re incredibly valuable," he said.
Whose cost?
Note that it's a low cost only in that the city does not put forward resources, but, as Humphreys acknowledged, the city is giving up resources.
In the case of Atlantic Yards, naming rights have been granted not in response to a threat to move but as a carrot offered to the team owner.
In January of last year, I asked the Empire State Development Corporation (ESDC), "Given that the arena is publicly-owned, should the Local Development Corporation [set up to own the arena] be in charge of naming rights? Can the LDC pass them on to Forest City Ratner?"
An ESDC spokeswoman responded: "Financing for the stadium comes ultimately from the team. The team has the naming rights. It's the same deal as with the Mets - who also sold naming rights to their new stadium."
Well, there's not much evidence that any deal was negotiated--an argument that the arena financing lacks the democratic accountability and transparency that law professor Clayton Gillette testified gives legitimacy to sports facility deals. Nor would financing come solely from the team, given the significant subsidy--perhaps $165 million--from tax-exempt bonds.
Notably, the city's Independent Budget Office never counted naming rights as a benefit. But surely someone should’ve been on notice, especially given this quote from a 1/23/04 New York Times article, after the Nets were sold to an ownership group led by Bruce Ratner:
Marc Ganis, president of Sportscorp, a sports economic consulting company based in Chicago, said, "It will generate the largest naming-rights fee in the history of professional sports, because it is in New York City and the only other arena, Madison Square Garden, can't change its brand name without losing a lot of cachet."
AY a "classic example"
Humphreys continued his answer: "That’s one of the reasons it’s often given to the team. Now it’s not always given to the team. There are instances where cities have retained the right to name the stadium or have control over the name of the stadium. So I wouldn’t say it’s always given away, but it’s basically because of the power the teams have in these negotiations that awards them that."
"And it’s incredibly lucrative," he added. "It’s tens or hundreds of millions of dollars for these naming rights deals. The Atlantic Yards case in New York is a classic example, right. A bank paid almost $200 million for the naming rights to that facility."Actually, the Barclays Center deal is for $400 million over 20 years--apparently, even more of a classic example.
Neil deMause's criticism
In July, I published an interview with Field of Schemes co-author Neil deMause, in which I asked him why naming rights aren't counted as a subsidy.
"Because it’s industry standard, don’t you understand?" he replied, in a mocking tone. "That’s the only answer--the teams always said: we always get the money for this, so therefore it’s private money. There’s no reason for this to be private money. If the public is building the stadium, if the public is owning the stadium, why should the team get to slap a name and get the money from it, or consider the money from it that pays off the stadium as paying off their share?"
"Y’know, I rent; if I decide to put a giant billboard on the roof of my house here--if my landlord lets me do it, I really don’t think he could let me keep all the money from it. If I say, I’d like to move into your apartment, but in order to pay my rent, I have to put a big billboard outside, he’s going to look at me as if I had two heads."
How it happened
The process, deMause suggested, started small: "I think what happened was, originally it was not very much money and the teams said, we can sell naming rights and we use that to help raise money and the city says fine. Now, in many cases, especially the Nets, it’s a huge amount of money… The arena will be owned by the state in order for them to use this PILOT dodge and be exempt from property taxes… It’s very odd that the state will own everything about the arena except the part that makes money."
"[I]t’s absolutely a gift," he said. "There’s no reason that the state could not have said: OK, we’re selling the naming rights"... The problem was it wasn’t trying to negotiate an equitable deal, it was about trying to get a deal done."
An architect of the Yankee Stadium deal was an IRS insider
The AmLaw Daily blog explains that the one architect of the Yankee Stadium financing deal was a real insider:
Nixon Peabody public finance partners Bruce Serchuk and Mitchell Rapaport were retained by the Yankees and the New York City Industrial Development Agency (NYCIDA), an arm of the New York City Economic Development Corporation (NYCEDC). Serchuk, who worked in the office of tax policy at the Treasury Department and in the IRS's chief counsel office, is considered one of the primary architects of the Yankees's strategy to obtain over $940 million in tax-exempt bonds to help finance construction for the team's new stadium, set to open on April 16 of next year.
Nixon Peabody public finance partners Bruce Serchuk and Mitchell Rapaport were retained by the Yankees and the New York City Industrial Development Agency (NYCIDA), an arm of the New York City Economic Development Corporation (NYCEDC). Serchuk, who worked in the office of tax policy at the Treasury Department and in the IRS's chief counsel office, is considered one of the primary architects of the Yankees's strategy to obtain over $940 million in tax-exempt bonds to help finance construction for the team's new stadium, set to open on April 16 of next year.
Sunday, September 21, 2008
At the Atlantic Antic, another FCR/Nets presence
The Atlantic Antic, the borough's largest street festival, will be held Sunday October 5, and Brooklyn's leading developer and the associated Nets will be the lead sponsors. Last year, as far as I can tell from the press release, Sovereign Bank was at the top of the list; in 2006, Sovereign Bank was the top sponsor.
Saturday, September 20, 2008
A second look at the Kucinich hearing, the Yankee Stadium controversy, and the future of the Atlantic Yards arena
It's worth a second look at some of the charges and countercharges that emerged Thursday in response to Assemblyman Richard Brodsky’s report on the new Yankee Stadium and the hearing held by Rep. Dennis Kucinich (D-OH), chair of the Domestic Policy Subcommittee of the Oversight and Government Reform Committee, called “Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York”. (Hearing video is now available.)
What are the hurdles for Atlantic Yards?
1) Investigators from the committees headed by both Brodsky and Kucinich have concluded, at least on an interim basis, that city officials "gamed" the tax assessment for the new Yankee Stadium so it would be high enough to justify the amount of tax-exempt bonds requested by the team. If similar shenanigans were found regarding the Atlantic Yards arena, tax-exempt bonds might be scotched, costing the developer perhaps $165 million.
2) Even if no such subterfuge is found, the arena is still jeopardized by a proposed Internal Revenue Service (IRS) rule that would require that PILOTs (payments in lieu of taxes) fluctuate so they look like generally applicable taxes, rather than fixed so they look like bond payments. The city and state have lobbied hard to get the arena--as well as additional financing for the Yankees and Mets--grandfathered in. Develop Don't Destroy Brooklyn disagrees.
The New York Observer notes that the controversy "comes as the I.R.S. in a waning Bush administration weighs the request by the city and state to allow the use of their financing structure for the Nets arena." Perhaps, as with the approval of Atlantic Yards in the last days of the Pataki gubernatorial administration, project backers are wary of a change of leadership.
Is Kucinich's committee done?
Not in the slightest. Kucinich asked Brodsky how New York City Department of Finance came up with the $275 per square foot amount assessment for Yankee Stadium and who actually did the assessment.
"After reviewing documents, we met directly with Department of Finance personnel. The seven elements of this assessment are listed in my direct testimony," said Brodsky (right). "When we raised with them, the question of why they didn’t take comparables in the Bronx, why they took them in Manhattan, when we raised with them why they didn’t adjust for lot size, they literally fell silent."
Brodsky pointed out that, two blocks from the stadium, the developer of the Bronx Terminal Market, which has an interest in lower per square foot land value, found it calculated at $9 psf.
Kucinich commented, "In this particular case, the disparity between $275 per square foot and $45 per square foot requires this subcommittee to not rest until the silence is broken."
Do those who testify before Kucinich's subcommittee testify under oath?
Yes. Officials from the city and Yankees are expected to testify at a future hearing.
Will the IRS investigate the apparent effort to "game" the assessment for the Yankees?
Maybe. IRS lawyer Stephen Larson said that his department does not audit requests for private letter rulings (PLRs), which the Yankees and Mets obtained, but all information is submitted under penalties of perjury.
He said he could not discuss any specific cases, but "the IRS does read the papers."
What are the consequences if the assessment of Yankee Stadium was improperly inflated?
"We’re speaking hypothetically, but there could be extraordinarily serious consequences for the city of New York," commented NYU law professor Clayton Gillette. "The IRS would have the ability to declare bonds taxable. If those bonds were in fact taxable, then bondholders who purchased them on the belief that the interest was tax-exempt will be, shall I say, mildly upset."
The city would have to pay the lost revenue--perhaps $200 million--to the feds to avoid imposing additional tax liability on the bondholders, who might file claims against the city. "If there have been knowing misrepresentations, then I take it, the city, along with other participants in the bond process, would be subject to liability."
Was the Yankees' threat to leave New York City--the ostensible justification for tax-exempt bonds--credible?
"The evidence we uncovered shows that such a threat was not made and when asked, under oath, the head of the IDA [Industrial Development Authority, Seth Pinsky] sort of conceded that he didn’t know if, when and how such a threat was made," Brodsky testified. "To the extent that it was in the ether, in the background, and was something that the city had to sort of be worried about, without an explicit threat--well, it seems to me, when you’re negotiating a billion dollars worth of goodies, you ought to have more than the ether. Second of all, for that to be a real threat, there had to be a place for them to go... Were they going to go to Jersey? They had said publicly they would not do that."
"Now, you’re playing chicken a little bit here," he added, "because no leader of the city of New York wants to be the public person responsible for ‘losing China’--I mean, losing the Yankees--and in that case, I would simply suggest that there was a public process to test it, they had an obligation to tell the truth, and they did not."
Can Atlantic Yards developers get arena bonds?
PILOTs (payments in lieu of taxes) can’t exceed the amount of foregone taxes, but PILOTs for the Yankee Stadium were based on an assessment inflated aimed to justify a certain quantity of bonds, Brodsky and Kucinich charged. The same tactic might be in store for Brooklyn, given that the expected arena PILOTs far exceed the foregone taxes for the comparable Madison Square Garden.
Also, NYU law professor Clayton Gillette suggested that tax-exempt financing for sports facilities, given that it’s not subject to transparency and local democratic oversight, should be looked at skeptically by the federal government.
Still, that's not to say the arena wouldn't be grandfathered in--or perhaps we should start calling it, in an echo of the 421-a "carve out," the "IRS carve-out."
Is a compromise possible?
Sure. A lower assessment than currently expected regarding the AY arena would mean lower foregone taxes, which would limit the amount of tax-exempt bonds. But that still might be enough to build the arena--perhaps one with fewer bells and whistles, at a lower cost.
What about the credit crunch? What about suites?
It might make it harder to sell the bonds, but it certainly wouldn't scotch the deal. Another factor is that the meltdown on Wall Street is going to make it harder to sell the luxury suites the developer hopes will pay off the bonds, as the New York Post reported yesterday.
The Post said "roughly 30%" of the Atlantic Yards arena suites have been sold. That's all according to Nets brass, so take it with a grain of salt.
Does the public really pay for construction?
Well, if you consider that the developer doesn't have to pay real estate taxes--but it depends on which public. The New York City Industrial Development Authority, in its detailed rebuttal to Brodsky’s charges, expressed a fundamental disagreement on whether a benefit to the Yankees is also a cost to local taxpayers.
Brodsky says the use of PILOTs to pay bonds is a cost to the city because it doesn't collect real estate taxes. However, the NYC IDA points out that, before and after project, the city will be collecting exactly the same amount in real estate taxes from the Yankees. (The Independent Budget Office has similarly not counted it as a loss.)
Brodsky counts lost income tax on tax-exempt bonds as a cost of project. However, the Yankees have said that without the tax exemption, they would not have done the project, according to the city's rebuttal, so bonds for a new stadium would never have been issued on a taxable basis. The city says that PILOTs aren't taxes. Then again, as Brodsky points out, to the IRS they said PILOTs were taxes.
"What this needs is a forensic accountant and somone who wants to apply the law fairly to everybody," Brodsky testified Thursday. "I didn’t get any pleasure out of this mess. But the fact of it is when you examine the details of the economic and legal relationships, they stink."
What about the arena?
The same rationale applies to the arena, but... Forest City Ratner chief Bruce Ratner has said casually that the developer will do the project no matter what happens to the regulations. A spokesman also said the developer was confident about obtaining taxable financing.
Now that doesn't mean a commitment to taxable financing for the entire arena, just the portion--perhaps $150 million of the $950 million tab?--not covered by the tax-exempt financing. Still, it's worth a further look. If the developer could build the arena without tax-exempt financing, then the benefit to Forest City Ratner could be considered a cost to taxpayers.
Who wins, who loses?
A tax-exempt financing deal sounds like magic--it's no cost to the city, but it's a benefit to the Yankees and, the city would argue, to the city coffers and the city at large.
The losers are federal taxpayers, as pointed at the hearing Thursday. Then again, as even Brodsky acknowledged, there's a backhanded argument for such subsidies, given that New York State, unlike most states, contributes more to Washington in tax revenue than it receives.
Then again, the main beneficiaries would be the Yankees, not the public, according to Brodsky. The same could be said to apply to Forest City Ratner regarding Atlantic Yards.
What's the test for lawmakers?
If federal taxpayers are the losers, what in general should lawmakers consider in regulating tax-exempt financing?
As Gillette testified Thursday, "[T]he tax exemption should be tied to fostering democratic accountability and financial transparency at the local level. The use of PILOTs, at least as structured in the Yankee Stadium deal, does not readily meet that test."
Could arena valuation increase?
Kucinich noted that sports stadiums typically lose some of their value over time as they become obsolete, but "the City makes the highly suspect claim that the stadium never depreciates."
The inflated assessment thus allows the City to claim that the payments that will be made by the Yankees for debt service fit the IRS rules for PILOTs.
We should keep watch for a similar claim regarding the Atlantic Yards arena. As author Neil deMause has noted, major changes in sports facilities are usually requested by their second decade.
What exactly is Atlantic Yards?
The city said: [Brodsky's'] new efforts, though, may create hurdles for other economic development projects, including, for example, Atlantic Yards in Brooklyn - a $4 BN project expected to create thousands of unionized jobs and 2,000+ units of affordable housing.
Note how the city focuses on the most politically palatable elements. Atlantic Yards would create relatively few new permanent jobs (I estimate fewer than 1500 in the first phase), with only a fraction unionized.
Atlantic Yards would bring thousands of temporary construction jobs, 1500 a year for a decade--or a smaller number per year over a longer period of time. As noted at the hearing, construction jobs could be created with an alternative use of subsidies.
While a denial of tax-exempt financing for the arena would make it harder to create Atlantic Yards, given that the design of the arena is integrated into the four towers around it, tax-exempt arena financing is not required to create affordable housing.
In fact, a significant amount of tax-exempt housing bonds--$1.4 billion--would be required for the affordable housing, and the city doesn't have the capacity to issue such bonds in the short-term, at least.
When will IRS issue its final rule on PILOTs?
Larson (right), Associate Chief Counsel, Financial Institutions and Products for the IRS, described how, after the "loophole" allowing the Yankees and Mets to proceed caught their attention, in October 2006, the Treasury Department and the IRS published Proposed Regulations to clarify and to tighten the standard, essentially eliminating “the ability of a State or local government to set PILOTs at fixed amounts that do not fluctuate with changes in the underlying taxes on which the PILOT is based.”
Larson noted that the IRS and Treasury Department have received numerous public comments on the Proposed Regulations and plan to issue final regulations "soon" on the treatment of PILOTs, with appropriate modifications based on the public comments received.
What are those “appropriate modifications”?
The city and state want to make sure the three New York sports facilities are grandfathered in.
Larson, in response to a question, gave at least a nod to those concerns. He testified that, in choosing an effective date for tax regulations, one consideration is that "we look at the expectations of people being affected."
Would the IRS proposed regulation for fluctuating PILOTs work in the bond market?
If PILOTs must track generally applicable taxes, and change as real estate assessments change, as is proposed, it might be very hard to sell the bonds. "We are certainly not experts in the marketing of bonds," Larson said. "That's why there was a public comment."
Stay tuned.
What are the hurdles for Atlantic Yards?1) Investigators from the committees headed by both Brodsky and Kucinich have concluded, at least on an interim basis, that city officials "gamed" the tax assessment for the new Yankee Stadium so it would be high enough to justify the amount of tax-exempt bonds requested by the team. If similar shenanigans were found regarding the Atlantic Yards arena, tax-exempt bonds might be scotched, costing the developer perhaps $165 million.
2) Even if no such subterfuge is found, the arena is still jeopardized by a proposed Internal Revenue Service (IRS) rule that would require that PILOTs (payments in lieu of taxes) fluctuate so they look like generally applicable taxes, rather than fixed so they look like bond payments. The city and state have lobbied hard to get the arena--as well as additional financing for the Yankees and Mets--grandfathered in. Develop Don't Destroy Brooklyn disagrees.
The New York Observer notes that the controversy "comes as the I.R.S. in a waning Bush administration weighs the request by the city and state to allow the use of their financing structure for the Nets arena." Perhaps, as with the approval of Atlantic Yards in the last days of the Pataki gubernatorial administration, project backers are wary of a change of leadership.
Is Kucinich's committee done?
Not in the slightest. Kucinich asked Brodsky how New York City Department of Finance came up with the $275 per square foot amount assessment for Yankee Stadium and who actually did the assessment.
"After reviewing documents, we met directly with Department of Finance personnel. The seven elements of this assessment are listed in my direct testimony," said Brodsky (right). "When we raised with them, the question of why they didn’t take comparables in the Bronx, why they took them in Manhattan, when we raised with them why they didn’t adjust for lot size, they literally fell silent."Brodsky pointed out that, two blocks from the stadium, the developer of the Bronx Terminal Market, which has an interest in lower per square foot land value, found it calculated at $9 psf.
Kucinich commented, "In this particular case, the disparity between $275 per square foot and $45 per square foot requires this subcommittee to not rest until the silence is broken."
Do those who testify before Kucinich's subcommittee testify under oath?
Yes. Officials from the city and Yankees are expected to testify at a future hearing.
Will the IRS investigate the apparent effort to "game" the assessment for the Yankees?
Maybe. IRS lawyer Stephen Larson said that his department does not audit requests for private letter rulings (PLRs), which the Yankees and Mets obtained, but all information is submitted under penalties of perjury.
He said he could not discuss any specific cases, but "the IRS does read the papers."
What are the consequences if the assessment of Yankee Stadium was improperly inflated?
"We’re speaking hypothetically, but there could be extraordinarily serious consequences for the city of New York," commented NYU law professor Clayton Gillette. "The IRS would have the ability to declare bonds taxable. If those bonds were in fact taxable, then bondholders who purchased them on the belief that the interest was tax-exempt will be, shall I say, mildly upset."
The city would have to pay the lost revenue--perhaps $200 million--to the feds to avoid imposing additional tax liability on the bondholders, who might file claims against the city. "If there have been knowing misrepresentations, then I take it, the city, along with other participants in the bond process, would be subject to liability."
Was the Yankees' threat to leave New York City--the ostensible justification for tax-exempt bonds--credible?
"The evidence we uncovered shows that such a threat was not made and when asked, under oath, the head of the IDA [Industrial Development Authority, Seth Pinsky] sort of conceded that he didn’t know if, when and how such a threat was made," Brodsky testified. "To the extent that it was in the ether, in the background, and was something that the city had to sort of be worried about, without an explicit threat--well, it seems to me, when you’re negotiating a billion dollars worth of goodies, you ought to have more than the ether. Second of all, for that to be a real threat, there had to be a place for them to go... Were they going to go to Jersey? They had said publicly they would not do that."
"Now, you’re playing chicken a little bit here," he added, "because no leader of the city of New York wants to be the public person responsible for ‘losing China’--I mean, losing the Yankees--and in that case, I would simply suggest that there was a public process to test it, they had an obligation to tell the truth, and they did not."
Can Atlantic Yards developers get arena bonds?
PILOTs (payments in lieu of taxes) can’t exceed the amount of foregone taxes, but PILOTs for the Yankee Stadium were based on an assessment inflated aimed to justify a certain quantity of bonds, Brodsky and Kucinich charged. The same tactic might be in store for Brooklyn, given that the expected arena PILOTs far exceed the foregone taxes for the comparable Madison Square Garden.
Also, NYU law professor Clayton Gillette suggested that tax-exempt financing for sports facilities, given that it’s not subject to transparency and local democratic oversight, should be looked at skeptically by the federal government.
Still, that's not to say the arena wouldn't be grandfathered in--or perhaps we should start calling it, in an echo of the 421-a "carve out," the "IRS carve-out."
Is a compromise possible?
Sure. A lower assessment than currently expected regarding the AY arena would mean lower foregone taxes, which would limit the amount of tax-exempt bonds. But that still might be enough to build the arena--perhaps one with fewer bells and whistles, at a lower cost.
What about the credit crunch? What about suites?
It might make it harder to sell the bonds, but it certainly wouldn't scotch the deal. Another factor is that the meltdown on Wall Street is going to make it harder to sell the luxury suites the developer hopes will pay off the bonds, as the New York Post reported yesterday.
The Post said "roughly 30%" of the Atlantic Yards arena suites have been sold. That's all according to Nets brass, so take it with a grain of salt.
Does the public really pay for construction?
Well, if you consider that the developer doesn't have to pay real estate taxes--but it depends on which public. The New York City Industrial Development Authority, in its detailed rebuttal to Brodsky’s charges, expressed a fundamental disagreement on whether a benefit to the Yankees is also a cost to local taxpayers.
Brodsky says the use of PILOTs to pay bonds is a cost to the city because it doesn't collect real estate taxes. However, the NYC IDA points out that, before and after project, the city will be collecting exactly the same amount in real estate taxes from the Yankees. (The Independent Budget Office has similarly not counted it as a loss.)
Brodsky counts lost income tax on tax-exempt bonds as a cost of project. However, the Yankees have said that without the tax exemption, they would not have done the project, according to the city's rebuttal, so bonds for a new stadium would never have been issued on a taxable basis. The city says that PILOTs aren't taxes. Then again, as Brodsky points out, to the IRS they said PILOTs were taxes.
"What this needs is a forensic accountant and somone who wants to apply the law fairly to everybody," Brodsky testified Thursday. "I didn’t get any pleasure out of this mess. But the fact of it is when you examine the details of the economic and legal relationships, they stink."
What about the arena?
The same rationale applies to the arena, but... Forest City Ratner chief Bruce Ratner has said casually that the developer will do the project no matter what happens to the regulations. A spokesman also said the developer was confident about obtaining taxable financing.
Now that doesn't mean a commitment to taxable financing for the entire arena, just the portion--perhaps $150 million of the $950 million tab?--not covered by the tax-exempt financing. Still, it's worth a further look. If the developer could build the arena without tax-exempt financing, then the benefit to Forest City Ratner could be considered a cost to taxpayers.
Who wins, who loses?
A tax-exempt financing deal sounds like magic--it's no cost to the city, but it's a benefit to the Yankees and, the city would argue, to the city coffers and the city at large.
The losers are federal taxpayers, as pointed at the hearing Thursday. Then again, as even Brodsky acknowledged, there's a backhanded argument for such subsidies, given that New York State, unlike most states, contributes more to Washington in tax revenue than it receives.
Then again, the main beneficiaries would be the Yankees, not the public, according to Brodsky. The same could be said to apply to Forest City Ratner regarding Atlantic Yards.
What's the test for lawmakers?
If federal taxpayers are the losers, what in general should lawmakers consider in regulating tax-exempt financing?
As Gillette testified Thursday, "[T]he tax exemption should be tied to fostering democratic accountability and financial transparency at the local level. The use of PILOTs, at least as structured in the Yankee Stadium deal, does not readily meet that test."
Could arena valuation increase?
Kucinich noted that sports stadiums typically lose some of their value over time as they become obsolete, but "the City makes the highly suspect claim that the stadium never depreciates."
The inflated assessment thus allows the City to claim that the payments that will be made by the Yankees for debt service fit the IRS rules for PILOTs.
We should keep watch for a similar claim regarding the Atlantic Yards arena. As author Neil deMause has noted, major changes in sports facilities are usually requested by their second decade.
What exactly is Atlantic Yards?
The city said: [Brodsky's'] new efforts, though, may create hurdles for other economic development projects, including, for example, Atlantic Yards in Brooklyn - a $4 BN project expected to create thousands of unionized jobs and 2,000+ units of affordable housing.
Note how the city focuses on the most politically palatable elements. Atlantic Yards would create relatively few new permanent jobs (I estimate fewer than 1500 in the first phase), with only a fraction unionized.
Atlantic Yards would bring thousands of temporary construction jobs, 1500 a year for a decade--or a smaller number per year over a longer period of time. As noted at the hearing, construction jobs could be created with an alternative use of subsidies.
While a denial of tax-exempt financing for the arena would make it harder to create Atlantic Yards, given that the design of the arena is integrated into the four towers around it, tax-exempt arena financing is not required to create affordable housing.
In fact, a significant amount of tax-exempt housing bonds--$1.4 billion--would be required for the affordable housing, and the city doesn't have the capacity to issue such bonds in the short-term, at least.
When will IRS issue its final rule on PILOTs?
Larson (right), Associate Chief Counsel, Financial Institutions and Products for the IRS, described how, after the "loophole" allowing the Yankees and Mets to proceed caught their attention, in October 2006, the Treasury Department and the IRS published Proposed Regulations to clarify and to tighten the standard, essentially eliminating “the ability of a State or local government to set PILOTs at fixed amounts that do not fluctuate with changes in the underlying taxes on which the PILOT is based.”Larson noted that the IRS and Treasury Department have received numerous public comments on the Proposed Regulations and plan to issue final regulations "soon" on the treatment of PILOTs, with appropriate modifications based on the public comments received.
What are those “appropriate modifications”?
The city and state want to make sure the three New York sports facilities are grandfathered in.
Larson, in response to a question, gave at least a nod to those concerns. He testified that, in choosing an effective date for tax regulations, one consideration is that "we look at the expectations of people being affected."
Would the IRS proposed regulation for fluctuating PILOTs work in the bond market?
If PILOTs must track generally applicable taxes, and change as real estate assessments change, as is proposed, it might be very hard to sell the bonds. "We are certainly not experts in the marketing of bonds," Larson said. "That's why there was a public comment."
Stay tuned.
Fact vs. Fiction vs. Fact: City statement on Yankees vs. Brodsky statement
The city responded vigorously Thursday to Assemblyman Richard Brodsky's report slamming Yankee Stadium financing plan, and Brodsky responded Friday in kind.
The city statement
Yankee Stadium: Fact vs. Fiction
At a time when economic development is sorely needed in New York, AM Richard Brodsky is criticizing a project that has led to one of the largest private investments in Bronx history, creating thousands of unionized jobs. AM Brodsky was right on the many occasions when he voted in favor of this project, and fortunately is too late to derail its success. His new efforts, though, may create hurdles for other economic development projects, including, for example, Atlantic Yards in Brooklyn - a $4 BN project expected to create thousands of unionized jobs and 2,000+ units of affordable housing.
Jobs
AM Brodsky: "Only 15 new permanent jobs would be created."
Facts
Yankees currently project 1,000 new, permanent jobs; 5,000+ unionized, construction jobs
In 2006 IDA application, Yankees reported the following relating to permanent jobs:
§ 2006: 104 Full Time (FT)/879 Part Time (PT) employees
§ Projected Post-Project: 140FT/950PT + 550-750PT concessionaire employees
City undertook the project for many reasons beyond just jobs ($1BN+ private investment; relieves City of maintenance that would have exceeded rent by $41MM over 40 yrs.; creates new parkland, infrastructure, and transportation improvements; 67% of construction contracts so far to NYC cos./29% to Bronx cos.)
Land Assessment
AM Brodsky: "The profound differences among the three appraisals were not an accident or omission."
Facts
DoF used standard procedures for assessment
IDA has appropriately had no involvement in assessment
Referenced valuations looked at land for different purposes and so had different assumptions (e.g., not all assumed completion of $1+ BN stadium; not all assumed $200+ MM of public infrastructure)
Luxury Box
AM Brodsky: "Luxury suite was secretly acquired by NYCIDA and the Mayor's Office with the proceeds from stadium bonds."
Facts
City only has an option to use suite
Suite being built with taxable, not tax-exempt, debt
Deal was disclosed as early as 2006 in official statement for project bonds
Deal is consistent with what City has had for years at Shea, Cyclones and Staten Island Yankees stadia
Available to reward employees and entertain dignitaries to market New York (as cities around U.S. do)
Process
AM Brodsky: "Failure to provide accurate and complete information to the public about authority activities and finances."
Facts
One of the most transparent projects in City history
Almost 20 public hearings (though Assembly held no hearings before its park alienation vote)
Approved by IDA Board, City Council, State Legislature, Gov., IRS
Hundreds of hours responding to Brodsky/Kucinich questions and testifying before Brodsky
Cost
AM Brodsky: "The total cost to taxpayers and savings to the Yankees is between $585 million and $826 million."
Facts
AM Brodsky says use of PILOTs to pay bonds is a cost to City, but before and after project, City will be collecting exactly the same amount in real estate taxes from the Yankees
AM Brodsky counts lost income tax on tax-exempt bonds as a cost of project, but:
§ Many bond purchasers may not be NYC/NYS residents and would not pay taxes even if bonds were taxable
§ Yankees have said that without tax-exemption, they would not have done project, so bonds for a new stadium would never have been issued on a taxable basis
AM Brodsky looks at project costs and ignores benefits (2006 IDA cost-benefit analysis est. $41MM net benefit)
City is contributing capital only to infrastructure ($174 MM for parks; $37 MM for general infrastructure;
$39 MM for Metro-North; $31 MM for soft costs)
APPENDIX
Noteworthy Votes by AM Brodsky (2005 to 2008)
AM Brodsky voted repeatedly in favor of new Yankee Stadium
Park Alienation (June 2005; S5818)
05-06 Budget Amendment, incl. ~$70MM for Garages (June 2005; S5928)
06-07 Budget, incl. ~$70MM for Garages (March 2006; S7166/A10486)
06-07 Budget Amendment, incl. ~$70MM for Garages (April 2006; S7265/A10653)
06-07 Tech. Budget Amendment, incl. ~$70MM for Garages (April 2006; A10652)
Education, Labor, Family Assistance and Econ Devel. Budget, incl. ~$70MM for Garages (S6807c)
Just this year, AM Brodsky voted in favor of bailing out two sports enterprises:
New York Racing Authority ~$140MM bailout (February 2008; A9998)
Monticello Raceway incentives (June 2008, S8700/A11744)
Selected, Recent Tax-Exempt Financings of Economic Development Projects (2002 to 2008)
2002: Chatham Ridge Redevelopment in Chicago, IL ($18 MM)
2002: Gallery Place Project in Washington, DC ($74 MM)
2002: Mandarin Oriental Project in Washington, DC ($46 MM)
2005: Downtown Mixed-Use Redevelopment in Kansas City, MO ($115 MM)
2006: Former Myrtle Beach Air Force Base Mixed-Use Redevelopment in Myrtle Beach, SC ($31 MM)
The Brodsky statement
Statement of Emma Furman, Deputy Chief of Staff to Assemblyman Richard Brodsky
NOW AND THEN: WHICH TIME DID THE CITY TELL THE TRUTH?
“FACT V. FICTION”, New York City’s non-denial denial response to the facts in Assemblyman Brodsky’s Yankee Stadium Report requires only a re-statement of the City’s own sworn statements to reveal the truth.
JOBS
Now: “Yankees currently project 1,000 new, permanent jobs.”
Then: Page 7 of the Yankees sworn March 2008 Core Application to the IDA.
Number of existing permanent jobs: 125
Number of jobs after completion of new Stadium: 140
Then we did the math……………………net increase: 15
Now they scramble to change what the documents reveal. Nice pivot. What did you expect them to say once the sworn data was made public?
LAND ASSESSMENT
Now: “Referenced valuations looked at land for different purposes”
Then: For the IRS the City valued the Stadium land at $204 million, $275 psf
For the National Park Service the City valued the same land at $21 million, $30 psf
For New York State the City valued the same land at $40 million, $50 psf
Well, the whole point of valuing the land separately is to not change the value because of the actual building on it. That is valued separately. Three different land appraisals, three different City financial needs, three different values, three different sworn submissions to the Feds. You couldn’t make this stuff up. And by the way, take a look at land values elswhere in the neighborhood, including another City deal, the Bronx Terminal Market, put together by Related. Land value there? $9 per square foot. Exactly how do they do these assessments?
LUXURY SUITE
Now: “Deal was disclosed as early as 2006 in official statement for project bonds.”
Then: There have been plenty of press conferences extolling non-existent jobs etc. Did anyone mention luxury suites publicly? Did anyone mention that ticket prices were going to skyrocket so that the same taxpayers paying for the Stadium couldn’t afford to go, but the political class gets to go free? Gimme a break.
PROCESS
Now: “One of the most transparent projects in City history.”
Then: Transparent? Was the “Deviation Letter” saying there was no required public economic benefit made public? Nope. Was the decision to issue a billion dollars in tax-free bonds made by elected officials? Nope. Exactly who is the IDA and how did they come to control City debt?
COST
Now: “City will be collecting exactly the same amount in real estate taxes from the Yankees.”
(And in and earlier press release) “Funding for the $800 million in construction costs is being provided fully by the Yankees.”
Then: In a sworn letter to the IRS the City says. “The City has determined to use its property taxes (in this case PILOTs) to finance the construction and operation…of the Stadium.”
Now which City statement do you want to believe, the press release or the sworn statement to the IRS? The Yankees are getting close to $1 billion in taxpayer money.
All we did was read the sworn statements in previously undisclosed documents, and compare it to the press releases then and now. These are the City’s own words, not anyone’s opinion. We’re not happy to uncover this mess. But at a time when we can’t fund the capital needs of the MTA, or schools, or hospitals, the City can pour billions into sports facilities. But the truth is the truth, and the City will have to live with it.
The city statement
Yankee Stadium: Fact vs. Fiction
At a time when economic development is sorely needed in New York, AM Richard Brodsky is criticizing a project that has led to one of the largest private investments in Bronx history, creating thousands of unionized jobs. AM Brodsky was right on the many occasions when he voted in favor of this project, and fortunately is too late to derail its success. His new efforts, though, may create hurdles for other economic development projects, including, for example, Atlantic Yards in Brooklyn - a $4 BN project expected to create thousands of unionized jobs and 2,000+ units of affordable housing.
Jobs
AM Brodsky: "Only 15 new permanent jobs would be created."
Facts
Yankees currently project 1,000 new, permanent jobs; 5,000+ unionized, construction jobs
In 2006 IDA application, Yankees reported the following relating to permanent jobs:
§ 2006: 104 Full Time (FT)/879 Part Time (PT) employees
§ Projected Post-Project: 140FT/950PT + 550-750PT concessionaire employees
City undertook the project for many reasons beyond just jobs ($1BN+ private investment; relieves City of maintenance that would have exceeded rent by $41MM over 40 yrs.; creates new parkland, infrastructure, and transportation improvements; 67% of construction contracts so far to NYC cos./29% to Bronx cos.)
Land Assessment
AM Brodsky: "The profound differences among the three appraisals were not an accident or omission."
Facts
DoF used standard procedures for assessment
IDA has appropriately had no involvement in assessment
Referenced valuations looked at land for different purposes and so had different assumptions (e.g., not all assumed completion of $1+ BN stadium; not all assumed $200+ MM of public infrastructure)
Luxury Box
AM Brodsky: "Luxury suite was secretly acquired by NYCIDA and the Mayor's Office with the proceeds from stadium bonds."
Facts
City only has an option to use suite
Suite being built with taxable, not tax-exempt, debt
Deal was disclosed as early as 2006 in official statement for project bonds
Deal is consistent with what City has had for years at Shea, Cyclones and Staten Island Yankees stadia
Available to reward employees and entertain dignitaries to market New York (as cities around U.S. do)
Process
AM Brodsky: "Failure to provide accurate and complete information to the public about authority activities and finances."
Facts
One of the most transparent projects in City history
Almost 20 public hearings (though Assembly held no hearings before its park alienation vote)
Approved by IDA Board, City Council, State Legislature, Gov., IRS
Hundreds of hours responding to Brodsky/Kucinich questions and testifying before Brodsky
Cost
AM Brodsky: "The total cost to taxpayers and savings to the Yankees is between $585 million and $826 million."
Facts
AM Brodsky says use of PILOTs to pay bonds is a cost to City, but before and after project, City will be collecting exactly the same amount in real estate taxes from the Yankees
AM Brodsky counts lost income tax on tax-exempt bonds as a cost of project, but:
§ Many bond purchasers may not be NYC/NYS residents and would not pay taxes even if bonds were taxable
§ Yankees have said that without tax-exemption, they would not have done project, so bonds for a new stadium would never have been issued on a taxable basis
AM Brodsky looks at project costs and ignores benefits (2006 IDA cost-benefit analysis est. $41MM net benefit)
City is contributing capital only to infrastructure ($174 MM for parks; $37 MM for general infrastructure;
$39 MM for Metro-North; $31 MM for soft costs)
APPENDIX
Noteworthy Votes by AM Brodsky (2005 to 2008)
AM Brodsky voted repeatedly in favor of new Yankee Stadium
Park Alienation (June 2005; S5818)
05-06 Budget Amendment, incl. ~$70MM for Garages (June 2005; S5928)
06-07 Budget, incl. ~$70MM for Garages (March 2006; S7166/A10486)
06-07 Budget Amendment, incl. ~$70MM for Garages (April 2006; S7265/A10653)
06-07 Tech. Budget Amendment, incl. ~$70MM for Garages (April 2006; A10652)
Education, Labor, Family Assistance and Econ Devel. Budget, incl. ~$70MM for Garages (S6807c)
Just this year, AM Brodsky voted in favor of bailing out two sports enterprises:
New York Racing Authority ~$140MM bailout (February 2008; A9998)
Monticello Raceway incentives (June 2008, S8700/A11744)
Selected, Recent Tax-Exempt Financings of Economic Development Projects (2002 to 2008)
2002: Chatham Ridge Redevelopment in Chicago, IL ($18 MM)
2002: Gallery Place Project in Washington, DC ($74 MM)
2002: Mandarin Oriental Project in Washington, DC ($46 MM)
2005: Downtown Mixed-Use Redevelopment in Kansas City, MO ($115 MM)
2006: Former Myrtle Beach Air Force Base Mixed-Use Redevelopment in Myrtle Beach, SC ($31 MM)
The Brodsky statement
Statement of Emma Furman, Deputy Chief of Staff to Assemblyman Richard Brodsky
NOW AND THEN: WHICH TIME DID THE CITY TELL THE TRUTH?
“FACT V. FICTION”, New York City’s non-denial denial response to the facts in Assemblyman Brodsky’s Yankee Stadium Report requires only a re-statement of the City’s own sworn statements to reveal the truth.
JOBS
Now: “Yankees currently project 1,000 new, permanent jobs.”
Then: Page 7 of the Yankees sworn March 2008 Core Application to the IDA.
Number of existing permanent jobs: 125
Number of jobs after completion of new Stadium: 140
Then we did the math……………………net increase: 15
Now they scramble to change what the documents reveal. Nice pivot. What did you expect them to say once the sworn data was made public?
LAND ASSESSMENT
Now: “Referenced valuations looked at land for different purposes”
Then: For the IRS the City valued the Stadium land at $204 million, $275 psf
For the National Park Service the City valued the same land at $21 million, $30 psf
For New York State the City valued the same land at $40 million, $50 psf
Well, the whole point of valuing the land separately is to not change the value because of the actual building on it. That is valued separately. Three different land appraisals, three different City financial needs, three different values, three different sworn submissions to the Feds. You couldn’t make this stuff up. And by the way, take a look at land values elswhere in the neighborhood, including another City deal, the Bronx Terminal Market, put together by Related. Land value there? $9 per square foot. Exactly how do they do these assessments?
LUXURY SUITE
Now: “Deal was disclosed as early as 2006 in official statement for project bonds.”
Then: There have been plenty of press conferences extolling non-existent jobs etc. Did anyone mention luxury suites publicly? Did anyone mention that ticket prices were going to skyrocket so that the same taxpayers paying for the Stadium couldn’t afford to go, but the political class gets to go free? Gimme a break.
PROCESS
Now: “One of the most transparent projects in City history.”
Then: Transparent? Was the “Deviation Letter” saying there was no required public economic benefit made public? Nope. Was the decision to issue a billion dollars in tax-free bonds made by elected officials? Nope. Exactly who is the IDA and how did they come to control City debt?
COST
Now: “City will be collecting exactly the same amount in real estate taxes from the Yankees.”
(And in and earlier press release) “Funding for the $800 million in construction costs is being provided fully by the Yankees.”
Then: In a sworn letter to the IRS the City says. “The City has determined to use its property taxes (in this case PILOTs) to finance the construction and operation…of the Stadium.”
Now which City statement do you want to believe, the press release or the sworn statement to the IRS? The Yankees are getting close to $1 billion in taxpayer money.
All we did was read the sworn statements in previously undisclosed documents, and compare it to the press releases then and now. These are the City’s own words, not anyone’s opinion. We’re not happy to uncover this mess. But at a time when we can’t fund the capital needs of the MTA, or schools, or hospitals, the City can pour billions into sports facilities. But the truth is the truth, and the City will have to live with it.
Friday, September 19, 2008
At Congressional hearing, criticism of Yankees deal and stadium funding; IRS says final regulation coming soon
Piling on to Assemblyman Richard Brodsky’s report on the new Yankee Stadium, Rep. Dennis Kucinich (D-OH) said yesterday that his Subcommittee’s “still ongoing investigation has uncovered substantial evidence of improprieties and possible fraud” by the stadium’s financial architects.
Kucinich chairs the Domestic Policy Subcommittee of the Oversight and Government Reform Committee, which yesterday held a hearing to which representatives of the Yankees and the city of New York were conspicuously absent, though they are expected to appear in the future.
Though the hearing, “Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York,” focused on Yankee Stadium, the issues raised have direct applicability to the planned Atlantic Yards arena.
PILOTs (payments in lieu of taxes) can’t exceed the amount of foregone taxes, but PILOTs for the Yankee Stadium were based on an assessment inflated to justify a certain quantity of bonds, Brodsky and Kucinich charged. The same tactic might be in store for Brooklyn, given that the expected arena PILOTs far exceed the foregone taxes for the comparable Madison Square Garden.
Moreover, the new ballparks for the Yankees and Mets rely on special Internal Revenue Service rulings that allowed fixed PILOTs that conform to bond payments, while the IRS has proposed changing the rule to make sure that PILOTs fluctuate with taxes--anathema to the bond market.
That rule, expected to be finalized soon, has city officials nervous. Indeed, according to Metro, the city yesterday issued a statement that “complained of the new hurdles” to financing other projects similarly, such as Atlantic Yards. Whether Atlantic Yards might be grandfathered in under the old rules, as the city and state have sought, remains unclear, but the benefit to Forest City Ratner would be significant; I’ve estimated $165 million on $800 million of tax-exempt bonds.
(The city's statement: [Brodsky's'] new efforts, though, may create hurdles for other economic development projects, including, for example, Atlantic Yards in Brooklyn - a $4 BN project expected to create thousands of unionized jobs and 2,000+ units of affordable housing. It would not create thousands of permanent unionized jobs, just construction jobs. Tax-exempt financing for the arena is not required to create affordable housing.)
Other warnings
At the hearing, an economist pointed out leaps in ticket prices engendered by the new Yankee Stadium and warned that economic impact projections for sports facilities should be taken with a grain of salt. He also cautioned about overstating an increase in construction jobs, given that available subsidies could be redeployed for other projects.
Also, a law professor suggested that tax-exempt financing for sports facilities, given that it’s not subject to transparency and local democratic oversight, should be looked at skeptically by the federal government.
Did public pay for arena?
The New York City Industrial Development Authority yesterday offered a detailed rebuttal to Brodsky’s charges regarding the assessments. There's a fundamental disagreement on whether a benefit to the Yankees is also a cost to local taxpayers.
Brodsky says the use of PILOTs to pay bonds is a cost to the City, but before and after project, the City will be collecting exactly the same amount in real estate taxes from the Yankees, the rebuttal noted. (The Independent Budget Office has similarly not counted it as a loss.)
Brodsky counts lost income tax on tax-exempt bonds as a cost of project, but the Yankees have said that without the tax exemption, they would not have done the project, according to the rebuttal, so bonds for a new stadium would never have been issued on a taxable basis.
(My sources for this article are the written statements submitted by witnesses, plus some press coverage. The hearing was webcast in real time, but no webcast was available in the evening when I accessed the hearing web site.)
Kucinich’s criticisms
It was the third hearing in a year-and-a-half Kucinich’s subcommittee has held regarding sports facilities. In his opening statement, Kucinich reiterated criticisms established earlier: “[B]uilding sports stadiums does not make sense as a tool of taxpayer-subsidized economic development” and state and local governments “compete with each other to lure or retain professional sports teams in a senseless race to the bottom for larger public subsidies subsidized by the federal taxpayer.”
While support for needed infrastructure is neglected, taxpayers subsidize stadiums that are essentially private, he said, and taxpayer subsidies for sports stadiums represent “a transfer of wealth from the many to the wealthy.”
Kucinich cited “wildly divergent valuations for the land under the stadium... submitted by City and State government officials to the federal government.” He said that the Subcommittee’s consultation with experts led to the “provisional judgment” that the lower appraisal was more reasonable--and thus would’ve supported PILOTs for much lower bonds.
[The city said: Referenced valuations looked at land for different purposes and so had different assumptions (e.g., not all assumed completion of $1+ BN stadium; not all assumed $200+ MM of public infrastructure).]
Kucinich said that the tax-exemption on $940 million in tax-exempt bonds “will save the Yankees well over $100 million in interest costs” and “cost federal taxpayers almost $200 million in lost tax revenues.” While New York City has requested that the IRS approve more than $360 million in bonds for the Yankees, Kucinich said “these bonds should not be approved without further investigation.”
Though I don’t know if they discussed the Atlantic Yards arena, the implication of Kucinich’s remarks is that no arena bonds should be approved for now. Indeed, Brodsky called for the end of tax subsidies for stadiums.
Stadium valuation grows?
Kucinich also cast doubt on the city’s projected claims of future value: “Typically sports stadiums lose some of their value over time as they become obsolete, a process that usually lasts less than 40 years. But the City makes the highly suspect claim that the stadium never depreciates. Rather, they assert that it gains three percent in value a year through 2046.”
The inflated assessment thus allows the City to claim that the payments that will be made by the Yankees for debt service fit the IRS rules for PILOTs. However, a proper assessment would’ve led to either a smaller stadium or larger contribution by the Yankees.
New hearing(s) coming
Kucinich said representatives of the New York Yankees and the New York City Industrial Development Agency were unavailable, but will appear later; the Yankees will testify October 7.
“The assessment issues are complex, and our inquiry is incomplete, in large part because the Yankees and the City have repeatedly failed to comply with our requests to produce documents about the assessments,” he said.
IRS testimony
Stephen Larson, Associate Chief Counsel, Financial Institutions and Products for the Internal Revenue Service (IRS), described the difficulty in deciding whether a customized PILOT deal more resembles “a generally applicable tax” or “more like a lease, rent or other payment” impermissible under IRS rules: “This line becomes particularly difficult to draw when the tax is abated through negotiations or is a PILOT that is crafted for the transaction and essentially results in debt service being fully paid by the private business.
Without referring to the Yankees and Mets by name, Larson noted that in July 2006, the IRS Office of Chief Counsel issued two favorable Private Letter Rulings (PLRs) on tax-exempt governmental bond financings for stadiums. While the IRS concluded that existing Treasury Regulations supported a favorable response--Kucinich disagrees--the PLRs “served to focus our attention on how broadly the existing regulations could be interpreted to permit PILOTs to be used to pay debt service on tax-exempt bonds in situations where the PILOTs bear an insufficient link to the otherwise generally applicable tax, and in fact closely resemble the expected debt service on the bonds.”
Thus, in October 2006, the Treasury Department and the IRS published Proposed Regulations to clarify and to tighten the standard, essentially eliminating “the ability of a State or local government to set PILOTs at fixed amounts that do not fluctuate with changes in the underlying taxes on which the PILOT is based.”
Regulation coming soon
Larson noted that the IRS and Treasury Department have received numerous public comments on the Proposed Regulations and”plan to issue final regulations soon on the treatment of PILOTs, with appropriate modifications based on the public comments received.”
What those “appropriate modifications” are remains unclear, but New York City and New York State have asked that requests for additional funding for the Yankees and Mets stadiums to be grandfathered in, along with the plan for tax-exempt bonds for the Atlantic Yards arena.
"The private letter ruling is only valid to the extent that it was based on factual recitations," Larson said, according to the Bond Buyer. "If the audit team were to determine that the underlying representations were false, then the PLR would essentially no longer be effective and the audit team would pursue its normal recourse."
Brodsky testimony
In his testimony, Brodsky addressed the national policy issue. "There is a growing national consensus that public financing of private sports facilities serves no useful public interest," he said. "The evidence we uncovered with respect to the Stadium deal is that there is little, if any, economic benefit to the public resulting from taxpayer subsidies. At a time when we are unable to fund our most basic infrastructure needs, the subsidization of sports facilities is not in the public interest and should cease."
Two wrongs make a right?
Brodsky allowed, as he did at the July 2 hearing he held, that there’s an argument for reciprocal unfairness, given that New York State gets more than $80 billion less than what taxpayers send to Washington.
"The only reason for the Stadium deal that stands scrutiny is that any arrangement that returns tax dollars to New York remedies the unfairness of the current system," he said. "The fact that these public dollars flow to the Yankees, a private, hugely successful and wealthy corporation not located in New York is a disturbing fact, but I must in fairness note the interests of my state in a fairer distribution of federal money."
Brodsky: bad policy
Brodsky offered a fundamental criticism of tax-exempt bonding: "There is a fundamental flaw in the decision by the Congress to allow for tax-exemptions that benefit private persons. The most obvious consequence of this policy is to create an economic development model that creates little new economic activity on a national basis. You have created a system that pits one state against another, that is marked by the elegant blackmail of private interests who receive subsidies and tax breaks not because of new investment, but because they threaten to leave one state for another.:
He concluded, "The Congress should stop the madness and restore fairness and equity to our tax system by denying tax-exemptions whose purpose is to move economic activity from one state to another." While Brodsky has not fundamentally criticized the Atlantic Yards project, his call to deny such tax exemptions would scotch the arena funding plan.
Indeed, the arena would bring new revenues to New York City and New York State mainly because it would shift economic activity from New Jersey, the current home of the Nets, according to the Independent Budget Office.
A law professor’s analysis
In his testimony, Clayton P. Gillette of the New York University School of Law aimed to define “ the proper scope of the federal tax exemption.” He noted, “there is a substantial argument that the tax exemption constitutes an inefficient subsidy,” given that it costs the federal government more in forgone income than it returns to states and cities in terms of reduced borrowing costs.
Such “potential inefficiency” is an argument for properly defining the scope of the exemption, he said. He challenged the claim that denial of the tax exemption interferes with local decisions about which capital projects to pursue; after all, states and localities can pursue projects without tax exemptions. They’d just have to pay the full market cost. Given that nonresident federal taxpayers receive no benefit from the project, the justification of the subsidy is unclear.
In fact, he added, an economic perspective argues that the locality should “bear the full costs of the project, so that local officials have an incentive to balance the purported benefits of the project against its costs and to induce local residents to ensure that their tax dollars are being spent in a manner consistent with their preferences.”
When’s a subsidy OK?
He suggested two circumstances under which such a subsidy is appropriate. One case involves projects undertaken by states and localities “that have positive external effects,” for example a project that could reduce pollution in multiple jurisdictions.
The second category, he said, is “a bit more nebulous, and arguably broader,” since it involves “projects that enhance the local autonomy of local governments generally,” giving them the latitude to experiment regarding “the best mix of publicly provided goods and services.” Also, he said, “Autonomous local governments also confer broader social benefits by acting in a manner that attracts a tax base that they believe will help enrich their communities.”
“Thus,” he observed, “federal subsidies are appropriate to ensure that localities possess the basic infrastructure and capital capacity that is a prerequisite to more productive local government.”
Sports facilities
“For instance, if a locality truly believes that a sports stadium will provide it with a competitive advantage or enhance residents’ sense of community, it may use the federal tax exemption to pursue that vision,” he said, adding that “federal tax law contains a variety of provisions that can properly be understood as imposing on a locality the obligation to ensure that the decision to undertake a project does, in fact, reflect the preferences of local residents.”
If the project aims solely “to satisfy the interests of a relatively small group of constituents,” then it doesn’t foster local autonomy, undermining the argument for federal subsidies.
“The availability of the tax exemption under those conditions looks more like an effort by which local officials can simply confer a significant benefit on favored interests in the form of lower financing costs, and shift the lion’s share of the subsidy to federal rather than to state and local taxpayers,” he said. “From the perspective of local officials, this is a winning strategy. They can confer an advantage onto local interest groups, but externalize the related costs in a manner that saves them from having to increase taxes or charges on their constituents.”
So the issuance of tax-exempt bonds, he said, should be linked to transparency and democratic accountability, helping ensure that subsidized projects will foster local autonomy and generate significant spillovers.
“To continue my example of the locally desired stadium, the locality may take advantage of the federal subsidy if it is willing to finance a stadium from municipal revenues that have been generated by the traditional taxing mechanism used by the city to fund the public goods and services that it provides – what are referred to in Treasury Department regulations as ‘generally applicable taxes,’” he said.
The point is that, if taxpayers are willing to pay for it, then it’s more likely “consistent with the ideal mix of goods and services that define local autonomy,” he said.
What about PILOTs?
He essentially expressed support for the proposed IRS amendments: “[T]o the extent that specific PILOT payments are dedicated to debt service for a particular project, those payments arguably have more in common with the kind of special charge, such as an assessment related to a particular municipal improvement, that the regulations exclude from “generally applicable taxes” used for general governmental purposes,” he said.
Because PILOTs don’t fit well with the issues of transparency and democratic accountability supposed to apply to generally applicable taxes--they don’t show up on governmental budget lines--”PILOTs appear to bear greater resemblance to the exactions that fall within the scope of private payments than to taxes,” he said.
The NYC conundrum
Gillette pointed to the efforts by the city to have it both ways. On the one hand, PILOTs are presented as substitutes for taxes. On the other, "the Mayor of New York City has taken the position that PILOTs constitute contractual rights that had been negotiated by the city rather than tax payments. As such, the Mayor’s Office has claimed that PILOTs were not revenues of the City susceptible to payment into the general fund and control by the City Council; instead, they were assignable to City projects within the discretion of the Mayor.”
“[A]t least to the extent that PILOTs are treated differently from taxes, they permit evasion of the kinds of democratic scrutiny that ensure that federally tax-exempt projects and financing structures reflect constituent preferences and serve the objectives of local autonomy,” Gillette warned.
That doesn’t mean the use of PILOTs for local projects is illegitimate, he said. “But nothing about the fact that PILOTs are useful from a local perspective requires that the federal government similarly embrace the concept,” he added. “Indeed, it is plausible that by disadvantaging opacity in public finance, federal tax law can provide useful incentives for the reform of anachronistic procedures in state and local finance.”
Consequence of change
Gillette, according to the Bond Buyer, said that if the IRS invalidated the PLR based on the allegations that have surfaced, the agency could declare the bonds taxable.
"Then bond holders who purchased them on the belief that the interest they received would be tax exempt are going to be, shall we say mildly upset," Gillette said. "The city would have to step up to avoid imposing additional tax liability on the bondholders."
Ticket prices going up
Brad R. Humphreys, Associate Professor, Department of Economics, University of Alberta, and a critic of sports facility deals, offered some context: “the financing of both new baseball stadiums in New York City was influenced by threats made by both the New York Yankees and New York Mets to leave the city of New York.”
In his testimony, he said that teams benefited from the anti-trust exemption that limits the number of Major League Baseball (MLB) franchises and gives them bargaining power. “The ultimate cause of the New York PILOT mess is MLB’s anti-trust exemption,” he said.
The lack of competition means teams have “significant latitude when setting prices.” Indeed, the new Yankee Stadium will lead to a “139% annual change in the average price of a Yankees ticket, and a stunning 669% annual increase in the price of the highest ticket price offered. No MLB team moving into a new stadium has increased the top ticket price offered by this amount in the past 33 years.”
(Note that Nets ticket prices also would leap some 73%, according to one set of documents.)
He suggested that the “access to lower interest rates offered by tax exempt funding, coupled with the lack of budgetary-related limits on costs combine to produce the most expensive stadium construction project in the history of Major League Baseball,” and the lavish stadium enables the Yankees “to pass on extraordinary ticket price increases to their fans.”
Economic impacts
Humphreys also scoffed at claims of significant economic benefits from sports stadium construction and operation. “First, they are forecasts, and not actual counts of jobs created or income earned,” he said. “In the PILOT issue, and every other sports facility construction project I have studied, these forecasts of economic benefits are treated as factual assessments, rather than the forecasts that they are... Any additional claims of future economic benefits from the project should be taken with a grain of salt."
Construction jobs
He also suggested skepticism regarding claimed benefits from the construction jobs. “The key to determining the actual net economic benefits generated by sports stadium construction projects is to determine how many jobs are created that would not have existed if the project did not take place, and also to determine how many of the workers filling those jobs would have been unemployed if the project had not taken place,” he said. “According to economic theory, only this small subset of the total number of jobs created by a stadium construction project can be counted as part of the economic impact of the project.”
“The net economic benefit created by stadium construction projects is much smaller than the total economic benefit (which can be easily found by simply adding up the total amount of spending associated with the project) because of the presence of opportunity costs, and the double counting that typically takes place when non-economists attempt to estimate these benefits,” he observed.
“Opportunity cost is the cost of forgone alternatives. In the case of the New Yankee Stadium, the facility generates significant opportunity costs for the City of New York and in the local community," he said. "The City could have issued a billion plus dollars of tax exempt bonds to finance any number of alternatives.”
“The materials and supplies that are going into the construction of the new stadium could have been used on other construction projects,” he said. “And most importantly, the construction workers employed on this project could have worked on other projects.”
Similarly, that’s been one argument regarding Atlantic Yards--while supporters often suggest it’s AY or nothing, others point out that an alternative, albeit smaller project, could be built on the Vanderbilt Yard, and subsidies and incentives deployed elsewhere.
Kucinich chairs the Domestic Policy Subcommittee of the Oversight and Government Reform Committee, which yesterday held a hearing to which representatives of the Yankees and the city of New York were conspicuously absent, though they are expected to appear in the future.Though the hearing, “Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York,” focused on Yankee Stadium, the issues raised have direct applicability to the planned Atlantic Yards arena.
PILOTs (payments in lieu of taxes) can’t exceed the amount of foregone taxes, but PILOTs for the Yankee Stadium were based on an assessment inflated to justify a certain quantity of bonds, Brodsky and Kucinich charged. The same tactic might be in store for Brooklyn, given that the expected arena PILOTs far exceed the foregone taxes for the comparable Madison Square Garden.
Moreover, the new ballparks for the Yankees and Mets rely on special Internal Revenue Service rulings that allowed fixed PILOTs that conform to bond payments, while the IRS has proposed changing the rule to make sure that PILOTs fluctuate with taxes--anathema to the bond market.
That rule, expected to be finalized soon, has city officials nervous. Indeed, according to Metro, the city yesterday issued a statement that “complained of the new hurdles” to financing other projects similarly, such as Atlantic Yards. Whether Atlantic Yards might be grandfathered in under the old rules, as the city and state have sought, remains unclear, but the benefit to Forest City Ratner would be significant; I’ve estimated $165 million on $800 million of tax-exempt bonds.
(The city's statement: [Brodsky's'] new efforts, though, may create hurdles for other economic development projects, including, for example, Atlantic Yards in Brooklyn - a $4 BN project expected to create thousands of unionized jobs and 2,000+ units of affordable housing. It would not create thousands of permanent unionized jobs, just construction jobs. Tax-exempt financing for the arena is not required to create affordable housing.)
Other warnings
At the hearing, an economist pointed out leaps in ticket prices engendered by the new Yankee Stadium and warned that economic impact projections for sports facilities should be taken with a grain of salt. He also cautioned about overstating an increase in construction jobs, given that available subsidies could be redeployed for other projects.
Also, a law professor suggested that tax-exempt financing for sports facilities, given that it’s not subject to transparency and local democratic oversight, should be looked at skeptically by the federal government.
Did public pay for arena?
The New York City Industrial Development Authority yesterday offered a detailed rebuttal to Brodsky’s charges regarding the assessments. There's a fundamental disagreement on whether a benefit to the Yankees is also a cost to local taxpayers.
Brodsky says the use of PILOTs to pay bonds is a cost to the City, but before and after project, the City will be collecting exactly the same amount in real estate taxes from the Yankees, the rebuttal noted. (The Independent Budget Office has similarly not counted it as a loss.)
Brodsky counts lost income tax on tax-exempt bonds as a cost of project, but the Yankees have said that without the tax exemption, they would not have done the project, according to the rebuttal, so bonds for a new stadium would never have been issued on a taxable basis.
(My sources for this article are the written statements submitted by witnesses, plus some press coverage. The hearing was webcast in real time, but no webcast was available in the evening when I accessed the hearing web site.)
Kucinich’s criticisms
It was the third hearing in a year-and-a-half Kucinich’s subcommittee has held regarding sports facilities. In his opening statement, Kucinich reiterated criticisms established earlier: “[B]uilding sports stadiums does not make sense as a tool of taxpayer-subsidized economic development” and state and local governments “compete with each other to lure or retain professional sports teams in a senseless race to the bottom for larger public subsidies subsidized by the federal taxpayer.”
While support for needed infrastructure is neglected, taxpayers subsidize stadiums that are essentially private, he said, and taxpayer subsidies for sports stadiums represent “a transfer of wealth from the many to the wealthy.”
Kucinich cited “wildly divergent valuations for the land under the stadium... submitted by City and State government officials to the federal government.” He said that the Subcommittee’s consultation with experts led to the “provisional judgment” that the lower appraisal was more reasonable--and thus would’ve supported PILOTs for much lower bonds.
[The city said: Referenced valuations looked at land for different purposes and so had different assumptions (e.g., not all assumed completion of $1+ BN stadium; not all assumed $200+ MM of public infrastructure).]
Kucinich said that the tax-exemption on $940 million in tax-exempt bonds “will save the Yankees well over $100 million in interest costs” and “cost federal taxpayers almost $200 million in lost tax revenues.” While New York City has requested that the IRS approve more than $360 million in bonds for the Yankees, Kucinich said “these bonds should not be approved without further investigation.”
Though I don’t know if they discussed the Atlantic Yards arena, the implication of Kucinich’s remarks is that no arena bonds should be approved for now. Indeed, Brodsky called for the end of tax subsidies for stadiums.
Stadium valuation grows?
Kucinich also cast doubt on the city’s projected claims of future value: “Typically sports stadiums lose some of their value over time as they become obsolete, a process that usually lasts less than 40 years. But the City makes the highly suspect claim that the stadium never depreciates. Rather, they assert that it gains three percent in value a year through 2046.”
The inflated assessment thus allows the City to claim that the payments that will be made by the Yankees for debt service fit the IRS rules for PILOTs. However, a proper assessment would’ve led to either a smaller stadium or larger contribution by the Yankees.
New hearing(s) coming
Kucinich said representatives of the New York Yankees and the New York City Industrial Development Agency were unavailable, but will appear later; the Yankees will testify October 7.
“The assessment issues are complex, and our inquiry is incomplete, in large part because the Yankees and the City have repeatedly failed to comply with our requests to produce documents about the assessments,” he said.
IRS testimony
Stephen Larson, Associate Chief Counsel, Financial Institutions and Products for the Internal Revenue Service (IRS), described the difficulty in deciding whether a customized PILOT deal more resembles “a generally applicable tax” or “more like a lease, rent or other payment” impermissible under IRS rules: “This line becomes particularly difficult to draw when the tax is abated through negotiations or is a PILOT that is crafted for the transaction and essentially results in debt service being fully paid by the private business.
Without referring to the Yankees and Mets by name, Larson noted that in July 2006, the IRS Office of Chief Counsel issued two favorable Private Letter Rulings (PLRs) on tax-exempt governmental bond financings for stadiums. While the IRS concluded that existing Treasury Regulations supported a favorable response--Kucinich disagrees--the PLRs “served to focus our attention on how broadly the existing regulations could be interpreted to permit PILOTs to be used to pay debt service on tax-exempt bonds in situations where the PILOTs bear an insufficient link to the otherwise generally applicable tax, and in fact closely resemble the expected debt service on the bonds.”
Thus, in October 2006, the Treasury Department and the IRS published Proposed Regulations to clarify and to tighten the standard, essentially eliminating “the ability of a State or local government to set PILOTs at fixed amounts that do not fluctuate with changes in the underlying taxes on which the PILOT is based.”
Regulation coming soon
Larson noted that the IRS and Treasury Department have received numerous public comments on the Proposed Regulations and”plan to issue final regulations soon on the treatment of PILOTs, with appropriate modifications based on the public comments received.”
What those “appropriate modifications” are remains unclear, but New York City and New York State have asked that requests for additional funding for the Yankees and Mets stadiums to be grandfathered in, along with the plan for tax-exempt bonds for the Atlantic Yards arena.
"The private letter ruling is only valid to the extent that it was based on factual recitations," Larson said, according to the Bond Buyer. "If the audit team were to determine that the underlying representations were false, then the PLR would essentially no longer be effective and the audit team would pursue its normal recourse."
Brodsky testimony
In his testimony, Brodsky addressed the national policy issue. "There is a growing national consensus that public financing of private sports facilities serves no useful public interest," he said. "The evidence we uncovered with respect to the Stadium deal is that there is little, if any, economic benefit to the public resulting from taxpayer subsidies. At a time when we are unable to fund our most basic infrastructure needs, the subsidization of sports facilities is not in the public interest and should cease."
Two wrongs make a right?
Brodsky allowed, as he did at the July 2 hearing he held, that there’s an argument for reciprocal unfairness, given that New York State gets more than $80 billion less than what taxpayers send to Washington.
"The only reason for the Stadium deal that stands scrutiny is that any arrangement that returns tax dollars to New York remedies the unfairness of the current system," he said. "The fact that these public dollars flow to the Yankees, a private, hugely successful and wealthy corporation not located in New York is a disturbing fact, but I must in fairness note the interests of my state in a fairer distribution of federal money."
Brodsky: bad policy
Brodsky offered a fundamental criticism of tax-exempt bonding: "There is a fundamental flaw in the decision by the Congress to allow for tax-exemptions that benefit private persons. The most obvious consequence of this policy is to create an economic development model that creates little new economic activity on a national basis. You have created a system that pits one state against another, that is marked by the elegant blackmail of private interests who receive subsidies and tax breaks not because of new investment, but because they threaten to leave one state for another.:
He concluded, "The Congress should stop the madness and restore fairness and equity to our tax system by denying tax-exemptions whose purpose is to move economic activity from one state to another." While Brodsky has not fundamentally criticized the Atlantic Yards project, his call to deny such tax exemptions would scotch the arena funding plan.
Indeed, the arena would bring new revenues to New York City and New York State mainly because it would shift economic activity from New Jersey, the current home of the Nets, according to the Independent Budget Office.
A law professor’s analysis
In his testimony, Clayton P. Gillette of the New York University School of Law aimed to define “ the proper scope of the federal tax exemption.” He noted, “there is a substantial argument that the tax exemption constitutes an inefficient subsidy,” given that it costs the federal government more in forgone income than it returns to states and cities in terms of reduced borrowing costs.
Such “potential inefficiency” is an argument for properly defining the scope of the exemption, he said. He challenged the claim that denial of the tax exemption interferes with local decisions about which capital projects to pursue; after all, states and localities can pursue projects without tax exemptions. They’d just have to pay the full market cost. Given that nonresident federal taxpayers receive no benefit from the project, the justification of the subsidy is unclear.
In fact, he added, an economic perspective argues that the locality should “bear the full costs of the project, so that local officials have an incentive to balance the purported benefits of the project against its costs and to induce local residents to ensure that their tax dollars are being spent in a manner consistent with their preferences.”
When’s a subsidy OK?
He suggested two circumstances under which such a subsidy is appropriate. One case involves projects undertaken by states and localities “that have positive external effects,” for example a project that could reduce pollution in multiple jurisdictions.
The second category, he said, is “a bit more nebulous, and arguably broader,” since it involves “projects that enhance the local autonomy of local governments generally,” giving them the latitude to experiment regarding “the best mix of publicly provided goods and services.” Also, he said, “Autonomous local governments also confer broader social benefits by acting in a manner that attracts a tax base that they believe will help enrich their communities.”
“Thus,” he observed, “federal subsidies are appropriate to ensure that localities possess the basic infrastructure and capital capacity that is a prerequisite to more productive local government.”
Sports facilities
“For instance, if a locality truly believes that a sports stadium will provide it with a competitive advantage or enhance residents’ sense of community, it may use the federal tax exemption to pursue that vision,” he said, adding that “federal tax law contains a variety of provisions that can properly be understood as imposing on a locality the obligation to ensure that the decision to undertake a project does, in fact, reflect the preferences of local residents.”
If the project aims solely “to satisfy the interests of a relatively small group of constituents,” then it doesn’t foster local autonomy, undermining the argument for federal subsidies.
“The availability of the tax exemption under those conditions looks more like an effort by which local officials can simply confer a significant benefit on favored interests in the form of lower financing costs, and shift the lion’s share of the subsidy to federal rather than to state and local taxpayers,” he said. “From the perspective of local officials, this is a winning strategy. They can confer an advantage onto local interest groups, but externalize the related costs in a manner that saves them from having to increase taxes or charges on their constituents.”
So the issuance of tax-exempt bonds, he said, should be linked to transparency and democratic accountability, helping ensure that subsidized projects will foster local autonomy and generate significant spillovers.
“To continue my example of the locally desired stadium, the locality may take advantage of the federal subsidy if it is willing to finance a stadium from municipal revenues that have been generated by the traditional taxing mechanism used by the city to fund the public goods and services that it provides – what are referred to in Treasury Department regulations as ‘generally applicable taxes,’” he said.
The point is that, if taxpayers are willing to pay for it, then it’s more likely “consistent with the ideal mix of goods and services that define local autonomy,” he said.
What about PILOTs?
He essentially expressed support for the proposed IRS amendments: “[T]o the extent that specific PILOT payments are dedicated to debt service for a particular project, those payments arguably have more in common with the kind of special charge, such as an assessment related to a particular municipal improvement, that the regulations exclude from “generally applicable taxes” used for general governmental purposes,” he said.
Because PILOTs don’t fit well with the issues of transparency and democratic accountability supposed to apply to generally applicable taxes--they don’t show up on governmental budget lines--”PILOTs appear to bear greater resemblance to the exactions that fall within the scope of private payments than to taxes,” he said.
The NYC conundrum
Gillette pointed to the efforts by the city to have it both ways. On the one hand, PILOTs are presented as substitutes for taxes. On the other, "the Mayor of New York City has taken the position that PILOTs constitute contractual rights that had been negotiated by the city rather than tax payments. As such, the Mayor’s Office has claimed that PILOTs were not revenues of the City susceptible to payment into the general fund and control by the City Council; instead, they were assignable to City projects within the discretion of the Mayor.”
“[A]t least to the extent that PILOTs are treated differently from taxes, they permit evasion of the kinds of democratic scrutiny that ensure that federally tax-exempt projects and financing structures reflect constituent preferences and serve the objectives of local autonomy,” Gillette warned.
That doesn’t mean the use of PILOTs for local projects is illegitimate, he said. “But nothing about the fact that PILOTs are useful from a local perspective requires that the federal government similarly embrace the concept,” he added. “Indeed, it is plausible that by disadvantaging opacity in public finance, federal tax law can provide useful incentives for the reform of anachronistic procedures in state and local finance.”
Consequence of change
Gillette, according to the Bond Buyer, said that if the IRS invalidated the PLR based on the allegations that have surfaced, the agency could declare the bonds taxable.
"Then bond holders who purchased them on the belief that the interest they received would be tax exempt are going to be, shall we say mildly upset," Gillette said. "The city would have to step up to avoid imposing additional tax liability on the bondholders."
Ticket prices going up
Brad R. Humphreys, Associate Professor, Department of Economics, University of Alberta, and a critic of sports facility deals, offered some context: “the financing of both new baseball stadiums in New York City was influenced by threats made by both the New York Yankees and New York Mets to leave the city of New York.”
In his testimony, he said that teams benefited from the anti-trust exemption that limits the number of Major League Baseball (MLB) franchises and gives them bargaining power. “The ultimate cause of the New York PILOT mess is MLB’s anti-trust exemption,” he said.
The lack of competition means teams have “significant latitude when setting prices.” Indeed, the new Yankee Stadium will lead to a “139% annual change in the average price of a Yankees ticket, and a stunning 669% annual increase in the price of the highest ticket price offered. No MLB team moving into a new stadium has increased the top ticket price offered by this amount in the past 33 years.”
(Note that Nets ticket prices also would leap some 73%, according to one set of documents.)
He suggested that the “access to lower interest rates offered by tax exempt funding, coupled with the lack of budgetary-related limits on costs combine to produce the most expensive stadium construction project in the history of Major League Baseball,” and the lavish stadium enables the Yankees “to pass on extraordinary ticket price increases to their fans.”
Economic impacts
Humphreys also scoffed at claims of significant economic benefits from sports stadium construction and operation. “First, they are forecasts, and not actual counts of jobs created or income earned,” he said. “In the PILOT issue, and every other sports facility construction project I have studied, these forecasts of economic benefits are treated as factual assessments, rather than the forecasts that they are... Any additional claims of future economic benefits from the project should be taken with a grain of salt."
Construction jobs
He also suggested skepticism regarding claimed benefits from the construction jobs. “The key to determining the actual net economic benefits generated by sports stadium construction projects is to determine how many jobs are created that would not have existed if the project did not take place, and also to determine how many of the workers filling those jobs would have been unemployed if the project had not taken place,” he said. “According to economic theory, only this small subset of the total number of jobs created by a stadium construction project can be counted as part of the economic impact of the project.”
“The net economic benefit created by stadium construction projects is much smaller than the total economic benefit (which can be easily found by simply adding up the total amount of spending associated with the project) because of the presence of opportunity costs, and the double counting that typically takes place when non-economists attempt to estimate these benefits,” he observed.
“Opportunity cost is the cost of forgone alternatives. In the case of the New Yankee Stadium, the facility generates significant opportunity costs for the City of New York and in the local community," he said. "The City could have issued a billion plus dollars of tax exempt bonds to finance any number of alternatives.”
“The materials and supplies that are going into the construction of the new stadium could have been used on other construction projects,” he said. “And most importantly, the construction workers employed on this project could have worked on other projects.”
Similarly, that’s been one argument regarding Atlantic Yards--while supporters often suggest it’s AY or nothing, others point out that an alternative, albeit smaller project, could be built on the Vanderbilt Yard, and subsidies and incentives deployed elsewhere.
Thursday, September 18, 2008
At state Senate hearing, calls for reform of state eminent domain laws, notably blight
Opponents of governmental plans to use eminent domain for Atlantic Yards, the Columbia University expansion, and Willets Point redevelopment were at center stage yesterday at a State Senate hearing on reforming state eminent domain laws, where they and others pointed out that, in the years following the Supreme Court’s 2005 Kelo v. New London Supreme Court decision, New York has been among the few states that has made no effort to tighten eminent domain laws either through legislative or judicial action.
“Nowhere else in the country is eminent domain used to benefit private interests so rampantly and so brazenly,” declared Christina Walsh, a representative of the Institute for Justice, the libertarian legal organization that has led the fight nationally against eminent domain.
Harlem State Senator Bill Perkins, an opponent of the Columbia expansion who convened the hearing, called for a moratorium on the use of eminent domain in the state and a stall on the Columbia plan. He said he supported a special commission to reform eminent domain laws--a recommendation made by a New York State Bar Association task force to study changes in the 32-year-old Eminent Domain Procedure Law (EDPL).
(Perkins is at center. State Senator Velmanette Montgomery is at left and State Senator Efrain Gonzalez is at right. Photos by Lucy Koteen.)
Among the recommendations: formally define and limit the definition of “blight,” which is undefined; give those threatened by eminent domain a chance to challenge determinations in court by calling witnesses; and even to eliminate the use of eminent domain for private redevelopment.
Daniel Goldstein of Develop Don't Destroy Brooklyn, drawing on the Atlantic Yards example, suggested that only locally elected legislative bodies, not the unelected agencies like the Empire State Development Corporation, approve the use of eminent domain.
The 5-4 Kelo decision essentially affirmed Supreme Court doctrine, which had long allowed eminent domain for “public purpose” rather than the constitutional “public use;” however, it was the first decision to affect individual private homes. States, however, have the option to narrow the doctrine.
Unbalanced hearing
The hearing drew some 70 people at its peak, with State Senator Efrain Gonzalez of the Bronx and Velmanette Montgomery of Brooklyn joining Perkins. In the audience: a mix of advocates and property owners, mainly white, plus several Harlem residents, people of color. (However the five elected officials who spoke or submitted testimony were all people of color, and expressed concern about their constituents.)
No supporters of eminent domain testified; Perkins said that Empire State Development Corporation was invited to testify but did not do so. (An ESDC representative was in the audience, as was Janella Meeks, a manager of community relations for the New Jersey Nets, who works out of 1 MetroTech Center.)
Nor were there any of the planners and lawyers who consider themselves supporters of prudent use of eminent domain and hope that the backlash against Kelo--at least nationally--doesn’t go too far.
In a Daily News op-ed today headlined We need eminent domain to keep New York City growing
Kathryn Wylde, president of the Partnership for New York City, wrote:
Eminent domain - the power to take ownership of private property and assemble sites for construction of projects that will serve a public purpose - is one of those [governmental] powers. New York has a pipeline of important projects that can go forward with the help of eminent domain.
She said that eminent domain is under attack and argued that holdouts are getting “fair market value” and more, but still in some cases refuse.
Indeed, in a column today headlined The right way to fight blight, Daily News columnist Errol Louis called it a “surreal hearing” because “a small but vocal group of anti-development advocates are pushing” for “a set of handcuffs on the public development agencies charged with planning and executing large-scale projects.”
Louis did allow that advocate Norman Siegel and his client Nick Sprayregen, the major landowner in Columbia’s expansion zone, “are perfectly within their rights to try and rewrite the law, and a re-examination of the 40-year-old rules makes sense.” But he didn’t try to sort out what might work. Nor did he reflect on the appeals court hearing later yesterday in which some judges expressed skepticism about blight claims regarding Atlantic Yards.
Community-based planning
Perhaps the person with the broadest view--who testified after Louis left the hearing room--was Julie Lawrence, a member of Brooklyn Community Board 1, who testified on behalf of the Community-Based Planning Task Force, a coalition that includes grassroots organizations, community boards, academics, and planners--and, as its name suggests, wants more community input.
Lawrence pointed out that, despite the city’s growth, "New York City still lacks a comprehensive planning framework. Redevelopment of New York City... will succeed only when all stakeholders are brought together to achieve consensus around development goals. We need a citywide planning framework grounded in consensus and based on city policies, city goals, and neighborhood plans—such as Manhattan Community Board 9’s 197-a Plan."
She added that the role of the ESDC "means projects sidestep ULURP—our flawed yet Charter-defined due process for projects seeking discretionary approvals. Removing ULURP means removing the community boards, borough presidents, and City Council members in the deliberations that shape outcomes. Projects that rely on the taking of private property need more transparency, accountability, and standardization, not less."
She acknowledged that blight “is notoriously subjective,” but requires local input for better comprehension: "As we have seen in the case of Atlantic Yards, without a participatory planning process in place, development gets delayed, faith in government erodes, and land use decisions end up being made in the courts."
She did express support for eminent domain as a “tool to achieve community development goals.” But she said it should be used carefully: "Until and unless the public benefit is undeniable, flows from a clear plan, and has been agreed upon through a public process, eminent domain should not be used."
(Her use of the term “public benefit,” rather than “public use,” left open the possibility that eminent domain could be used for projects beyond the traditional schools, roads, hospitals, etc.)
Limiting eminent domain
Attorney Michael Rikon, whose firm is the only one in the state that limits its practice to eminent domain case, argued that “the use of this most extreme power should be limited to a true public purpose.”
Rikon noted that the U.S. Supreme Court in Kelo, upheld eminent domain for economic development because it occurred within an integrated development plan. “Actually, the Supreme Court had it wrong,” Rikon declared. “There was no integrated development plan by New London. There were no obligations by the developer at all.”
Rikon noted that 42 states have passed post-Kelo legislative reforms. (Some critics of Kelo think most of those reforms are minor.) He also called for a temporary commission. There is no real or effective procedure to stop a condemnation,” he said. “It is virtually impossible to win a challenge.”
Perkins asked if there was a model for such a commission. Rikon pointed to a New York State commission a quarter-century ago. But didn’t that commission come up with the law we have today, Gonzalez asked. Rikon said that government agencies and lobbyists “chopped and amended” the recommendations
Walsh of the Institute for Justice suggested that blight be limited only to properties that pose immediate threat to public health and safety.
(Walsh is at left. Atlantic Yards footprint property owner Henry Weinstein is at center, and Dan Feinstein of the Willets Point Industrial and Realty Association is at right.)
Michael D. D. White of Noticing New York, an attorney and urban planner, called for prohibition of “so-called gag order, non-disclosure, and tout-for-the-project agreements,” noting that “private entities like Forest City Ratner and Columbia University, while obtaining property with the threat of eminent domain, now also obtain non-disclosure agreements.” He also suggested that compensation is not yet fair, since, numerous transaction costs--including brokerage and lawyer fees to acquire new property, costs of changing employees or changing arrangements with employees, skittishness and lost business opportunities--are not generally reimbursed.
Legislation coming
“I plan to craft legislation that addresses the inequities and weeds out the potential corruption that could exist when mixing private purposes with the public interest,” said Perkins. “It will be important to ensure that valid economic development objectives can be clearly identified, while abuses are identified and corrected.”
Despite Perkins’s criticism of eminent domain, his statement suggested more of a willingness to compromise than those speaking at the hearing--or maybe it was just a recognition of the political realities. He acknowledged that no legislation would move this year but suggested it might gain momentum once the Democratic Party, as is expected, gain control of the State Senate. Still, there is considerable support for the status quo.
Elected officials’ concerns
Despite that support, several political officials expressed concern. Gonzalez commented, “My concern is that, when developers or government--by the time it reaches the community, it’s already almost a done deal.”
A representative of State Senator José Serrano argued for blight to be narrowly and uniformly defined and that New York eliminate the use of eminent domain for private developers. He expressed concern about the steady increase of developer interest in East Harlem and the South Bronx.
A staff member from the office of Council Member Hiram Monserrate, who represents Willets Point, read a statement in which Monserrate explained how he’s introduced legislation in the City Council “to require responsible use of eminent domain in cases of economic development.” It would require financial impact reports, including the estimated costs and benefits of the proposed project, and would require increased compensation for property taken by eminent domain.
Inconsistencies with blight
Two inconsistencies in the application of blight were noted. Serrano’s representative testified that the case of Atlantic Yards, buildings were deemed vacant with 50% vacancy rates, while in the Columbia University expansion, buildings were initially deemed vacant at 25% vacancy rates.
Attorney Philip Van Buren noted that consultant AKRF has asserted that a building not fulfilling 60% of its development rights is underutilized. (This was part of the Atlantic Yards Blight Study.) However, he said, “The City Planning Commission uses 50% for its policy planning purposes. Even 50% is arbitrary.”
The Columbia case
Siegel, a veteran civil rights attorney, past (and current) candidate for Public Advocate, and representative of Sprayregen, declared, “The entire process is unfair. Perhaps the single most serious problem is the fact that the condemnee must file the challenge in an appellate court, not a trial court. If you can change anything, and you should change a lot, you should change this violation of due process.”
When Tuck-it-Away’s properties are condemned, it does not have an opportunity to challenge it in trial court, Siegel said, contrasting the case with a challenge to other government agency decisions, and eminent domain proceedings “in every other state of which we are aware.” He noted that there is no opportunity for discovery, no right to introduce no evidence after the closing of the record, no right to call witnesses, and no right to cross-examine experts. There’s only 15 minutes to argue the case. “Give the property owner a right to a fair hearing,” he said.
Siegel said that the public hearing process gives speakers too little time--five minutes in one case, three in the other--to express objections. “There’s virtually no possibility for persuading the ESDC to alter its course,” he said.
Further, he argued, the proceeding is unconstitutional because no information can be added after the closing of the record, even though he’s in court on behalf of Sprayregen to pry additional records from the state.
He said that the state should mandate that ESDC board members be present at public hearings. “Assigning an independent hearing officer is inadequate,” Siegel said. “The dynamic adds to the too-high cynicism about the process being a sham.”
ESDC role
No board members were at the Atlantic Yards hearings, either. Perkins said he’d sent a letter to the ESDC after the Columbia hearings saying he viewed the Directors’ failure to attend as an insult, given that “you might as well put a recorder there, or a camera and walk away.” An ESDC response stated. “The Directors’ presence was not necessary to accomplish the hearings’ purpose, which was to provide the public with an opportunity to comment” and that the Directors would be provided with a transcript and a summary of comments and responses to them. An ESDC staffer in the audience invited people to submit comments on the Columbia plan.
Siegel said that ESDC quorum requirements should be a majority of board members, not a majority of those sitting at the time. “I was shocked,” he said, when the ESDC board, which is supposed to have nine members, passed the Columbia General Project Plan with only three members present. (Four board members approved Atlantic Yards.)
Changing eminent domain
Siegel said that, as in other states, there should be be written criteria setting forth what constitutes blight. In terms of eminent domain, he said, the city has moved from slum clearance to urban renewal to the “economic development era,” when the government shows “enormous deference to the developer.”
Siegel also said the use of eminent domain should conform to the state constitution, which simply says “public use.” He added that the ESDC, formally known as the Urban Development Corporation, was set up in the wake of the assassination of Martin Luther King, Jr. to provide affordable housing for low-income people. “Somewhere in the last 40 years,” he said, the agency has lost sight of its mission.
More on Columbia
Sprayregen, who also offered an op-ed in today’s Daily News, testified: “The system right now is broken, biased and clearly unfair. it is robbery in the broad daylight. How is it that the state can declare Manhattanville blighted? .. How can the state feel it is OK to share the same consultant--AKRF--as Columbia--the applicant requesting eminent domain? How can the state, prior to formally hiring AKRF, first receive a preliminary draft of a blight study so as to confirm... what the conclusion will be?”
Sprayregen has filed four lawsuits and won two, with two decisions pending. His lawyers have asked for the record to remain open.
He seconded Siegel’s call for a reform of the court procedures: “As it stands now, in a few months when the state formally condemns my family’s property, I will not be allowed to take the witness stand.” He noted that “the vast majority of those threatened with eminent domain do not have the financial resources that I have.”
Siegel, responding to questions from Perkins, noted that the EDPL was set up 32 years ago, “to expedite the condemnation, to be deferential to developers,” and sent a message to the ESDC and city agencies to work in partnership with the private developers.
Van Buren, co-counsel for Tuck-It-Away and also a representative of tenants, detailed four attempts to try to find blight in the Columbia expansion zone When the firm AKRF “was found to be in a tangled relationship with Columbia University” by a state appellate court, he noted, ESDC made a fourth attempt and hired a consultant, Earth Tech, to “replicate” the AKRF study, in the words of an ESDC staffer.
(A state appellate justice yesterday expressed skepticism about AKRF in the appeal of the decision dismissing the challenge to the Atlantic Yards environmental review.)
Walter South, member of Manhattan Community Board 9 (which includes Columbia and produced its own plan for Manhattanville) but speaking individually, noted that he has master’s degrees in sociology, urban planning, and historic preservation. “In New York State, if you’re well-connected politically and have money, you can actually rent the New York State government,” he declared.
He sardonically called Columbia’s plan “a fantasy” illustrated by “a fancy architect” and backed up by chimerical numbers. He suggested that blight could not be redefined, nor should just compensation or the hearing process fixed: “The right answer is there should be no condemnation of private property given over to private individuals.”
The Atlantic Yards case
Goldstein, who owns a condo in the Atlantic Yards footprint, testified that state procedure “are serving private interests for private benefits and private profit. In reality, more often than not, eminent domain in New York has become the tool of the all powerful real estate lobby.” he noted that, “over these five years not one single elected official or official from the Empire State Development Corporation... or any other agency has ever convened a meeting with those property owners and tenants whose homes and businesses would be seized to supposedly benefit the public. Throughout, we have been treated as the enemy, and entirely ignored by the government actors who claim the eminent domain is for the public’s benefit.”
When “used as an excuse” for eminent domain, he said, “economic development” is always “highly speculative for the public while the eminent domain itself makes it a sure thing for the developer.”
(Well, it makes it easier, but, as we’ve seen with the recent economic downturn, may become much more uncertain. Update: Goldstein e-mails me to say, "a 'sure thing' meaning the developer gains the valuable control of the land." Emphases in his testimony are from the written version.)
(Goldstein is at center. Walter South is to his right and Michael Rikon to his left.)
As for Atlantic Yards, he asserted, “Every single purported public benefit touted by the Empire State Development Corporation (ESDC) could be achieved without the use of eminent domain. The only reason eminent domain is being used for the Atlantic Yards project is to give a massive private benefit to the private developer—the windfall benefit of cheap land and the windfall benefit of a complete zoning override.”
(The ESDC says it needs to assemble land for an arena, though Forest City Ratner, some argued, could have chosen to replace its Atlantic Center mall, or an arena could have been sited in Coney Island.)
“The use of eminent domain for Atlantic Yards clearly serves no public purpose whatsoever,” he said. “If the purpose of the project was economic development, as claimed by the ESDC, then the proper way to accomplish that would be to rezone the area.” (The ESDC did find public purpose; that has been contested in court.)
Goldstein noted that “the agency’s predetermined analysis found that the exact same footprint that Ratner had drawn up in his boardroom was blighted,” pointing out that the ESDC Board approved the blight determination, the project and the use of eminent domain during a hearing that lasted 15 minutes.
He suggested that state law require that only locally elected legislative bodies—such as the City Council— approve the use of eminent domain, thus excluding “unelected, unaccountable public authorities.” He said a “transparent and independent economic impact study and cost/benefit analysis must be undertaken and completed before any condemnation decisions are made.”
He said the definition of blight should be narrowed, perhaps restricted to “areas that are a true hindrance to public health only after remediation attempts have proven ineffective.” He suggested that compensation exceed market value and should be mandated for tenants, who often are excluded.
Goldstein’s detailed testimony--he spoke for some 11 minutes; Perkins had asked people to keep their remarks to five minutes, but did not curtail Goldstein--concluded with the recommendation that eminent domain be limited to public use--”or, alternatively, only legislative bodies can initiate economic development projects that require the use of eminent domain.”
Henry Weinstein, a property owner in the footprint, decried the state's "disingenuous" tactics regarding the ownership of his building. (ESDC said that the building was controlled by Forest City Ratner, though Weinstein disputed the assignment of the lease and so far has prevailed in court, though the case is under appeal.) He added that “the facts coming out about the trickery and lies used to push the new Yankees and Mets stadiums should give everyone pause.”
Montgomery called Atlantic Yards, “the most embarrassing and outrageous experience that I’ve had in government.., the ESDC has worked essentially in concert, in cahoots with the developer.” She saluted Goldstein for his effort to stand up to eminent domain.
She said that part of the $300 million (actually $305 million) in governmental funds was to assist the developer in “removing people from their land.” (Well, $100 million in city funding was used to compensate the developer for negotiated buyouts, not for the expected use of eminent domain, but the buyouts, some of them considered generous, were accomplished under the threat of eminent domain.)
Willets Point
Dan Feinstein of the Willets Point Industry and Realty Association (WPIRA) discarded his prepared testimony, noting that many of the points had already been made. Noting that members of his group own more than 50 percent of the land at issue, he called the city’s plan “the next great pipe dream,” as a yet-to-be-chosen developer does not have financing nor a concrete plan.
(Attorney Van Buren later suggested that Feinstein’s formulation was wrong, that it was better to find blight “before negotiations begin with any developer, so there’s a public review before there are interested players.” That seems to better conform with the process outlined in Kelo.)
“Could you imagine what it is to wake up one day and see in the newspaper that someone's going to build an office building where your land is, land that’s been in your family for 80 years," Feinstein said, generating a sympathetic “hmm” from Perkins.
“They say it’s blighted and must be fixed,” Feinstein said. “What’s really blighted are the streets and the services that the city’s never provided.”
“Nowhere else in the country is eminent domain used to benefit private interests so rampantly and so brazenly,” declared Christina Walsh, a representative of the Institute for Justice, the libertarian legal organization that has led the fight nationally against eminent domain.
Harlem State Senator Bill Perkins, an opponent of the Columbia expansion who convened the hearing, called for a moratorium on the use of eminent domain in the state and a stall on the Columbia plan. He said he supported a special commission to reform eminent domain laws--a recommendation made by a New York State Bar Association task force to study changes in the 32-year-old Eminent Domain Procedure Law (EDPL).(Perkins is at center. State Senator Velmanette Montgomery is at left and State Senator Efrain Gonzalez is at right. Photos by Lucy Koteen.)
Among the recommendations: formally define and limit the definition of “blight,” which is undefined; give those threatened by eminent domain a chance to challenge determinations in court by calling witnesses; and even to eliminate the use of eminent domain for private redevelopment.
Daniel Goldstein of Develop Don't Destroy Brooklyn, drawing on the Atlantic Yards example, suggested that only locally elected legislative bodies, not the unelected agencies like the Empire State Development Corporation, approve the use of eminent domain.
The 5-4 Kelo decision essentially affirmed Supreme Court doctrine, which had long allowed eminent domain for “public purpose” rather than the constitutional “public use;” however, it was the first decision to affect individual private homes. States, however, have the option to narrow the doctrine.
Unbalanced hearing
The hearing drew some 70 people at its peak, with State Senator Efrain Gonzalez of the Bronx and Velmanette Montgomery of Brooklyn joining Perkins. In the audience: a mix of advocates and property owners, mainly white, plus several Harlem residents, people of color. (However the five elected officials who spoke or submitted testimony were all people of color, and expressed concern about their constituents.)
No supporters of eminent domain testified; Perkins said that Empire State Development Corporation was invited to testify but did not do so. (An ESDC representative was in the audience, as was Janella Meeks, a manager of community relations for the New Jersey Nets, who works out of 1 MetroTech Center.)
Nor were there any of the planners and lawyers who consider themselves supporters of prudent use of eminent domain and hope that the backlash against Kelo--at least nationally--doesn’t go too far.
In a Daily News op-ed today headlined We need eminent domain to keep New York City growing
Kathryn Wylde, president of the Partnership for New York City, wrote:
Eminent domain - the power to take ownership of private property and assemble sites for construction of projects that will serve a public purpose - is one of those [governmental] powers. New York has a pipeline of important projects that can go forward with the help of eminent domain.
She said that eminent domain is under attack and argued that holdouts are getting “fair market value” and more, but still in some cases refuse.
Indeed, in a column today headlined The right way to fight blight, Daily News columnist Errol Louis called it a “surreal hearing” because “a small but vocal group of anti-development advocates are pushing” for “a set of handcuffs on the public development agencies charged with planning and executing large-scale projects.”
Louis did allow that advocate Norman Siegel and his client Nick Sprayregen, the major landowner in Columbia’s expansion zone, “are perfectly within their rights to try and rewrite the law, and a re-examination of the 40-year-old rules makes sense.” But he didn’t try to sort out what might work. Nor did he reflect on the appeals court hearing later yesterday in which some judges expressed skepticism about blight claims regarding Atlantic Yards.
Community-based planning
Perhaps the person with the broadest view--who testified after Louis left the hearing room--was Julie Lawrence, a member of Brooklyn Community Board 1, who testified on behalf of the Community-Based Planning Task Force, a coalition that includes grassroots organizations, community boards, academics, and planners--and, as its name suggests, wants more community input.
Lawrence pointed out that, despite the city’s growth, "New York City still lacks a comprehensive planning framework. Redevelopment of New York City... will succeed only when all stakeholders are brought together to achieve consensus around development goals. We need a citywide planning framework grounded in consensus and based on city policies, city goals, and neighborhood plans—such as Manhattan Community Board 9’s 197-a Plan."
She added that the role of the ESDC "means projects sidestep ULURP—our flawed yet Charter-defined due process for projects seeking discretionary approvals. Removing ULURP means removing the community boards, borough presidents, and City Council members in the deliberations that shape outcomes. Projects that rely on the taking of private property need more transparency, accountability, and standardization, not less."
She acknowledged that blight “is notoriously subjective,” but requires local input for better comprehension: "As we have seen in the case of Atlantic Yards, without a participatory planning process in place, development gets delayed, faith in government erodes, and land use decisions end up being made in the courts."
She did express support for eminent domain as a “tool to achieve community development goals.” But she said it should be used carefully: "Until and unless the public benefit is undeniable, flows from a clear plan, and has been agreed upon through a public process, eminent domain should not be used."
(Her use of the term “public benefit,” rather than “public use,” left open the possibility that eminent domain could be used for projects beyond the traditional schools, roads, hospitals, etc.)
Limiting eminent domain
Attorney Michael Rikon, whose firm is the only one in the state that limits its practice to eminent domain case, argued that “the use of this most extreme power should be limited to a true public purpose.”
Rikon noted that the U.S. Supreme Court in Kelo, upheld eminent domain for economic development because it occurred within an integrated development plan. “Actually, the Supreme Court had it wrong,” Rikon declared. “There was no integrated development plan by New London. There were no obligations by the developer at all.”
Rikon noted that 42 states have passed post-Kelo legislative reforms. (Some critics of Kelo think most of those reforms are minor.) He also called for a temporary commission. There is no real or effective procedure to stop a condemnation,” he said. “It is virtually impossible to win a challenge.”
Perkins asked if there was a model for such a commission. Rikon pointed to a New York State commission a quarter-century ago. But didn’t that commission come up with the law we have today, Gonzalez asked. Rikon said that government agencies and lobbyists “chopped and amended” the recommendations
Walsh of the Institute for Justice suggested that blight be limited only to properties that pose immediate threat to public health and safety.(Walsh is at left. Atlantic Yards footprint property owner Henry Weinstein is at center, and Dan Feinstein of the Willets Point Industrial and Realty Association is at right.)
Michael D. D. White of Noticing New York, an attorney and urban planner, called for prohibition of “so-called gag order, non-disclosure, and tout-for-the-project agreements,” noting that “private entities like Forest City Ratner and Columbia University, while obtaining property with the threat of eminent domain, now also obtain non-disclosure agreements.” He also suggested that compensation is not yet fair, since, numerous transaction costs--including brokerage and lawyer fees to acquire new property, costs of changing employees or changing arrangements with employees, skittishness and lost business opportunities--are not generally reimbursed.
Legislation coming
“I plan to craft legislation that addresses the inequities and weeds out the potential corruption that could exist when mixing private purposes with the public interest,” said Perkins. “It will be important to ensure that valid economic development objectives can be clearly identified, while abuses are identified and corrected.”
Despite Perkins’s criticism of eminent domain, his statement suggested more of a willingness to compromise than those speaking at the hearing--or maybe it was just a recognition of the political realities. He acknowledged that no legislation would move this year but suggested it might gain momentum once the Democratic Party, as is expected, gain control of the State Senate. Still, there is considerable support for the status quo.
Elected officials’ concerns
Despite that support, several political officials expressed concern. Gonzalez commented, “My concern is that, when developers or government--by the time it reaches the community, it’s already almost a done deal.”
A representative of State Senator José Serrano argued for blight to be narrowly and uniformly defined and that New York eliminate the use of eminent domain for private developers. He expressed concern about the steady increase of developer interest in East Harlem and the South Bronx.
A staff member from the office of Council Member Hiram Monserrate, who represents Willets Point, read a statement in which Monserrate explained how he’s introduced legislation in the City Council “to require responsible use of eminent domain in cases of economic development.” It would require financial impact reports, including the estimated costs and benefits of the proposed project, and would require increased compensation for property taken by eminent domain.
Inconsistencies with blight
Two inconsistencies in the application of blight were noted. Serrano’s representative testified that the case of Atlantic Yards, buildings were deemed vacant with 50% vacancy rates, while in the Columbia University expansion, buildings were initially deemed vacant at 25% vacancy rates.
Attorney Philip Van Buren noted that consultant AKRF has asserted that a building not fulfilling 60% of its development rights is underutilized. (This was part of the Atlantic Yards Blight Study.) However, he said, “The City Planning Commission uses 50% for its policy planning purposes. Even 50% is arbitrary.”
The Columbia case
Siegel, a veteran civil rights attorney, past (and current) candidate for Public Advocate, and representative of Sprayregen, declared, “The entire process is unfair. Perhaps the single most serious problem is the fact that the condemnee must file the challenge in an appellate court, not a trial court. If you can change anything, and you should change a lot, you should change this violation of due process.”
When Tuck-it-Away’s properties are condemned, it does not have an opportunity to challenge it in trial court, Siegel said, contrasting the case with a challenge to other government agency decisions, and eminent domain proceedings “in every other state of which we are aware.” He noted that there is no opportunity for discovery, no right to introduce no evidence after the closing of the record, no right to call witnesses, and no right to cross-examine experts. There’s only 15 minutes to argue the case. “Give the property owner a right to a fair hearing,” he said.
Siegel said that the public hearing process gives speakers too little time--five minutes in one case, three in the other--to express objections. “There’s virtually no possibility for persuading the ESDC to alter its course,” he said.
Further, he argued, the proceeding is unconstitutional because no information can be added after the closing of the record, even though he’s in court on behalf of Sprayregen to pry additional records from the state.
He said that the state should mandate that ESDC board members be present at public hearings. “Assigning an independent hearing officer is inadequate,” Siegel said. “The dynamic adds to the too-high cynicism about the process being a sham.”
ESDC role
No board members were at the Atlantic Yards hearings, either. Perkins said he’d sent a letter to the ESDC after the Columbia hearings saying he viewed the Directors’ failure to attend as an insult, given that “you might as well put a recorder there, or a camera and walk away.” An ESDC response stated. “The Directors’ presence was not necessary to accomplish the hearings’ purpose, which was to provide the public with an opportunity to comment” and that the Directors would be provided with a transcript and a summary of comments and responses to them. An ESDC staffer in the audience invited people to submit comments on the Columbia plan.
Siegel said that ESDC quorum requirements should be a majority of board members, not a majority of those sitting at the time. “I was shocked,” he said, when the ESDC board, which is supposed to have nine members, passed the Columbia General Project Plan with only three members present. (Four board members approved Atlantic Yards.)
Changing eminent domain
Siegel said that, as in other states, there should be be written criteria setting forth what constitutes blight. In terms of eminent domain, he said, the city has moved from slum clearance to urban renewal to the “economic development era,” when the government shows “enormous deference to the developer.”
Siegel also said the use of eminent domain should conform to the state constitution, which simply says “public use.” He added that the ESDC, formally known as the Urban Development Corporation, was set up in the wake of the assassination of Martin Luther King, Jr. to provide affordable housing for low-income people. “Somewhere in the last 40 years,” he said, the agency has lost sight of its mission.
More on Columbia
Sprayregen, who also offered an op-ed in today’s Daily News, testified: “The system right now is broken, biased and clearly unfair. it is robbery in the broad daylight. How is it that the state can declare Manhattanville blighted? .. How can the state feel it is OK to share the same consultant--AKRF--as Columbia--the applicant requesting eminent domain? How can the state, prior to formally hiring AKRF, first receive a preliminary draft of a blight study so as to confirm... what the conclusion will be?”
Sprayregen has filed four lawsuits and won two, with two decisions pending. His lawyers have asked for the record to remain open.
He seconded Siegel’s call for a reform of the court procedures: “As it stands now, in a few months when the state formally condemns my family’s property, I will not be allowed to take the witness stand.” He noted that “the vast majority of those threatened with eminent domain do not have the financial resources that I have.”
Siegel, responding to questions from Perkins, noted that the EDPL was set up 32 years ago, “to expedite the condemnation, to be deferential to developers,” and sent a message to the ESDC and city agencies to work in partnership with the private developers.
Van Buren, co-counsel for Tuck-It-Away and also a representative of tenants, detailed four attempts to try to find blight in the Columbia expansion zone When the firm AKRF “was found to be in a tangled relationship with Columbia University” by a state appellate court, he noted, ESDC made a fourth attempt and hired a consultant, Earth Tech, to “replicate” the AKRF study, in the words of an ESDC staffer.
(A state appellate justice yesterday expressed skepticism about AKRF in the appeal of the decision dismissing the challenge to the Atlantic Yards environmental review.)
Walter South, member of Manhattan Community Board 9 (which includes Columbia and produced its own plan for Manhattanville) but speaking individually, noted that he has master’s degrees in sociology, urban planning, and historic preservation. “In New York State, if you’re well-connected politically and have money, you can actually rent the New York State government,” he declared.
He sardonically called Columbia’s plan “a fantasy” illustrated by “a fancy architect” and backed up by chimerical numbers. He suggested that blight could not be redefined, nor should just compensation or the hearing process fixed: “The right answer is there should be no condemnation of private property given over to private individuals.”
The Atlantic Yards case
Goldstein, who owns a condo in the Atlantic Yards footprint, testified that state procedure “are serving private interests for private benefits and private profit. In reality, more often than not, eminent domain in New York has become the tool of the all powerful real estate lobby.” he noted that, “over these five years not one single elected official or official from the Empire State Development Corporation... or any other agency has ever convened a meeting with those property owners and tenants whose homes and businesses would be seized to supposedly benefit the public. Throughout, we have been treated as the enemy, and entirely ignored by the government actors who claim the eminent domain is for the public’s benefit.”
When “used as an excuse” for eminent domain, he said, “economic development” is always “highly speculative for the public while the eminent domain itself makes it a sure thing for the developer.”(Well, it makes it easier, but, as we’ve seen with the recent economic downturn, may become much more uncertain. Update: Goldstein e-mails me to say, "a 'sure thing' meaning the developer gains the valuable control of the land." Emphases in his testimony are from the written version.)
(Goldstein is at center. Walter South is to his right and Michael Rikon to his left.)
As for Atlantic Yards, he asserted, “Every single purported public benefit touted by the Empire State Development Corporation (ESDC) could be achieved without the use of eminent domain. The only reason eminent domain is being used for the Atlantic Yards project is to give a massive private benefit to the private developer—the windfall benefit of cheap land and the windfall benefit of a complete zoning override.”
(The ESDC says it needs to assemble land for an arena, though Forest City Ratner, some argued, could have chosen to replace its Atlantic Center mall, or an arena could have been sited in Coney Island.)
“The use of eminent domain for Atlantic Yards clearly serves no public purpose whatsoever,” he said. “If the purpose of the project was economic development, as claimed by the ESDC, then the proper way to accomplish that would be to rezone the area.” (The ESDC did find public purpose; that has been contested in court.)
Goldstein noted that “the agency’s predetermined analysis found that the exact same footprint that Ratner had drawn up in his boardroom was blighted,” pointing out that the ESDC Board approved the blight determination, the project and the use of eminent domain during a hearing that lasted 15 minutes.
He suggested that state law require that only locally elected legislative bodies—such as the City Council— approve the use of eminent domain, thus excluding “unelected, unaccountable public authorities.” He said a “transparent and independent economic impact study and cost/benefit analysis must be undertaken and completed before any condemnation decisions are made.”
He said the definition of blight should be narrowed, perhaps restricted to “areas that are a true hindrance to public health only after remediation attempts have proven ineffective.” He suggested that compensation exceed market value and should be mandated for tenants, who often are excluded.
Goldstein’s detailed testimony--he spoke for some 11 minutes; Perkins had asked people to keep their remarks to five minutes, but did not curtail Goldstein--concluded with the recommendation that eminent domain be limited to public use--”or, alternatively, only legislative bodies can initiate economic development projects that require the use of eminent domain.”
Henry Weinstein, a property owner in the footprint, decried the state's "disingenuous" tactics regarding the ownership of his building. (ESDC said that the building was controlled by Forest City Ratner, though Weinstein disputed the assignment of the lease and so far has prevailed in court, though the case is under appeal.) He added that “the facts coming out about the trickery and lies used to push the new Yankees and Mets stadiums should give everyone pause.”
Montgomery called Atlantic Yards, “the most embarrassing and outrageous experience that I’ve had in government.., the ESDC has worked essentially in concert, in cahoots with the developer.” She saluted Goldstein for his effort to stand up to eminent domain.
She said that part of the $300 million (actually $305 million) in governmental funds was to assist the developer in “removing people from their land.” (Well, $100 million in city funding was used to compensate the developer for negotiated buyouts, not for the expected use of eminent domain, but the buyouts, some of them considered generous, were accomplished under the threat of eminent domain.)
Willets Point
Dan Feinstein of the Willets Point Industry and Realty Association (WPIRA) discarded his prepared testimony, noting that many of the points had already been made. Noting that members of his group own more than 50 percent of the land at issue, he called the city’s plan “the next great pipe dream,” as a yet-to-be-chosen developer does not have financing nor a concrete plan.
(Attorney Van Buren later suggested that Feinstein’s formulation was wrong, that it was better to find blight “before negotiations begin with any developer, so there’s a public review before there are interested players.” That seems to better conform with the process outlined in Kelo.)
“Could you imagine what it is to wake up one day and see in the newspaper that someone's going to build an office building where your land is, land that’s been in your family for 80 years," Feinstein said, generating a sympathetic “hmm” from Perkins.
“They say it’s blighted and must be fixed,” Feinstein said. “What’s really blighted are the streets and the services that the city’s never provided.”
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.
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.
At Congressional hearing tomorrow, Brodsky will be the sole New Yorker
Dennis Kucinich (D-OH), Chairman of the Subcommittee on Domestic Policy of the Oversight and Government Reform Committee, has released the witness list for the hearing tomorrow called “Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York,” and the only New Yorker is Assemblyman Richard Brodsky, whose committee yesterday released a scathing report on the new Yankee Stadium.
The president of the New York City Economic Development Corporation, Seth Pinsky, was scheduled to testify, but withdrew. Discussions with New York City officials about their appearance before the subcommittee are ongoing, according to Kucinich's office. Representatives from the New York Yankees will testify at hearing on October 7.
(I say in the headline that Brodsky will be the only New Yorker. Actually, a law professor from NYU will be testifying, so more accurately, Brodsky will be the only official from New York.)
The witness list
PANEL I
Mr. Stephen Larson
Associate Chief Counsel
Financial Institutions and Products
Internal Revenue Service
PANEL II
Assemblyman Richard L. Brodsky
92nd Assembly District State of New York
Professor Clayton Gillette
New York University School of Law
Professor Brad R. Humphreys
Department of Economics
University of Alberta
The president of the New York City Economic Development Corporation, Seth Pinsky, was scheduled to testify, but withdrew. Discussions with New York City officials about their appearance before the subcommittee are ongoing, according to Kucinich's office. Representatives from the New York Yankees will testify at hearing on October 7.
(I say in the headline that Brodsky will be the only New Yorker. Actually, a law professor from NYU will be testifying, so more accurately, Brodsky will be the only official from New York.)
The witness list
PANEL I
Mr. Stephen Larson
Associate Chief Counsel
Financial Institutions and Products
Internal Revenue Service
PANEL II
Assemblyman Richard L. Brodsky
92nd Assembly District State of New York
Professor Clayton Gillette
New York University School of Law
Professor Brad R. Humphreys
Department of Economics
University of Alberta
In Brodsky’s report slamming Yankee Stadium deal, major questions implied about Atlantic Yards arena plan
Westchester Assemblyman Richard Brodsky yesterday released a report, The House That You Built (PDF), slamming the city on multiple grounds for its management of the Yankee Stadium deal, suggesting the willingness to grant tax-exempt bonds was based on an empty threat--a vague report, backed up without direct evidence, that the Yankees would leave the media capital of New York City for a stadium elsewhere.
Brodsky’s charges drew a fierce rebuttal from the city, which not coincidentally, was followed by an announcement that Seth Pinsky, president of the New York City Economic Development Corporation and the only witness at a contentious July 2 Assembly hearing called by Brodsky’s Committee on Corporations, Commissions and Authorities, had withdrawn from a planned appearance at a Congressional hearing tomorrow on the Yankees deal.
No other city official will take his place. "We have informed the congressman [Dennis Kucinich] that it will not work for us," Pinsky said, according to the New York Sun. "But we remain happy to speak to him about this subject." (Doesn’t Congress have subpoena power?) Nor will the Yankees testify.
AY implications
The absence of any city representative suggests that Kucinich’s committee will have trouble publicly exploring the parallels between the Yankees deal and that planned for the Atlantic Yards arena. While Brodsky’s report doesn’t mention Atlantic Yards, it raises significant questions about the arena deal, notably whether taxpayers are paying for construction and whether the city is willing to manipulate the arena tax assessment to meet requirements for tax-exempt bonds.
In the case of the Yankees, according to Brodsky's report, the city relied "without independent inquiry" on stadium costs supplied by a Goldman Sachs banker--the same banker working on the arena deal.
Indeed, Brodsky’s report states unequivocally that the stadium financing deal, based on PILOTs (payments in lieu of taxes), means that the public, not the team, is paying for the new Yankee Stadium--a highly contentious charge, and one made by Atlantic Yards critics regarding the planned arena. (I've said it's arguable.)
I asked Brodsky if he believes there's any essential difference between the PILOT deal for the Yankees and the PILOT deal planned for the Atlantic Yards arena. His response: "Having not looked at the Ratner Deal in any detail, it would be pure speculation to come to any conclusion."
(He did say, according to the AP, that concerns about subsidies for private businesses without direct benefit to the public could also apply to proposals to help the New York Mets build a new stadium and for a Nets basketball arena in Brooklyn.)
Perhaps more importantly, Brodsky’s report suggests--as has already been reported--a concerted attempt to “game” the assessed valuation of Yankee Stadium to ensure a total high enough for the PILOTs associated with the Yankees bond deal. The machinations by the New York City Department of Finance (NYC DOF), criticized in withering detail in the report, may have been repeated for the Atlantic Yards arena, though no information has surfaced.
More bonds?
Kucinich’s committee is likely looking into this issue. For now, the city is waiting to see if the Internal Revenue Service (IRS) will grandfather in requests by the Yankees and Mets for additional tax-exempt bonds, and the Forest City Ratner request for tax-exempt arena bonds, applying the older, more lenient rule. The agency has proposed a change that would invalidate the old rule and Kucinich has called for a moratorium until his committee finishes its work.
Brodsky's report points out that, given the Yankees' non-relocation agreement, "there is absolutely no basis for a new threat to leave," thus undermining a request for additional bonds.
City response
The city and Brodsky disagree enormously on how many jobs were created by the Yankee Stadium deal and, more importantly for the Atlantic Yards debate, what PILOTs actually mean. According to Newsday, Pinsky said Brodsky "doesn't understand" or was "willfully ignoring the fact" that private money is paying the construction costs.
In a statement issued by his office that did not respond point by point, Pinsky said, "I'd like to think that Assembly Member Brodsky is simply misinformed, but after all of the public hearings, questions and analysis, it is becoming increasingly difficult to explain his blatant and fundamental errors and omissions.”
“While finding ways to bring jobs and private investment to the South Bronx, we’ve been working closely with elected officials who represent the South Bronx, not those who simply stop by for press conferences,” he added. “In these difficult economic times, the last thing the Assembly should want to do is trash billion-dollar private investments that will employ thousands of hard-working New Yorkers and generate tens of millions of dollars in new tax revenues for the City and State."
I’ll go through Brodsky’s findings one by one.
No economic impact?
1) The New Stadium Will Not Create Any Significant New Permanent Employment or Economic Activity
The $500 million to $1 billion in public subsidies, the report states, will create few jobs or benefits; the report cites Brooklyn-based writer Neil DeMause, co-author of Field of Schemes, on the limited impacts of sports facilities. Notably, Brodsky says, in the letter required to have the New York City Industrial Development Authority (NYC IDA) deviate from its policy that requires a certain amount of economic benefit for bonds it issues, “the sole reason given in support of public financing was a purported Yankee threat to relocate out of the City. There is no evidence that the Yankees actually made such a threat.”
Brodsky and the city/Yankees disagree significantly with the numbers about new jobs, with Brodsky saying it's a handful and the city/team responding that it's over 1000. Note that, because the Atlantic Yards arena would shift a team from another state, the sports facility would likely bring more jobs. Still, it’s unclear how many; the 453 arena jobs would be subject to union rules and may be filled with current employees now in New Jersey. (I estimated 60% new jobs: 272.) While the tax-exempt arena bonds wouldn't support the rest of Atlantic Yards, city officials justify the project, in part, on the grounds that other elements of AY would bring jobs.
Is the public paying?
2) The Public, Not The Yankees, Is Paying The Cost of Constructing The New Yankee Stadium.
Perhaps most controversial is this charge:
Taxpayers are paying the cost of constructing the new Yankee Stadium despite repeated claims to the contrary by City officials: “Funding for the $800 million in construction costs is being provided fully by the Yankees.” These statements are simply not true. The cost of construction is being paid by diverting tax payments the Yankees are legally obligated to make to New York City to repayment of the tax-exempt bonds floated by the NYCIDA. The City repeatedly in legal documents admits that it is taxpayer money, not Yankee money, which is building the new Stadium. “The City has determined to use its property taxes (in this case PILOTs) to finance the construction and operation…of the Stadium.”
This is a fascinating argument, because, in the request to the Internal Revenue Service for a Private Letter Ruling (PLR) endorsing the Yankee deal, lawyers working for the city did say the above. On the other hand, in 2006 testimony on Yankee Stadium, the Independent Budget Office (IBO) more narrowly noted that land at issue is tax-exempt:
Because there is no loss of current revenue, IBO does not include the value of the exemption as a cost to the city.
In its September 2005 Fiscal Brief on Atlantic Yards, IBO also said:
Although FCRC will make what the Memorandum of Understanding refers to as PILOT payments to the LDC, these payments are not the equivalent of city property tax payments. Instead they will cover the construction costs for the arena in the first 30 years—and some arena maintenance if the PILOTs exceed debt service. In a more conventional development model, a developer would need to make both construction financing payments and property tax payments for any property tax liability remaining after applying available abatements and exemptions…
IBO’s estimate of new property tax revenue lost to the arena PILOT does not include a loss of property taxes for the MTA land that would be part of the arena building foot print. The city currently receives no tax payment from the MTA for the rail yard because the MTA, like other state entities, is exempt from local property tax. Under the MTA’s Request for Proposals, any developer acquiring the development rights to the site would probably enter into a long-term lease, leaving the MTA in place as the owner. Therefore, the property would likely remain off the city’s tax roll, resulting in no impact on the city budget. Indeed, the MTA has an incentive to make a deal that maintains the tax exemption in order to maximize the price it receives for the development rights.
But, as I wrote, the MTA did not do so.
The IBO did point out that such financing arrangements represent a loss of resources, given the limited allocation of tax exempt private activity bonding authority available to each state for residential and other economic development projects.
Regarding Yankee Stadium, Pinsky defended the federal subsidy (described as $120.2 million but now perhaps 50% more), the New York Observer reported last year:
“Tax-exempt financing provides a largely federal subsidy to a project that will bring important benefits to an underserved part of the city,” Mr. Pinsky said via e-mail. “This subsidy, which is permissible under IRS regulations, is one that makes sense for the city to leverage--especially given its status as a substantial contributor to the U.S. Treasury
Failure to disclose?
3) The Actions Of The NYCIDA Did Not Protect The Public Interest, And May Have Violated The Law.
Brodsky’s report charges:
The NYCIDA manipulated and evaded State law requirements that there be a public economic benefit in exchange for the massive public subsidies received by the Yankees... The state law which governs NYCIDA actions should be amended to end these abuses, to require broader disclosure of key elements of its projects, to assure a real public benefit in exchange for public subsidies, to end the abuse of the UTEP process through “deviation letters”, and to limit the unfettered and explosive growth in NYCIDA sponsored public debt.
Too much public debt
4) The NYCIDA Should Not Be Used For The Creation Of Massive Amounts Of Public Debt. Such Use May Violate Existing Law.
The issuance of PILOTs, to be paid off by public authorities and Local Development Corporations, creates “billions of dollars of new public debt with little transparency or control by elected officials and outside of existing debt restrictions.”
The report charges:
The securitization of PILOTs as a new way to create unrestricted public debt may not be legal. The Mayor’s original assertion that he could create such debt through these new entities without legislative approval was clearly beyond the law. Whether or not the City Council's actions cured that defect in City actions is unclear. Whether or not state law permits such machinations is also unclear should be examined. If state law does permit such debt issuance it should be amended to contain reasonable standards protecting the public interest and procedures to assure transparency and fairness.
That has major implications for Atlantic Yards.
Ticket prices
5) The NYCIDA’s Refusal To Consider The Issues Of Ticket Prices And Public Access To The New Yankee Stadium Was A Failure To Protect The Public Interest.
“The Yankees right to charge any price they wish for tickets ended when they sought and received public subsidies,” the report states--a charge that raises questions about what exactly is standard practice around the country. This also has implications for the Atlantic Yards arena.
Tax assessment practices
6) The Tax Assessment Practices of DOF, For Yankee Stadium And Elsewhere, Need Immediate Independent Review.
This is probably the most significant charge. The report states:
The NYCDOF inflated the assessed value of the new Yankee Stadium despite sworn promises by New York City that it would not. It did so, in all probability, to qualify the Stadium project for tax exemptions. The decisions and actions by DOF with respect to its assessment of the land and facility at Yankee Stadium are disturbing, and may have violated legal requirements.... The consequence of these actions is an assessed value for the Yankee Stadium project that is inflated by as much as one-third.
An immediate, thorough, and independent review of this assessment, and assessments elsewhere in the Stadium neighborhood, and perhaps elsewhere in the City, is required.
That suggests a look at Atlantic Yards.
Other charges
7) New York City’s Acquisition Of A Luxury Suite And Yankee Tickets Was, At Best, Unwise.
8) There Is An Immediate Need For Thorough, Independent Reviews Of The Actions OF DOF, NYCIDA, And Other Public And Private Parties.
Tensions with city
Brodsky’s report suggests significant tension:
The NYCIDA produced voluminous documents with unfailing courtesy. It is unclear if all requested information was produced however. The DOF produced some documents. It is likely that all information requested has not been produced. The Committee is pursuing those documents.
The size of the PILOTs
Brodsky’s report goes into considerable detail on the size of the PILOTs:
However, the City argued that as long as the PILOT payments were not in excess of the real property taxes otherwise owed by the Yankees, the tests were met and the IRS should approve the tax exemption for the bonds. In other words, the IRS should not object to the use of PILOTs to pay off tax-exempt bonds floated to build the Stadium, if the PILOT payments were not artificially inflated to meet the debt service requirements. Again, if $50 million was needed annually to pay off the bondholders, but actual property taxes or PILOT payments generated only $30 million, the local government could not artificially raise the tax or PILOT payment the additional $20 million a year, even with the permission of the taxpayer.
If DOF, however, had artificially inflated the assessed value, the entire legal justification for the tax-exemption collapses and the tax exemption would be denied. It is noteworthy that this concern was publicly discussed. The New York City IBO specifically raised the issue in testimony by the New York City Council: “Given the large annual payments needed to service…tax exempt bonds…a regular property tax bill would be…considerably below the annual debt service payments.”1
This warning was ignored by the City, the IRS, the Yankees, and the lawyers for all parties.
Implications for AY
As I've written, Forest City Ratner expects an $800 million tax-exempt bond issue, which, by my estimation, would save the developer $165 million. Based on the example of the Yankee Stadium bonds, an $800 million bond issue would require $48 million in annual payments.
However, foregone property taxes for Madison Square Garden, which the Independent Budget Office considers more valuable property than the expected arena in Brooklyn, are only $12 million a year.
Valuation questions
The report states:
The heart of the IRS policy is to stop manipulation of property taxes for the purpose of receiving tax exempt financing. In other words, if the Yankees were treated as any ordinary taxpayer would be treated, the bonds could be approved. There was intense and voluminous correspondence between the IRS and the NYCIDA, Yankees, and others largely responding to IRS concerns. The NYCIDA swore to the IRS that the Yankees would be so treated and that the annual PILOT would be “commensurate” with the actual property tax liability of the Yankees to New York City, and, in a key assurance by the NYCIDA, that the New York City Department of Finance, which sets the assessed value for each parcel in the City, would assess the property in accordance with normal and accepted procedures.
In a July 3, 2006 letter to the IRS, NYCIDA counsel asserted that “…the New York City Department of Finance (“Finance”), the City agency that is responsible for assessing any property located in the City subject to real property tax, will use the same assessment method for the Stadium is (sic) used for assessing properties of the same class within the City...In other words, the City’s use of the actual assessed value, equalization rate, and tax rates…results in that PILOT being commensurate with the applicable real property tax.” The NYCIDA was legally obligated to make sure that the Yankee Stadium property was assessed as every other such property is assessed, and to apply the same tax rate applied to any other such property, and to not artificially inflate the tax payments. It did not keep that commitment, the DOF assessment was inflated, and the IRS was never informed.
The report states that DOF chose to use eight “comparable” parcels from Manhattan, where real estate values are significantly higher, and none in the Bronx. In fact, despite the city’s claim that Harlem was similar to the South Bronx, DOF used parcels in Chelsea and the Lower East Side.
Moreover, though DOF makes “customary adjustments for location, size and time,” in this case, “in violation of its own standard practices, [DOF] made only those adjustments which increased value and failed to make the adjustments which would have decreased value. When asked, DOF had no explanation for this decision. The effect of these decisions was to substantially inflate the assessed value of the Stadium land.
The report adds:
The City did two other appraisals of the Stadium land, both of which dramatically contradict the DOF assessment, and both of which were withheld from the IRS, state and Federal officials, and the public.
The role of Goldman Sachs
The report cites the role of Gregory Carey, the Goldman Sachs banker who is also working on the Atlantic Yards arena deal:
On April 10, 2006 DOF announced that the assessed value of the Stadium itself was $1,025, 283,187. This figure was the total of hard costs of $749,396,309 and soft costs of $275,886,878. These numbers were supplied in a letter to DOF Assistant Commissioner Dara Ottley-Brown in a February 27, 2006 letter from Mr. Gregory Carey, a senior member of Goldman, Sachs & Co. DOF admits it accepted without independent inquiry Mr. Carey’s assertion of Stadium costs....
First, it is not customary assessment practice to receive and accept such cost numbers from financial advisors to a taxpayer, without verification or inquiry...
Second, various categories of cost asserted by the Yankees and accepted by DOF seem unusual in both their nature and their value...
Third, the same concern is raised by the inclusion in real property value of $53 million for “Luxury/Sky/ Boxes”...
Fourth, it appears that the Yankees included two similar categories of cost, $36 million for “Escalation”, and $34 million for “Project Contingency”...
Fifth, certain soft costs seem unusually high...
Sixth, it appears that the Yankees included costs for the construction of property not legally part of the Stadium, particularly the cost of construction of a new police station...
These matters are highly technical, and no definitive conclusion on the legality or propriety of any individual cost can now be reached... The Committee has been told they have received all documents in the file, and concludes that in the absence of any documents clarifying these decisions, having sought expert opinion on these matters, and based on its own understanding of the law and accepted assessment practice, there is a need for further investigation of the actions of DOF in assessing the Stadium facility.
Who’s in charge?
The report suggests these deals are not subject to sufficient democratic oversight, an issue Brodsky’s committee has repeatedly pursued:
As a matter of law, the decision to provide billions of dollars of public financial assistance to the Yankees was made by the NYCIDA Board, whose current members are: Seth Pinsky, Derek Park, Amanda M. Burden, Michael A. Cardozo, Albert V. De Leon, Steven C. Devereaux, Robert C. Lieber, Joseph I. Douek, Kevin Doyle, Andrea Feirstein, Bernard Haber, Albert M. Rodriguez, Robert D. Santos, William C. Thompson. With all due respect to these public-spirited and well-intentioned citizens and government employees, it is unlikely many New Yorkers have heard of them, or wish them to be vested with the enormous power they now wield.
When asked about this issue, Mr. Pinsky replied that only the Mayor of New York City needed to be involved in such decisions:
Chairman Brodsky: Does it seem to you that this is a matter of such public importance that elected officials ought to be driving the decision?
Mr. Pinsky: Like the mayor, sure.
Chairman Brodsky: Other than the mayor, are there any elected officials worthy of participation in this?
Mr. Pinsky: No.
In fact, the decision to go forward with the Yankee deal was largely the decision of the Mayor, and the NYCIDA admitted as much. In a June 30, 2006 letter to the IRS, Mitchell Rapaport and Bruce Serchuk (of Nixon Peabody LLP), counsel to the NYCIDA explicitly admitted that the deal was not in the control of the NYCIDA, but had been “negotiated with the City,” apparently meaning the Mayor.
It is not in the public interest for the decision to issue billions in public debt to be made purely by the executive, outside the constitutional system of checks and balances. The State Legislature, the City Council, and others concerned about the governance of public institutions, and the proliferation of public debt, need to address these complicated, formal and informal, executive driven, and secretive institutional arrangements. One can hardly expect enormously wealthy private entities such as the Yankees to avoid the riches showered on them by these deals if elected officials themselves do not examine and control them.
Brodsky’s charges drew a fierce rebuttal from the city, which not coincidentally, was followed by an announcement that Seth Pinsky, president of the New York City Economic Development Corporation and the only witness at a contentious July 2 Assembly hearing called by Brodsky’s Committee on Corporations, Commissions and Authorities, had withdrawn from a planned appearance at a Congressional hearing tomorrow on the Yankees deal.
No other city official will take his place. "We have informed the congressman [Dennis Kucinich] that it will not work for us," Pinsky said, according to the New York Sun. "But we remain happy to speak to him about this subject." (Doesn’t Congress have subpoena power?) Nor will the Yankees testify.
AY implications
The absence of any city representative suggests that Kucinich’s committee will have trouble publicly exploring the parallels between the Yankees deal and that planned for the Atlantic Yards arena. While Brodsky’s report doesn’t mention Atlantic Yards, it raises significant questions about the arena deal, notably whether taxpayers are paying for construction and whether the city is willing to manipulate the arena tax assessment to meet requirements for tax-exempt bonds.
In the case of the Yankees, according to Brodsky's report, the city relied "without independent inquiry" on stadium costs supplied by a Goldman Sachs banker--the same banker working on the arena deal.
Indeed, Brodsky’s report states unequivocally that the stadium financing deal, based on PILOTs (payments in lieu of taxes), means that the public, not the team, is paying for the new Yankee Stadium--a highly contentious charge, and one made by Atlantic Yards critics regarding the planned arena. (I've said it's arguable.)
I asked Brodsky if he believes there's any essential difference between the PILOT deal for the Yankees and the PILOT deal planned for the Atlantic Yards arena. His response: "Having not looked at the Ratner Deal in any detail, it would be pure speculation to come to any conclusion."
(He did say, according to the AP, that concerns about subsidies for private businesses without direct benefit to the public could also apply to proposals to help the New York Mets build a new stadium and for a Nets basketball arena in Brooklyn.)
Perhaps more importantly, Brodsky’s report suggests--as has already been reported--a concerted attempt to “game” the assessed valuation of Yankee Stadium to ensure a total high enough for the PILOTs associated with the Yankees bond deal. The machinations by the New York City Department of Finance (NYC DOF), criticized in withering detail in the report, may have been repeated for the Atlantic Yards arena, though no information has surfaced.
More bonds?
Kucinich’s committee is likely looking into this issue. For now, the city is waiting to see if the Internal Revenue Service (IRS) will grandfather in requests by the Yankees and Mets for additional tax-exempt bonds, and the Forest City Ratner request for tax-exempt arena bonds, applying the older, more lenient rule. The agency has proposed a change that would invalidate the old rule and Kucinich has called for a moratorium until his committee finishes its work.
Brodsky's report points out that, given the Yankees' non-relocation agreement, "there is absolutely no basis for a new threat to leave," thus undermining a request for additional bonds.
City response
The city and Brodsky disagree enormously on how many jobs were created by the Yankee Stadium deal and, more importantly for the Atlantic Yards debate, what PILOTs actually mean. According to Newsday, Pinsky said Brodsky "doesn't understand" or was "willfully ignoring the fact" that private money is paying the construction costs.
In a statement issued by his office that did not respond point by point, Pinsky said, "I'd like to think that Assembly Member Brodsky is simply misinformed, but after all of the public hearings, questions and analysis, it is becoming increasingly difficult to explain his blatant and fundamental errors and omissions.”
“While finding ways to bring jobs and private investment to the South Bronx, we’ve been working closely with elected officials who represent the South Bronx, not those who simply stop by for press conferences,” he added. “In these difficult economic times, the last thing the Assembly should want to do is trash billion-dollar private investments that will employ thousands of hard-working New Yorkers and generate tens of millions of dollars in new tax revenues for the City and State."
I’ll go through Brodsky’s findings one by one.
No economic impact?
1) The New Stadium Will Not Create Any Significant New Permanent Employment or Economic Activity
The $500 million to $1 billion in public subsidies, the report states, will create few jobs or benefits; the report cites Brooklyn-based writer Neil DeMause, co-author of Field of Schemes, on the limited impacts of sports facilities. Notably, Brodsky says, in the letter required to have the New York City Industrial Development Authority (NYC IDA) deviate from its policy that requires a certain amount of economic benefit for bonds it issues, “the sole reason given in support of public financing was a purported Yankee threat to relocate out of the City. There is no evidence that the Yankees actually made such a threat.”
Brodsky and the city/Yankees disagree significantly with the numbers about new jobs, with Brodsky saying it's a handful and the city/team responding that it's over 1000. Note that, because the Atlantic Yards arena would shift a team from another state, the sports facility would likely bring more jobs. Still, it’s unclear how many; the 453 arena jobs would be subject to union rules and may be filled with current employees now in New Jersey. (I estimated 60% new jobs: 272.) While the tax-exempt arena bonds wouldn't support the rest of Atlantic Yards, city officials justify the project, in part, on the grounds that other elements of AY would bring jobs.
Is the public paying?
2) The Public, Not The Yankees, Is Paying The Cost of Constructing The New Yankee Stadium.
Perhaps most controversial is this charge:
Taxpayers are paying the cost of constructing the new Yankee Stadium despite repeated claims to the contrary by City officials: “Funding for the $800 million in construction costs is being provided fully by the Yankees.” These statements are simply not true. The cost of construction is being paid by diverting tax payments the Yankees are legally obligated to make to New York City to repayment of the tax-exempt bonds floated by the NYCIDA. The City repeatedly in legal documents admits that it is taxpayer money, not Yankee money, which is building the new Stadium. “The City has determined to use its property taxes (in this case PILOTs) to finance the construction and operation…of the Stadium.”
This is a fascinating argument, because, in the request to the Internal Revenue Service for a Private Letter Ruling (PLR) endorsing the Yankee deal, lawyers working for the city did say the above. On the other hand, in 2006 testimony on Yankee Stadium, the Independent Budget Office (IBO) more narrowly noted that land at issue is tax-exempt:
Because there is no loss of current revenue, IBO does not include the value of the exemption as a cost to the city.
In its September 2005 Fiscal Brief on Atlantic Yards, IBO also said:
Although FCRC will make what the Memorandum of Understanding refers to as PILOT payments to the LDC, these payments are not the equivalent of city property tax payments. Instead they will cover the construction costs for the arena in the first 30 years—and some arena maintenance if the PILOTs exceed debt service. In a more conventional development model, a developer would need to make both construction financing payments and property tax payments for any property tax liability remaining after applying available abatements and exemptions…
IBO’s estimate of new property tax revenue lost to the arena PILOT does not include a loss of property taxes for the MTA land that would be part of the arena building foot print. The city currently receives no tax payment from the MTA for the rail yard because the MTA, like other state entities, is exempt from local property tax. Under the MTA’s Request for Proposals, any developer acquiring the development rights to the site would probably enter into a long-term lease, leaving the MTA in place as the owner. Therefore, the property would likely remain off the city’s tax roll, resulting in no impact on the city budget. Indeed, the MTA has an incentive to make a deal that maintains the tax exemption in order to maximize the price it receives for the development rights.
But, as I wrote, the MTA did not do so.
The IBO did point out that such financing arrangements represent a loss of resources, given the limited allocation of tax exempt private activity bonding authority available to each state for residential and other economic development projects.
Regarding Yankee Stadium, Pinsky defended the federal subsidy (described as $120.2 million but now perhaps 50% more), the New York Observer reported last year:
“Tax-exempt financing provides a largely federal subsidy to a project that will bring important benefits to an underserved part of the city,” Mr. Pinsky said via e-mail. “This subsidy, which is permissible under IRS regulations, is one that makes sense for the city to leverage--especially given its status as a substantial contributor to the U.S. Treasury
Failure to disclose?
3) The Actions Of The NYCIDA Did Not Protect The Public Interest, And May Have Violated The Law.
Brodsky’s report charges:
The NYCIDA manipulated and evaded State law requirements that there be a public economic benefit in exchange for the massive public subsidies received by the Yankees... The state law which governs NYCIDA actions should be amended to end these abuses, to require broader disclosure of key elements of its projects, to assure a real public benefit in exchange for public subsidies, to end the abuse of the UTEP process through “deviation letters”, and to limit the unfettered and explosive growth in NYCIDA sponsored public debt.
Too much public debt
4) The NYCIDA Should Not Be Used For The Creation Of Massive Amounts Of Public Debt. Such Use May Violate Existing Law.
The issuance of PILOTs, to be paid off by public authorities and Local Development Corporations, creates “billions of dollars of new public debt with little transparency or control by elected officials and outside of existing debt restrictions.”
The report charges:
The securitization of PILOTs as a new way to create unrestricted public debt may not be legal. The Mayor’s original assertion that he could create such debt through these new entities without legislative approval was clearly beyond the law. Whether or not the City Council's actions cured that defect in City actions is unclear. Whether or not state law permits such machinations is also unclear should be examined. If state law does permit such debt issuance it should be amended to contain reasonable standards protecting the public interest and procedures to assure transparency and fairness.
That has major implications for Atlantic Yards.
Ticket prices
5) The NYCIDA’s Refusal To Consider The Issues Of Ticket Prices And Public Access To The New Yankee Stadium Was A Failure To Protect The Public Interest.
“The Yankees right to charge any price they wish for tickets ended when they sought and received public subsidies,” the report states--a charge that raises questions about what exactly is standard practice around the country. This also has implications for the Atlantic Yards arena.
Tax assessment practices
6) The Tax Assessment Practices of DOF, For Yankee Stadium And Elsewhere, Need Immediate Independent Review.
This is probably the most significant charge. The report states:
The NYCDOF inflated the assessed value of the new Yankee Stadium despite sworn promises by New York City that it would not. It did so, in all probability, to qualify the Stadium project for tax exemptions. The decisions and actions by DOF with respect to its assessment of the land and facility at Yankee Stadium are disturbing, and may have violated legal requirements.... The consequence of these actions is an assessed value for the Yankee Stadium project that is inflated by as much as one-third.
An immediate, thorough, and independent review of this assessment, and assessments elsewhere in the Stadium neighborhood, and perhaps elsewhere in the City, is required.
That suggests a look at Atlantic Yards.
Other charges
7) New York City’s Acquisition Of A Luxury Suite And Yankee Tickets Was, At Best, Unwise.
8) There Is An Immediate Need For Thorough, Independent Reviews Of The Actions OF DOF, NYCIDA, And Other Public And Private Parties.
Tensions with city
Brodsky’s report suggests significant tension:
The NYCIDA produced voluminous documents with unfailing courtesy. It is unclear if all requested information was produced however. The DOF produced some documents. It is likely that all information requested has not been produced. The Committee is pursuing those documents.
The size of the PILOTs
Brodsky’s report goes into considerable detail on the size of the PILOTs:
However, the City argued that as long as the PILOT payments were not in excess of the real property taxes otherwise owed by the Yankees, the tests were met and the IRS should approve the tax exemption for the bonds. In other words, the IRS should not object to the use of PILOTs to pay off tax-exempt bonds floated to build the Stadium, if the PILOT payments were not artificially inflated to meet the debt service requirements. Again, if $50 million was needed annually to pay off the bondholders, but actual property taxes or PILOT payments generated only $30 million, the local government could not artificially raise the tax or PILOT payment the additional $20 million a year, even with the permission of the taxpayer.
If DOF, however, had artificially inflated the assessed value, the entire legal justification for the tax-exemption collapses and the tax exemption would be denied. It is noteworthy that this concern was publicly discussed. The New York City IBO specifically raised the issue in testimony by the New York City Council: “Given the large annual payments needed to service…tax exempt bonds…a regular property tax bill would be…considerably below the annual debt service payments.”1
This warning was ignored by the City, the IRS, the Yankees, and the lawyers for all parties.
Implications for AY
As I've written, Forest City Ratner expects an $800 million tax-exempt bond issue, which, by my estimation, would save the developer $165 million. Based on the example of the Yankee Stadium bonds, an $800 million bond issue would require $48 million in annual payments.
However, foregone property taxes for Madison Square Garden, which the Independent Budget Office considers more valuable property than the expected arena in Brooklyn, are only $12 million a year.
Valuation questions
The report states:
The heart of the IRS policy is to stop manipulation of property taxes for the purpose of receiving tax exempt financing. In other words, if the Yankees were treated as any ordinary taxpayer would be treated, the bonds could be approved. There was intense and voluminous correspondence between the IRS and the NYCIDA, Yankees, and others largely responding to IRS concerns. The NYCIDA swore to the IRS that the Yankees would be so treated and that the annual PILOT would be “commensurate” with the actual property tax liability of the Yankees to New York City, and, in a key assurance by the NYCIDA, that the New York City Department of Finance, which sets the assessed value for each parcel in the City, would assess the property in accordance with normal and accepted procedures.
In a July 3, 2006 letter to the IRS, NYCIDA counsel asserted that “…the New York City Department of Finance (“Finance”), the City agency that is responsible for assessing any property located in the City subject to real property tax, will use the same assessment method for the Stadium is (sic) used for assessing properties of the same class within the City...In other words, the City’s use of the actual assessed value, equalization rate, and tax rates…results in that PILOT being commensurate with the applicable real property tax.” The NYCIDA was legally obligated to make sure that the Yankee Stadium property was assessed as every other such property is assessed, and to apply the same tax rate applied to any other such property, and to not artificially inflate the tax payments. It did not keep that commitment, the DOF assessment was inflated, and the IRS was never informed.
The report states that DOF chose to use eight “comparable” parcels from Manhattan, where real estate values are significantly higher, and none in the Bronx. In fact, despite the city’s claim that Harlem was similar to the South Bronx, DOF used parcels in Chelsea and the Lower East Side.
Moreover, though DOF makes “customary adjustments for location, size and time,” in this case, “in violation of its own standard practices, [DOF] made only those adjustments which increased value and failed to make the adjustments which would have decreased value. When asked, DOF had no explanation for this decision. The effect of these decisions was to substantially inflate the assessed value of the Stadium land.
The report adds:
The City did two other appraisals of the Stadium land, both of which dramatically contradict the DOF assessment, and both of which were withheld from the IRS, state and Federal officials, and the public.
The role of Goldman Sachs
The report cites the role of Gregory Carey, the Goldman Sachs banker who is also working on the Atlantic Yards arena deal:
On April 10, 2006 DOF announced that the assessed value of the Stadium itself was $1,025, 283,187. This figure was the total of hard costs of $749,396,309 and soft costs of $275,886,878. These numbers were supplied in a letter to DOF Assistant Commissioner Dara Ottley-Brown in a February 27, 2006 letter from Mr. Gregory Carey, a senior member of Goldman, Sachs & Co. DOF admits it accepted without independent inquiry Mr. Carey’s assertion of Stadium costs....
First, it is not customary assessment practice to receive and accept such cost numbers from financial advisors to a taxpayer, without verification or inquiry...
Second, various categories of cost asserted by the Yankees and accepted by DOF seem unusual in both their nature and their value...
Third, the same concern is raised by the inclusion in real property value of $53 million for “Luxury/Sky/ Boxes”...
Fourth, it appears that the Yankees included two similar categories of cost, $36 million for “Escalation”, and $34 million for “Project Contingency”...
Fifth, certain soft costs seem unusually high...
Sixth, it appears that the Yankees included costs for the construction of property not legally part of the Stadium, particularly the cost of construction of a new police station...
These matters are highly technical, and no definitive conclusion on the legality or propriety of any individual cost can now be reached... The Committee has been told they have received all documents in the file, and concludes that in the absence of any documents clarifying these decisions, having sought expert opinion on these matters, and based on its own understanding of the law and accepted assessment practice, there is a need for further investigation of the actions of DOF in assessing the Stadium facility.
Who’s in charge?
The report suggests these deals are not subject to sufficient democratic oversight, an issue Brodsky’s committee has repeatedly pursued:
As a matter of law, the decision to provide billions of dollars of public financial assistance to the Yankees was made by the NYCIDA Board, whose current members are: Seth Pinsky, Derek Park, Amanda M. Burden, Michael A. Cardozo, Albert V. De Leon, Steven C. Devereaux, Robert C. Lieber, Joseph I. Douek, Kevin Doyle, Andrea Feirstein, Bernard Haber, Albert M. Rodriguez, Robert D. Santos, William C. Thompson. With all due respect to these public-spirited and well-intentioned citizens and government employees, it is unlikely many New Yorkers have heard of them, or wish them to be vested with the enormous power they now wield.
When asked about this issue, Mr. Pinsky replied that only the Mayor of New York City needed to be involved in such decisions:
Chairman Brodsky: Does it seem to you that this is a matter of such public importance that elected officials ought to be driving the decision?
Mr. Pinsky: Like the mayor, sure.
Chairman Brodsky: Other than the mayor, are there any elected officials worthy of participation in this?
Mr. Pinsky: No.
In fact, the decision to go forward with the Yankee deal was largely the decision of the Mayor, and the NYCIDA admitted as much. In a June 30, 2006 letter to the IRS, Mitchell Rapaport and Bruce Serchuk (of Nixon Peabody LLP), counsel to the NYCIDA explicitly admitted that the deal was not in the control of the NYCIDA, but had been “negotiated with the City,” apparently meaning the Mayor.
It is not in the public interest for the decision to issue billions in public debt to be made purely by the executive, outside the constitutional system of checks and balances. The State Legislature, the City Council, and others concerned about the governance of public institutions, and the proliferation of public debt, need to address these complicated, formal and informal, executive driven, and secretive institutional arrangements. One can hardly expect enormously wealthy private entities such as the Yankees to avoid the riches showered on them by these deals if elected officials themselves do not examine and control them.
Essentially undermining Ratner's pledge, Deputy Mayor says market will determine AY timetable
Deputy Mayor for Economic Development Robert Lieber, in an interview yesterday with the New York Observer, was asked:
Do you think it will ever be built out in full, to 6,400 apartments?
His response:
Sure. What I would say is that we want to create the conditions so that can happen. The market will determine when that happens.
Lieber's realistic answer, however, clashes with the assertion by developer Bruce Ratner that "We anticipate finishing all of Atlantic Yards by 2018."
It also backs up the neighborhood and civic groups challenging the stated 2016 Build Year in the Atlantic Yards environmental review; they contend that a ten-year timetable--however realistic from a construction sense--does not comport with the reality of a megaproject, and the state should've studied impacts over a longer period.
We'll see if Lieber's comments are raised in the appellate argument today.
More subsidies?
Asked if the city were open to more subsidies for Atlantic Yards, Lieber responded:
There are a number of ways we’re trying to help them do that. Obviously, we have budget concerns and budget issues that we have to be very mindful of.
Develop Don't Destroy Brooklyn rightly called that a hedge.
Do you think it will ever be built out in full, to 6,400 apartments?
His response:
Sure. What I would say is that we want to create the conditions so that can happen. The market will determine when that happens.
Lieber's realistic answer, however, clashes with the assertion by developer Bruce Ratner that "We anticipate finishing all of Atlantic Yards by 2018."
It also backs up the neighborhood and civic groups challenging the stated 2016 Build Year in the Atlantic Yards environmental review; they contend that a ten-year timetable--however realistic from a construction sense--does not comport with the reality of a megaproject, and the state should've studied impacts over a longer period.
We'll see if Lieber's comments are raised in the appellate argument today.
More subsidies?
Asked if the city were open to more subsidies for Atlantic Yards, Lieber responded:
There are a number of ways we’re trying to help them do that. Obviously, we have budget concerns and budget issues that we have to be very mindful of.
Develop Don't Destroy Brooklyn rightly called that a hedge.
Tuesday, September 16, 2008
An anchor tenant for Building 1? The search just got tougher
The Lehman Brothers meltdown can't be good news for backers of Atlantic Yards, especially since Forest City Ratner is searching for an anchor tenant to begin construction of Building 1, the one office tower planned for now.
From a New York Times article, headlined City and State Brace for Greater Demands on Diminishing Resources:
With the prospect of Lehman’s space going on the market, the likely result will be a drop in rents at some of the city’s premier buildings and fewer new towers going up, said real estate executives, urban planners and government officials. Those that are built will probably be smaller, they said.
...The crisis on Wall Street does not bode well for the proposed towers designed for financial firms at some of the city’s most important projects, either, including the rail yards on the West Side of Manhattan.
A tougher market for financing
There also may be trouble getting financing in general. From AM NY:
If the housing market softens, developers may get jittery and be less willing to finance all the new buildings going up, leading to lots of empty lots. And big projects like the new World Trade Center and the Atlantic Yards could grind to a halt, according to Chris Jones, a researcher at the Regional Plan Association, should financing becomes more difficult and tax revenues dry up.
From a New York Times article, headlined City and State Brace for Greater Demands on Diminishing Resources:
With the prospect of Lehman’s space going on the market, the likely result will be a drop in rents at some of the city’s premier buildings and fewer new towers going up, said real estate executives, urban planners and government officials. Those that are built will probably be smaller, they said.
...The crisis on Wall Street does not bode well for the proposed towers designed for financial firms at some of the city’s most important projects, either, including the rail yards on the West Side of Manhattan.
A tougher market for financing
There also may be trouble getting financing in general. From AM NY:
If the housing market softens, developers may get jittery and be less willing to finance all the new buildings going up, leading to lots of empty lots. And big projects like the new World Trade Center and the Atlantic Yards could grind to a halt, according to Chris Jones, a researcher at the Regional Plan Association, should financing becomes more difficult and tax revenues dry up.
In EIS case appeal, debate over blight and a mysterious market study
Key to the battle in the lawsuit over the Atlantic Yards environmental review, the subject of an oral argument in state appellate court tomorrow, is a document that surfaced only in mid-August, well after the lawsuit (or even the appeal) was filed by 26 neighborhood and civic groups. The document that suggests that the Empire State Development Corporation (ESDC), in its eagerness to determine blight on the Atlantic Yards footprint, ignored or omitted an investigation into market trends that was part of the initial Blight Study contract with environmental consultant AKRF.
The document, which I received via a Freedom of Information Law Request (seeking information on the issue of conflict-of-interest, not blight) shows that AKRF, in the Contract Scope for the Blight Study, was supposed to “analyze residential and commercial rents on the project site and within the study area and to analyze assessed value trends on the project site.”
No such analysis was conducted, even as claims by the plaintiffs—echoing many Atlantic Yards critics, and even some supporters—that the project footprint wasn’t blighted were dismissed as merely anecdotal.
The plaintiffs, who are appealing the dismissal of their case, want the Contract Scope to be included in the administrative record, while the ESDC and fellow defendant Forest City Ratner disagree. No decision has emerged before the hearing, but, should the judges favor the plaintiffs on this procedural issue, that would offer new support to the legal argument challenging blight.
Dueling arguments
The ESDC argues that there was no reason for the Contract Scope to be included in the Administrative Record, because it was not relied upon in the blight determination. Rather, the decisionmaking, the ESDC says, was based on the Blight Study, and other documents in the administrative record.
The ESDC also calls the document irrelevant, because the blight determination was based on the evaluation of the condemning authority and did not require any analysis of market forces might ameliorate such conditions.
To that, the appellants respond that ESDC has flip-flopped, given that the agency attacked Appellants’ argument that known real estate market conditions in and around the Project site warranted a market study of the area, contending that "Appellants present no competent evidence to support this claim, which is mere speculation.”
However, the appellants add, the Contract Scope “plainly establishes that ESDC actually engaged AKRF to analyze and compare rents, value and vacancy trends, and economic activity within the Project site and in the surrounding area.” That “strongly suggests that ESDC intentionally omitted such factors from the Blight Study.”
Should it have been included?
The ESDC also argues that, because the Contract Scope was not before the trial court, the inclusion of such evidence for the appeal is improper. Appellants “provide no adequate excuse for not having presented this document to the lower court,” the ESDC contends.
No excuse? In response, the appellants call that argument “particularly cynical and disingenuous,” given that the document was absent from the voluminous administrative record and was never disclosed in this case.
Blight details
The Blight Study evaluated each lot on the project site using six categories of blight characteristics: unsanitary and unsafe conditions; indications of structural damage; building code violations; vacancy status; underutilization; and environmental concerns. As the ESDC concluded, 70% percent of the lots on the project site, constituting 86% of the project site’s land area, exhibited one or more blight characteristics.
In legal papers, the ESDC points out that court give agencies a lot of discretion to determine that an area is “substandard or insanitary,” including areas characterized by “economic underdevelopment,” “diversity of land ownership making assemblage of property difficult,” “pollution,” “outmoded and deteriorated structures,” or “vacant land.” Also, as noted in litigation over the Atlantic Yards eminent domain case, unblighted parcels may be condemned as part of an overall plan, according to Supreme Court doctrine.
The appellants, argues the ESDC, concede that ATURA--the blocks in the Atlantic Terminal Urban Renewal Area--is blighted, but asks the court to second-guess ESDC’s decision to include the adjoining 2 1/3 blocks, including the north side of Dean Street and the south side of Pacific Street. Moreover, those blocks themselves are blighted, argues the ESDC.
The appellants, however, point to the absence of the market study:
Determining blight is more than simply compiling a catalogue of the physical attributes of an area… To… ignore such trends can have the absurd result that buildings currently vacant or in marginally substandard condition are deemed blighted despite imminent plans at redevelopment.
Examples in dispute
In several cases, the two sides joust about whether blight was correct determination. The ESDC says the site at the corner of Flatbush Avenue and Dean Street, for years a gas station, was blighted because of a history of gasoline spills and “a grossly underutilized lot.”
The appellants respond that the Blight Study notes that contamination is already being remediated, and that neither the ESDC nor blight study address why it would be appropriate to ignore the economic vitality of the existing use.
In another case, the ESDC cites numerous open Building Code violations in one building, while the appellants respond that they were primarily related to public assembly or unknown issues, and there’s no evidence that the structure is substantially compromised.
The ESDC says one building on Dean Street (the fifth from left) is blighted because it uses less than 40% of development potential. The appellants note that the adjoining lot contains a three-story building that is not blighted, “simply because it has one additional floor.”
The ESDC says the appellants cite no benchmark for an agency to use instead of 60% of allowable development rights. (No apparent benchmark has been used previously. “You have to have a cutoff somewhere," an ESDC lawyer said in court last year.)
On the southeastern block of the site, ESDC contends that two lots are blighted because of abandoned cars and miscellaneous debris, but FCR, says appellant, has owned these lots since 2004, “and it simply defies common sense for ESDC to designate them as blighted because the Project’s developer which owns the lots has failed to maintain them.”
The blighting rail yard?
The MTA’s Vanderbilt Yard is a blighting influence, according to the Blight Study. However, two recent condo conversions (Spalding, Atlantic Arts) are located on Block 1127 fronting on Pacific Street, “soundly refuting the claim,” according to the appellants.
“Moreover, ESDC has no explanation of why the Newswalk Building [at left in photo] was converted into luxury condominiums, despite its location on Block 1128 directly across Pacific Street from the rail yard,” the appellants claim. The Blight Study “ignores that Block 1128 fronts directly onto the supposedly insurmountable blighting influence of the Vanderbilt Rail Yards…”
Still, the ESDC asserts that the accuracy of the statement—that blighted conditions are related to proximity to open railyard—“is not diminished by the presence of these three buildings.”
(Note that the one footprint building in Block 1128 opposite the railyard also isn't blighted, according to the blight map at right.)
Arena a civic project
ESDC says appellants incorrectly claim the arena will be privately owned and operated, as a for-profit professional sports arena. The ESDC says it’s publicly owned, and it will host a number of events.
The ESDC says court should give deference to the agency's determination that it’s a civic project.. and that it does not forfeit its status as a result of being operated by FCR. The brief reminds us that the ESDC was created to encourage "maximum" private participation.
The appellants say public ownership is “merely a legal fiction,” given that it will be leased for $1 a year, with all profits and losses accruing to the developer, “including a breathtaking $400 million for the naming rights”… a blatant attempt to shoehorn a private arena into the coverage of the statute, in order to afford the developer as many public benefits and as much private profit as possible." That, says the appellants was not the purpose of the legislature when it said a civic project must be publicly owned or leased to an entity that has a civic purpose.
The appellants’ argument, that the Arena must serve a civic educational, cultural, or recreational purpose, was not raised previously, according to the ESDC and, even so, does not represent a plausible reading of the statute. Even if it does, says the state ESDC, “There are few more ‘civic’ recreational activities than the phenomenon of local fans attending a game to root for their team.”
(Emphasis added)
Build year 2016?
The ESDC says the 2016 build year in the Final Environmental Impact Statement was not arbitrary or capricious, arguing that the appellants offer no credible evidence to indicate that the schedule prepared by Turner Construction and carefully reviewed by ESDC and its consultants was faulty in any material way.
The appellants responds the ESDC wrongly insists on only considering construction scheduling without considering financing, market forces, and lawsuits: “The Turner Construction schedule may or may not be physically possible, but it is clearly unrealistic…”
The ESDC says a three-month start delay was blown out of proportion by defendants and that statements about delays by Forest City Enterprises’ Chuck Ratner and landscape architect Laurie Olin shouldn’t be taken seriously.
The appellants say Chuck Ratner’s “clarification” about delay--that he meant the project would take 15 years from conception, not to build--was “damage control,” noting that ESDC fails to mention that Ratner said, “We are terrible… to be able to predict when it will go from idea to reality.” While ESDC denigrates Olin as a layman, he’s also a professional, the appellants point out.
Terrorism
The ESDC says the lower court rationally rejected issue of a terrorist attack, and that FCR’s preparation of a security planning document was not an acknowledgment that environmental. impacts of a terrorist attack are reasonably related to the project.
The appellants respond that, when the risk of terrorism to projects subject to the the State Environmental Quality Review Act (SEQRA) is high enough to warrant substantial study and analysis, the associated environmental risks and mitigation measures should be addressed in the EIS.
The document, which I received via a Freedom of Information Law Request (seeking information on the issue of conflict-of-interest, not blight) shows that AKRF, in the Contract Scope for the Blight Study, was supposed to “analyze residential and commercial rents on the project site and within the study area and to analyze assessed value trends on the project site.”
No such analysis was conducted, even as claims by the plaintiffs—echoing many Atlantic Yards critics, and even some supporters—that the project footprint wasn’t blighted were dismissed as merely anecdotal.
The plaintiffs, who are appealing the dismissal of their case, want the Contract Scope to be included in the administrative record, while the ESDC and fellow defendant Forest City Ratner disagree. No decision has emerged before the hearing, but, should the judges favor the plaintiffs on this procedural issue, that would offer new support to the legal argument challenging blight.
Dueling arguments
The ESDC argues that there was no reason for the Contract Scope to be included in the Administrative Record, because it was not relied upon in the blight determination. Rather, the decisionmaking, the ESDC says, was based on the Blight Study, and other documents in the administrative record.
The ESDC also calls the document irrelevant, because the blight determination was based on the evaluation of the condemning authority and did not require any analysis of market forces might ameliorate such conditions.
To that, the appellants respond that ESDC has flip-flopped, given that the agency attacked Appellants’ argument that known real estate market conditions in and around the Project site warranted a market study of the area, contending that "Appellants present no competent evidence to support this claim, which is mere speculation.”
However, the appellants add, the Contract Scope “plainly establishes that ESDC actually engaged AKRF to analyze and compare rents, value and vacancy trends, and economic activity within the Project site and in the surrounding area.” That “strongly suggests that ESDC intentionally omitted such factors from the Blight Study.”
Should it have been included?
The ESDC also argues that, because the Contract Scope was not before the trial court, the inclusion of such evidence for the appeal is improper. Appellants “provide no adequate excuse for not having presented this document to the lower court,” the ESDC contends.
No excuse? In response, the appellants call that argument “particularly cynical and disingenuous,” given that the document was absent from the voluminous administrative record and was never disclosed in this case.
Blight details
The Blight Study evaluated each lot on the project site using six categories of blight characteristics: unsanitary and unsafe conditions; indications of structural damage; building code violations; vacancy status; underutilization; and environmental concerns. As the ESDC concluded, 70% percent of the lots on the project site, constituting 86% of the project site’s land area, exhibited one or more blight characteristics.
In legal papers, the ESDC points out that court give agencies a lot of discretion to determine that an area is “substandard or insanitary,” including areas characterized by “economic underdevelopment,” “diversity of land ownership making assemblage of property difficult,” “pollution,” “outmoded and deteriorated structures,” or “vacant land.” Also, as noted in litigation over the Atlantic Yards eminent domain case, unblighted parcels may be condemned as part of an overall plan, according to Supreme Court doctrine.
The appellants, argues the ESDC, concede that ATURA--the blocks in the Atlantic Terminal Urban Renewal Area--is blighted, but asks the court to second-guess ESDC’s decision to include the adjoining 2 1/3 blocks, including the north side of Dean Street and the south side of Pacific Street. Moreover, those blocks themselves are blighted, argues the ESDC.
The appellants, however, point to the absence of the market study:
Determining blight is more than simply compiling a catalogue of the physical attributes of an area… To… ignore such trends can have the absurd result that buildings currently vacant or in marginally substandard condition are deemed blighted despite imminent plans at redevelopment.
Examples in dispute
In several cases, the two sides joust about whether blight was correct determination. The ESDC says the site at the corner of Flatbush Avenue and Dean Street, for years a gas station, was blighted because of a history of gasoline spills and “a grossly underutilized lot.”
The appellants respond that the Blight Study notes that contamination is already being remediated, and that neither the ESDC nor blight study address why it would be appropriate to ignore the economic vitality of the existing use.
In another case, the ESDC cites numerous open Building Code violations in one building, while the appellants respond that they were primarily related to public assembly or unknown issues, and there’s no evidence that the structure is substantially compromised.
The ESDC says one building on Dean Street (the fifth from left) is blighted because it uses less than 40% of development potential. The appellants note that the adjoining lot contains a three-story building that is not blighted, “simply because it has one additional floor.”The ESDC says the appellants cite no benchmark for an agency to use instead of 60% of allowable development rights. (No apparent benchmark has been used previously. “You have to have a cutoff somewhere," an ESDC lawyer said in court last year.)
On the southeastern block of the site, ESDC contends that two lots are blighted because of abandoned cars and miscellaneous debris, but FCR, says appellant, has owned these lots since 2004, “and it simply defies common sense for ESDC to designate them as blighted because the Project’s developer which owns the lots has failed to maintain them.”
The blighting rail yard?
The MTA’s Vanderbilt Yard is a blighting influence, according to the Blight Study. However, two recent condo conversions (Spalding, Atlantic Arts) are located on Block 1127 fronting on Pacific Street, “soundly refuting the claim,” according to the appellants.
“Moreover, ESDC has no explanation of why the Newswalk Building [at left in photo] was converted into luxury condominiums, despite its location on Block 1128 directly across Pacific Street from the rail yard,” the appellants claim. The Blight Study “ignores that Block 1128 fronts directly onto the supposedly insurmountable blighting influence of the Vanderbilt Rail Yards…”
Still, the ESDC asserts that the accuracy of the statement—that blighted conditions are related to proximity to open railyard—“is not diminished by the presence of these three buildings.”
(Note that the one footprint building in Block 1128 opposite the railyard also isn't blighted, according to the blight map at right.)Arena a civic project
ESDC says appellants incorrectly claim the arena will be privately owned and operated, as a for-profit professional sports arena. The ESDC says it’s publicly owned, and it will host a number of events.
The ESDC says court should give deference to the agency's determination that it’s a civic project.. and that it does not forfeit its status as a result of being operated by FCR. The brief reminds us that the ESDC was created to encourage "maximum" private participation.
The appellants say public ownership is “merely a legal fiction,” given that it will be leased for $1 a year, with all profits and losses accruing to the developer, “including a breathtaking $400 million for the naming rights”… a blatant attempt to shoehorn a private arena into the coverage of the statute, in order to afford the developer as many public benefits and as much private profit as possible." That, says the appellants was not the purpose of the legislature when it said a civic project must be publicly owned or leased to an entity that has a civic purpose.
The appellants’ argument, that the Arena must serve a civic educational, cultural, or recreational purpose, was not raised previously, according to the ESDC and, even so, does not represent a plausible reading of the statute. Even if it does, says the state ESDC, “There are few more ‘civic’ recreational activities than the phenomenon of local fans attending a game to root for their team.”
(Emphasis added)
Build year 2016?
The ESDC says the 2016 build year in the Final Environmental Impact Statement was not arbitrary or capricious, arguing that the appellants offer no credible evidence to indicate that the schedule prepared by Turner Construction and carefully reviewed by ESDC and its consultants was faulty in any material way.
The appellants responds the ESDC wrongly insists on only considering construction scheduling without considering financing, market forces, and lawsuits: “The Turner Construction schedule may or may not be physically possible, but it is clearly unrealistic…”
The ESDC says a three-month start delay was blown out of proportion by defendants and that statements about delays by Forest City Enterprises’ Chuck Ratner and landscape architect Laurie Olin shouldn’t be taken seriously.
The appellants say Chuck Ratner’s “clarification” about delay--that he meant the project would take 15 years from conception, not to build--was “damage control,” noting that ESDC fails to mention that Ratner said, “We are terrible… to be able to predict when it will go from idea to reality.” While ESDC denigrates Olin as a layman, he’s also a professional, the appellants point out.
Terrorism
The ESDC says the lower court rationally rejected issue of a terrorist attack, and that FCR’s preparation of a security planning document was not an acknowledgment that environmental. impacts of a terrorist attack are reasonably related to the project.
The appellants respond that, when the risk of terrorism to projects subject to the the State Environmental Quality Review Act (SEQRA) is high enough to warrant substantial study and analysis, the associated environmental risks and mitigation measures should be addressed in the EIS.
What happened to the footprint trees? Parks Department says replacements due only after construction
Some 86 trees have been disappearing around the Atlantic Yards footprint over the past several months as preconstruction demolition and utility work has continued, prompting some community alarm, given that the tree removal was apparently not formally announced and, apparently unanticipated in the environmental review, there are still people living and working in the Atlantic Yards footprint.Jim Vogel, an officer in the Council of Brooklyn Neighborhoods, said members of his East Pacific Street Block Association are concerned about 13 mature trees on the south side of Pacific Street between Fourth and Flatbush avenues, across from the planned development at Site 5. Pacific Street must be widened for what the Brooklyn Paper has called "the Fourth-to-Flatbush two-step," and Vogel says he's worried that the south side will be vulnerable. (Actually, Chapter 24, Response to Comments, of the Atlantic Yards Final Enviornmental Impact Statement, says the proposed widening of the street would not affect the south sidewalk or its trees.)
Still, the dismay is such that City Council Member Letitia James said yesterday that there should be "a moratorium on the removal of any more trees, in and around the foot print." Vogel suggested that the tree removals are a "p.r. stunt for the groundbreaking," pointing out that the announced project groundbreaking in November can only be symbolic.
"If the project goes through, take the trees down as you need them," he said, suggesting that the tree removals reinforce claims of blight.(Photo of block bounded by Dean and Pacific streets and Flatbush and Sixth avenues, via Google Maps. Photo of tree stump on Flatbush Avenue near Fifth Avenue by Steve Soblick for No Land Grab.)
Info is hard to get
Tree removal has not been mentioned in the Construction Updates issued by the Empire State Development Corporation. In fact, when I queried the ESDC and was told to contact developer Forest City Ratner, which did not respond to an e-mail query. (Shouldn't this information have been at the fingertips of the ESDC Ombudsman and also the Atlantic Yards Community Liaison Office?)
Parks Department explanationThen I contacted the New York City Parks Department; spokesman Phil Abramson told me, "A removal permit for 86 trees was issued in March 2008. There was no way to keep the trees in place and build what they want to build there, and transplanting them would have been risky as far as survival.
I asked for a copy of the permit; I was told to submit a Freedom of Information Law (FOIL) request. (Vogel has been distributing information on how to file such FOIL requests; I imagine that the Parks Department will receive numerous requests for the permit.)
[Photo from The Footprint Gazette, which has photos and videos from April tree removal.]
Restitution
"Restitution was set at either 328 replacement trees or $246,180," Abramson said. "They agreed to plant 116 trees and pay the remaining $159,000 in restitution. They are also planting an additional 546 trees within the complex itself, which we did not count as restitution."
Restitution, he explained, is not 1 for 1 but rather is based on the trees' size and condition. "The factor is determined by taking the diameter of the tree to be removed at 4.5 feet (dbh [Diameter at Breast Height] standard) and determining how many 3" caliper trees would fit inside that area, then multiplying by a condition rating."
Where and when?
The 116 trees, he said, would be planted "along the streets surrounding the new construction" within the city's right of way.
And when will they arrive? They'll be planted at the "end of construction," because they'd be damaged during construction, Abramson said.
But what does "end of construction" mean in the context of a project that could take dozens of years, in two official (but perhaps more) phases?
"At the end of each phase," Abramson responded. "So the trees around the arena would be planted when the arena was done, and so on."
However, if construction of the towers around the arena is ongoing, then the trees--at least trees in a specific zone--might have to wait until each tower is completed. Perhaps that question is answered in the yet-unseen permit.As for the trees on private property, he said, "we would assume would also be [planted] after major construction had ended." (Indeed, graphics in the Draft Design Guidelines suggest that landscaping would be included as each building is completed.)
Brutally weird: ESDC blames project opponents for using name "Barclays Center"
The Atlantic Yards battle has produced its share of strange moments, and one of the weirdest--brutally weird, in fact--emerges from the legal papers filed in the appeal of a state judge's decision to dismiss a challenge to the Atlantic Yards environmental review.
In the brief from the Empire State Development Corporation (ESDC), amid a dispute over whether a "civic project" must be publicly owned or leased to an entity with a civic purpose, the state agency strains credulity with a posture of baffling obtuseness:
Finally, Appellants labor to fortify their argument by calling the Arena the ‘Barclays Center.’ There is no record evidence that this name will be used, although this name has been reported in the press. In any event, the name of the facility does not change its civic character. The New York State Theater at Lincoln Center will not cease to be the cultural facility it has been since its creation simply because a captain of industry recently purchased the naming rights for $100 million.”
Well, one difference is that David Koch didn’t buy naming rights, but rather made a donation to a nonprofit organization after the theater was built.
If there's "no record evidence," shouldn't the developer's efforts (see screenshot) to call the arena the Barclays Center hold any weight? What about the efforts of Brooklyn Borough President Marty Markowitz, as in his 2007 State of the Borough address? Indeed, the appellants note that the ESDC tries to minimize the name despite the presence of the BarclaysCenter.com web site.
This dispute is probably minor in the totality of the litigation. Still, given the enormous dispute over the reality of blight, you'd think the two sides could agree on the reality of naming rights announcements.
In the brief from the Empire State Development Corporation (ESDC), amid a dispute over whether a "civic project" must be publicly owned or leased to an entity with a civic purpose, the state agency strains credulity with a posture of baffling obtuseness:Finally, Appellants labor to fortify their argument by calling the Arena the ‘Barclays Center.’ There is no record evidence that this name will be used, although this name has been reported in the press. In any event, the name of the facility does not change its civic character. The New York State Theater at Lincoln Center will not cease to be the cultural facility it has been since its creation simply because a captain of industry recently purchased the naming rights for $100 million.”
Well, one difference is that David Koch didn’t buy naming rights, but rather made a donation to a nonprofit organization after the theater was built.If there's "no record evidence," shouldn't the developer's efforts (see screenshot) to call the arena the Barclays Center hold any weight? What about the efforts of Brooklyn Borough President Marty Markowitz, as in his 2007 State of the Borough address? Indeed, the appellants note that the ESDC tries to minimize the name despite the presence of the BarclaysCenter.com web site.
This dispute is probably minor in the totality of the litigation. Still, given the enormous dispute over the reality of blight, you'd think the two sides could agree on the reality of naming rights announcements.
Monday, September 15, 2008
Brodsky: city manipulated assessed value for Yankee Stadium (and a lot more)
A not-so-understated press release issued today by Assemblyman Richard Brodsky about the Yankee Stadium deal indicates
1) an interim report from Brodsky's Assembly committee is coming tomorrow;
2) Brodsky will be testifying Thursday in the Congressional hearing, which will look into not just the Yankee Stadium deal but also that contemplated for the planned Atlantic Yards arena; and
3) the city, according to the report, manipulated the assessed value of the stadium to meet the need for an IRS tax exemption.
That latter tactic, already the subject of columns by Juan Gonzalez of the Daily News, has potential parallels in the case of Atlantic Yards. Why? Only a high assessed value--likely much higher than that faced by Madison Square Garden--would be necessary to ensure that the PILOTs (payments in lieu of taxes) are sufficient to repay the tax-exempt bonds planned. (A lower assessed value means lower foregone taxes; the bond payments can't be higher than the foregone taxes.)
Update: The AP has responses from city officials and the Yankees.
The press release
“THE HOUSE THAT YOU BUILT”: BRODSKY RELEASES REPORT ON PUBLIC SUBSIDIES FOR NEW YANKEE STADIUM
Interim Report “The House That You Built” Reveals Massive Subsidies, Inflated Tax Assessment, Lack of Job Creation, Questionable Actions by NYCIDA, Luxury Suite Acquisition, Violation of IRS Requirements, Excessive Ticket Prices And Other Issues
What: Press conference to release the Brodsky Report “The House That You Built”
When: Tuesday, September 16, 2008 at 12:00 p.m.
Where: Corner of 164th Street and Jerome Avenue (directly behind the new Yankee Stadium), Bronx, New York
Assemblyman Richard Brodsky (D-Greenburgh), Chairman of the Assembly Committee on Corporations, Commissions and Authorities, will release tomorrow, Tuesday, September 16, 2008 at a press conference being held on the corner of 164th Street and Jerome Avenue (directly behind the new Yankee Stadium) in the Bronx, THE HOUSE THAT YOU BUILT: An Interim Report Into Public Financial Assistance for The New Yankee Stadium.
The 30-page document is based on a five-month investigation into the decision by the New York City Industrial Development Agency and others to provide hundreds of millions of public dollars for the construction of the new Stadium. The findings of this investigation are detailed in the Report and include:
· $550 - $850 million dollars in taxpayer investment resulted in the creation of only 15 new permanent jobs
· The public, not the Yankees, is paying the costs of constructing the new stadium
· A luxury suite was secretly acquired by NYCIDA and the Mayor’s Office with the proceeds from stadium bonds
· The City manipulated the assessed value of the Stadium to meet the need for an IRS tax exemption
· Sworn commitments to the IRS, the National Park Service, and state officials were not kept
· NYCIDA may have violated existing law in its creation of massive amounts of public debt, and its failure to assure public benefits from the massive taxpayer investment
· The City refused to protect the public from excessive ticket price increases by the Yankees
· Independent investigations of the actions of DOF, NYCIDA, and other public and private parties must be undertaken immediately
The Report is based on a review of thousands of pages of documents, sworn testimony by City officials, and meetings with City officials. It uncovers in depth the actions and decisions that led to the Yankees receipt of cash contributions from the City and State of about $350 million, and additional subsidies of between $200 and $500 million in interest savings on IRS approved tax-exempt bonds, for a total taxpayer investment of between $550 and $850 million and how in exchange the Stadium project will create 15 new permanent jobs, and little in private investment. The Report will be presented to the United States Congress in testimony to be given by Chairman Brodsky this Thursday in Washington.
1) an interim report from Brodsky's Assembly committee is coming tomorrow;
2) Brodsky will be testifying Thursday in the Congressional hearing, which will look into not just the Yankee Stadium deal but also that contemplated for the planned Atlantic Yards arena; and
3) the city, according to the report, manipulated the assessed value of the stadium to meet the need for an IRS tax exemption.
That latter tactic, already the subject of columns by Juan Gonzalez of the Daily News, has potential parallels in the case of Atlantic Yards. Why? Only a high assessed value--likely much higher than that faced by Madison Square Garden--would be necessary to ensure that the PILOTs (payments in lieu of taxes) are sufficient to repay the tax-exempt bonds planned. (A lower assessed value means lower foregone taxes; the bond payments can't be higher than the foregone taxes.)
Update: The AP has responses from city officials and the Yankees.
The press release
“THE HOUSE THAT YOU BUILT”: BRODSKY RELEASES REPORT ON PUBLIC SUBSIDIES FOR NEW YANKEE STADIUM
Interim Report “The House That You Built” Reveals Massive Subsidies, Inflated Tax Assessment, Lack of Job Creation, Questionable Actions by NYCIDA, Luxury Suite Acquisition, Violation of IRS Requirements, Excessive Ticket Prices And Other Issues
What: Press conference to release the Brodsky Report “The House That You Built”
When: Tuesday, September 16, 2008 at 12:00 p.m.
Where: Corner of 164th Street and Jerome Avenue (directly behind the new Yankee Stadium), Bronx, New York
Assemblyman Richard Brodsky (D-Greenburgh), Chairman of the Assembly Committee on Corporations, Commissions and Authorities, will release tomorrow, Tuesday, September 16, 2008 at a press conference being held on the corner of 164th Street and Jerome Avenue (directly behind the new Yankee Stadium) in the Bronx, THE HOUSE THAT YOU BUILT: An Interim Report Into Public Financial Assistance for The New Yankee Stadium.
The 30-page document is based on a five-month investigation into the decision by the New York City Industrial Development Agency and others to provide hundreds of millions of public dollars for the construction of the new Stadium. The findings of this investigation are detailed in the Report and include:
· $550 - $850 million dollars in taxpayer investment resulted in the creation of only 15 new permanent jobs
· The public, not the Yankees, is paying the costs of constructing the new stadium
· A luxury suite was secretly acquired by NYCIDA and the Mayor’s Office with the proceeds from stadium bonds
· The City manipulated the assessed value of the Stadium to meet the need for an IRS tax exemption
· Sworn commitments to the IRS, the National Park Service, and state officials were not kept
· NYCIDA may have violated existing law in its creation of massive amounts of public debt, and its failure to assure public benefits from the massive taxpayer investment
· The City refused to protect the public from excessive ticket price increases by the Yankees
· Independent investigations of the actions of DOF, NYCIDA, and other public and private parties must be undertaken immediately
The Report is based on a review of thousands of pages of documents, sworn testimony by City officials, and meetings with City officials. It uncovers in depth the actions and decisions that led to the Yankees receipt of cash contributions from the City and State of about $350 million, and additional subsidies of between $200 and $500 million in interest savings on IRS approved tax-exempt bonds, for a total taxpayer investment of between $550 and $850 million and how in exchange the Stadium project will create 15 new permanent jobs, and little in private investment. The Report will be presented to the United States Congress in testimony to be given by Chairman Brodsky this Thursday in Washington.
More details emerge on Yankees lobbying efforts re tax-free bonds
The Daily News has the scoop:
The city and the Yankees secretly crafted a letter Rep. Charles Rangel used to lobby the IRS for tax changes that would save the team $66 million, the Daily News has learned.
The arena connection
Yes, the Atlantic Yards arena is part of this controversy. The article concludes:
In 2006, Akin Gump - a bipartisan firm that for years has donated thousands to both Democrats and Republicans - reported that the Yankees hired the firm to lobby the U.S. Department of Interior for "federal approval required to complete stadium relocation."
That job ended Jan. 1, 2007. Levine said the Yankees hired the law firm again three months ago - this time to represent the team in a congressional probe on the use of public funds for sports arenas. Hearings are set for this week.
Levine said the firm had nothing to do with the Rangel letter and insisted the letter was meant to serve the interests of the Yankees and other projects, such as the Mets' new stadium and developer Bruce Ratner's proposed Nets' arena in Brooklyn.
Mets officials said they had nothing to do with the letter.
A spokesman for Ratner did not return calls.
So one of the lingering questions is whether Forest City Ratner had anything to do with the letter.
The city and the Yankees secretly crafted a letter Rep. Charles Rangel used to lobby the IRS for tax changes that would save the team $66 million, the Daily News has learned.
The arena connection
Yes, the Atlantic Yards arena is part of this controversy. The article concludes:
In 2006, Akin Gump - a bipartisan firm that for years has donated thousands to both Democrats and Republicans - reported that the Yankees hired the firm to lobby the U.S. Department of Interior for "federal approval required to complete stadium relocation."
That job ended Jan. 1, 2007. Levine said the Yankees hired the law firm again three months ago - this time to represent the team in a congressional probe on the use of public funds for sports arenas. Hearings are set for this week.
Levine said the firm had nothing to do with the Rangel letter and insisted the letter was meant to serve the interests of the Yankees and other projects, such as the Mets' new stadium and developer Bruce Ratner's proposed Nets' arena in Brooklyn.
Mets officials said they had nothing to do with the letter.
A spokesman for Ratner did not return calls.
So one of the lingering questions is whether Forest City Ratner had anything to do with the letter.
The Times corrects the "Atlantic Yards" caption
From today's New York Times:A picture caption with an article in some editions on Wednesday about potential hurdles to plans by the developer Bruce C. Ratner to break ground in December on his $4 billion Atlantic Yards project in Brooklyn misstated the name of the railyards that the development will be built over, in part. They are the Vanderbilt Yards, not the Atlantic Yards.
The Times could have further specified that Atlantic Yards is not a place. And shouldn't it be "would be built over," not "will be built over"?
I also wonder why the correction took five days. Fact-checking should've taken about ten seconds and led to a correction the next morning. Still, that's better than ignoring corrections altogether.
FCR to CB 8: evasive and disingenuous on project timing, jobs, bridge opening
Forest City Ratner's announcement in May that Atlantic Yards was moving ahead generated several questions from Brooklyn Community Board 8, which got back a response that is often evasive, vague, and disingenuous.According to the letter, sent July 18, the developer is unwilling to commit to a start date for Phase 2 nor to commit to opening the arena only when reconstruction of the adjacent Sixth Avenue bridge is complete. The developer offers a highly-qualified pledge for interim open space and, in asserting project’s benefits, likely overestimates the number of permanent jobs in Phase 1 by a factor of two.
The letter, from Senior VP Scott Cantone, was sent to CB8 Chairman Robert Matthews and cc’d to various public and elected officials. CB8 has not yet publicly responded.
(I've added bolding for emphasis in several places.)
Timetable
The first question involved the timetable:
1. Besides signing an anchor tenant for the B1 building, what other dependencies must be met for the remaining buildings in Phase 1 to be built... What is the timetable for resolving these dependences?
The response:
The completion of buildings in Phase 1... is dependent on factors typical to any large-scale development, such as:
- completing acquisition of the site
- finalizing project documentation and agreements with the Empire State Development Corporation
- securing financing; and
- finalizing agreements with the City of New York for affordable housing programming.
However, it is hardly typical that the acquisition of a site depends on eminent domain, which in this case has been contested in court. Also, the towers depend on the arena, and right now there’s no financing for the arena. That’s probably why Cantone did not pledge any start date.
What about Phase 2?
As I’ve reported, there’s no start date for Phase 2, and CB8 wanted to know more:
2. The City and State funding agreement don’t specify a deadline for the construction for Phase 2, but most of the public benefits associated with the project are dependent on Phase 2. Is Forest City planning to commit to a start date for Phase 2, and agree to remedies for the community if the start date is not achieved?
The response:
FCR intends to start Phase 2 as soon as possible. However, the tremendous public benefits that come immediately with Phase 1 should not be overlooked.
Having ignored the question, Cantone switched the subject and ignored the question of remedies:
The completion of Phase 1 will bring hundreds of affordable housing units for low- and middle-income families, representing 30% of all residential units constructed on the Arena Block. The Arena itself will be a major civic facility for Brooklyn. Furthermore, Phase 1 will generate over 3000 new, permanent jobs as well as significant new tax revenues for the City and State, and it will include significant public amenities, such as the Urban Room (which includes approximately 10,000 square feet of publicly accessible space) and the new entryway into the subway.
However, the Urban Room and subway issue would serve the arena and the buildings as much as any surrounding community, including that in CB 8. The Arena would not be “for Brooklyn” if it’s rented for $100,000, even if the developer, as per the Community Benefits Agreement, makes it available ten times a year for community groups. (FCR has since said the rental price would be lower.)
And the benefits would hardly come immediately if the developer has a 12+ years to build Phase 1 and there's no anchor tenant for Building 1.
3000 new permanent jobs?
Cantone’s pledge of 3000 new jobs is doubtful, so let’s do some math.
Building 1, with 650,000 square feet of office space, at 250 sf per job (the measure used by the city and state), could accommodate 2600 jobs. However, the New York City Economic Development Corporation (NYCEDC), in an analysis of an earlier configuration, calculated a 7 percent vacancy rate (182), which would mean 2418 jobs. NYCEDC also suggested that only 30 percent of the jobs would be new to New York, rather than moved from Manhattan. That would mean only 725 new office jobs at Atlantic Yards.
According to a memo from the Empire State Development Corporation, there would be 453 arena jobs; however, as the New York Observer reported in 2005, the arena jobs (400 in that article) would be subject to union rules and may be filled with current employees. Let’s estimate 60% new jobs from 453: 272.
According to the ESDC memo, there would be one building services job for every 20 units; at 1500 units (which represents 1.5 million square feet, the minimum over 12 years in City Funding Agreement), that means 75 building services jobs. At 2000 units, that would be 100 jobs.
Parking is 92 jobs at full buildout of 3670 spaces; but there would only be 2346 spaces in Phase 1; that same ratio, 63.9%, yields 59 jobs.
There would be 91,000 gsf of retail space in Phase 1; at 300 gsf per job, according to the ESDC memo, that means 303 jobs.
So my calculation for the total number of jobs for Phase 1 would be 1434 (725 + 272 + 75 + 59 + 303). There could be a few more building service jobs, potentially more new office jobs, and also some spinoff jobs, but for now, Cantone should be asked for details rather than taken on faith.
Worker numbers?
CB 8 asked:
3. Demolition of buildings in the Phase 2 site was claimed to have been necessary to create construction staging and worker parking areas during Phase 1. Now that only the arena and one building are going to be built in the first stage of Phase 1, how has your estimate of the peak number of workers at the site changed? What percentage of those workers are you now projecting will drive to the site?
(Note that CB8 only includes in its boundaries Phase 2.)
The response:
As mentioned above, the scope of Phase 1 has not changed from what was approved as part of ESDC’s General Project Plan. However, the schedule has been delayed approximately two years as a result of litigation. The number of construction workers on the site will remain generally the same as was disclosed in the Final Environmental Impact Statement (FEIS) for both Phase 1 and Phase 2.
Well, the scope may not have been changed, but the developer has said nothing about Site 5, the site now occupied by Modell’s and P.C. Richard. So “generally the same” may contain some leeway.
Staging needs
CB 8 asked:
4. Since the construction of B1 and the cluster buildings in Phase 1 will be delayed, how has your assessment of the amount of space required for staging changed? Are you considering the use of the areas of the Phase 1 site adjoining the arena and the first residential building for staging and worker parking instead of using some or all of the Phase 2 site? If the unbuilt areas of Phase 1 won’t be used for staging, how will the space be used?
Cantone replied:
The staging areas identified in the FEIS remain the same. The construction of both the Arena and the LIRRR railyard, which will be undertaken as part of Phase 1, requires the use of Block 1129 for staging. At the time the Arena opens, we anticipate a portion of the Phase 2 site will continue to be used for development, construction staging or other project uses to support the development of the platform over the LIRR new yard, the construct
ion of the residential buildings, and the open space that is part of Phase 2.He didn't mention that a significant portion of the Phase 2 site would be used for interim surface parking.
Buildings as buffer
CB 8 asked:
5. The Atlantic Yards FEIS refers to the buildings around the arena as a buffer for locating the arena in a residential neighborhood. With only one residential building slated to be complete at the time of the arena opening, that buffer will not be in place at that time. In addition, due to the changes in the construction timetable, the impact of the arena on the residential and commercial areas around the project, (including the arena’s radical swings from dormancy to intense activity), will no longer be compensated for by the residential high density of the ring buildings. The one residential building proposed to be complete at the time of the arena opening is roughly the same number of residential units as the number of units displaced b the project as a whole. Please detail how you plan to prevent the arena from affecting the residential and commercial areas around the project adversely during the extended buildout of the project.
Cantone responded:
In the event that any of the development sites that surround the Arena (Buildings 1-4) are not in construction by the time that the Arena open, FCRC will create temporary public open spaces between the Arena and the surrounding streets; however, we anticipate that construction of Phase 1 will be complete or underway at the time of the Arena opening.
The pledge for temporary open space seems iffy, given the broad scope of “in construction.” Even if there were temporary open space, it wouldn’t arrive until the arena opens, at least three years down the line.
Displacement issues
Cantone also took issue with the claim that the building would contain roughly the same number of residential units as the number displace:
This is factually incorrect. The proposed residential building will offer approximately 300 residential units.
He’s correct. Chapter 4 of the FEIS, Socioeconomic, states
The proposed project would directly displace 171 residential units housing an estimated 410 residents.
It also states:
[I]t was estimated that the study area contains approximately 2,929 households that are potentially at risk of indirect residential displacement.
However, the study doubts that the total is at risk from the project, citing ongoing gentrification, because new housing units could relieve market pressure, and because most of the at-risk households would be more than a half-mile away. I wrote in July 2006 that one of the reasons--that the housing would be similar--was bogus.
New open space?
CB 8 asked:
6. What is the open space plan for Phase 1 across the new timetable you have recently released. Will there be any open space added to the project in Phase 1 to compensate for the loss of the arena roof as open space?
Cantone repeated the answers about the Urban Room and temporary open space, adding:
As noted above, in the event that a development site on the Arena Block is not in construction or needed for other project purposes by the time the Arena is completed, FCRC will create temporary open spaces that will persist until such site is needed for development or construction activities.
Actually, Cantone first said that open space would be created if a development site is “in construction” but here he's added a broad qualifier: “needed for other project purposes.” That gives the developer a lot of leeway.
Bridges open?
Question 7 confirmed plans for indoor parking. The final question from CB 8 concerned bridges:
8. Will the Carlton Avenue and 6th Avenue bridges be complete and open when the arena is opened?
Cantone responded:
Both the Carlton Avenue and the 6th Avenue bridges are anticipated to be open when the Arena opens.
An ESDC spokesman told me last November, “Forest City Ratner tells us that while the arena might be able to open without the bridge in operation, the goal is to have the bridge open in coordination with the arena's opening."
Note that “anticipated” is a weasel word. The Carlton Avenue bridge is undergoing reconstruction and surely would be finished before the Sixth Avenue bridge is addressed. At the current timetable, the Sixth Avenue bridge should be open by early 2011, providing a good chunk of time before the basketball season begins in October--but there can always be snags.
Who's in charge?
Local public officials and community boards surely would not want the Sixth Ave bridge closed during an arena event, since the traffic problems could be ruinous. But Forest City Ratner certainly wouldn't want to miss an arena opening at the beginning of the basketball season: there are suites to sell and a naming rights contract to fulfill.
In that case, there might be significant tension between the interests of the developer and the interests of the public.
Sunday, September 14, 2008
Flashback January 2004: where's the team store in the "privately financed" arena?
Along with the extreme hype, two interesting aspects emerge in a second look at the cover of the 1/22/04 New York Times Sports section. (Click on graphic to enlarge.)First, the caption at left declares that the arena would be "privately financed," though that phrase didn't appear in the overview article. While no direct public subsidy had been announced--a 2/18/05 Memorandum of Understanding set out $200 million in subsidies, $100 million each from the city and the state--the Times could have been more skeptical.
After all, the 12/11/03 article announcing the Atlantic Yards plan stated:
Mr. Ratner said that the project "will be almost exclusively privately financed," although taxes derived from elements of the project will be diverted to help pay for it.
(Emphasis added)
From TIFs to PILOTs
That was apparently a reference to TIF (tax-increment financing), a strategy suggested in the early days of AY but soon abandoned, perhaps because TIFs in New York State require legislative approval.
As it turns out, the private financing now envisioned relies on tax-exempt bonds, a subsidy worth perhaps $165 million, which is borne mainly by federal taxpayers. Of course, that plan may not fly, since it relies on fixed PILOTs (payments in lieu of taxes) to repay the bonds, which the chief counsel of the Internal Revenue Service calls a "loophole."
The IRS has proposed a revised rule that would require PILOTs to be tied to actual foregone property taxes, which means the bond payments would fluctuate. The "loophole" has inspired some apparent shenanigans regarding the valuation of the new Yankee Stadium, the subject of a Congressional hearing Thursday, which also should touch on the AY arena.
What about the team store?
Note that architect Frank Gehry, who later said, "We tried to understand the body language of Brooklyn," initially put the team store in Building 2, on Dean Street, between Flatbush and Sixth Avenues, though quite much closer to Flatbush, with the entrance toward Flatbush.
The store has since been moved to the Urban Room, connected to the base of Building 1, closer to the intersection of Flatbush and Atlantic avenues.
The site map suggests that a good part of Building 2 would be opposite the blank wall of a retail enterprise, rather than the row houses elsewhere on the south side of Dean Street. Still, someone had to figure out that the team store would draw a large population to Dean Street, which will remain a relatively narrow residential street.
Saturday, September 13, 2008
As busy week approaches, Yankees' deal gets more scrutiny; will AY arena be included?
Next week is going to be very interesting. On Wednesday will be the State Senate's eminent domain public hearing and the oral argument in the appeal of a judge's dismissal of the lawsuit challenging the Atlantic Yards environmental impact statement. On Thursday, a Congressional subcommittee will look into whether city officials "gamed" valuations of Yankee Stadium to ensure that the assessment was enough to fit with bond payments used for PILOTs (payment in lieu of taxes).
And in a column yesterday headlined Yanks land deal ain't fair ball, Daily News columnist Juan Gonzalez revealed that Assemblyman Richard Brodsky, who on July 2 held a hearing on the Yankees deal, will next week release an "interim report" on the Yankees probe
Surely Brodsky will do so before the Congressional hearing called by Rep. Dennis Kucinich (D-OH).
The PILOTs problem
The Yankees deal is understandably the focus, given that, as Gonzalez wrote, in January 2007, the city assessed land under the new Yankee Stadium at ten times the market value of its neighbors--an assessment justified, city officials said, by comparing it to other stadiums around the country.
The PILOTs can't exceed the value of foregone property taxes, hence the need for a high valuation. The same situation applies to the Atlantic Yards arena.
Will they get to AY?
The Atlantic Yards case may be even more of a challenge for the city. First, if the arena bond deal is going to be finished in November (even if the bonds aren't sold yet), the city must have prepared a preliminary assessment.
But the city would have to compare the Brooklyn arena not just to new arenas elsewhere but also to Madison Square Garden.
As I've written, Forest City Ratner expects a $800 million tax-exempt bond issue, which, by my estimation, would save the developer $165 million. Based on the example of the Yankee Stadium bonds, an $800 million bond issue would require $48 million in annual payments.
However, foregone property taxes for Madison Square Garden, which the Independent Budget Office considers more valuable property than the expected arena in Brooklyn, are only $12 million a year.
Maybe Kucinich and Brodsky can shed some light on this.
And in a column yesterday headlined Yanks land deal ain't fair ball, Daily News columnist Juan Gonzalez revealed that Assemblyman Richard Brodsky, who on July 2 held a hearing on the Yankees deal, will next week release an "interim report" on the Yankees probe
Surely Brodsky will do so before the Congressional hearing called by Rep. Dennis Kucinich (D-OH).
The PILOTs problem
The Yankees deal is understandably the focus, given that, as Gonzalez wrote, in January 2007, the city assessed land under the new Yankee Stadium at ten times the market value of its neighbors--an assessment justified, city officials said, by comparing it to other stadiums around the country.The PILOTs can't exceed the value of foregone property taxes, hence the need for a high valuation. The same situation applies to the Atlantic Yards arena.
Will they get to AY?
The Atlantic Yards case may be even more of a challenge for the city. First, if the arena bond deal is going to be finished in November (even if the bonds aren't sold yet), the city must have prepared a preliminary assessment.
But the city would have to compare the Brooklyn arena not just to new arenas elsewhere but also to Madison Square Garden.
As I've written, Forest City Ratner expects a $800 million tax-exempt bond issue, which, by my estimation, would save the developer $165 million. Based on the example of the Yankee Stadium bonds, an $800 million bond issue would require $48 million in annual payments.
However, foregone property taxes for Madison Square Garden, which the Independent Budget Office considers more valuable property than the expected arena in Brooklyn, are only $12 million a year.
Maybe Kucinich and Brodsky can shed some light on this.
Polytechnic alumni file suit to rescind NYU consolidation deal
Some two months after the State Board of Regents in late June approved New York University's no-money-down absorption of Brooklyn's Polytechnic University, a group of seven dissident alumni have filed suit (PDF) in Albany to rescind the decision, arguing the Regents allowed the affiliation in violation of a 2005 Polytechnic board decision to remain independent.
NYU’s consolidation effort--the school is now known as Polytechnic Institute of NYU--not only adds engineering to the university’s portfolio but provides a beachhead in Brooklyn, providing perhaps one-quarter of the real estate NYU needs to expand. The lawsuit, filed against both the Poly board and the Board of Regents, charges that the university's board failed to obtain an appraisal to establish the value of its real estate, air rights and other assets, a breach of its fiduciary duty.State report lingers
Indeed, a report issued May 20 by State Sen. Kenneth LaValle, the chairman of the State Senate Committee on Higher Education, raised some serious questions about the deal, stating that in three instances the board did not act with the duty of care and/or loyalty required by a fiduciary, notably negotiations conducted in secret, the exclusion of dissident board members from working committees, and the failure to update a three-year-old appraisal of the university's valuable property in Downtown Brooklyn's MetroTech Center. (LaValle, oddly enough, released the report without an accompanying press release or comment.)
On June 8, Polytechnic posted a two-page commentary in response to those three conclusions, noting that it was "not a detailed rebuttal of the Senator’s Report." For example, the response noted that Poly would remain the owner of its real estate after the "Affiliation," that the board "had access to detailed, expert analysis of the substantial cost of renovation of Polytechnic’s buildings and was aware that the Brooklyn real estate market was softening," and the board "was fully aware that Polytechnic’s short-term and long-term financial distress went much deeper than the value of its real estate."
No mention of LaValle's report, or the response, appeared in the summary material posted on the Board of Regents web site.
Plaintiffs' argument
The plaintiffs, including officers of the Alumni Association, are part of the Committee to Save Polytechnic University. They argue that they have been aggrieved individually because they can’t participate in Poly decisionmaking, as well as aggrieved collectively because their alma mater no longer exists as an autonomous institution.
Plaintiff Thomas Mauro, a Washington lawyer who is the immediate past president of the Polytechnic Alumni Association, said in an affidavit that, at a 2005 meeting of the university board, the trustees by a 3-1 margin passed a resolution rejecting NYU’s takeover offer and instructing Polytechnic’s administration to end any merger discussions with NYU.
However, Mauro charged, in August 2007, the presidents of Polytechnic and NYU “jointly announced their secretly negotiated agreement,” which would give “NYU de facto ownership of Polytechnic’s valuable real estate and other assets,” including an endowment over more than $125 million.
Real estate value
The agreement adopted by the Polytechnic board gives NYU “irreversible equitable ownership of Polytechnic’s valuable real property assets," Mauro stated.
How much is that worth? "We have done appraisals of our real estate and understand that the remaining value is minimal after considering all outstanding debt and the cost to lease or build new space if the property were sold,” Polytechnic officials said in an August 2007 letter to alumni—though LaValle’s report indicated that there were no current appraisals.
A January 2005 appraisal valued Poly property at $213 million, according to the senator's report. Poly has signed a letter of intent regarding its air rights with developer Forest City Ratner, its MetroTech neighbor, but has not begun new buildings.
Mauro added in a footnote that “NYU privately informed the federal government” that the real estate it would gain is worth more than $300 million. No source for that claim is provided; Mauro told me by e-mail that "the back-up for this statement will emerge at a later date."
Charges of secrecy
In the affidavit, Mauro stated that he can provide the court with a copy of post-affiliation bylaws only in draft form because the final version has not been made public, even though the administration had not restricted public disclosure of the previous bylaws.
Mauro added in response to my question, "It is not accurate to speak of the alumni as 'split' over this issue since only two alumni, myself and [Alumni Association President] George Likourezos, know the terms of the transaction. One of the purposes of the lawsuit is to bring the transaction out into the open. Only then can the alumni make any kind of informed decision. It is not possible to know what kind of transaction this is from the administration and Board's releases because the Poly administration and Board leadership vary its message to fit the audience and the purpose of the release."
Contested election
Still, the dissident alumni seem to be in the minority. The official Polytechnic alumni web site notes that the alumni association will issue no response to LaValle’s report and will take no further action to oppose the affiliation “except to request that the Definitive Agreement be made available to the Association.”
The alumni association is having its first contested election, with pro-affiliation candidates opposing the nominees of the Nominations Committee.
Changes emerge
Besides a changed name and visual identity, NYU-Poly seems to be drawing on the resources of the larger university. A press release this week announced that Nassim Nicholas Taleb, “the hottest thinker in the world,” according to the London Times, is the Polytechnic Institute of NYU’s new distinguished professor of risk engineering.
Friday, September 12, 2008
Remember, Bloomberg said the city would only help with infrastructure
As Mayor Mike Bloomberg pledges "everything we can" (if not cash) for Atlantic Yards, it's worth looking back at his weekly radio appearance with WABC’s John Gambling on 1/23/04, six weeks after the Atlantic Yards plan was announced, when he insisted that there wouldn't be any city spending on Atlantic Yards beyond infrastructure.
JG: The city will spend money on this?
MB: Well, we spend--if you build a new building, we have to fix the roads in front of the building. There’s always some expenses. Fundamentally, the answer to your question is: this will be done with private money, and any city monies of any meaningful size will be [corrected] debt issues financed by the extra tax revenues that come from this. So, we’re not going to have to divert money from education, or police or fire or any other part of the city to do this. No. It is private money in that sense.
As I wrote in January 2007, Bloomberg was apparently referring to tax increment financing (TIF) for the arena as well as the expected general increase in tax revenues. But that was before the city and state each agreed to put in $100 million in cash. And before the city agreed to devote large--though still unspecified--amounts of its allocation of housing bonds to support the residential buildings.
Contribution doubles
I wrote that a few days before we learned that the city had pledged another $105 million to the project. Since then, we learned that the additional $105 million goes to infrastructure, while the original $100 million will reimburse developer Forest City Ratner for "Arena Land," thus enabling what the developer portrayed as generous buyouts.
JG: The city will spend money on this?
MB: Well, we spend--if you build a new building, we have to fix the roads in front of the building. There’s always some expenses. Fundamentally, the answer to your question is: this will be done with private money, and any city monies of any meaningful size will be [corrected] debt issues financed by the extra tax revenues that come from this. So, we’re not going to have to divert money from education, or police or fire or any other part of the city to do this. No. It is private money in that sense.
As I wrote in January 2007, Bloomberg was apparently referring to tax increment financing (TIF) for the arena as well as the expected general increase in tax revenues. But that was before the city and state each agreed to put in $100 million in cash. And before the city agreed to devote large--though still unspecified--amounts of its allocation of housing bonds to support the residential buildings.
Contribution doubles
I wrote that a few days before we learned that the city had pledged another $105 million to the project. Since then, we learned that the additional $105 million goes to infrastructure, while the original $100 million will reimburse developer Forest City Ratner for "Arena Land," thus enabling what the developer portrayed as generous buyouts.
Taking a look at the primary; was AY a factor in the District Leader race?
What to make of the primary election? Well, as it's clear that the three Atlantic Yards opponents (see the Atlantic Yards Voter Guide) didn't win, but in only one race Atlantic Yards was likely a factor and it's unclear how much.
Similarly, after the 2006 primary, I wrote that the results certainly weren't a referendum against the project--as many AY opponents sought to achieve--but they weren't a referendum for the project.
The Towns-Powell race
The New York Times's CityRoom blog on Wednesday, in an article headlined Winners and Losers in the Primary, declared that one loser was the Central Brooklyn Independent Democrats (CBID), which endorsed writer and activist Kevin Powell, "who lost overwhelmingly to the longtime incumbent Edolphus Towns." (Powell criticized Atlantic Yards, while Towns is a supporter. CBID is led by AY opponents Chris Owens and Lucy Koteen.)
Towns, who outraised Powell by a significant factor (including contributions from the Ratner family), won 22,586 votes (67.2%), versus Powell's total of 11,046 (32.8%), according to the Brooklyn Paper
In 2006 Towns won 19,469 votes, while rival Charles Barron (an AY opponent) got 15,345 votes and Roger Green got 6,237 votes. The difference is more likely attributable to Barron's greater profile in the district and Towns's more significant campaign effort.
The 57th District Leader
The Times observed that CBID also lost in endorsing Bill Saunders, longtime incumbent Democratic 57th District leader, who was defeated by challenger Walter Mosley, who has ties to Towns and others in the Brooklyn Democratic organization. (I haven't seen the vote totals.) CBID cited "Mosley’s tepid criticism of Atlantic Yards" as a factor in the endorsement, though CBID said members were impressed by him.
Saunders was backed by City Council Member Letitia James and State Senator Velmanette Montgomery, both AY opponents, while Mosley was supported by (and campaigned with) Assemblyman Hakeem Jeffries and State Senator Eric Adams, a mild critic and a supporter of the project. (The Times declared Jeffries and Adams winners in the primary.)
Mosley, a lawyer, is part of a well-known political family and is two generations younger than Saunders, so there were likely multiple factors at work, well beyond AY. Still, if the race reflected the relative power of James/Montgomery vs. Jeffries/Adams, at least in the 57th, the edge goes to the latter.
The Squadron win
Challenger Daniel Squadron's narrow victory over incumbent State Senator Martin Connor likely had little to do with Atlantic Yards. Note that Atlantic Yards Voter Guide expressed skepticism about Squadron, citing his support from AY backers Sen. Charles Schumer and Mayor Mike Bloomberg.
Still, it's worth noting that Squadron's camp positioned the challenger as a critic of Atlantic Yards, compared to Connor's caution.
The Silver win
Veteran Assembly Speaker Sheldon Silver easily defeated challengers Paul Newell and Luke Henry, even though Newell got endorsements from the New York Times, the New York Daily News, and the New York Post. The power of incumbency, as well as a history of delivering pork for his neighborhood, was clearly more important to constituents than criticism of the "three men in a room" political arrangement in the state.
Newell criticized Silver on a number of fronts, including his coziness with the powerful. On Monday's Brian Lehrer Show, Newell, at 19:15, brought up Forest City Ratner:
When someone is as powerful as Sheldon Silver has been, the people who get into that room are other powerful people. It's not that he's a bad guy. I think he does care about the fact that we have overcrowded schools. But what's his solution? He goes to one of his largest donors, Bruce Ratner, gives him millions and millions of dollars in subsidies and tax breaks to build a 76-story luxury tower that we need like a hole in the head, and build a school in the basement, ostensibly, that we're going to get, maybe, in five years, if we're lucky. He's already pushed it back two years, and the market's going to push it back again."
Newell suggested that a school could open in September 2009 by converting office space. Note that Ratner has given big to the Democratic Assembly Campaign Committee's Housekeeping account, but I haven't found evidence he's given directly to Silver. (His brother Michael Ratner and Michael's wife Karen Ranucci each gave Silver $3000 two years ago.)
The main tax breaks for the Beekman Tower include Liberty Bonds and a convoluted approval of 421-a subsidies. (I'm not sure of Silver's role.)
Similarly, after the 2006 primary, I wrote that the results certainly weren't a referendum against the project--as many AY opponents sought to achieve--but they weren't a referendum for the project.
The Towns-Powell race
The New York Times's CityRoom blog on Wednesday, in an article headlined Winners and Losers in the Primary, declared that one loser was the Central Brooklyn Independent Democrats (CBID), which endorsed writer and activist Kevin Powell, "who lost overwhelmingly to the longtime incumbent Edolphus Towns." (Powell criticized Atlantic Yards, while Towns is a supporter. CBID is led by AY opponents Chris Owens and Lucy Koteen.)
Towns, who outraised Powell by a significant factor (including contributions from the Ratner family), won 22,586 votes (67.2%), versus Powell's total of 11,046 (32.8%), according to the Brooklyn Paper
In 2006 Towns won 19,469 votes, while rival Charles Barron (an AY opponent) got 15,345 votes and Roger Green got 6,237 votes. The difference is more likely attributable to Barron's greater profile in the district and Towns's more significant campaign effort.
The 57th District Leader
The Times observed that CBID also lost in endorsing Bill Saunders, longtime incumbent Democratic 57th District leader, who was defeated by challenger Walter Mosley, who has ties to Towns and others in the Brooklyn Democratic organization. (I haven't seen the vote totals.) CBID cited "Mosley’s tepid criticism of Atlantic Yards" as a factor in the endorsement, though CBID said members were impressed by him.
Saunders was backed by City Council Member Letitia James and State Senator Velmanette Montgomery, both AY opponents, while Mosley was supported by (and campaigned with) Assemblyman Hakeem Jeffries and State Senator Eric Adams, a mild critic and a supporter of the project. (The Times declared Jeffries and Adams winners in the primary.)
Mosley, a lawyer, is part of a well-known political family and is two generations younger than Saunders, so there were likely multiple factors at work, well beyond AY. Still, if the race reflected the relative power of James/Montgomery vs. Jeffries/Adams, at least in the 57th, the edge goes to the latter.
The Squadron win
Challenger Daniel Squadron's narrow victory over incumbent State Senator Martin Connor likely had little to do with Atlantic Yards. Note that Atlantic Yards Voter Guide expressed skepticism about Squadron, citing his support from AY backers Sen. Charles Schumer and Mayor Mike Bloomberg.
Still, it's worth noting that Squadron's camp positioned the challenger as a critic of Atlantic Yards, compared to Connor's caution.
The Silver win
Veteran Assembly Speaker Sheldon Silver easily defeated challengers Paul Newell and Luke Henry, even though Newell got endorsements from the New York Times, the New York Daily News, and the New York Post. The power of incumbency, as well as a history of delivering pork for his neighborhood, was clearly more important to constituents than criticism of the "three men in a room" political arrangement in the state.
Newell criticized Silver on a number of fronts, including his coziness with the powerful. On Monday's Brian Lehrer Show, Newell, at 19:15, brought up Forest City Ratner:
When someone is as powerful as Sheldon Silver has been, the people who get into that room are other powerful people. It's not that he's a bad guy. I think he does care about the fact that we have overcrowded schools. But what's his solution? He goes to one of his largest donors, Bruce Ratner, gives him millions and millions of dollars in subsidies and tax breaks to build a 76-story luxury tower that we need like a hole in the head, and build a school in the basement, ostensibly, that we're going to get, maybe, in five years, if we're lucky. He's already pushed it back two years, and the market's going to push it back again."
Newell suggested that a school could open in September 2009 by converting office space. Note that Ratner has given big to the Democratic Assembly Campaign Committee's Housekeeping account, but I haven't found evidence he's given directly to Silver. (His brother Michael Ratner and Michael's wife Karen Ranucci each gave Silver $3000 two years ago.)
The main tax breaks for the Beekman Tower include Liberty Bonds and a convoluted approval of 421-a subsidies. (I'm not sure of Silver's role.)
Thursday, September 11, 2008
The departed "Brooklyn South": views of Prospect Heights a decade ago
The Steven Bochco TV drama Brooklyn South, which lasted for just one year (1997-98), is appreciated by loyal fans for its multiple plot lines and large cast and denounced by then-Brooklyn Borough President Howard Golden for its graphic portrait of crime.For those interested in Atlantic Yards, the show is fascinating because the mythical 74th Precinct uses as a stand-in precinct house the 78th, at 6th Avenue and Bergen Street in Prospect Heights, a block from the AY footprint, and there are other shots of footprint blocks. (The interiors were filmed in Los Angeles.)
Even though the vision of Brooklyn as crime-ridden can seem a cartoon, it's still notable how renovations and lowered crime have reduced "blight" both in Brooklyn and specifically Prospect Heights--even as the Empire State Development Corporation persists in its dubious claim that, absent Atlantic Yards, the project footprint would remain blighted.
Unwinding at Freddy's
One constant in each episodes is an exterior shot of the precinct house. Another constant is the place where cops unwind, Freddy’s Bar & Grill, at the corner of Dean Street and Sixth Avenue, now Freddy’s Bar & Backroom, slated to be demolished for the Atlantic Yards project.
The sign in the second room was for the “dining room,” not the backroom. Yes, Freddy's was a cop bar before it catered to a more eclectic crowd.
Scenes on Flatbush and Dean
In the opening episode, which contained graphic violence shocking for its time, a crazed convict starts a shooting spree on Flatbush Avenue near the precinct house. The story line explores issues of police brutality and racial conflict, issues that had real-life counterparts in New York. (It was actually filmed just before the Abner Louima incident.) The setting captures a stretch of Flatbush that has since changed significantly.As the gunman runs northwest toward the intersection with Dean Street, a Flatbush Avenue scene shows Bergen Tile, which remains, and behind it, the sign for the Mobil station, now demolished, and the Flatbush-fronting buildings behind it.
He’s then chased to Dean Street between Flatbush and Sixth avenues--and we see buildings on the north side of Dean slated to be demolished for Atlantic Yards.
The convict, named Hopkins, even goes into Freddy’s to take a hostage.As the camera sweeps, we even see an awning on the mixed-use commercial and residential building across the street, on the north side of Dean just east of Sixth Avenue, another building slated for demolition.
That building was the subject of an eviction dispute, settled last winter, regarding a tenant who wanted to open a child care center.
On Pacific Street
At another point, the cops hold a meeting on dark, bleak Pacific Street, bordering the empty (at night) Vanderbilt Yard, centerpiece of the Atlantic Yards footprint.
There’s a clear view of the Williamsburgh Savings Bank tower in the background; the Atlantic Terminal mall, with the Bank of New York tower, didn’t open until 2004. The now-demolished Underberg Building, long empty and immortalized in Jonathan Lethem's novel The Fortress of Solitude, is visible in the center of the shot.Precursor to a renovation
The camera briefly touches on a street-level view of the unrenovated and closed warehouse later to be renovated into the Atlantic Arts condo building, home to Daniel Goldstein, spokesman for Develop Don’t Destroy Brooklyn and plaintiff in the pending eminent domain litigation.
(Forest City Ratner likes pre-renovation photos, too.)
Pacific Street looks pretty bleak.
Complaints at the time
Was the show realistic? Not exactly. The show portrayed Brooklyn as a place where there was some shocking random and endemic crime. (A bank robbery with hostages downtown?)
At one point, during the precinct lineup, the cops are told, “Be advised events are upcoming at Brooklyn Academy of Music this week. Special attention to muggers looking to prey on lovers of dance-type things before they can get back to Manhattan.”
“Where they’ll be safe,” follows up a beat cop.
Of course, there were events at BAM pretty much regularly.
During another lineup, the cops are told, "Transit authority has appealed to us to clamp down on jitneys picking up on Flatbush Avenue. Particular attention to the area around the Williamsburgh Savings Bank."
That might have been realistic--but an armed robbery and a victim DOA at a gay bar at 7th Avenue on Union Street?
Stretching boundaries
In order to shoehorn in as much as possible, the precinct boundaries stretch implausibly, including Eastern Parkway and the Lubavitcher Hasids of Ki
ngston Avenue. The cops talk about conducting motorist checkpoints at “Vanderbilt and Atlantic, Flatbush and Church;” the latter is pretty far from Prospect Heights.A street guy the cops roughly question at the Dean Street playground (right; now under renovation) offers, as an excuse, that he was picking up his methadone at 8 a.m. on Livonia Avenue--which is way to the east. There are clinics for addicts far closer to Dean Street.
The three houses partly visible in the far left of the screenshot are all slated to be demolished for Atlantic Yards.
The precinct extends to include the Gowanus Houses, and that’s where the cops wind up searching for an Asian-American gangster. Needless to say, the Gowanus Houses have not been the locus of Asian-American gangs.
And, in a cringeworthy piece of locational error, a copy testifies at one point about a location known as “Flatbush Avenue and Dean Avenue.” (Didn’t anybody know Dean Street?)
BP’s criticism
Brooklyn Borough President Howard Golden complained to Bochco: "Brooklyn South depicts my borough as a place where gunmen wander the streets shooting motorists, snippers lurk on rooftops, and every citizen is a potential perpetrator. The Brooklyn you choose to present to the nation could not be further from the truth...Crime in Brooklyn has dropped dramatically and our neighborhoods. are being rebuilt...We have worked hard to effect positive change in Brooklyn and I am greatly concerned that your new series perpetuates a myth which works against all of our efforts."(Above right is the shootout on Dean Street, with Freddy's at the far end of the street. Was that a sign of blight in 1997?)
Golden told the Los Angeles Times, "'Brooklyn South' names specific neighborhoods and depicts them as crime-ridden. In fact, Brooklyn today is economically resurgent and crime is down."
Bochco offered a nonresponse, "Most people are smart enough to realize that there are bad people everywhere, and good and heroic people, too...as your hysteria abates, you'll see that the heroism and goodness of the Brooklyn cops and citizens we portray far outweigh their malevolence."Golden had a point, since the subtleties escaped a lot of reviewers. Wrote a columnist in the 11/5/98 Illawarra Mercury of Australia:
The action focuses on the boys and girls in blue who walk the beat in Brooklyn, New York's most notorious borough. This is an area dominated by murderers, drug traffickers and the poor and homeless, a hive of criminal activity.
Interestingly, crime was already going down. Still, the show describes prostitution activity along Pacific Street, a reminder that, during the era of the Daily News printing plant, as I've written, Pacific Street was much more rough. (Now it's been converted to Newswalk.)
These days, crime has since declined significantly, according to NYPD statistics.
Signs of changeHow Flatbush Avenue has changed. Where once there were Nkiru Books and a stationary place on St. Mark’s Place just east of Sixth Avenue in Park Slope, now there’s Flatbush Farm. On Sixth Avenue, just below Flatbush, we see a Dominican restaurant (below), now Helio's, and a bodega, the awning of which remains, but which is now closed.
Detectives go for a drink at Snooky's, on 7th Avenue (which closed last year).
The reduction of crime has been part of gentrification--a mixed-bag regarding the diversity of retail and the affordability of housing, but, as of now, seemingly inevitable. The question is how to manage it.Even then, Brooklyn South depicted an eviction case, in which a bespectacled long-haired, graduate student tenant contends that the landlord wants to turn the building into "co-ops for lawyers and Wall Street bond traders.... The people who've lived their lives here will not roll over and play dead so he can make a profit... This is a community."
But it's more complicated: the landlord says he has 30 days to get a loan to bring the building up to code, and the only way to do it is to turn it into a co-op. Let's assume that someone filming a 2008 version of Brooklyn South would have a lot more to say about real estate.
Echoes from the past
One plot point apparently takes off on the plot by Palestinians to blow up the Atlantic Avenue subway station, which was foiled on July 31, 1997. On Brooklyn South, the culprits, implausibly enough, are white supremacists inspired by the shootings in Waco, living at the mythical 1305 Underhill Avenue; they tell the cops they want passage to JFK and then to Australia. (Maybe that Muslim extremist angle was worth pursuing.)But there is one constant, as the screenshot shows: lots of traffic along Flatbush Avenue near the intersection with Atlantic Avenue. (Look at the top right of the screenshot to spot an advertisement for the new Atlantic Center mall, Forest City Ratner's first project near that crucial intersection.)
The picture clouds for FCR; what might the spreadsheet say?
An anonymous blogger with a keen sense of the financial markets (and no love for Atlantic Yards) opines that the picture is getting rather cloudy:
No, the Atlantic Yards project won't ever get the decisive stake to the heart. There will be a dozen cuts instead, not least among them higher financing costs, discounted naming rights, restrictions on tax-exemption, Brooklyn pols refusing to chuck any more subsidies at it, and mounting losses at the Nets. At some point, FCR's stock analysts are going to start suggesting that it goes back to nickel-and-diming government agencies on a smaller scale than through gargantuan sports-related boondoggles.
A spreadsheet runs through it
You have to believe that the spreadsheet folks inside Forest City Enterprises and Forest City Ratner have done the numbers, and that the developer can incur Nets losses and the carrying costs of the land as long as the upside--including tax-exempt bonds and naming rights--is available.
If that upside changes--and there's no proof that it will, just the possibility--then the numbers change and the deal changes. Then things might get even more interesting.
No, the Atlantic Yards project won't ever get the decisive stake to the heart. There will be a dozen cuts instead, not least among them higher financing costs, discounted naming rights, restrictions on tax-exemption, Brooklyn pols refusing to chuck any more subsidies at it, and mounting losses at the Nets. At some point, FCR's stock analysts are going to start suggesting that it goes back to nickel-and-diming government agencies on a smaller scale than through gargantuan sports-related boondoggles.
A spreadsheet runs through it
You have to believe that the spreadsheet folks inside Forest City Enterprises and Forest City Ratner have done the numbers, and that the developer can incur Nets losses and the carrying costs of the land as long as the upside--including tax-exempt bonds and naming rights--is available.
If that upside changes--and there's no proof that it will, just the possibility--then the numbers change and the deal changes. Then things might get even more interesting.
Bloomberg: we'll "do everything we can" to get Atlantic Yards going
NY1, ignoring the evidence against anything but a Potemkin groundbreaking for Atlantic Yards this year, reported yesterday that the project would begin construction in December.
But the news is this quote from Mayor Mike Bloomberg: "We desperately need to have development and that's a very big part of the development in Brooklyn. I don't know that we have to put government money in, but we certainly will do everything we can to work with [developer Forest City] Ratner to get those buildings going."
How can city help?
So, if the direct subsidies the developer seeks aren't on the table, what might "everything we can" mean? For one thing, the city, along with the state, is trying to make sure that FCR gets a ruling from the Internal Revenue Service that would allow tax-exempt bonds for the arena to be paid off by fixed PILOTs (payments in lieu of taxes). That could be worth $165 million to the developer.
For another, it might mean the city will try to ensure that Atlantic Yards goes to the head of the line to receive scarce tax-exempt bonds for housing.
Either way, it's hardly clear that this will produce the tax dollars the city needs--another justification for the project, NY1 reported.
But the news is this quote from Mayor Mike Bloomberg: "We desperately need to have development and that's a very big part of the development in Brooklyn. I don't know that we have to put government money in, but we certainly will do everything we can to work with [developer Forest City] Ratner to get those buildings going."
How can city help?
So, if the direct subsidies the developer seeks aren't on the table, what might "everything we can" mean? For one thing, the city, along with the state, is trying to make sure that FCR gets a ruling from the Internal Revenue Service that would allow tax-exempt bonds for the arena to be paid off by fixed PILOTs (payments in lieu of taxes). That could be worth $165 million to the developer.
For another, it might mean the city will try to ensure that Atlantic Yards goes to the head of the line to receive scarce tax-exempt bonds for housing.
Either way, it's hardly clear that this will produce the tax dollars the city needs--another justification for the project, NY1 reported.
Wednesday, September 10, 2008
Times: Barclays naming deal has November deadline; FCR seeks $100M in subsidies
The New York Times, which broke news last March about the Atlantic Yards stall, today casts some doubt about developer Forest City Ratner's announced plan to break ground on the Atlantic Yards arena before the end of the year, and reveals--thanks to unnamed sources--that the $400 million Barclays Center naming rights deal requires financing to be closed by November.
It's doubtful that deadline will be met; while it doesn't mean that the Barclays Center deal is on death row, it could lead Barclays to reconsider and/or renegotiate the deal. (FCR wouldn't comment.)
The article also states that CEO Bruce Ratner has asked government officials recently for as much as $100 million in additional cash for the project, citing rising costs and problems in the bond markets, according to anonymous sources. (Remember, Chuck Ratner of parent Forest City Enterprises told investment analysts in April that "we still need more" subsidies.)
Reasons for skepticism
DDDB suggests that additional subsidies would be unacceptable; indeed, the state and city budgets are quite tight. Then again, Mayor Mike Bloomberg and others are big boosters of the project, so some creative solution might be in the works. (DDDB says "The Deal is Coming Un-Done"; that's too conclusory, but we now know how it might come undone.)
The Times article, headlined Brooklyn Arena Builder Plans to Break Ground in December After Delay, is somewhat more skeptical than the optimistic headline, but it could be even more skeptical. (Update: The print issue does have a deck, or subheadline, saying "But Lawsuits and Rising Costs Raise Doubts.")
(Note that the Times still hasn't figured out that Atlantic Yards is a project, not a place, and the railyard is officially called the Vanderbilt Yard--or Yards, as some say. Click on photo to enlarge.)
December groundbreaking?
The article begins:
The developer Bruce C. Ratner has told state and city officials that he plans to break ground in December on his long-delayed $4 billion Atlantic Yards project in Brooklyn, which will feature thousands of apartments and offices in 16 towers built around a glamorous basketball arena for the Nets.
But it is unclear whether Mr. Ratner will be able to meet his own deadline to start one of the most ambitious projects in Brooklyn in decades, given the softening economy, the crisis in the debt markets, rising costs and a persistent group of opponents who have filed one lawsuit after another.
The article doesn't define "break ground." While the developer obviously could hold a ribbon-cutting ceremony, it's hardly guaranteed that pending legal cases would be dismissed, or that additional appeals or legal challenges wouldn't emerge.
The article quotes Daniel Goldstein of Develop Don't Destroy Brooklyn: “There’s no way they’ll get control of the land they need, get the financing, end the litigation and break ground by December." Indeed, even in the event the two lawsuits are cleared this year, it would still take additional time to acquire properties via eminent domain.
Note that the Times's phrase "will feature" suggests that the current plan for 16 towers is a go; evidence suggests the project is seriously in flux.
Bonding problems
The Times reports that the financing plan depends not only on the removal of court challenges but a favorable ruling by the Treasury Department to allow the use of fixed PILOTs (payments in lieu of taxes) to pay off the bonds. The Times could've added that Rep. Dennis Kucinich, an opponent of such use of PILOTs, will hold a hearing September 18 on the financing plans for the Yankees and Mets stadiums, and the AY arena.
If the developer uses taxable bonds, the cost could be an additional $165 million, as I've estimated. The Times suggests that, either way, it would be tough to sell bonds in the current economy; hence the request for more subsidies.
Developer optimism
The Times cites comments by Chuck Ratner yesterday, who told investment analysts “we can make it happen” by the end of the year; the newspaper doesn't note Ratner's general caution about the market for such large projects.
The FCR spokesman Joe DePlasco offers some spin:
While it is a tough market, we have secured more than $1.5 billion in construction loans this year so far,” Mr. DePlasco said. “And this is the most exciting project in the country and the most exciting arena in the world.”
Well, part of that total is Liberty Bonds; another part is state housing bonds. Such tax-exempt bonds are a much better deal than taxable bonds.
It's doubtful that deadline will be met; while it doesn't mean that the Barclays Center deal is on death row, it could lead Barclays to reconsider and/or renegotiate the deal. (FCR wouldn't comment.)
The article also states that CEO Bruce Ratner has asked government officials recently for as much as $100 million in additional cash for the project, citing rising costs and problems in the bond markets, according to anonymous sources. (Remember, Chuck Ratner of parent Forest City Enterprises told investment analysts in April that "we still need more" subsidies.)
Reasons for skepticism
DDDB suggests that additional subsidies would be unacceptable; indeed, the state and city budgets are quite tight. Then again, Mayor Mike Bloomberg and others are big boosters of the project, so some creative solution might be in the works. (DDDB says "The Deal is Coming Un-Done"; that's too conclusory, but we now know how it might come undone.)The Times article, headlined Brooklyn Arena Builder Plans to Break Ground in December After Delay, is somewhat more skeptical than the optimistic headline, but it could be even more skeptical. (Update: The print issue does have a deck, or subheadline, saying "But Lawsuits and Rising Costs Raise Doubts.")
(Note that the Times still hasn't figured out that Atlantic Yards is a project, not a place, and the railyard is officially called the Vanderbilt Yard--or Yards, as some say. Click on photo to enlarge.)
December groundbreaking?
The article begins:
The developer Bruce C. Ratner has told state and city officials that he plans to break ground in December on his long-delayed $4 billion Atlantic Yards project in Brooklyn, which will feature thousands of apartments and offices in 16 towers built around a glamorous basketball arena for the Nets.
But it is unclear whether Mr. Ratner will be able to meet his own deadline to start one of the most ambitious projects in Brooklyn in decades, given the softening economy, the crisis in the debt markets, rising costs and a persistent group of opponents who have filed one lawsuit after another.
The article doesn't define "break ground." While the developer obviously could hold a ribbon-cutting ceremony, it's hardly guaranteed that pending legal cases would be dismissed, or that additional appeals or legal challenges wouldn't emerge.
The article quotes Daniel Goldstein of Develop Don't Destroy Brooklyn: “There’s no way they’ll get control of the land they need, get the financing, end the litigation and break ground by December." Indeed, even in the event the two lawsuits are cleared this year, it would still take additional time to acquire properties via eminent domain.
Note that the Times's phrase "will feature" suggests that the current plan for 16 towers is a go; evidence suggests the project is seriously in flux.
Bonding problems
The Times reports that the financing plan depends not only on the removal of court challenges but a favorable ruling by the Treasury Department to allow the use of fixed PILOTs (payments in lieu of taxes) to pay off the bonds. The Times could've added that Rep. Dennis Kucinich, an opponent of such use of PILOTs, will hold a hearing September 18 on the financing plans for the Yankees and Mets stadiums, and the AY arena.
If the developer uses taxable bonds, the cost could be an additional $165 million, as I've estimated. The Times suggests that, either way, it would be tough to sell bonds in the current economy; hence the request for more subsidies.
Developer optimism
The Times cites comments by Chuck Ratner yesterday, who told investment analysts “we can make it happen” by the end of the year; the newspaper doesn't note Ratner's general caution about the market for such large projects.
The FCR spokesman Joe DePlasco offers some spin:
While it is a tough market, we have secured more than $1.5 billion in construction loans this year so far,” Mr. DePlasco said. “And this is the most exciting project in the country and the most exciting arena in the world.”
Well, part of that total is Liberty Bonds; another part is state housing bonds. Such tax-exempt bonds are a much better deal than taxable bonds.
FCE's Chuck Ratner: "this is a time to pull back" (but not AY?)
Chuck Ratner, President and CEO of Forest City Enterprises (FCE), parent of Forest City Ratner, didn't tell investment analysts yesterday anything as arresting as his claim last March that "we still need more" subsidies or his March 2007 acknowledgement that "we are terrible" at predicting when projects "go from idea to reality."
Still, in yesterday's second quarter conference call, Ratner expressed considerable caution about the timing of projects in FCE's "shadow pipeline" (or development pipeline), which includes Atlantic Yards.
So, even though Ratner claimed that the developer was aiming to close the complicated Atlantic Yards bond transaction by the end of the year, his overall tone contrasted with FCR CEO Bruce Ratner’s claim last May that the project is on track, and that “[w]e anticipate finishing all of Atlantic Yards by 2018.” (After all, other signs—such as the absence of renderings of Phase 2—suggest such a finishing date is doubtful.)
Several cautions
Early in the call, at about 3:55, Ratner suggested that FCE has flexibility, citing a large shadow pipeline that promises real opportunity when the time is right and the economy picks back up.
(The quotes come from listening to the webcast; the transcript is available from Seeking Alpha.)
Later, at about 22:10, Ratner returned to the shadow pipeline:
Let me preface this section by saying that, as a company, we’ve always respected the market… a number of our analysts and investors, including some on the call, have observed that, in today’s market, development is a four-letter word. I understand and respect the sentiment. In fact, we’re focusing considerable time and effort on balancing the realities of current conditions with our commitment to continue to grow… We know and have learned well that you can’t time the market, but you must respect the market. We demonstrated that in the early 90s…
Pulling back?
He continued:
To a great degree, our pipeline gives us the ability to pull back on slow projects as markets weaken or, if the outlook improves, to move projects at a faster pace. Clearly, from everything that we see, this is a time to pull back and that’s exactly what we’ve done. So let me tell you about the steps we’re taking, and why these actions give us comfort, that with the adjustments we’ve made, and continue to make, we’re on the right course.
Immediately after saying that "this is a time to pull back," Ratner discussed Atlantic Yards, without predicting a slowdown:
Let me begin with an update on Atlantic Yards in Brooklyn, our largest pipeline project. Overall, the project continues to move forward. During the first half, we received a favorable legal ruling when the U.S. Supreme Court decided not to hear an eminent domain appeal brought by project opponents.
Lawsuits resolved by November?
Ratner continued with some dubious predictions of when legal cases would be resolved:
There are only two material lawsuits remaining, one concerning the project’s environmental impact statement, which will be heard and expected to be decided in the third quarter, and a state court action challenging eminent domain, which we expect to be resolved within the same time frame.
Is he saying the appeal of the case dismissing the environmental review will be decided by the end of October (the third quarter in FCE's fiscal year)? Given that oral argument is September 17, it's unlikely, not to mention the inevitable effort at an appeal, which would further delay resolution.
As for the eminent domain case, I reported that, while the defendants likely will try to get the case dismissed, it likely won’t be heard until January or later.
Financing coming?
Chuck Ratner continued:
We’re working very closely with the city, the state, and the MTA. We continue to make progress on financing for the Barclays arena, including ongoing discussions with the rating agencies concerning the bonds. Our team is working very hard to achieve a closing on the transaction by the end of the year. There are many moving pieces on this project, as you can well imagine, and lots to do, but it is a major focus of our New York team and we’re confident that we’ll be able to make it happen.
Pulling back on existing projects
At about 28:00, Ratner expanded on the company's caution regarding projects ahead of Atlantic Yards:
In our development business, we have said previously we have pulled back on a number of projects, slowing some and eliminating others. As you can see, from the numbers we shared in our press release, even though our overall development pipeline includes 15 projects representing more than $900 million of cost, we are committed to begin construction in the next 12 months on just four projects, representing approximately $250 million at cost of the company’s pro rata share. We believe that’s a very prudent and doable number, with strong individual projects.
A press release quoted Ratner:
"We continue to believe strongly in development as a core strength and primary lever to add value over the long term, but we have pulled back from a number of projects in our pipeline, eliminating some and slowing others. We have raised our risk-adjusted return requirements to ensure that we pursue only those projects with the opportunity to create significant value, even in this volatile environment."
In control of the timing
He added:
Just think about where we are with these major projects and the position it puts us in. And that is the reason we’re so optimistic. We have a tremendous reservoir of opportunities that we have been creating for the better part of the past five to seven years. The Yards in Washington, Waterfront Station, Mesa del Sol, Johns Hopkins, Stapleton, and soon Atlantic Yards. These are all places where we are really just starting to build a great future. To a significant degree, the pacing of that future and those opportunities is within our control. If you look back, for example, at University Park at MIT and MetroTech Center in Brooklyn, there were certainly challenging times for those projects as well. Today, we count them among our most valuable assets.
“Within our control”? The City and State Funding Agreements for Atlantic Yards offer rather flexible deadlines before penalties are levied—6+ years to build the arena, 12+ years for Phase 1—but ESDC officials have said that yet-unfinished documentation would require “commercially reasonable” efforts to move forward.
Note that while Chuck Ratner mentioned six projects, the press release highlighted four, omitting Atlantic Yards and Johns Hopkins.
Are cities tougher?
At about 1:15:15, Rich Moore of RBC Capital asked about the changing environment:
You guys have such close relationships with the cities... What is their view in all of this economic distress: Are they tougher on you guys, are they easier on you guys?...
Chuck Ratner responded:
Y’know, that’s a very, very important question. We don’t know enough yet, I don’t think, because we too have pulled back, to give any real concrete answer. But I can tell you that, in the places where we have these large public-private partnerships, Washington, Denver, New York, elsewhere, we believe we still have very strong and very good relationships, and the partnership is very strong. And every commitment that’s been made has been lived up to, by both our side and the side of the public…
Indeed, at an Assembly oversight hearing July 2, city official Seth Pinsky said that no new requests for funds had been made by Forest City Ratner, but "we all know that we’re operating in a difficult economic and financial environment."
Still, in yesterday's second quarter conference call, Ratner expressed considerable caution about the timing of projects in FCE's "shadow pipeline" (or development pipeline), which includes Atlantic Yards.
So, even though Ratner claimed that the developer was aiming to close the complicated Atlantic Yards bond transaction by the end of the year, his overall tone contrasted with FCR CEO Bruce Ratner’s claim last May that the project is on track, and that “[w]e anticipate finishing all of Atlantic Yards by 2018.” (After all, other signs—such as the absence of renderings of Phase 2—suggest such a finishing date is doubtful.)
Several cautions
Early in the call, at about 3:55, Ratner suggested that FCE has flexibility, citing a large shadow pipeline that promises real opportunity when the time is right and the economy picks back up.
(The quotes come from listening to the webcast; the transcript is available from Seeking Alpha.)
Later, at about 22:10, Ratner returned to the shadow pipeline:
Let me preface this section by saying that, as a company, we’ve always respected the market… a number of our analysts and investors, including some on the call, have observed that, in today’s market, development is a four-letter word. I understand and respect the sentiment. In fact, we’re focusing considerable time and effort on balancing the realities of current conditions with our commitment to continue to grow… We know and have learned well that you can’t time the market, but you must respect the market. We demonstrated that in the early 90s…
Pulling back?
He continued:
To a great degree, our pipeline gives us the ability to pull back on slow projects as markets weaken or, if the outlook improves, to move projects at a faster pace. Clearly, from everything that we see, this is a time to pull back and that’s exactly what we’ve done. So let me tell you about the steps we’re taking, and why these actions give us comfort, that with the adjustments we’ve made, and continue to make, we’re on the right course.
Immediately after saying that "this is a time to pull back," Ratner discussed Atlantic Yards, without predicting a slowdown:
Let me begin with an update on Atlantic Yards in Brooklyn, our largest pipeline project. Overall, the project continues to move forward. During the first half, we received a favorable legal ruling when the U.S. Supreme Court decided not to hear an eminent domain appeal brought by project opponents.
Lawsuits resolved by November?
Ratner continued with some dubious predictions of when legal cases would be resolved:
There are only two material lawsuits remaining, one concerning the project’s environmental impact statement, which will be heard and expected to be decided in the third quarter, and a state court action challenging eminent domain, which we expect to be resolved within the same time frame.
Is he saying the appeal of the case dismissing the environmental review will be decided by the end of October (the third quarter in FCE's fiscal year)? Given that oral argument is September 17, it's unlikely, not to mention the inevitable effort at an appeal, which would further delay resolution.
As for the eminent domain case, I reported that, while the defendants likely will try to get the case dismissed, it likely won’t be heard until January or later.
Financing coming?
Chuck Ratner continued:
We’re working very closely with the city, the state, and the MTA. We continue to make progress on financing for the Barclays arena, including ongoing discussions with the rating agencies concerning the bonds. Our team is working very hard to achieve a closing on the transaction by the end of the year. There are many moving pieces on this project, as you can well imagine, and lots to do, but it is a major focus of our New York team and we’re confident that we’ll be able to make it happen.
Pulling back on existing projects
At about 28:00, Ratner expanded on the company's caution regarding projects ahead of Atlantic Yards:
In our development business, we have said previously we have pulled back on a number of projects, slowing some and eliminating others. As you can see, from the numbers we shared in our press release, even though our overall development pipeline includes 15 projects representing more than $900 million of cost, we are committed to begin construction in the next 12 months on just four projects, representing approximately $250 million at cost of the company’s pro rata share. We believe that’s a very prudent and doable number, with strong individual projects.
A press release quoted Ratner:
"We continue to believe strongly in development as a core strength and primary lever to add value over the long term, but we have pulled back from a number of projects in our pipeline, eliminating some and slowing others. We have raised our risk-adjusted return requirements to ensure that we pursue only those projects with the opportunity to create significant value, even in this volatile environment."
In control of the timing
He added:
Just think about where we are with these major projects and the position it puts us in. And that is the reason we’re so optimistic. We have a tremendous reservoir of opportunities that we have been creating for the better part of the past five to seven years. The Yards in Washington, Waterfront Station, Mesa del Sol, Johns Hopkins, Stapleton, and soon Atlantic Yards. These are all places where we are really just starting to build a great future. To a significant degree, the pacing of that future and those opportunities is within our control. If you look back, for example, at University Park at MIT and MetroTech Center in Brooklyn, there were certainly challenging times for those projects as well. Today, we count them among our most valuable assets.
“Within our control”? The City and State Funding Agreements for Atlantic Yards offer rather flexible deadlines before penalties are levied—6+ years to build the arena, 12+ years for Phase 1—but ESDC officials have said that yet-unfinished documentation would require “commercially reasonable” efforts to move forward.
Note that while Chuck Ratner mentioned six projects, the press release highlighted four, omitting Atlantic Yards and Johns Hopkins.
Are cities tougher?
At about 1:15:15, Rich Moore of RBC Capital asked about the changing environment:
You guys have such close relationships with the cities... What is their view in all of this economic distress: Are they tougher on you guys, are they easier on you guys?...
Chuck Ratner responded:
Y’know, that’s a very, very important question. We don’t know enough yet, I don’t think, because we too have pulled back, to give any real concrete answer. But I can tell you that, in the places where we have these large public-private partnerships, Washington, Denver, New York, elsewhere, we believe we still have very strong and very good relationships, and the partnership is very strong. And every commitment that’s been made has been lived up to, by both our side and the side of the public…
Indeed, at an Assembly oversight hearing July 2, city official Seth Pinsky said that no new requests for funds had been made by Forest City Ratner, but "we all know that we’re operating in a difficult economic and financial environment."
Kucinich's Subcommittee to look at stadium and AY arena deals
Apparently the July 2 State Assembly hearing on financing the new Yankee Stadium was just a warm-up, since some tough questions about the deals for Yankee Stadium, the Mets' Citifield, and yes, the planned Atlantic Yards arena will be raised next week in Congress.
Rep. Dennis Kucinich (D-OH), who chairs Domestic Policy Subcommittee of the Oversight and Government Reform Committee, yesterday announced a hearing to be held September 18. It follows up on two public hearings the subcommittee held last year (3/29/07 and 10/10/07) that looked more broadly at some of the policy issues.
No witness list has been announced, but I assume someone from the New York City Industrial Development Authority, whose Seth Pinsky was on the hot seat July 2, will be among those present.
While no legislation has been proposed yet, the Subcommittee's concern may put pressure on the Internal Revenue Service (IRS) to clarify and finalize a proposed rule regarding PILOTs (payments in lieu of taxes) to finance sports facilities. That rule could stymie tax-exempt funding for the Atlantic Yards arena--or the city and state could succeed in getting the arena grandfathered in under the ruling that allowed funding for the two baseball stadiums.
The issues with PILOTs
The Yankees and Mets, with the assistance of New York City and State, gained "private letter rulings" (PLRs) from the IRS in October 2006 allowing an aggressive plan for tax-exempt financing. After financing for those stadiums was approved, the IRS issued a revised regulation that would eliminate what its chief counsel called a "loophole."
New York City and State would like to see the loophole extended for additional financing for the two stadiums, as well as for the Atlantic Yards arena, which officials contend should be grandfathered in under those old rules, given that it was proposed and proceeded long before October 2006. However, the project was not approved until December 2006.
Kucinich, who's no fan of tax-exempt financing for sports facilities in the first place, takes issue with the IRS's claim that it was compelled to allow the "loophole," which allows PILOTs (payments in lieu of taxes) used to pay off sports facilities to be assigned to fixed bond payments.
The proposed but not yet implemented IRS rule would require PILOTs to look more like actual taxes, meaning they'd fluctuate each year--a no-no for the bond market.
"Gaming" the valuations?
Kucinich is also looking into whether the valuation of the new Yankee Stadium was "gamed" so that the foregone taxes exceeded the expected bond payments, thus allowing the PILOT. Evidence has emerged that a high assessed value was used so that taxes exceeded PILOTs, but that a "much lower value was used when the city got the land appraised to satisfy a federal requirement to replace parkland with property of equal value," as reported by Metro.
Some similar questions have been raised regarding Atlantic Yards. As reported by AYR and cited by Develop Don't Destroy Brooklyn, available evidence suggests that the foregone property tax might be much less than the anticipated PILOT payment, thus leading to suspicion about whether the valuation of the arena would be "gamed."
Forest City Ratner expects a $800 million tax-exempt bond issue, which, by my estimation, would save Forest City Ratner $165 million. Based on the example of the Yankee Stadium bonds, an $800 million bond issue would require $48 million in annual payments.
However, as I wrote, there seems to be a discrepancy; foregone property taxes for Madison Square Garden, which the Independent Budget Office considers more valuable property than the expected arena in Brooklyn, are only $12 million a year.
The press release
The Domestic Policy Subcommittee of the Oversight and Government Reform Committee will hold a hearing, “Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York,” on Thursday, September 18, 2008, at 10:00 a.m. in 2154 Rayburn House Office Building.
This will be the third hearing held by the Domestic Policy Subcommittee examining whether the use of the federal tax code to subsidize the construction of professional sports stadiums and arenas furthers the public interest, and the first to examine alleged improprieties in the financing process.
Specifically, the hearing will address whether efforts to finance new stadiums for the New York Yankees and New York Mets and a new arena for the New Jersey Nets by issuing federally tax-exempt bonds advance the public interest; whether the U.S. Department of Treasury’s rulemaking has been consistent with the Tax Reform Act of 1986; and the legal, policy, and economic implications of the existing and proposed IRS rules regulating the structure of payments of lieu of taxes (PILOTs) permitted to finance projects funded by the issuance of federally tax-exempt bonds (i.e., the PILOT rule).
The hearing will also address alleged misrepresentations made to the IRS and investors related to the assessment of the new Yankee Stadium, whether these alleged misrepresentations affect the tax-exempt status of the bonds issued to finance construction of the stadium, and whether these alleged misrepresentations are an outgrowth of the incentives provided to state and municipal stakeholders by the PILOT rule.
Rep. Dennis Kucinich (D-OH), who chairs Domestic Policy Subcommittee of the Oversight and Government Reform Committee, yesterday announced a hearing to be held September 18. It follows up on two public hearings the subcommittee held last year (3/29/07 and 10/10/07) that looked more broadly at some of the policy issues.
No witness list has been announced, but I assume someone from the New York City Industrial Development Authority, whose Seth Pinsky was on the hot seat July 2, will be among those present.
While no legislation has been proposed yet, the Subcommittee's concern may put pressure on the Internal Revenue Service (IRS) to clarify and finalize a proposed rule regarding PILOTs (payments in lieu of taxes) to finance sports facilities. That rule could stymie tax-exempt funding for the Atlantic Yards arena--or the city and state could succeed in getting the arena grandfathered in under the ruling that allowed funding for the two baseball stadiums.
The issues with PILOTs
The Yankees and Mets, with the assistance of New York City and State, gained "private letter rulings" (PLRs) from the IRS in October 2006 allowing an aggressive plan for tax-exempt financing. After financing for those stadiums was approved, the IRS issued a revised regulation that would eliminate what its chief counsel called a "loophole."
New York City and State would like to see the loophole extended for additional financing for the two stadiums, as well as for the Atlantic Yards arena, which officials contend should be grandfathered in under those old rules, given that it was proposed and proceeded long before October 2006. However, the project was not approved until December 2006.
Kucinich, who's no fan of tax-exempt financing for sports facilities in the first place, takes issue with the IRS's claim that it was compelled to allow the "loophole," which allows PILOTs (payments in lieu of taxes) used to pay off sports facilities to be assigned to fixed bond payments.
The proposed but not yet implemented IRS rule would require PILOTs to look more like actual taxes, meaning they'd fluctuate each year--a no-no for the bond market.
"Gaming" the valuations?
Kucinich is also looking into whether the valuation of the new Yankee Stadium was "gamed" so that the foregone taxes exceeded the expected bond payments, thus allowing the PILOT. Evidence has emerged that a high assessed value was used so that taxes exceeded PILOTs, but that a "much lower value was used when the city got the land appraised to satisfy a federal requirement to replace parkland with property of equal value," as reported by Metro.
Some similar questions have been raised regarding Atlantic Yards. As reported by AYR and cited by Develop Don't Destroy Brooklyn, available evidence suggests that the foregone property tax might be much less than the anticipated PILOT payment, thus leading to suspicion about whether the valuation of the arena would be "gamed."
Forest City Ratner expects a $800 million tax-exempt bond issue, which, by my estimation, would save Forest City Ratner $165 million. Based on the example of the Yankee Stadium bonds, an $800 million bond issue would require $48 million in annual payments.
However, as I wrote, there seems to be a discrepancy; foregone property taxes for Madison Square Garden, which the Independent Budget Office considers more valuable property than the expected arena in Brooklyn, are only $12 million a year.
The press release
The Domestic Policy Subcommittee of the Oversight and Government Reform Committee will hold a hearing, “Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York,” on Thursday, September 18, 2008, at 10:00 a.m. in 2154 Rayburn House Office Building.
This will be the third hearing held by the Domestic Policy Subcommittee examining whether the use of the federal tax code to subsidize the construction of professional sports stadiums and arenas furthers the public interest, and the first to examine alleged improprieties in the financing process.
Specifically, the hearing will address whether efforts to finance new stadiums for the New York Yankees and New York Mets and a new arena for the New Jersey Nets by issuing federally tax-exempt bonds advance the public interest; whether the U.S. Department of Treasury’s rulemaking has been consistent with the Tax Reform Act of 1986; and the legal, policy, and economic implications of the existing and proposed IRS rules regulating the structure of payments of lieu of taxes (PILOTs) permitted to finance projects funded by the issuance of federally tax-exempt bonds (i.e., the PILOT rule).
The hearing will also address alleged misrepresentations made to the IRS and investors related to the assessment of the new Yankee Stadium, whether these alleged misrepresentations affect the tax-exempt status of the bonds issued to finance construction of the stadium, and whether these alleged misrepresentations are an outgrowth of the incentives provided to state and municipal stakeholders by the PILOT rule.
Tuesday, September 09, 2008
Critic Rybczynski: Gehry is challenged to adapt style to large project
The article's two years old, but it only surfaced recently in full text, so it's worth considering architecture critic Witold Rybczynski's cautions about using starchitects like Frank Gehry--especially since, as Develop Don't Destroy Brooklyn reminded us yesterday, the latest version of Forest City Ratner's plans show only buildings in Phase 1. (I reported in May how the latest renderings were significantly less ambitious than their predecessors.)
The article, headlined Architectural Branding, was first published in Fall 2006 issue of the Wharton Real Estate Review, excerpted in Slate, and republished in the Summer 2008 issue of Appraisal Institute's Appraisal Journal, Summer 2008.
Superior product?
Witold Rybczynski, a professor of urbanism and real estate at the University of Pennsylvania, observes:
To the extent that a celebrated architect delivers a superior product-a truly better and more efficient building-he will add value to the project, but it is a risk to place a high monetary value on a recognized architectural brand.
The Gehry effect
Regarding Gehry, he writes:
Frank Gehry has perhaps the strongest architectural franchise in the world today. Although he has built a number of small commercial projects in Prague, Berlin, and Boston, he is chiefly known for his cultural monuments, notably the Guggenheim Museum in Bilbao and the Disney Concert Hall in Los Angeles. The Gehry brand is unmistakable: whimsical, sculptural, quirky buildings that don't look like buildings (and, incidentally, are difficult and expensive to build). It will be a challenge to successfully adapt Gehry's approach to a large commercial development, such as the ones that he is planning for Brooklyn and downtown Los Angeles.
Atlantic Yards would be less a commercial development than a residential one, but it would be a megaproject.
[Similarly, Kevin Roche in Archinect, interviewed November 2006:
I guess probably Frank Gehry is a good example of a person dealing with very large-scale projects such as the Atlantic Yards development in Brooklyn. It is a very, very tough problem. How do you deal with the underlying drive to provide as much possible rental space—which is the reason the project is being built—and at the same time do that in a way that is sympathetic to the community, the urban design, and the humanist aspects of it. It will be interesting to see how that develops; it will be interesting to see how it will be experienced. Certainly he has shown his genius at providing these forms that become interesting.]
Branding = success?
Rybczynski concludes that branding does not necessarily mean success:
The lesson is that architectural branding has to be very carefully positioned with respect to the demand. The market for a boutique hotel or a small residential project may appreciate-and even be willing to pay extra for-a name-brand architect. The broader market, even the luxury sector, may be more value-oriented. Luxury automobiles have shown that high-end consumers are responsive to good design. To the extent that a name architect delivers a superior product, a truly better and more efficient building, he will add value to the project The name may bring the customers in the door, but traditional values-location, price, quality-will close the deal.
With AY, other benefits and costs
I think Rybczynski may be looking rather narrowly at the impact of branding. Gehry also was helpful to developer Forest City Ratner in influencing public opinion about Atlantic Yards, thus tamping down potential opposition and getting some supporters on board, as New York magazine's Kurt Andersen wrote.
Of course, Gehry's own "picketing Henry Ford" comments didn't help him much, which might be why Gehry's been quiet for a while.
.
The article, headlined Architectural Branding, was first published in Fall 2006 issue of the Wharton Real Estate Review, excerpted in Slate, and republished in the Summer 2008 issue of Appraisal Institute's Appraisal Journal, Summer 2008.
Superior product?
Witold Rybczynski, a professor of urbanism and real estate at the University of Pennsylvania, observes:
To the extent that a celebrated architect delivers a superior product-a truly better and more efficient building-he will add value to the project, but it is a risk to place a high monetary value on a recognized architectural brand.
The Gehry effect
Regarding Gehry, he writes:
Frank Gehry has perhaps the strongest architectural franchise in the world today. Although he has built a number of small commercial projects in Prague, Berlin, and Boston, he is chiefly known for his cultural monuments, notably the Guggenheim Museum in Bilbao and the Disney Concert Hall in Los Angeles. The Gehry brand is unmistakable: whimsical, sculptural, quirky buildings that don't look like buildings (and, incidentally, are difficult and expensive to build). It will be a challenge to successfully adapt Gehry's approach to a large commercial development, such as the ones that he is planning for Brooklyn and downtown Los Angeles.
Atlantic Yards would be less a commercial development than a residential one, but it would be a megaproject.
[Similarly, Kevin Roche in Archinect, interviewed November 2006:
I guess probably Frank Gehry is a good example of a person dealing with very large-scale projects such as the Atlantic Yards development in Brooklyn. It is a very, very tough problem. How do you deal with the underlying drive to provide as much possible rental space—which is the reason the project is being built—and at the same time do that in a way that is sympathetic to the community, the urban design, and the humanist aspects of it. It will be interesting to see how that develops; it will be interesting to see how it will be experienced. Certainly he has shown his genius at providing these forms that become interesting.]
Branding = success?
Rybczynski concludes that branding does not necessarily mean success:
The lesson is that architectural branding has to be very carefully positioned with respect to the demand. The market for a boutique hotel or a small residential project may appreciate-and even be willing to pay extra for-a name-brand architect. The broader market, even the luxury sector, may be more value-oriented. Luxury automobiles have shown that high-end consumers are responsive to good design. To the extent that a name architect delivers a superior product, a truly better and more efficient building, he will add value to the project The name may bring the customers in the door, but traditional values-location, price, quality-will close the deal.
With AY, other benefits and costs
I think Rybczynski may be looking rather narrowly at the impact of branding. Gehry also was helpful to developer Forest City Ratner in influencing public opinion about Atlantic Yards, thus tamping down potential opposition and getting some supporters on board, as New York magazine's Kurt Andersen wrote.
Of course, Gehry's own "picketing Henry Ford" comments didn't help him much, which might be why Gehry's been quiet for a while.
.
Crain's finds FCR's projections out of line with reality
From Crain's NY Business (via DDDB), a pointed example of journalists recognizing the difference between reality and Forest City Ratner's spin:
Forest City Ratner still insists that it can break ground on its Brooklyn basketball arena this year. Reality says otherwise.
By contrast, the Daily News last month reported Forest City Ratner CEO Bruce Ratner's statement that the arena would open in 2011, with groundbreaking next year, then doubled back to give the last word to other company representatives who claimed it would open earlier and groundbreaking would occur this fall.
Forest City Ratner still insists that it can break ground on its Brooklyn basketball arena this year. Reality says otherwise.
By contrast, the Daily News last month reported Forest City Ratner CEO Bruce Ratner's statement that the arena would open in 2011, with groundbreaking next year, then doubled back to give the last word to other company representatives who claimed it would open earlier and groundbreaking would occur this fall.
Monday, September 08, 2008
City term limits, Atlantic Yards, and the question of David Paterson
A reader recently wondered whether Mayor Mike Bloomberg's increasingly public flirtation with an effort to extend term limits would be bad news for the Atlantic Yards opposition.
Well, it probably wouldn't be good news, given that new blood in City Hall and the City Council might offer marginally more scrutiny of the project and might question a request for more subsidies. However, it's far less relevant than getting Governor David Paterson up to speed, City Council Member Letitia James, the project's leading political opponent, told me.
The project has gone through all its public approvals, James noted, so "the question is, what is our governor prepared to do?"
Paterson, who's got his plate full, has not yet focused on Atlantic Yards, even as the Empire State Development Corporation he controls hasn't clarified the timing and scale of the project. The funding for the project remains murky, and the developer has stated that "we still need more" subsidies.
(Paterson will be speaking at a Crain's New York Business breakfast tomorrow; let's see if anyone brings up Atlantic Yards.)
Backlash emerges
The effort to extend term limits via a City Council vote (as opposed to a referendum) has provoked a backlash via good government groups and term limits proponent Ronald Lauder, reported the New York Times on Saturday.
Most City Council members support an extension (according to the Times) and many other candidates stay mum. Public Advocate Betsy Gotbaum is an exception, saying a change should be up to the people, while "a back room, closed door legislative deal... is a terrible, undemocratic idea."
Bloomberg redux
Bloomberg's strong support for Atlantic Yards is notably unquestioning, so another four-year term in 2009 might be more of the same--and might mean some more quiet increases in subsidies for the project.
By contrast, a somewhat more thoughtful AY supporter like Comptroller William Thompson--who has publicly questioned the project's status--might be considered a minor improvement from the perspective of AY opponents. Other than longshot candidate Council Member Tony Avella, no announced candidate (including City Council Speaker Christine Quinn and Rep. Anthony Weiner) has criticized Atlantic Yards.
Scrutiny from BP?
Also, an extension of term limits would keep Marty Markowitz (who disingenuously supports an extension) in the Brooklyn Borough President's office. Candidates include AY opponent Charles Barron; presumed supporter Yvonne Graham, Markowitz's deputy; and supporter-with-reservations Bill de Blasio, who's likely the front-runner. (Other rumored candidates include AY supporters Dominic Recchia and Carl Kruger.)
Markowitz would not be expected to support greater scrutiny of Atlantic Yards. Another BP might move marginally in the direction, while individual Council Members might use their positions to offer some oversight.
Changes in Council?
Whatever the result of the term limits debate, James would remain in her 35th District seat. Given that she's still on her first full term, having taken office after the assassination of James Davis, James, along with several other mid-term entrants, would have seniority under the status quo--or, later, under a term limits extension. She told me she's always opposed term limits, but also opposes a change in the law via a City Council vote rather than a referendum.
Council Member David Yassky's 33rd District seat is being contested by several candidates; among those who've gained the most contributions, Jo Anne Simon is a supporter of the BrooklynSpeaks mend-it-don't-end-it position. I'm not sure about the next two, but, Stephen Levin, aide to Assemblyman Vito Lopez, may share his boss's pro-AY stance, and Evan Thies, former aide to Yassky, may share the Council Member's conditional support. Ken Baer and Ken Diamondstone have opposed the project.
As for de Blasio's 39th District seat, Josh Skaller, Bob Zuckerman, and Craig Hammerman (both individually and in his capacity at CB 6) have offered strong criticism of Atlantic Yards, and Brad Lander, the fundraising leader, cites his early criticism and says "we should use the opportunity to either fix the flaws or reconsider the project." (Gary Reilly also opposes the project.) The debates should show candidates are more up to speed than de Blasio, who, it should be noted, appointed Lander to CB 6.
Another interesting race may emerge in the 36th District, encompassing parts of Bedford-Stuyvesant and Crown Heights, where Al Vann's two terms expire at the end of next year. Writer and activist Mark Winston Griffith is a candidate and, while AY is not on his list of priorities, he has commented critically on the project, saying it "deserves further public scrutiny and debate."
The candidates positions on AY and other issues likely will be fleshed out as the campaigns begin in earnest. For now, and probably even after the 2009 election, the most important official is Paterson.
Well, it probably wouldn't be good news, given that new blood in City Hall and the City Council might offer marginally more scrutiny of the project and might question a request for more subsidies. However, it's far less relevant than getting Governor David Paterson up to speed, City Council Member Letitia James, the project's leading political opponent, told me.
The project has gone through all its public approvals, James noted, so "the question is, what is our governor prepared to do?"
Paterson, who's got his plate full, has not yet focused on Atlantic Yards, even as the Empire State Development Corporation he controls hasn't clarified the timing and scale of the project. The funding for the project remains murky, and the developer has stated that "we still need more" subsidies.
(Paterson will be speaking at a Crain's New York Business breakfast tomorrow; let's see if anyone brings up Atlantic Yards.)
Backlash emerges
The effort to extend term limits via a City Council vote (as opposed to a referendum) has provoked a backlash via good government groups and term limits proponent Ronald Lauder, reported the New York Times on Saturday.
Most City Council members support an extension (according to the Times) and many other candidates stay mum. Public Advocate Betsy Gotbaum is an exception, saying a change should be up to the people, while "a back room, closed door legislative deal... is a terrible, undemocratic idea."
Bloomberg redux
Bloomberg's strong support for Atlantic Yards is notably unquestioning, so another four-year term in 2009 might be more of the same--and might mean some more quiet increases in subsidies for the project.
By contrast, a somewhat more thoughtful AY supporter like Comptroller William Thompson--who has publicly questioned the project's status--might be considered a minor improvement from the perspective of AY opponents. Other than longshot candidate Council Member Tony Avella, no announced candidate (including City Council Speaker Christine Quinn and Rep. Anthony Weiner) has criticized Atlantic Yards.
Scrutiny from BP?
Also, an extension of term limits would keep Marty Markowitz (who disingenuously supports an extension) in the Brooklyn Borough President's office. Candidates include AY opponent Charles Barron; presumed supporter Yvonne Graham, Markowitz's deputy; and supporter-with-reservations Bill de Blasio, who's likely the front-runner. (Other rumored candidates include AY supporters Dominic Recchia and Carl Kruger.)
Markowitz would not be expected to support greater scrutiny of Atlantic Yards. Another BP might move marginally in the direction, while individual Council Members might use their positions to offer some oversight.
Changes in Council?
Whatever the result of the term limits debate, James would remain in her 35th District seat. Given that she's still on her first full term, having taken office after the assassination of James Davis, James, along with several other mid-term entrants, would have seniority under the status quo--or, later, under a term limits extension. She told me she's always opposed term limits, but also opposes a change in the law via a City Council vote rather than a referendum.
Council Member David Yassky's 33rd District seat is being contested by several candidates; among those who've gained the most contributions, Jo Anne Simon is a supporter of the BrooklynSpeaks mend-it-don't-end-it position. I'm not sure about the next two, but, Stephen Levin, aide to Assemblyman Vito Lopez, may share his boss's pro-AY stance, and Evan Thies, former aide to Yassky, may share the Council Member's conditional support. Ken Baer and Ken Diamondstone have opposed the project.
As for de Blasio's 39th District seat, Josh Skaller, Bob Zuckerman, and Craig Hammerman (both individually and in his capacity at CB 6) have offered strong criticism of Atlantic Yards, and Brad Lander, the fundraising leader, cites his early criticism and says "we should use the opportunity to either fix the flaws or reconsider the project." (Gary Reilly also opposes the project.) The debates should show candidates are more up to speed than de Blasio, who, it should be noted, appointed Lander to CB 6.
Another interesting race may emerge in the 36th District, encompassing parts of Bedford-Stuyvesant and Crown Heights, where Al Vann's two terms expire at the end of next year. Writer and activist Mark Winston Griffith is a candidate and, while AY is not on his list of priorities, he has commented critically on the project, saying it "deserves further public scrutiny and debate."
The candidates positions on AY and other issues likely will be fleshed out as the campaigns begin in earnest. For now, and probably even after the 2009 election, the most important official is Paterson.
Sunday, September 07, 2008
Delay in Bus Rapid Transit pushes possible Flatbush route further back
Bus Rapid Transit (BRT)--with a dedicated express lane, staggered stoplights, and perhaps new loading platforms--on Flatbush Avenue might be crucial to the success of the Atlantic Yards project, as I've written.
Now a possible Flatbush Avenue route is pushed even further into the future, because of delays in the Metropolitan Transportation Authority's BRT experiment, known as Special Bus Service.
(Right: the city's Flatbush Avenue BRT concept plan--no longer available, except via the Internet Archive-- which envisions new dedicated bus lanes north of Grand Army Plaza.)
BRT delays
In a New York Times article Friday headlined An Experimental Bus Route Gets Passengers’ Praise
Buses on an experimental route in the Bronx are moving significantly faster thanks to a series of innovations meant to cut travel time, including having riders pay before they board, transit officials said on Thursday.
But the officials conceded that there would be nothing fast about getting the planned innovations for bus routes in other parts of the city under way — with a delay of up to two years before the next souped-up route is created.
Nostrand Avenue 2012
The Times reported:
...Plans now call for bringing Select Bus Service to First and Second Avenues in Manhattan — the busiest route in the city, where the M15 currently runs — and Nostrand Avenue in Brooklyn. But the Manhattan route will not be ready until some time in 2010, according to Ted Orosz, the project manager for the program. The Brooklyn route should get the improved service in 2012.
Why is that? The MTA doesn't have enough of the right buses.
I wrote nearly two years ago that the pilot Nostrand Avenue project might not begin until 2008. Now that route is delayed four years--and a subsequent route on Flatbush Avenue wouldn't arrive until well after 2012.
Now a possible Flatbush Avenue route is pushed even further into the future, because of delays in the Metropolitan Transportation Authority's BRT experiment, known as Special Bus Service.(Right: the city's Flatbush Avenue BRT concept plan--no longer available, except via the Internet Archive-- which envisions new dedicated bus lanes north of Grand Army Plaza.)
BRT delays
In a New York Times article Friday headlined An Experimental Bus Route Gets Passengers’ Praise
Buses on an experimental route in the Bronx are moving significantly faster thanks to a series of innovations meant to cut travel time, including having riders pay before they board, transit officials said on Thursday.
But the officials conceded that there would be nothing fast about getting the planned innovations for bus routes in other parts of the city under way — with a delay of up to two years before the next souped-up route is created.
Nostrand Avenue 2012
The Times reported:
...Plans now call for bringing Select Bus Service to First and Second Avenues in Manhattan — the busiest route in the city, where the M15 currently runs — and Nostrand Avenue in Brooklyn. But the Manhattan route will not be ready until some time in 2010, according to Ted Orosz, the project manager for the program. The Brooklyn route should get the improved service in 2012.
Why is that? The MTA doesn't have enough of the right buses.
I wrote nearly two years ago that the pilot Nostrand Avenue project might not begin until 2008. Now that route is delayed four years--and a subsequent route on Flatbush Avenue wouldn't arrive until well after 2012.
Saturday, September 06, 2008
Study: sports facilities more lax about selling alcohol to underage & drunk
Was Kristyn LaPlante of Park Slope Neighbors, at the 8/23/06 hearing on the Atlantic Yards Draft Environmental Impact Statement, going too far when she alleged, "Drunken sports fans won’t be urinating in the backyards of the luxury condos. They’ll be peeing on the stoops of the rest of us."
Well, she was pointing out that the open space at the project would most likely be closed when arena events ended.
Warnings in new study
And a new study points out that vendors at sports facilities are often wiling to sell alcohol to minors or people visibly intoxicated. As the New York Times reported September 1, a new study in the journal Alcoholism: Clinical and Experimental Research shows that "alcohol was sold to 18 percent of the testers who appeared under age and 74 percent of the testers who appeared intoxicated."
The authors suggested better training of vendors and, potentially, the banning of alcohol sales. The latter is unlikely in the planned Barclays Center, where Bud Light is a founding partner.
Well, she was pointing out that the open space at the project would most likely be closed when arena events ended.
Warnings in new study
And a new study points out that vendors at sports facilities are often wiling to sell alcohol to minors or people visibly intoxicated. As the New York Times reported September 1, a new study in the journal Alcoholism: Clinical and Experimental Research shows that "alcohol was sold to 18 percent of the testers who appeared under age and 74 percent of the testers who appeared intoxicated."
The authors suggested better training of vendors and, potentially, the banning of alcohol sales. The latter is unlikely in the planned Barclays Center, where Bud Light is a founding partner.
Friday, September 05, 2008
Report says Nets bonds to be sold in November, but many questions remain
NetsDaily, quoting the meat of a one-paragraph squib in Project Finance magazine, says Goldman Sachs is close to launching an $800 million bond issue for the Barclays Center, according to ”sources close to the financing."
Goldman is in the process of having the bonds rated, and expects financing to be in place by the end of November 2008, according to the article.
[Update: What this means, a reader suggests, is not that the bonds would be sold in November, but that the deal would be worked out by then, with the sale in place for when litigation closes.]
Questions about pending lawsuits
The brief article, however, doesn't address some major outstanding questions. For one, how easy is it to rate bonds for risk when major lawsuits remain outstanding? Forest City Ratner executive Andrew Silberfein filed an affidavit in January in the state lawsuit challenging the AY environmental impact statement.
He stated:
Although the decision that was issued by Justice Madden in this case on January 11, 2008 should be helpful in providing comfort to potential investors that there is no significant risk that the courts will annul the approvals for the Atlantic Yards project, there is a serious question as to whether, given the current state of the debt market, the underwriters will be able to proceed with the financing for the arena while the appeal is pending before this Court.
Oral arguments in the appeal will be heard September 17. While it's plausible that the tenor of the discussion may offer clues to the court's decision, it's unlikely that a decision will be issued by November.
A separate state case challenging the use of eminent domain has been filed in state court after being dismissed in federal court and, though the case is a long shot, oral argument is not likely until 2009.
That's not to say that the market can't factor the risk into the cost of the bonds, but surely the cost would be lower should the lawsuits be resolved.
Questions about arena bonds
Will the $800 million in bonds be tax-exempt or taxable? If they are taxable, then Forest City Ratner need not worry about the scrutiny of tax-exempt bonds for sports facilities--specifically the scheme under which bonds for the Yankees and Mets stadiums were issued, and under which the AY arena would be financed--under way in Washington.
But surely the developer wants them to be tax-exempt bonds, given the significant savings--my rough estimate was $165 million--involved.
However, the strategy under which the Empire State Development Corporation (ESDC) and developer Forest City Ratner seek tax-exempt bonds for the Atlantic Yards arena has been acknowledged by the chief counsel of the Internal Revenue Service (IRS) as a “loophole” the agency moved quickly to eliminate.
Also, Rep. Dennis Kucinich (D-OH), who chairs the Domestic Policy Subcommittee of the House Committee on Oversight and Reform, has asked the IRS and Treasury Department to desist from approving any more sports facility deals based on payments-in-lieu-of-taxes, or PILOTs, pending further clarification of their policies.
Does Goldman Sachs believe that the IRS and Treasury Department will have clarified their policies by then?
Goldman is in the process of having the bonds rated, and expects financing to be in place by the end of November 2008, according to the article.
[Update: What this means, a reader suggests, is not that the bonds would be sold in November, but that the deal would be worked out by then, with the sale in place for when litigation closes.]
Questions about pending lawsuits
The brief article, however, doesn't address some major outstanding questions. For one, how easy is it to rate bonds for risk when major lawsuits remain outstanding? Forest City Ratner executive Andrew Silberfein filed an affidavit in January in the state lawsuit challenging the AY environmental impact statement.
He stated:
Although the decision that was issued by Justice Madden in this case on January 11, 2008 should be helpful in providing comfort to potential investors that there is no significant risk that the courts will annul the approvals for the Atlantic Yards project, there is a serious question as to whether, given the current state of the debt market, the underwriters will be able to proceed with the financing for the arena while the appeal is pending before this Court.
Oral arguments in the appeal will be heard September 17. While it's plausible that the tenor of the discussion may offer clues to the court's decision, it's unlikely that a decision will be issued by November.
A separate state case challenging the use of eminent domain has been filed in state court after being dismissed in federal court and, though the case is a long shot, oral argument is not likely until 2009.
That's not to say that the market can't factor the risk into the cost of the bonds, but surely the cost would be lower should the lawsuits be resolved.
Questions about arena bonds
Will the $800 million in bonds be tax-exempt or taxable? If they are taxable, then Forest City Ratner need not worry about the scrutiny of tax-exempt bonds for sports facilities--specifically the scheme under which bonds for the Yankees and Mets stadiums were issued, and under which the AY arena would be financed--under way in Washington.
But surely the developer wants them to be tax-exempt bonds, given the significant savings--my rough estimate was $165 million--involved.
However, the strategy under which the Empire State Development Corporation (ESDC) and developer Forest City Ratner seek tax-exempt bonds for the Atlantic Yards arena has been acknowledged by the chief counsel of the Internal Revenue Service (IRS) as a “loophole” the agency moved quickly to eliminate.
Also, Rep. Dennis Kucinich (D-OH), who chairs the Domestic Policy Subcommittee of the House Committee on Oversight and Reform, has asked the IRS and Treasury Department to desist from approving any more sports facility deals based on payments-in-lieu-of-taxes, or PILOTs, pending further clarification of their policies.
Does Goldman Sachs believe that the IRS and Treasury Department will have clarified their policies by then?
In Marty's Brooklyn!!, no mention of Ratner's "Brooklyn Day"
I've written more than once about Brooklyn Borough President Marty Markowitz's promotional Brooklyn!! publication, which includes a plethora of events and people but typically downplays Markowitz's support of the controversial Atlantic Yards project.
The same pattern recurs in the Fall 2008 edition (cover below), which promotes the 3rd annual Brooklyn Book Festival (the lineup looks terrific) and contains items saluting, among many events, Bastille Day, National Health Day, the protest against a homeless shelter, a John Legend concert, "Lighten Up, Brooklyn," the Boricua Festival, and the opening of the Ikea store in Red Hook.
And that's just (part of) page 3.
Conspicuously absent is any mention of Brooklyn Day, the Forest City Ratner-sponsored event June 5 at Borough Hall, where Markowitz, with an embattled edge in his voice, defended the Atlantic Yards project. (Photo by Tracy Collins)
The only mention in Brooklyn!! of Atlantic Yards is an item, on p. 29 (of 32), about A. Stein Meat Products of Sunset Park, maker of the "Brooklyn Burger," described as "the official burger of the Cyclones and the soon-to-be Brooklyn Nets."
The same pattern recurs in the Fall 2008 edition (cover below), which promotes the 3rd annual Brooklyn Book Festival (the lineup looks terrific) and contains items saluting, among many events, Bastille Day, National Health Day, the protest against a homeless shelter, a John Legend concert, "Lighten Up, Brooklyn," the Boricua Festival, and the opening of the Ikea store in Red Hook.And that's just (part of) page 3.
Conspicuously absent is any mention of Brooklyn Day, the Forest City Ratner-sponsored event June 5 at Borough Hall, where Markowitz, with an embattled edge in his voice, defended the Atlantic Yards project. (Photo by Tracy Collins)
The only mention in Brooklyn!! of Atlantic Yards is an item, on p. 29 (of 32), about A. Stein Meat Products of Sunset Park, maker of the "Brooklyn Burger," described as "the official burger of the Cyclones and the soon-to-be Brooklyn Nets."
State Senator to hold eminent domain hearing September 17
Harlem State Senator Bill Perkins, a critic of Columbia University's plans to use eminent domain, has announced a hearing on the practice of eminent domain in New York State, to be held on the morning of September 17. (In the afternoon that day, a state appellate court will hear oral arguments in the case challenging the Atlantic Yards environmental review).
It's likely Perkins is most interested in the Columbia case, the subject of a recent Wall Street Journal op-ed. It's also likely Atlantic Yards opponents will try to get on the witness list, especially because Perkins is interested in eminent domain used "at the behest of private developers" and which "at worst create[s] the impression of a corporatocracy instead of true democratic governance."
Can Perkins get anywhere? The State Senate is at this moment controlled by the Republicans, not Democrats like Perkins, but that could change in November. Still, all legislation must get through Assembly Speaker Sheldon Silver, an Atlantic Yards supporter who's unlikely to favor changes that hamper the project.
Whether legislation emerges from the hearing, it at least will cast some light on this complex and sometimes dubious practice.
The announcement
Senator Bill Perkins, ranking member of the Committee on Corporations, Authorities & Commissions will convene a hearing on the execution of the policy of eminent domain by the State and City of New York.
SUBJECT: The Use of Eminent Domain in New York State
PURPOSE: To solicit input on the procedures and rationale for the implementation of Eminent Domain as an economic development tool for recent private development projects.
PLACE: Adam Clayton Powell Jr. State Office Building 163 West 125th Street, 8th Floor
TIME: Wednesday, September 17, 2008 10:00am
It is understood that the issue of eminent domain has been heightened in the public consciousness by a 2005 U.S. Supreme Court decision in Kelo vs. New London that upheld the Ability of government entities to utilize eminent domain for the purposes of furthering economic development objectives. During 2005, hearings were convened and studies were undertaken to examine the role of eminent domain in the city and the state, as well as the rest of the country.
In New York City the citizenry is taking stock of the middle stage of the proposed Columbia University expansion to a mixed residential/commercial district in West Harlem. That middle stage consists of the necessary government sign offs, which includes agreement from the New York City Council and a declaration of blight by the Urban Development Corporation dba the Empire State Development Corporation.
The Senator has requested that participants in this hearing direct their focus to what has become a unique phenomenon in the execution of eminent domain in New York. In many instances, eminent domain is an instrument used by government, not in the context of their independently created economic development plans, but at the behest of private developers who wish for the state and city to use its powers of eminent domain to aggregate parcels of land for commercial benefit.
This methodology has strained the relationship between government and communities affected by these development plans, that have at best, a vague public purpose and at worst create the impression of a corporatocracy instead of true democratic governance. It will be critical to examine the original procedural structure in place to justify and exercise eminent domain. The Senator also wishes to investigate past practices that subvert the role and responsibility of government to pursue eminent domain only as a last resort and with an arm's length relationship to potential private developers.
It is the intention of Senator Perkins to craft legislation that addresses the inequities and the corruptive potential of mixing private purpose with the public interest. It will be important to ensure that valid economic development objectives can be clearly identified, while abuses are identified and corrected. He will need the guidance of those who have developed a fact based point of view on both sides of this important issue before the public.
Participation will be by invitation only. Opening remarks should be limited to five minutes in duration. Five copies of those remarks and other written materials should be submitted at the registration desk.
Written materials will also be accepted and may be sent to the contact person listed on the reply form. In order to publicize this hearing further, please inform interested parties of the Senator's interest in receiving written remarks from all sources.
Persons wishing to present pertinent testimony at the above hearing should complete and return the enclosed form as soon as possible. It is important the reply form be fully completed and returned so that persons may be notified in the event of emergency postponement or cancellation. Oral testimony will be limited to 5 minutes. In preparing the order of witnesses we will attempt to accommodate individual requests to speak at particular times in view of special circumstances.
These requirements should be made on the attached reply form or communicated to staff as early as possible. We look forward to your participation.
Democratic members of the Committee on Corporations, Authorities & Commissions
Senator Bill Perkins, Ranking Member
Senator Efrain Gonzalez, Member
PUBLIC HEARING REPLY FORM
Persons invited to present testimony at the hearing on Eminent Domain are requested to complete this reply form as soon as possible and mail or fax it to:
Linda Wood Guy
Office of State Senator Bill Perkins
163 West 125th Street, Suite 912
New York, NY 10027
Tel: 212-222-7315
Fax: 212-678-0001
e-mail: woodguy [at] senate.state.ny.us
It's likely Perkins is most interested in the Columbia case, the subject of a recent Wall Street Journal op-ed. It's also likely Atlantic Yards opponents will try to get on the witness list, especially because Perkins is interested in eminent domain used "at the behest of private developers" and which "at worst create[s] the impression of a corporatocracy instead of true democratic governance."
Can Perkins get anywhere? The State Senate is at this moment controlled by the Republicans, not Democrats like Perkins, but that could change in November. Still, all legislation must get through Assembly Speaker Sheldon Silver, an Atlantic Yards supporter who's unlikely to favor changes that hamper the project.
Whether legislation emerges from the hearing, it at least will cast some light on this complex and sometimes dubious practice.
The announcement
Senator Bill Perkins, ranking member of the Committee on Corporations, Authorities & Commissions will convene a hearing on the execution of the policy of eminent domain by the State and City of New York.
SUBJECT: The Use of Eminent Domain in New York State
PURPOSE: To solicit input on the procedures and rationale for the implementation of Eminent Domain as an economic development tool for recent private development projects.
PLACE: Adam Clayton Powell Jr. State Office Building 163 West 125th Street, 8th Floor
TIME: Wednesday, September 17, 2008 10:00am
It is understood that the issue of eminent domain has been heightened in the public consciousness by a 2005 U.S. Supreme Court decision in Kelo vs. New London that upheld the Ability of government entities to utilize eminent domain for the purposes of furthering economic development objectives. During 2005, hearings were convened and studies were undertaken to examine the role of eminent domain in the city and the state, as well as the rest of the country.
In New York City the citizenry is taking stock of the middle stage of the proposed Columbia University expansion to a mixed residential/commercial district in West Harlem. That middle stage consists of the necessary government sign offs, which includes agreement from the New York City Council and a declaration of blight by the Urban Development Corporation dba the Empire State Development Corporation.
The Senator has requested that participants in this hearing direct their focus to what has become a unique phenomenon in the execution of eminent domain in New York. In many instances, eminent domain is an instrument used by government, not in the context of their independently created economic development plans, but at the behest of private developers who wish for the state and city to use its powers of eminent domain to aggregate parcels of land for commercial benefit.
This methodology has strained the relationship between government and communities affected by these development plans, that have at best, a vague public purpose and at worst create the impression of a corporatocracy instead of true democratic governance. It will be critical to examine the original procedural structure in place to justify and exercise eminent domain. The Senator also wishes to investigate past practices that subvert the role and responsibility of government to pursue eminent domain only as a last resort and with an arm's length relationship to potential private developers.
It is the intention of Senator Perkins to craft legislation that addresses the inequities and the corruptive potential of mixing private purpose with the public interest. It will be important to ensure that valid economic development objectives can be clearly identified, while abuses are identified and corrected. He will need the guidance of those who have developed a fact based point of view on both sides of this important issue before the public.
Participation will be by invitation only. Opening remarks should be limited to five minutes in duration. Five copies of those remarks and other written materials should be submitted at the registration desk.
Written materials will also be accepted and may be sent to the contact person listed on the reply form. In order to publicize this hearing further, please inform interested parties of the Senator's interest in receiving written remarks from all sources.
Persons wishing to present pertinent testimony at the above hearing should complete and return the enclosed form as soon as possible. It is important the reply form be fully completed and returned so that persons may be notified in the event of emergency postponement or cancellation. Oral testimony will be limited to 5 minutes. In preparing the order of witnesses we will attempt to accommodate individual requests to speak at particular times in view of special circumstances.
These requirements should be made on the attached reply form or communicated to staff as early as possible. We look forward to your participation.
Democratic members of the Committee on Corporations, Authorities & Commissions
Senator Bill Perkins, Ranking Member
Senator Efrain Gonzalez, Member
PUBLIC HEARING REPLY FORM
Persons invited to present testimony at the hearing on Eminent Domain are requested to complete this reply form as soon as possible and mail or fax it to:
Linda Wood Guy
Office of State Senator Bill Perkins
163 West 125th Street, Suite 912
New York, NY 10027
Tel: 212-222-7315
Fax: 212-678-0001
e-mail: woodguy [at] senate.state.ny.us
ESDC: hearing officer in Columbia case makes for "judicial and impartial" process
From a New York Times article today on the Empire State Development Corporation's (ESDC) hearings on eminent domain for the Columbia University expansion plan:
But while the two-day hearing featured testimony from a former mayor, members of the State Legislature and the president of Columbia University, the group that will make the ultimate decision, the development corporation’s board, was not there.
Instead, a lone hearing officer, a lawyer named Edward C. Kramer, listened stoically to more than 13 hours of often emotional testimony.
No ESDC board member attended the Atlantic Yards public hearing two years ago, though ESDC staff members were there. ESDC board members, upon voting approval of the Atlantic Yards plan in December 2006, showed themselves to be rather uninformed.
"Judicial and impartial"?
Apparently, the conduct of the hearing became an issue, according to the Times:
Some speakers pointed to the absence of the development corporation’s board members at the public hearing as a sign that the agency had already decided to grant the university eminent domain rights.
But Warner Johnston, a spokesman for the development corporation, said it was the agency’s practice to hire a hearing officer during eminent domain testimony rather than having the board listen to testimony firsthand to ensure that “the process is as judicial and impartial as possible.”
That same hearing officer, Edward Kramer, presided over the Atlantic Yards public hearing and the two follow-up community forums. The public hearing, however, quickly went off track when Kramer and the ESDC neglected to enforce time limits for speakers.
At the follow-up community forums, speakers found the microphones cut off after three minutes, a much more fair practices.
(I don't know if that policy was continued at the Columbia hearing--readers are welcome to let me know.)
But while the two-day hearing featured testimony from a former mayor, members of the State Legislature and the president of Columbia University, the group that will make the ultimate decision, the development corporation’s board, was not there.
Instead, a lone hearing officer, a lawyer named Edward C. Kramer, listened stoically to more than 13 hours of often emotional testimony.
No ESDC board member attended the Atlantic Yards public hearing two years ago, though ESDC staff members were there. ESDC board members, upon voting approval of the Atlantic Yards plan in December 2006, showed themselves to be rather uninformed.
"Judicial and impartial"?
Apparently, the conduct of the hearing became an issue, according to the Times:
Some speakers pointed to the absence of the development corporation’s board members at the public hearing as a sign that the agency had already decided to grant the university eminent domain rights.
But Warner Johnston, a spokesman for the development corporation, said it was the agency’s practice to hire a hearing officer during eminent domain testimony rather than having the board listen to testimony firsthand to ensure that “the process is as judicial and impartial as possible.”
That same hearing officer, Edward Kramer, presided over the Atlantic Yards public hearing and the two follow-up community forums. The public hearing, however, quickly went off track when Kramer and the ESDC neglected to enforce time limits for speakers.
At the follow-up community forums, speakers found the microphones cut off after three minutes, a much more fair practices.
(I don't know if that policy was continued at the Columbia hearing--readers are welcome to let me know.)
Thursday, September 04, 2008
Brutally weird: in new book on Brooklyn, departed Stuckey spins for AY, sans rebuttal
On the heels of Marc Eliot’s awkward, not-quite-oral history, Song of Brooklyn, comes another from Florida-dwelling sports book author Peter Golenbock, In the Country of Brooklyn: Inspiration to the World, with another distorted view of Atlantic Yards, courtesy of former Forest City Ratner executive Jim Stuckey, whose self-serving statements go unrebutted.For example, Stuckey claims that the developer has spent its own money on land acquistions and infrastructure that the city has paid for; he asserts that the "legislature" approved the project; and he suggests that New York will turn into Detroit unless the city "steps up" and helps projects like Atlantic Yards move forward.
And, in a master stroke reminiscent of his work spinning the New York Times, he claims that the critics, not the developer, are creating a deceptive picture.
Overstuffed and unbalanced
This lengthy (nearly 700 pages) book is both overstuffed (the interviews could be trimmed) and skewed, showing a distinct legacy from the author’s Brooklyn Dodgers’ oral history, Bums. (Of 46 interviewees, only three are women and none, as far as I can tell, are under 40.
While the Dodgers and early/mid-20th century left-wing politics get a good airing, the institutional causes of Brooklyn’s post-WW II decline get scant notice, and the impact of historic preservation and immigration on the post-1960s revival get mostly ignored (except for the singular case of Soviet Jews).
Rap music? South Asian and Arab Muslims? Caribbean-Americans? Not here, except for a mention of Shirley Chisholm’s protege [updated] and an interview with Richard Green of the Crown Heights Youth Collective.
While telling the story of Brooklyn is inevitably impossible, Golenbock pretty much punts on the present-day borough, telling the story of the 1980s through the 21st century via only nine people, two of them developers.
Worthy nuggets
Interviewees like author Pete Hamill and DJ Cousin Brucie Morrow are predictably good; even better are Daily Worker sports editor Lester Rodney, a crusader for sports integration, and historian John Hope Franklin, the first black “hired at a major white college" (and incoming history chair, to boot, at Brooklyn College), who was stymied in his attempt to find housing in Brooklyn.
Old-timers (and the voluble Guardian Angels founder Curtis Sliwa) portray a rougher Brooklyn: corrupt street cops, race battles at schools, and even the struggle to get a free table at Lundy’s.
No counter-evidence
There’s a neat trick to these oral histories: you can bulk up a book with testimony rather than analysis, and it’s easy to disregard counter-evidence. There’s also no obligation to fact-check the interviewees even on basic information, so, when one recalls that 1851 East 32nd Street meant “we weren’t far from Red Hook,” the Florida-based author doesn’t tell us that the location is close to Kings Plaza and rather far from Red Hook.
Rival author Eliot, who comes off as Woodward and Bernstein compared to Golenbock, achieved some counterpoint by popping in quotes from secondhand sources. Golenbock, when it comes to Atlantic Yards and Coney Island, sups at the feet of Stuckey and then Thor Equities' Joe Sitt.
