Friday, October 31, 2008

Decoding FCR’s Gilmartin on Beekman Tower: condo aversion may jeopardize AY condos (or 50/50 plan)

Forest City Ratner executive MaryAnne Gilmartin, the developer’s point person on Atlantic Yards, was honored last night by the American Institute of Architects (AIA) New York chapter at its Heritage Ball, and on Monday night, she spoke in detail about a less controversial but hardly uncomplicated Frank Gehry project also announced in 2003: the in-construction Beekman Tower in Lower Manhattan.

Yesterday, I suggested that her take-away quote, “every deal dies three times,” also applies to Atlantic Yards, which is going through even more gyrations.

Lessons for AY

But there are some other hints and lessons from her talk. While the Beekman Tower is less a model for Atlantic Yards housing than the under-construction tower at 80 DeKalb Avenue in Brooklyn, Gilmartin’s explanation of why Beekman contains rental units, not condos, may cast further doubt on the developer’s plans for 1930 condos in the Atlantic Yards project.

If the condo market is currently saturated, and the developer prefers the flexibility of rentals, then either the condos would be quite delayed or a switch to rentals would further undermine the pledge of 50/50 affordable and market-rate housing.

Also, while questions about Atlantic Yards just didn’t come up, Gilmartin’s assertion that “we just simply do not know how to give up” may be tested by trying to pursue Atlantic Yards during an economic downturn. Note also that she described "the development, community" as "change-resistant, by its very definition--we really only do things when we have to."

Focus on Beekman

The Beekman Tower, which combines rental apartments with a 100,000 sf school, is among eight examples in AIA NY’s +Housing exhibition, which illustrate “public uses combined with, and often financed by housing.” (For Forest City Ratner, it looks like Liberty Bonds were the key, not the housing.)

Gilmartin was honored for “her contribution for the revitalization of New York City… [her] outstanding contribution to architecture and the urban landscape.” She’s worked on FCR’s Times Square project and the new New York Times building. According to her bio, before joining Forest City in 1994, she was as Assistant Vice President for Commercial Development at the New York City Economic Development Corporation (EDC) during the Koch and Dinkins administrations, managing the corporate retention program that kept Bear Stearns, Morgan Stanley, Chase Manhattan Bank and others in the city. Some, in fact, went to Forest City Ratner’s MetroTech.

(Fun facts: Gilmartin’s favorite book is E.B. White’s Here is New York, and she lives in Westchester.)

Gilmartin, among a supportive and curious audience, spread good cheer. “I’m humbled by the AIA’s recognition,” she said., adding, “To make a great building, it takes a great many people,” noting that many of the people in the room participated not online in the Times Tower but Beekman Tower and Atlantic Yards. (Architecture Week just happens to be sponsored by Kramer Levin, a law firm that represents FCR.)

Coveted site

Gilmartin described the one-acre site near Pace University, once a parking lot owned by New York Downtown Hospital as “coveted by development community” because of its ability to straddle Wall Street as well as TriBeCa.

While the development site could have supported “a residential building with no bells and whistles,” Gilmartin said that the developer “realized we could do something very special” in some sort of public-private partnership. FCR purchased the rights to build just over 800,000 sf, with potential bonuses from a plaza. It also agreed to build one level of doctor’s offices and one floor of parking.

“The program evolved and changed over time,” she said, noting that the original plan was to combine a Pace dormitory with a more modest FCR residential project. “This is a notable quotable from me, but ‘every deal dies three times,’” she said early on.

As the project “became much more aspirational and more expensive... ultimately Pace decided they didn’t have appetite for great architecture and high design,” and dropped out. “We lost our Liberty Bonds, which were a very big piece of the financing,” she said, noting matter-of-factly that “the mechanisms that we utilize to finance it are complicated and essential to the underlying success of the project.”

“We realized there was an opportunity here,” she said, citing the chance to build a school to serve the growing residential community. She said it was a “poster child for the School Construction Authority, the way we packaged the deal.” The rest of program would be residential.

Condos vs. rentals

“The notion of doing condominium with Frank Gehry was alluring,” she said, given it “was sure to transform the skyline.” She added, again matter-of-factly, “our job is to maximize the economic equation as well as to drive high design.”

City of New York plaza requirements, however, stymied the initial effort. “In fact, [City Planning Commission Chairperson] Amanda [Burden] was absolutely captivated by the designs we presented her with, but she was straitjacketed that certain plazas have to have certain requirements,” Gilmartin said.

(Since when are community groups on a first-name basis with Burden?)

The city has since changed plaza requirements, which means FCR can go back and add some of the features that designers and developers wanted to add.

The second iteration of the building was to contain 1.1 million sf, with 480 rentals on the lower floors and 200 condos on the upper floors. “This was during the condo craze. We were very concerned, based on break-even... they would need to sell for a very hefty number to really pencil out,” said Gilmartin, noting that condos cost more to build more than rentals and limit flexibility, because such larger units are tougher to flip into rentals.

Flooded market

“The condo market we believe, was flooded with supply,” she said, noting that 10,000 units were to come online in 2006, “and based on the sales and the absorption, we believe that the projections for the pipeline in Manhattan would take about six years to absorb.”

(While she didn’t comment on the Brooklyn pipeline, Richard Meier, architect of the Brooklyn building One Prospect Park, told New York Magazine this week that he thought unsold apartments in that luxury building would go unsold, and “I think that people who don’t have things under construction are probably reconsidering whether they’re going to go under construction…”)

Gilmartin added, “It really is outside our core business: we are long-term holders of real estate, we create value, and we like to keep the value we create.”

AY implications

If building condos is “really antithetical to what we’re about,” does FCR plan to build any condos in Atlantic Yards? It’s an interesting question, because the developer initially promised a 50/50 plan for all the AY housing. Then, after the deal with ACORN was signed, FCR added condos—2800, now reduced to 1930, of which 200 would be affordable—and could point to the fine print, that the Housing Memorandum of Understanding addressed only rentals.

So, as noted either the condos would be quite delayed or a switch to rentals would further undermine the pledge of 50 percent affordable rentals.

Beekman: all rentals

“So we settled on what we all believed was the best for the project and for the company,” she said. It became 903 market-rate rentals. “We would have done 80/20 [20% low-income housing], but there were virtually no [affordable housing] bonds available at the time we were closing the financing.” She did note that “we had a contribution to the city so money could go offsite to build affordable housing.”

(How much? Not a huge amount--the Liberty Bond financing generated about $6 million in fees that go to the New York City Housing Development Corporation, while the $203.9 million in tax-exempt financing surely saved FCR many multiples of that. Remember, Forest City Enterprises CFO Bob O’Brien told investment analysts last April, with satisfaction, that the developer managed the unusual feat of getting tax-exempt bonds for market-rate units, without an affordable component in return.)


Holding firm

Pressure from lenders forced FCR “to defend our vision,” she said, noting that “it would’ve been easier to do a project not as aspirational, not as expensive.” The developer invested a significant amount of equity, $100 million, before construction loans closed.

That number is atypical, she said, explaining that that FCR faced a tight deadline to receive the 421-a housing break. (Remember, the state belatedly reformed a tax break that has long gone to luxury housing and FCR “blackmailed” the community board to support the application.)

Also, she said “construction costs were beginning to rise, making it very difficult for us to ascertain where they would be if we waited any protracted period of time to build.” Such rising construction costs inevitably affects Atlantic Yards, as Gilmartin has stated, though the numbers are hard to quantify.

In March 2008, FCR “cobbled together” five lenders, she said, essentially syndicating a $680 million loan. “It wasn’t as bad as where it is today,” she said, “but it was a very difficult time. Our ability to pull it off was questioned by many.”

Adding “sanity”

“What Gehry typically does is fantastic and memorable,” Gilmartin said enthusiastically, but Gehry can apparently go too far. “There was a point in time where the building actually torqued and it moved. We really need to introduce a certain amount of sanity, because we believed that the core needed to stay put.”

“We had to have a certain amount of discipline on the inside of the building,” she continued. “To do that, we believed we needed to marry Frank’s creative vision with the work of Ismael Leyva,” an expert in residential layout and design.

(Leyva, you might remember, is the Mexican-born architect once hailed as a minority contractor under FCR’s CBA—but is so successful he’s already designing Downtown Brooklyn towers. If the spirit of the Atlantic Yards Community Benefits Agreement is to change the traditional ways of doing business, as I’ve written, Leyva doesn’t exactly represent that.)

“We expected people to appreciate the Gehry factor, but we didn’t want them to compromise,” she said, giving the example of walls that moved or curved. Still, she said that rentals with kitchens designed by Gehry and lighting picked by him, and with no unit designs duplicated, “represents a pretty serious departure from the norm.”

Size and pricing

Gilmartin laid out the plans for the 903 units.

NumberTypeSq. feetRent/mo.
190Studio466$2915
4651 BR678$4237
491.5 BR791$4964
1742 BR1120$7000
253 BR1648$10,297

She said the $75/sf level was similar to other high-end buildings; in fact, FCR asked bankers to underwrite it like any other high-end building, while noting greater upside potential thanks to Gehry’s role. (By contrast, according to a Forest City Ratner planning document, market-rate units in the first round of AY buildings were to rent for $51.62/sf, though that figure surely has grown.)

Residents can automatically get their kids into a quality school in the base of the building. “We didn’t change all the mix to bet on that phenomenon, because it is an untested factor,” she said, but they can combine units to create more two-bedroom units if families flock to the building.

Asked the selling point for such expensive units, she said, “First of all, it’s the exposure. We’re selling views. From the moment you step into the apartment, you see sky.” Each apartment has three vistas, “which is extraordinary… When you clear the 11th floor, there’s not much to compete with it.”

“You have unbelievable thought and consideration for every detail in the unit,” she said, adding that the selection of materials was unprecedented for rentals.

Getting it done

“We were mindful the building would be iconic in nature, and... change the skyline,” Gilmartin said, citing “a great responsibility to us to make sure we did it right.”

That involved, she said, “Frank’s vision, and our stick-to-it-iveness… We just simply do not know how to give up.”

“We’re a public company, and my mission to create a project that reproduces return to our shareholders, and I’m not apologetic about that,” she said. “That’s kind of what I’m paid to do. While Frank’s paid to be a genius, I’m paid to make sure we make some money... that collaboration creates a great result.”

Some compromises

Still, there had to be compromises in the shift from condo to rental, one audience member pointed out, citing an interview with Gehry who seemed a little disappointed without the opportunity to design interiors. (It might have been this January 2006 Times Talk appearance, in which Gehry said “we can't really make a big architectural statement” about interiors.)

Gilmartin responded regarding the shift, “I actually don’t think Frank was disappointed. I think he was happy we made a decision. We were really in many ways belaboring whether we would do one or another.”

The rentals units have nine-foot ceilings, while condos would have 11-foot or 12-foot ceilings, she said. The average size of the units declined, as well.

Also, the shared amenity space for condos would be more lavish, perhaps a wine cellar or a screening room. “We will choose to do different things in amenity spaces, but Frank is designing them as well,” she said, noting that the rental building will contain a pool.

Still, she said, “I daresay that the finishes in the apartments ultimately changed very little. This is effectively condo-level finishes.”

The rental market

Noting that financing for the building is locked in, Gilmartin acknowledged that “we are watching very closely the rental market” and remained optimistic. Given that city rental market “performs very well,” FCR expects not a dip but perhaps more modest growth. “We’re in it for the long haul and we’re patient.”

While the building has a lot of units, the critical mass offers potential synergies, such as allowing some tenants to upgrade to bigger units or higher floors.

“I won’t want to speak to our break even, but our expectation is lease-up will take 20 months,” she said. “Typically you want to run a building like this at 95% occupancy.”

Going forward

“We will not see a building like this built over the next few years,” she said, citing the expiration of Liberty Bonds, the shifting boundaries of property eligible for 421-a benefits, and the difficulty in financing the project.

European banks have been far more receptive to lending to support iconic architecture, she said, but suggested that New York, and its banks, have an increased sophistication about architecture.

“If you build it, they will come,” she said. “The development, community, which is change-resistant, by its very definition--we really only do things when we have to, like the whole LEED thing--I like to think we’re on the forefront, but the fact is, it’s very hard to change how developers do things, in a tough town like New York, because it’s very hard to put a building together.”

“So I think the future holds great buildings that are also sustainable buildings. That we’ll be challenged by economic times, but in those challenging times creates great opportunities,” she concluded. “I come from economic development... if we have a great mayor, and I hope that we do, I think that this next five-year period represents tremendous opportunities for New York to build great buildings, because I think people of this town recognize the importance and the power of them, and it doesn’t mean just for private enterprise. It means that a public school is deserving of a great building.”

Who's made the AY timetable gaffe? (Jon) Benguiat or Bertha (Lewis)?

Journalist Michael Kinsley famously posited that "A gaffe is when a politician tells the truth."

By that measure, on Monday, when Jon Benguiat, Brooklyn Borough President Marty Markowitz's Director of Planning and Development, "blurted out" (in the words of the Brooklyn Paper), “I don’t know if we’re going to get the Nets,” it was a gaffe.

Yes, it might have been embarrassing to Markowitz, an unabashed Atlantic Yards booster. However, given all the chatter about a potential sale of the team and the delays in starting arena construction, Benguiat's statement was simple candor.

The Architect's Newspaper, which calls it "shocking news," got a statement from Markowitz's office expressing confidence in the project but not acknowledging the recent reports casting doubt on Forest City Ratner's plans.

Less credible, and thus more of a real gaffe, was ACORN head Bertha Lewis's unwillingness to acknowledge any doubts about the project and its timetable.

Thursday, October 30, 2008

FCR's Gilmartin: "Every deal dies three times"

While reports may seem to be ricocheting about the sale of the New Jersey Nets and even Atlantic Yards, multiple secondary reports in the blogosphere does not make it so.

Then again, the involvement of p.r. guru Howard Rubenstein, in denying (in the Star-Ledger) the Dubai/Russia sale talks, suggests a level of concern on the part of Forest City Ratner not seen since the first Nets-to-Newark rumor and hasty departure of former FCR point man Jim Stuckey.

"Every deal dies three times"

Consider an observation by MaryAnne Gilmartin, the FCR executive who replaced Stuckey on Atlantic Yards, speaking Monday night at the Center for Architecture: "“This is a notable quotable from me, but ‘every deal dies three times.'”

She said it in recounting the saga of the Frank Gehry-designed Beekman Tower in Lower Manhattan.

Atlantic Yards, even more complex and controversial than the Beekman Tower, has already gone through multiple iterations and timetables. It's hardly implausible that principal New Jersey Nets owner Bruce Ratner might consider selling the team, given the downgrading of parent Forest City Enterprises's credit rating, the tanking stock price, the difficulty filling seats in New Jersey, the pressure on governments to withold additional subsidies, and the economic crisis.

A new team owner might or might not give up on Brooklyn. And we don't know what other investors in the project might mean. (And, as DDDB points out, Ratner can't sell a project he hasn't built nor controls.) Nor do we know how many more lives it might have.

But there's a good bet Mr. Rubenstein will not lack for work.

By the way, Gilmartin's being honored tonight by the American Institute of Architects (AIA) New York chapter. I'll have a report tomorrow on her remarks at the Monday night event.

Deputy Mayor (in Newark): "look for the least necessary insertion of subsidies"

New York Governor David Paterson is looking for federal help to close the state's enormous budget deficit (projected to reach $47 billion by 2011), but he's also warning that no part of the state budget will remain unscathed. The Times reported yesterday:
“Don’t get me wrong, there will be hard and painful cuts,” he said in the address. “There will be no segment of this budget that will not be cut.”


So, if Paterson turns to projects sponsored by the Empire State Development Corporation, how might he set priorities? There has to be a wiser method than that posited by Comptroller William Thompson, who said last week, defending Atlantic Yards, "If those projects made sense two-three years ago, when things were booming, they make sense during slower economies, also."

Setting priorities

Well, last night, Newark Deputy Mayor Stefan Pryor offered some common-sense advice, speaking at a panel in Newark titled The New Newark, Part 1: Maintaining Momentum for Renewal in a Slowing Economy.

He was asked how to set priorities among projects in the city.

His response: "Well, I mentioned the basic construct, which is to look for efficiency, that is to say the least dependency on subsidies. There typically is a pro forma gap in the project, a gap that has to be filled because the construction costs outstrip the potential revenue in the budget line. We want to look for the least necessary insertion of subsidies."

He added, "The other aspect of our construct is community benefits. Will a project deliver jobs for our residents? Will a developer commit to a First Source compact where jobs will go to Newark residents first? Small [and] minority business contracting and green building sustainability are among our criteria. The other thing we're looking for is whether a developer can in fact demonstrate that private sector lenders will commit to the project... And we'll be looking for other factors that will ensure that project will proceed, for example timeline commitments."

Navigating tensions

Well, there is a potential tension between community benefits and subsidies, since a developer obviously could make more promises with a greater subsidy cushion. But Pryor at least suggests that are some rational ways of looking at a project.

With Atlantic Yards, it may be that subsidies already committed can't be touched. But Pryor's formulation certainly suggests a skeptical eye at additional subsidies. And, remember, the timeline commitments for AY are very loose, with six years to build the arena after the exercise of eminent domain and delivery of properties, 12 years to build Phase 1, and no timetable for Phase 2.

ACORN's Lewis still thinks AY's moving forward (but not paying as much attention)

On WBAI radio yesterday, sociologist and City Watch co-host Bill DiFazio invited ACORN chief organizer Bertha Lewis to defend the organization against charges of voter registration fraud--and, at about 17:50 in, brought up Atlantic Yards. (Lewis was elevated from New York to the national role in the wake of an embezzlement scandal.)

BD: Maybe it’s my ignorance, but I don’t know what’s happening with Atlantic Yards any more. I never hear about the Atlantic Yards project.
(He must not have been trying that hard.)

Personally, I’ve been against it…. It’s one of the few things we don’t agree on.
(See his comments when Lewis was a guest in February 2007.)

But what’s happening with it. What’s the current status?

Not paying as much attention

BL: I have to say I haven't been paying as much attention since I’ve just gotten a new position, I am now chief organizer for ACORN national. So...

Lewis continued, unmindful about the "AY is dead" meme or the proliferating reports of Bruce Ratner's attempts to sell the team.
(Update: DDDB reminds us that ACORN is contractually obligated to support the project.)

What I knew is demolition has been going on. They’be been winning their court cases.
(But not a key motion to dismiss, the loss of which flipped the AY inevitability meme.)

Lewis allowed that subsidies are still up in the air:
They’re still moving forward with development. The big crash and horrible financial condition that we find ourselves in, which, by the way, ACORN has been screaming about since 1999…. They're still pushing forward. We still have our housing plan intact and in place. They’re still looking to get the subsidies that they’re going to need in order to build 50% of affordable housing.

That would be 50% of the rentals, not the project as whole. And some of those subsidized rentals might cost more than $3000 a month.

Groundbreaking in December?

Even the developer has acknowledged the likelihood of a six-month delay, but Lewis didn't acknowledge that--or whether the credit crunch might have an impact:
So, they wanted to break ground by this December, they may still be able to do that. They may be delayed by a month or so. But the only thing that's been delaying them is one court case after another. But they’re still on track. Atlantic Yards is gonna be built. It may wind up taking six months more than originally stated. But it is moving forward. It is going to be built. The thousands of affordable housing units that are going to be there are needed now more than ever, because everything else in Downtown Brooklyn is all luxury.

Lewis is right that public policy failed, as landowners were given new development rights (and profits) in Downtown Brooklyn without a requirement to share the wealth via subsidized units. But it doesn't necessarily endorse the density and the subsidies behind Atlantic Yards.

"The truth does not matter"

In talking about the national political scene, at 15:10, DiFazio and Lewis had an interesting exchange that could also be applied to Atlantic Yards.

BD: It seems like one of the things [critics of ACORN] may be ultimately successful in doing is getting community organizers who are… working on voting to become more careful than they should, because they can become worried that, if you screw up in any way, the Republicans are going to use it as propaganda. And most people have no way of getting at facts.

BL: What we understand about the Republicans, the RNC, and their right-wing cohorts--you can be absolutely perfect—do everything perfect. It doesn’t matter to these people. They want to win and retain power at all costs. You know what—the truth does not matter to these folks. We’ve seen what’s been happening in this campaign so far.

Has she spent any time with Forest City Ratner's "liar fliers"?

DePaolo: "Not a done deal"

A guest later in the City Watch program, Williamsburg activist Phil DePaolo, aimed to talk about term limits. Host DiFazio pointed out (at 42:45) that Mayor Mike Bloomberg "has not been such a great mayor," citing his support for the West Side Stadium and for predatory lending. "He represents global capitalism," DeFazio said.

DePaolo followed up:
It was funny that you were discussing Atlantic Yards with Bertha earlier, because that's a classic example of Bloomberg not having any problems with using eminent domain and basically using the ruse of a sports arena to do a very vicious land grab and development.

And ironically, despite what Bertha said earlier, the major newspaper reported earlier today that Bruce Ratner is actually in talks with investors about selling the New Jersey Nets and staying in New Jersey. It seems like this a done deal is very much not a done deal.


At about 48:00 DePaolo added:
One of the things in history that will always be remembered from the Bloomberg administration will be the sense of greed.

DePaolo said about the term limits power grab:
We're facing a big moment in our democracy in our city.... The people have spoken and the people will speak again.

Wednesday, October 29, 2008

Nets official to Record: Brooklyn move won't happen

The leaks coming out of the basketball firmament just keep coming. Ian O'Connor, a columnist for the Bergen Record, writes that the Nets will stay in New Jersey, quoting Gov. Jon Corzine and finding a team official:
One longtime Nets’ official, a man who’s made big management decisions in the past, is telling people that the move to Brooklyn will never, ever happen. "Bruce just won’t end up with the money to do it," the official said. "Forget it."


O'Connor doesn't predict whether they would stay in the Meadowlands or move to Newark. Still, he concludes:
What are the chances of a second marriage between [superfan Frank] Capece and the Nets by 2010?

Better than the team’s chances of landing the eighth playoff seed next spring.

At LPC hearing on Prospect Heights Historic District, mention of the Ward Bakery and AY briefly unsettles the mood

Yesterday’s public hearing held by the Landmarks Preservation Commission (LPC) on the designation of part of Prospect Heights as a historic district, involving some 870 properties, was hardly contentious. Various interested parties, residents, neighborhood groups, and preservationists saluted the LPC for its decision to move forward in designating part of Prospect Heights as a historic district.

(Photo of Marty Markowitz testifying, by Michael D.D. White, who offers his own account of the hearing. Videos by Raul Rothblatt here.)

One question was what exactly people might say about the planned Atlantic Yards project, the blocks of which were not considered as part of the district. (Why? Because the project was going through state environmental review, an LPC staffer said last year, which essentially means that the decision was political. Previous coverage of the historic district is linked here.)

Council Member Letitia James, Lisa Kersavage of the Municipal Art Society (MAS), Gib Veconi of the Prospect Heights Neighborhood Development Council (PHNDC), among others, praised the LPC for moving ahead swiftly as out-of scale development loomed at the edge of neighborhood.

And many cited the ongoing efforts by various property owners to maximize square footage by adding backyard extensions or new floors, thus changing the character of existing blocks and adding urgency to the designation as a historic district.


Tensing up at the Ward mention

The LPC commissioners sat around a long table in the 9th floor hearing room at the Municipal Building and cordially took in steady thank-you’s and repeated mentions of the importance of preserving historic architecture for future generations.

But they perked up—tensed a little, actually—when Prospect Heights resident Patti Hagan got up to testify (video). “Please designate Prospect Heights Historic District ASAP. It’s really important,” said Hagan, who began the fight against the Atlantic Yards project.

“On my way here, I paid my last respects to the historic and late—at this point--Ward Bread Bakery, which has just been demolished, totally, by Bruce Ratner, in honor, I guess, of its 100th birthday," she continued. "It’s a shame that that building was not recycled and saved. It was the height of modern bread baking, of scientific bread baking, when Mr. Ward built it."

(View from Dean Street via AY Webcam. Below: April 2007 photo from Pacific Street by Jonathan Barkey. Here's another view and more history, from DDDB.)

Several people didn’t make eye contact. LPC chairman Robert Tierney, looking concerned, applied his forefinger to the space just above his lip.

The mood softened quickly when Hagan told the LPC that the tree-lined streets saluted in the LPC’s presentation, were in many cases the product of relatively recent arrivals. Thirty years ago, she said, there were almost no trees on her block. She and her neighbors planted 100 trees. She picked up some leaves along the way this morning, and brought them to 1 Centre Street.

White: "say no to corrupt no-bid projects"

Later, Michael D.D. White of Noticing New York, who previously called on the LPC to save the bakery, brought the issue home by focusing explicitly on Atlantic Yards. (Note that the western "finger" of the proposed Historic District would be directly opposite the bottom half of the eastern block of the AY footprint. The bakery site is on the southeast block of the footprint.)

“The importance of allowing our precious historic Brooklyn to weave together is the reason why the hole in the proposed historic district is so disconcerting. It will separate historic Prospect Heights from historic Fort Greene," he said.

"We know that the odd shape of the proposed Historic District is disingenuously intended to accommodate the similarly unjustifiably odd shape for the proposed no-bid Atlantic Yards project," he said. (Actually, a lot of historic districts have odd shapes and it might have been hard to make a contiguous Historic District. Then again, the MAS did note the Ward Bakery on its initial map, though it was not included in their proposed boundaries.)

"The Boymelgreen wrench shape of the Atlantic Yards project is notoriously odd, shaped exclusively for the purpose of generating windfall eminent domain and upzoning profit for Forest City Ratner. Looking at these two jigsaw pieces it is easy to put the puzzle together." (He was pointing to the omission of Shaya Boymelgreen's Newswalk condos, in a recycled newspaper factory, on the south-center block omitted from what would've been an even rectangle.)

“We ask you to proclaim this commission’s independence from the Mayor," he said. "Say no to corrupt no-bid projects and save the historic part of Brooklyn that should be allowed to weave naturally together in a healthy urban fabric.

He got healthy applause, I’m told, but not from the Commission.

The process

Others testifying yesterday included Borough President Marty Markowitz (video by Raul Rothblatt) and representatives of the Historic Districts Council, the Crown Heights North Association, and Community Board 8, which gave its unanimous approval.

MAS worked with PHNDC on seeking designation. MAS trained residents on historic building survey techniques; more than 20 volunteers cataloged and photographed some 1100 buildings. MAS staff converted this information into a map using its in-house Geographic Information Systems (GIS) technology. In early 2007 the two groups submitted to LPC a comprehensive report including the database, photographs and a proposal for a historic district of more than 800 buildings.

After the hearing, the process goes like this: the LPC’s Research Department will write a detailed report on the district, and send descriptions of each building in the district to owners. The Commissioners will review the draft report and use it, along with public testimony, as the basis for voting on approving the designation. The City Planning Commission then must hold a public hearing, and submit its report to the City Council on the effects of the designation. The City Council has 120 days from the time of the LPC filing to modify or disapprove the designation.

Report: Ratner talked with Russians, Dubai group about ownership

Sources are beginning to come out of the woodwork regarding Bruce Ratner's apparent efforts to sell the New Jersey Nets. First, the Daily News reported Ratner was trying to sell the team. An anonymous team spokesman told the Post that wasn't true.

Then Yahoo! Sports columnist Adrian Wojnarowski reported that Ratner talked to Russian oil tycoons not just about the Nets but the entire Atlantic Yards project. A Middle Eastern group also expressed interest to the NBA and Nets ownership.

OK, anyone with oil wealth might have to reconsider investments after the price of oil took a dive. But the accumulating reports must have project backers like Brooklyn Borough President Marty Markowitz a little antsy.

After all, after the New York Times reported last March on the AY stall, Markowitz declared, "I remain confident that Forest City Ratner, with its successful track record of development through all economic climates, will fulfill its vision of bringing the Nets, affordable housing, and a new city center to Downtown Brooklyn.”

Tuesday, October 28, 2008

If Ratner was trying to sell the Nets, what might that mean?

If New Jersey Nets principal owner Bruce Ratner, along with Forest City Enterprises, was trying to sell the team within the past year (but not walk away from plans to build the Atlantic Yards arena) as the Daily News reports today, what might that mean?

1) Ratner, who had previously sought additional investors to spread the losses, instead was willing to sell completely. It's just not the right time to sell a team.

2) Ratner may have been willing to sell the team at a loss compared to what he paid, just to stop the annual losses.

3) Ratner knows his core business is not sports, but real estate development.

4) If the goal now is to staunch the annual losses without selling the team, a temporary move to Newark has to be considered, despite the inter-county conflict in New Jersey.

5) What next?

Is "adoption" really "approval"? Looking more closely at ESDC board action in July 2006

In the Atlantic Yards chronology, the meaning of one action by the Empire State Development Corporation (ESDC) is a key to whether tax-exempt bonds for the project would be grandfathered in under new Internal Revenue Service (IRS) rules.

Last week, I (like others) concluded that the ESDC's vote to adopt the Atlantic Yards General Project Plan (GPP) at its 7/18/06 meeting likely constituted what the Treasury Department requires as "official action evidencing its preliminary approval of the project before October 19, 2006."

The issue may be more ambiguous. "Adoption" might also be seen merely as an agreement to release a "proposed" plan for public comment. On the other hand, "adoption" of a plan that receives no comment means it will go into effect, which does indicate approval.

(All emphases in text below are added.)

City/state argument

A May 8 letter to the IRS and Treasury Department from the ESDC and the New York City Industrial Development Authority (IDA), which clearly influenced the new regulations, stated:
On July 18, 2006, the ESDC Board approved the General Project Plan (the "GPP") for the Atlantic Yards Land Use Improvement and Civic Project. Adoption of a General Project Plan is ESDC's method of initially approving a project.

Then the letter switched to the word "approved":
We note that the GPP was approved prior to the IRS release of the Stadium PLRs [Private Letter Rulings, which enabled Yankee Stadium and the new Mets stadium] or the Proposed Regulations.

At the meeting

So what exactly happened at the meeting? I attended, and remember the board action as rather pro forma; the real action came afterward in a press conference, during which ESDC Chairman Charles Gargano answered questions not about the funding mechanism but the Draft Environmental Impact Statement and the process for ultimately project approval.

I asked ESDC for a copy of the meeting minutes (PDF), which totaled nine pages and consist mainly of resolutions rather than narrative. The minutes indicate that ESDC board members asked "several logistical questions" and that one wanted to make sure that the agency would use its condemnation powers for a public benefit. There was no apparent discussion of the plan to finance the arena, nor any indication that it was a novel strategy pending approval, in the case of the Yankees and Mets, by the IRS.

The ESDC's adoption vote was a prelude to another action: for purposes of the public hearing(s) required by Section 6 and Section 16 of the New York State Urban Development Corporation Act.... the proposed General Project Plan.
(Emphasis added)

Had the GPP been approved in preliminary fashion or had it simply been proposed? The vote was to approve a resolution that contained the "adoption" of the GPP for the purposes of a public hearing.

Looking at Section 16

Section 16 describes how the ESDC must file copies of the adopted GPP in local municipalities, how it must announce notice of the plan, and how it must announce a public hearing, It adds:
(c) the corporation shall conduct a public hearing pursuant to such notice, provided that such public hearing shall not take place before the adoption or the filing of such plan by the corporation;

In other words, the act of adoption may be akin to "filing," or on the continuum with it. Rather than a preliminary approval, it sounds like an administrative action.

Then again, other language in Section 16 buttresses the argument for preliminary approval: (d) upon a written finding of the chief executive officer of the corporation that no substantive negative testimony or comment has been received at such public hearing, such plan shall be effective at the conclusion of such hearing; provided, however, that if any substantive negative testimony or comment is received at such public hearing, the corporation may, after due consideration of such testimony and comment, affirm, modify or withdraw the plan in the manner provided for the initial filing of such plan in paragraph (a) of this subdivision.

If no negative testimony or comment is heard, the plan becomes effective, so no additional approval is needed.

Contrast

Executive Law § 807, regarding Local land use programs, uses "adoption" as similar to "enactment," rather than filing:
Upon approval, or approval subject to conditions by the agency, and upon valid enactment or adoption of such law or ordinance, the authority of the agency over such uses and facilities pursuant to sections eight hundred six and eight hundred nine of this article shall be vested in the local government,

Looking at the press release

In the 7/18/2006 press release regarding Atlantic Yards, the term "adopted" was used, but there was no mention of "approval":
Charles A. Gargano, Chairman of Empire State Development Corp., today announced the ESDC Board adopted the General Project Plan (GPP), made Land Use Improvement Project Findings and Civic Project Findings available, accepted the Draft Environmental Impact Statement (DEIS), and authorized a public hearing for the Atlantic Yards project in Brooklyn, NY.


The resolution noted that the ESDC found the DEIS "satisfactory." There is no mention in the resolution regarding the GPP that it was considered adequate or satisfactory.

ESDC statements

It's worth noting that the ESDC, in its public statements on similar projects, has used inconsistent language.

In a 4/5/2006 press release on the Javits Convention Center project, both words were used:
Empire State Development Chairman Charles A. Gargano announced today that the General Project Plan (GPP) for the redevelopment of the Jacob K. Javits Center has been adopted by the New York Convention Center Development Corporation (CCDC) and the Empire State Development Corporation (ESDC).

“Today’s approval marks another step forward in the redevelopment of the Jacob K. Javits Center,” CCDC Chairman Gargano said. “The new convention center will provide New York with the world-class, state-of-the-art facility our great city deserves, capable of hosting more conventions, exhibitions and trade shows...."


This year, regarding Columbia University's expansion plan, the 7/17/08 press release did not use the word "approved":
In adopting the General Project Plan, the ESDC board accepted the findings of a neighborhood conditions study conducted by the consulting firm AKRF Inc. and a comprehensive audit of that study by Earth Tech Inc. Both reports found that the area surrounding the project’s 17 buildings was mainly characterized by aging, poorly maintained and functionally obsolete industrial buildings, with little indication of recent reinvestment to revive their generally deteriorated conditions.

The word "accepted" may describe the essence of the board's action; it has neither the time nor expertise nor function to seriously analyze long reports prepared by specialized consultants.

Jobs, housing, and (not) hoops: the city's justification for arena bonds

Before a Congressional subcommittee hearing Friday regarding tax-exempt bonds for Yankee Stadium (and other projects), the New York City Economic Development Corporation, whose affiliate New York City Industrial Development Authority issues such bonds, produced a document called Yankee Stadium, Fact v. Fiction (PDF).

While the document only glancingly mentioned Atlantic Yards, the framework was quite curious. The tax-exempt bonds at issue would be used only to build the AY arena, not any other components of the project.

But what's the justification for the arena? Affordable housing and job creation. Most of the latter would be related to office, retail, and building services, not the arena. And affordable housing could be built without the arena.

From the document

IRS Regulations
Opponents:
New regulations are attempt to prohibit use of tax-exempt debt for future projects like Yankee Stadium
Facts:
Proposed regulations made technical changes to how some payments backing tax-exempt bonds could be structured in the future, doing so in a way that City felt disadvantaged New York versus other states
Final regulations amended proposal to let projects in the pipeline avoid changes, helping, most importantly, Brooklyn’s Atlantic Yards ($4 BN project that will create thousands of jobs and 2,000+ affordable housing units)
Nobody with appropriate authority (including IRS) has ever said similar tax-exempt bonds cannot be used for economic development or even stadia in the future
.
(Emphasis in original)

Monday, October 27, 2008

Yassky's doubletalk on the term limits issue

City Council Member David Yassky, known for his waffling on Atlantic Yards, today circulated a letter (full text below) explaining his equivocation on term limits.

Note the curious logic. On the one hand, Yassky wants voters to have a choice, not acknowledging the huge power of Mayor Mike Bloomberg's incumbency, and the mayor's $100 million war chest:
I became convinced that the right choice at this point in time was to leave open for voters the option of choosing to continue the Bloomberg Administration next November.

On the other hand, Yassky admits that he won't challenge the sitting Comptroller, who has the advantage of incumbency:
Finally, I know that some on the other side of this debate have accused Council Members of acting out of self-interest in voting to change term limits. For my part, I can say unequivocally that I saw no personal benefit in the Mayor's proposal. As you know, I have been planning to run for City Comptroller next year, and have felt confident about my prospects for success. That campaign may now be foreclosed, as the current Comptroller is eligible to run for reelection.

If he sees no personal benefit, has he ruled out running for his current seat? He didn't say so.

(Here's more from last week's coverage in the Times.)

The full letter

Dear friends:

I am sure you know by now that the City Council voted last week to approve Mayor Bloomberg's proposal to lengthen the term limit for City officeholders from eight years to 12 years.

I want you to know that after a great deal of thought, I chose to support the Mayor's proposal. This was the most difficult decision I have faced in the City Council – more than congestion pricing, the garbage plan, or the post-9/11 tax increase – and I want to explain why I believe it was the right choice.

Like many people, my initial reaction to the Mayor's proposal was outrage. While I have always held that the eight-year term limit was bad policy, it was a policy put in place by referendum and the fairest way to change it was by a subsequent referendum. I was saddened by the Mayor's eagerness to bypass the voters, and I strongly disagreed with his assertion that a referendum was not feasible. Most important, I knew that a Council vote to change term limits would confirm many people's most cynical suspicions about politics and politicians.

Following the Mayor's announcement, I advocated both publicly and privately, to the Mayor, the Speaker and my colleagues in the Council, that we should put the term limits question before the voters. I argued to the Mayor directly that he was making a mistake, and that he and the Council could not afford to undermine our moral legitimacy at precisely the time when we will be asking New Yorkers to sacrifice for the greater good.

As the vote neared, it became increasingly clear to me that the Mayor would not relent, and I focused intently on the choice before me. I had dozens – probably hundreds – of conversations with friends and constituents, and heard very strong feelings on both sides of the issue. Many people were appalled that the Council would even consider overturning a referendum, and many – I was surprised by how many – said simply: "I want to keep Mayor Bloomberg."

These conversations had a deep impact on my thinking. While I have worked well with the Mayor and I hold his Administration in high regard, I certainly don't believe he is the only person capable of leading the City over the coming years. But I do know that we are in a period of extraordinary challenge, and that voters may well value stability and experience in the City government. I became convinced that the right choice at this point in time was to leave open for voters the option of choosing to continue the Bloomberg Administration next November.

Even so, I pressed the referendum argument to the very end. Over the Mayor's objections, I introduced an amendment to the term limits bill that would have put the issue before the voters in a special election early next year. Many of my colleagues supported the amendment, and it was vigorously debated on the floor – but it lost narrowly. That left the stark choice: As much as I was loath to override the expressed will of the voters, I was unwilling to leave in place a term limits policy which I believe is bad in general and especially at this time.

Finally, I know that some on the other side of this debate have accused Council Members of acting out of self-interest in voting to change term limits. For my part, I can say unequivocally that I saw no personal benefit in the Mayor's proposal. As you know, I have been planning to run for City Comptroller next year, and have felt confident about my prospects for success. That campaign may now be foreclosed, as the current Comptroller is eligible to run for reelection.

I knew that many supporters would disagree with this vote. In making my final decision, one particular conversation stuck with me. In the supermarket, a few days before the vote, an older man approached me, told me he had voted for me, and told me he didn't like the term limits extension. But then he said: "Whatever you do, I trust you to do the right thing." I do believe that my constituents want me to look diligently at the issues before me and follow my best judgment about what is right for our City and for our community.

As difficult as this vote was, I know that still more wrenching choices lie ahead: closing hospitals versus fewer teachers, raising taxes versus cutting cops. On all of these issues, as with the term limits vote, I will take my responsibilities as a City Council Member with the utmost seriousness, and will work as hard as I possibly can to serve in the best interests of the people I represent

As Prospect Heights Historic District gets hearing Tuesday, some politic omissions

From 1:30 to 3:30 pm Tuesday, the Landmarks Preservation Commission (LPC) will hold a public hearing on the proposed (PDF) Prospect Heights Historic District, parts of which would border the Atlantic Yards footprint. (Previous coverage.)

The hearing is important both because of its the goal, long sought by Prospect Heights residents, and because it reminds us how landmarking is a political process, especially when historic preservation intersects with the Atlantic Yards project.



The hearing will be at the LPC’s offices in the Municipal Building, One Centre Street, in Manhattan, and approval at a later LPC meeting, which is expected, must be followed by approval by the City Planning Commission and City Council.


Public support

"Landmarking has received the support of hundreds of Prospect Heights residents," says the Prospect Heights Neighborhood Development Council. "It's also critical that community members attend the public hearing (and testify) in order to demonstrate the urgency of landmarking our neighborhood before another historic building is lost or irreparably altered." Those who can't attend can send comments to comments@lpc.nyc.gov.

Mayoral control and the Ward Bakery

Of course, the LPC answers to the mayor, and thus there was no attempt to include historic buildings like the Ward Bakery, currently under demolition (photo from AY web cam), in the district map.

Nor was there an attempt to include former industrial buildings in the AY footprint like the Spalding Building (below) and the Atlantic Arts Building, which, unlike the bakery, are not eligible for the National Register of Historic Places but represent valuable investments in "embodied energy," the labor and resources already expended in construction and rehabilitation.

Michael D.D. White of Noticing New York recently commented on a New York Times editorial that argued that the LPC needed the "full backing of the mayor" to do its job. Rather, he argued, it would be more important for "the commissioners had greater independence from the mayor."

He wrote of the Ward Bakery: "The building, which was in use until the mid-1990's, was being bought and sold by developers and probably would be under development now, soon to be adaptatively reused, had it not been for the advent of Bruce Ratner’s endeavors, blighting Prospect Heights and Fort Greene in pursuit of personal wealth."

Political difficulties

Given the imbalance of power between preservationists and developers, the former have to pick their spots, an issue which came up last Wednesday in a panel at the Municipal Art Society (MAS) on Recycling Industrial Buildings.

"If we tear down all remnants of our industrial past, how will future generations learn about it?" asked Mary Habstritt, president of the Society for Industrial Archaeology, making the case for preservation. She quoted architect Carl Elefante, who said, "The greenest building is one that's already built" and pointed to the concept of "embodied energy."

"I like to say that the greenest building is the one you don't send to a landfill," she said.

"I think that we need to be more careful with our buildings," commented Lisa Kersavage, MAS director of advocacy and policy. "Demolition is incredibly wasteful, and in New York City, 60% of our waste stream is demolition and construction debris, which is significantly higher than the rest of the country." She added that more jobs in the building trades are created via renovation than new construction.

In the audience, however, Stephanie Eisenberg, a developer and activist in Williamsburg, pointed to the failure to include more buildings in the landmarking of the former Domino sugar plant, in anticipation of the New Domino development. "How do you get the politics out of the landmarking process?" she asked. Panelists laughed nervously.

"That's a difficult question," Kersavage responded. "I think we have to advocate, advocate, advocate. I think that, with the Domino site, MAS certainly was advocating for slightly more to be protected... We have to balance new development and preservation. I think, personally, in this case, it tipped a little bit more towards the new development, but I think there's still room to influence this project.

With Atlantic Yards, MAS took a "mend it, don't end it" position, supporting adaptive reuse of the Ward Bakery and the LIRR stables, but not of renovated industrial buildings like the one building above (office space once destined for housing, at Carlton Avenue and Pacific Street), Spalding and Atlantic Arts.

MAS did comment that it is unacceptable for National Register-eligible buildings like Ward and LIRR to be demolished in Phase 1 for interim surface parking, given that Phase 2 could be redesigned. But MAS did not challenge the loss of renovated industrial buildings for the arena. (We'll know Forest City Ratner is really serious when they demolish Spalding, which, if Atlantic Yards fall through, could easily be filled with loft owners.)

Prospect Heights boundary issues



The proposed district nudges right up to the AY footprint. For example 555-557 Carlton Avenue, as shown in the slide above, is on the southeast corner of Dean Street; on the northeast corner is part of the AY footprint. And just up the block, at the corner of Carlton Avenue and Pacific Street, is the yellow building pictured above.

Caveats regarding the real estate media (#9 In Brownstoner's list) and the "Men of Myrtle"

In Brownstoner's list of the Top 50 "most influential people who have shaped Brooklyn neighborhoods," the Media (including me) snag the #9 slot and, while I won't quibble with the ranking, I do think the congratulatory air deserves some caveats.

Brownstoner states:
If a tree falls in the woods and nobody hears it, does it make a sound? No matter, with hundreds of reporters and bloggers in Brooklyn even the mere crack of a twig can turn into a fever pitch, and as a blog, we see media as a collective force since its work product is consolidated on our pages (yes, we know this is shameless cheating). Battles over projects like the Downtown Brooklyn redevelopment, Atlantic Yards and Coney Island are played out in the media daily, swaying public opinion, galvanizing activists, and selling the borough to buyers and investors. Speaking of buyers, a National Association of Home Builders study found during the boom years, over half said media reports had an impact on their decision -- where to buy, when, and at what price. An updated study was done during these bust years, and a spokeswoman told us the number was much higher but declined to release the figure. In Brownstone Brooklyn, with three of the nation's bloggiest communities, buyers especially have the edge, and may even discover a neighborhood they wouldn't have previously considered. A few of the many local notables: New York Post reporter Rich Calder and Daily News reporter Jotham Sederstrom break Brooklyn stories in the tabloid wars, and Brooklyn Daily Eagle columnist Dennis Holt and Brooklyn Paper editor Gersh Kuntzman disagree about almost everything in the local rags. Our publisher Jonathan Butler started Brooklyn’s most-read blog (our commenters, the New York magazine noted, encapsulate the “Brooklyn Wars”), and a city-wide hit with the Brooklyn Flea, bringing an average of 5,000 people into Clinton Hill every weekend. Other notable bloggers include Robert Guskind, founder of Gowanus Lounge and Brooklyn editor of city-wide Curbed, and Norman Oder, who has broken multiple stories on his Atlantic Yards Report. And speaking of Atlantic Yards, No Land Grab is the site that has tirelessly compiled every iota of media since the fight began.

Missing: the Times's Bagli

While in the list as a whole Brownstoner understandably tried to avoid personages of city-wide influence, the single most influential journalist covering real estate is Charles Bagli, real estate and development reporter for the New York Times. Only Bagli, it seems, can get Bruce Ratner (#1 on Brownstoner's list) to sit down mano a mano, driving the citywide (and even national) discourse with articles about the Atlantic Yards stall and, less credibly, the phantom scaleback.

If and when Bagli turns his attention to the New Domino project in Williamsburg, for example, maybe the city will recognize the project is much less about historic preservation than, as with Atlantic Yards, a request to build bigger than currently allowed. (In this case, it's a city rezoning, rather than, as with AY, a state override of zoning.)

What's missing

While, as Brownstoner states, the Downtown Brooklyn redevelopment, Atlantic Yards, and Coney Island all have gotten significant airing in the media, it's embarrassing that the citywide media could have misread a New Domino waterfront opening event on October 19; rebloggers at Brownstoner (and elsewhere) followed along.

"Nowhere in the country do so many people get so little local coverage," Brooklyn College professor Paul Moses has observed about Brooklyn's place in the local mediascape, given that Brooklyn, which would be the country's fourth-largest city if it were independent, does not have a comprehensive daily newspaper.

Yes, the publications, including blogs, cited by Brownstoner, have covered in great detail the development game, including issues of pricing, DOB violations, landmarking, and architecture, as well as events at community meetings. That's been valuable. (Also, though the commentary on Brownstoner can get snarky, it clearly generates readers.)

But it hasn't been always complemented by some deeper reporting less tied to higher-end neighborhoods. For example, it took months before the concept of "predatory equity"--investment funds making speculative investments in rental housing, intending to raise rents significantly-- got any traction among city officials, after local activists made the point, and months before the term hit the New York Times. (How often have we seen "predatory equity" on Brownstoner? None, as far as I can tell.)

And, while blogs have on the whole added to the discourse, the focus (my own included) on specific controversies can obscure the fact that other worthy issues deserve attention, such as the long-delayed Ingersoll Community Center. We need new bloggers to produce original material, not merely to echo and/or comment.

And what about the big stories that are under the radar? Surely we've all seen ads for United Homes; is the lawsuit against them, which claims predatory lending practices, bogus or just the tip of the iceberg? (It was referenced in a comment on Brownstoner.)

Developer-friendly list?

I'm not the only one to notice other flaws in Brownstoner's list. While there are some interesting names--for example, restaurateur Jim Mamary and a couple of land-use attorneys--as one commentator noted, "I know this is Brownstoner, and thus a blog that focuses in on real estate issues. But it seems like there are an awful lot of developers on this list."

Well, any list is subjective, and Brownstoner's treatment invites shorthand. Still, the summaries can be a little developer-friendly. One example:
18.The Men of Myrtle. The hopes of Downtown Brooklyn as a residential hub hinge on the critical mass of buildings rising at or near the intersection of Flatbush and Myrtle Avenues. The Oro, the 309-unit tower brought to you by United Homes, was the first to be completed, but a second Oro tower next door has been hanging in the balance. Next online has been The Toren, a 38-story, SOM-designed tower developed by BFC that's managed to stand out from the crown by emphasizing its design and green-ness. Avalon Bay is hard at work on its 650-unit rental project across the street. Pulling up the rear at 202 Myrtle Avenue is the first phase of John Catsimatidis' planned four-part complex which will hopefully provide some much needed supermarket and drugstore retail. A block away on Flatbush, work at the Isaac Hager's Flatbush Flatiron has been mightly slow lately. (Hager's also busy over on Kent Avenue in Williamsburg.)

Let's note that the Toren (a Brownstoner advertiser) has also stood out for its use (abuse, according to the Village Voice) of non-union labor.

If Catsimatidis will "hopefully provide some much needed supermarket and drugstore retail," that's because he tore down existing such retail and residents have been frustrated it's taken so long. And, as noted above, Oro developer United Homes has also been questioned.

In basketball saga, is Brooklyn more like Oklahoma City or Seattle?

Could it be that it is only smaller cities that need major league sports to feel "major league"?

Bruce Schoenfeld's New York Times Magazine article yesterday, headlined Where the Thunder Comes Dribbling Down the Plain, describes the transformation of NBA's Seattle SuperSonics into the Oklahoma City Thunder, and the latter city's embrace and support of the team.

The lessons for Brooklyn, I think, are mixed. Unlike some other medium and large cities, where existing major league teams suck up attention and media coverage, Brooklyn's in a big enough market to support a team, should the Nets ultimately move here.
Brooklyn is more like?

However, the Atlantic Yards saga suggests that New York behaved more like Oklahoma City than Seattle, offering political support, lobbying, and public funds to attract the team and built the arena, while in Seattle voters approved a measure, proposed by a group called Citizens for More Important Things, that ensured that any public money toward a new arena would have to generate legitimate financial returns.

Yes, the credit crisis may upend the Atlantic Yards plans, but in December 2003, when the project was announced in the midst of a booming real estate market, Brooklyn Borough President Marty Markowitz appeared almost abjectly grateful, saying:
Y’know, it wasn’t that many years ago that no one wanted to invest a dime in our borough. We should be celebrating it, and that’s how I feel, most enthusiastically.

The small market

Schoenfeld writes:
Yet given the way professional basketball has evolved, the Sonics’ move may have been inevitable. As I spent time in both Seattle and Oklahoma City, it became evident that the intense passions on both sides — Oklahoma City has been as feverish about the team’s arrival as Seattle was about its departure — were obscuring a larger issue facing the N.B.A. It may be that a midsize market like Seattle, with its big-league baseball and football teams and a wealth of recreational and entertainment options, has outgrown professional basketball, or at least the desire to fight terribly hard to keep it. A more appropriate home for a franchise these days seems to be a smaller city on the rise, with maybe a million to a million and a half people, plenty of money, local and regional art museums and a few ambitious restaurants but not too much else for its population to do, and an excess of civic pride ready to be harnessed. A place, in other words, exactly like Oklahoma City.


It would make the city major league:
Economically speaking, the Thunder will cause barely a ripple in Oklahoma City, where two energy companies with combined annual revenues approaching $20 billion, Devon and Chesapeake, are headquartered. [But] “It will enhance public perception of the entire state,” gushed Brad Henry, Oklahoma’s governor, when we spoke. “We’ll be on SportsCenter every night.”

Almost unanimously, it seems, Oklahoma City’s establishment — businessmen and columnists, Democrats and Republicans — believes that the N.B.A.’s presence will validate a community that seemed hopelessly downtrodden only a short time ago.


Seattle matured

While NBA Commissioner David Sterm is adamant that franchises remain in the largest cities, he acknowledges that small markets--e.g., Sacramento, San Antonio--without competing teams can be very successful. Schoenfeld follows up:
Like Oklahoma City, Seattle once craved the status that comes with a big-league designation. In 1967, it secured an expansion franchise to play in a five-year-old arena that had been upgraded with taxpayer money to attract a team, a situation almost precisely analogous to Oklahoma City with its Ford Center. Seattle was different then, pre-Starbucks, pre-Nirvana, on the fringe and without the Seahawks or the Mariners.

...As in every market on the continent with franchises in multiple leagues, Seattle’s football and baseball teams have been its priority. The Sonics, tradition-rich as they were, ran a distant third, and the civic and corporate resources needed to support big-league sports may not have extended that deep. In Oklahoma City, by contrast, the team will have almost no competition for the sports-entertainment dollar beyond college programs, and residents are hungry for a team. “The voters in Oklahoma City passed $126 million in improvements to the arena,” says Gavin Maloof, whose family owns the N.B.A.’s Sacramento Kings. “That shows me they really want the team.”


Asking the people

In New York, needless to say, support for the proposed Nets arena was never put to a vote. The most recent poll, from Crain's, shows respondents supporting the project, not the arena, though I contend the poll design influenced the response.

When New York residents were polled by the New York Times in 2004 and 2005, however, they expressed opposition to an arena that required eminent domain and required hundreds of millions of dollars in public funds.

Sunday, October 26, 2008

Lupica: Commissioner Stern is watching

From Daily News sports columnist Mike Lupica today:
Commissioner Stern must be pretty proud of the way things are working out for the Nets, geography-wise, and attendance-wise, the whole ball of wax.

And team-less Seattle, as noted on NetsDaily, may see Key Arena get renovated.

The IRS decision this week on tax-exempt bonds was very good news, from the perspective of Atlantic Yards backers. The deadline for Barclays Capital to renew and possibly renegotiate the naming-rights deal for the Barclays Center is less good news.

And the tanking stock price, and lowering of Forest City Enterprises' credit rating makes it more difficult, though not impossible, for the developer to wait patiently on Atlantic Yards.

Does anyone think that, even if the Brooklyn arena gets built, the Nets will spend four full seasons at the Izod Center in the Meadowlands?

Update: Mitch Lawrence of the Daily News (right) doesn't think the arena will be built at all. I'm not so sure.

Vox populi on term limits vote missing from the print Times

While the New York Times published six letters on Thursday, the day of the City Council's vote to overturn and extend voter-imposed term limits, it had not published a letter since. That's a serious lapse, after all, there were 710 comments on the Times's CityRoom blog responding to the Council's vote and 105 comments after Bloomberg defended the move on the radio.

Even if the Times eventually publishes some letters, it has partly squelched the instant voices of dissent.

Oh, and the Sunday City section surely has an article about the implications of the term limits extension, right? Nope. The lead article is about the proliferation of specialty coffee shops.

Saturday, October 25, 2008

Testy Kucinich presses city officials on “gaming” Yankee Stadium assessment; big disagreement over “smoking gun”

During a charged but inconclusive Congressional subcommittee hearing yesterday, a sometimes testy Rep. Dennis Kucinich pressed officials from the New York City Department of Finance (DOF) and New York City Industrial Development Authority (IDA) on how and why an assessment for the land under Yankee Stadium leaped sixfold in a day.

The officials stood their ground during the three-hour hearing, insisting implacably that nothing untoward had gone on, even as a fellow witness, New York Assemblyman Richard Brodsky, periodically expressed disbelief at their testimony.

(From left: Brodsky, Department of Finance Commissioner Martha Stark, Industrial Development Authority President Seth Pinsky; and New York Yankees President Randy Levine.)

While the hearing proceeded under the conclusory title, “Gaming the Tax Code,” and Brodsky and Kucinich walked in convinced of exactly that, the only “gaming” that clearly occurred was accomplished by the city and the Yankees, given that, as a frustrated Kucinich pointed out, they have failed to release 70% of the documents requested and released some key information his committee had requested only on Wednesday, after the Treasury Department had released new rules on PILOTs (payments in lieu of taxes), rendering the subcommittee’s investigation partially moot.

Kucinich, chairman of the Domestic Policy Subcommittee of the House Oversight and Government Reform Committee, had asked the Treasury department to not issue new regulations until the subcommittee completed its investigation, but was rebuffed. The new regulations grandfather in three projects--stadiums for the Yankees and Mets, and the planned Atlantic Yards arena--under looser rules that allow fixed PILOTs. (Floating PILOTs would be much harder to sell in the bond market.)

While Kucinich and Brodsky expressed exasperation, Yankees President Randy Levine presented a sly dig at the Congressman and a more forceful criticism of the Assemblyman, and DOF head Martha Stark, who seemed unflappable, also snuck in some digs at Brodsky.

The latter (right), who didn't get as much chance as he clearly wanted to rebut the testimony of Stark and IDA head Seth Pinsky, declared that "the documents that the Chairman read into the record are a smoking gun."

"In the end the evidence that the assessment of Yankee Stadium was cooked was overwhelming,” he said, later adding, "At some point, if we’re in an evidentiary hearing, where there’s cross-examination, I am confident we could carry the day." Indeed, while the city officials stood their ground well, their explanation of why parcels on the Lower East Side were chosen as comparables for the assessment remains vulnerable. (Here's coverage of Brodsky's prior report and hearing.)

The AY implication

The hearing aimed to examine whether city officials improperly reported to the Internal Revenue Service and prospective bond purchasers inflated values for land and buildings in order to secure more tax-exempt bonds for the construction of a new Yankee stadium. City officials said no, that in part the value was related to the cost of the expensive new building--but they couldn’t fully defend using comparable assessments from as far away as Alphabet City in Manhattan.

Atlantic Yards was hardly mentioned, but IDA head Seth Pinsky emphasized that city and state officials considered the new regulations more important to get the arena built than to get additional bonds for the two baseball stadiums, which are already under construction.

While I and others have expressed skepticism that the planned PILOTs to build the arena would be insufficient to pay the bond, given that the foregone taxes would have to be high enough to offset bond payments for a structure costing nearly $1 billion, the Yankee Stadium example seems to ensure that the PILOTs will work. In essence, the more expensive the building, the higher the underlying land value, and thus the higher the PILOTs.

Kucinich pledged to continue his investigation, so the implications of that strategy likely will be tested.

(Other coverage from Neil DeMause on the Village Voice blog; the New York Times, the Observer, Newsday, the Daily News, and the AP.)

Kucinich weighs in

In his opening statement, Kucinich pointed out that, as shown in previous hearings, “the practice of providing taxpayer subsidies to the building of sports stadiums is a transfer of wealth from the many taxpayers to the few wealthy owners. The new Yankee Stadium is no exception to the rule. Here, not only are city and state taxpayers are on the hook for expensive infrastructure improvements provided for the Yankees, but also federal taxpayers are deprived of hundreds of millions of dollars of tax revenues because the bondholders will pay no federal taxes on the $950 million of bonds issued to construct the stadium.”

He said that the Yankees and the city declined to testify at the Subcommittee’s hearing last month, “because they argued it was unfair to proceed before the Subcommittee could complete its investigation with the benefit of documents on the issue. No matter that the Yankees and City had withheld precisely these documents from the Subcommittee for two months.”

Kucinich charged that the “the timing and apparent coordination of the Yankees’ and City’s actions seem aimed to facilitate a favorable decision from the Treasury Department on their request to have City projects grandfathered from new regulation that proposed to close what the Treasury termed the PILOT ‘loophole.’ They got their wish.... The Yankees’ and City’s continued attempts to stymie this investigation is evidence that they don’t want to the truth to come out.”

He noted that the City is claiming attorney-client privilege in not releasing communications requested--but that privilege has never been binding on Congress.

Inflation of assessment

While subcommittee staff “has uncovered a litany of serious questions about all aspects of the $1.229 billion stadium assessment,” Kucinich said the hearing would “focus on what appears to be the most clear and egregious inaccuracies in the assessment: the possible inflation of the stadium site assessment.”

“From evidence that Subcommittee staff has reviewed, it has become clear that from the very beginning of the assessment process top City officials made it known to the Department of Finance (DOF) that they should be mindful of the Yankees’ interest ‘in seeing that the assessed valuation [would] be high enough to generate as much PILOT for tax-exempt debt as is lawful and appropriate.’ And DOF buckled.”

Whether and how that exactly happened was a matter of much debate during the hearing. Kucinich noted that, on March 21, 2006, DOF valued the 17-acre stadium site at $26.5 million, by comparing the South Bronx stadium site to land parcels in comparable Bronx neighborhoods and other comparably low-value areas in Staten Island and Brooklyn.

That valuation, about $32/sf, was “roughly in accord” with two other City-commissioned appraisals of substantial portions of the stadium site: a $21 million ($45/sf) appraisal in May 2006 of 11 acres commissioned by the New York State Office of Parks and submitted to the National Park Service; and a $40 million lease appraisal ($63/sf) in July 2006, of 14.5 acres, commissioned in conjunction with state-law requirements to proceed with the stadium project.

A day later, DOF revised its valuation of the stadium site some 600%, to $204 million, or $275 per square foot. Kucinich scoffed at written testimony already submitted by Stark, noting that DOF abandoned nearby comparables and chose “comparatively high-value neighborhoods in Manhattan."

“Why did this happen?” he asked rhetorically. “The Yankees were happy to pay more PILOTs to finance the construction bonds as long as the federal government and federal taxpayers would provide them with cheap tax-exempt bonds.” Typically, he noted, cities would raise taxes to pay debt service on bonds, therefore burdening their taxpayers with a more grandiose stadium.

“With PILOTs, the City reaps the benefits of the tax-exemption while shouldering none of the burden," he said. “Artificially inflating the stadium assessment would be the next step—albeit a graver step and an illegal step—down this path. “

A Republican is a “homer”

Rep. Christopher Cannon (R-UT), the ranking minority member, offered the city and team an olive branch. “If we have another baseball hearing,” he said affably, “I think American people are going to start worrying about whether Congress hates America’s favorite pastime.”

He said that, when the negotiations were done, the tax law was clear, though that’s not quite so: the city and state got a private letter ruling (PLR) to endorse the stadium, and the IRS then moved to close the “loophole.”

But he did provide a justification for grandfathering in the AY arena and further bonds for the stadiums, saying, “If we change the law in the middle of the deal, it would be unfair to those who put the deal together. It’s ludicrous that we are targeting New York City for entering into a legal deal.”

He criticized Kucinich for “demonizing the city” for “deciding to spur economic development in one of the poorest Congressional districts in the country.”

Moreover, he seemed to draw from testimony by Levine in stating, “This project has gone through more vetting than any other project in recent memory.”

A Kucinich ally

Rep. Elijah Cummings (D-MD) said that, despite Cannon’s disbelief at the charges, many people had heard statements regarding the “worldwide financial fiasco” that they previously would not have believed.

“What we are seeing in New York is a situation where I believe the federal government was simply taken to the bank,” he declared.

The Yankees’ take

Levine testified that, without PILOTs, a new stadium would not have been built and the Yankees would’ve been forced to leave the Bronx--a threat that, at least according to evidence presented at a hearing held by Brodsky, is certainly debatable.

He said that Brodsky voted twice for the project project and never raised any objections, that Brodsky, who says he’s against subsidies for sports facilities, “voted for a cash bailout of over $100 million to the New York Racing Association, and, “in a moment worthy of the grandstanding hall of fame,” released his report the day before the final game at “the historic Yankee Stadium.”

Sounding a bit reminiscent of former Atlantic Yards point man Jim Stuckey in both tone (earthy New York accent) and tactics, Levine cited the “tremendous transparency” (a direct Stuckey quote) for the project, invoking at least 16 public hearings and meetings and approval by the state Legislature and City Council. (AY has never been approved by the City Council.) “It is clear that the Yankee Stadium project was thoroughly vetted by New York’s elected officials,” he said.

Jabbing back

Levine pointed to the role tax-exempt financing has had in reviving cities, choosing Cleveland, the first major city to default on its bonds, while “you were mayor,” he said. (Kucinich, noted the New York Times, did not make eye contact.) Levine described Cleveland as “where my owner comes from,” a somewhat awkward reference to Yankees owner George Steinbrenner.

“Subsequent actions and policies helped Cleveland recover and prosper,” Levine said, citing the building of Jacobs Field for the Cleveland Indians.

Then he departed from his prepared testimony: “Congressman Cummings, I think we’d all agree, the building of Camden Yards [home of the baseball Orioles] in Baltimore, which was done with public subsidies, transformed that city.”

While no one rebutted that statement, it’s hardly clear. While Camden Yards and the nearby Inner Harbor clearly transformed sections of the city, Baltimore has been mired in economic difficulty, hence the grim HBO drama The Wire.

Levine went on to cite the various benefits to state, city, and borough-based firms in the project.. He said construction of the stadium “employed 6000 people;” no one pressed him on the fact that, in construction industry parlance, jobs are job-years, so the statement most likely involved 6000 job-years rather than 6000 people.

He also cited the Yankee Stadium Community Benefits Agreement (CBA), which others have criticized severely. In contrast to testimony from Brodsky, Levine said 1000 new jobs will be created and that, only because of this stadium, a long-sought new Metro-North train station would be built.

Again jabbing back at Brodsky’s reports on significant price increases in the stadium overall, Levine said that about 35% of the seats will cost $25 or less, and about 25,000 seats will have no price increase, including 5000 bleacher seats at $12.

He returned to the justification for the financing deal. “We don’t pay taxes in the present Yankee Stadium, [which is owned by the city],” he said. “If this agreement wasn’t put in place, there would be no new taxes. As a result, the PILOT services the debt. There is no money coming from New York City or New York.” He added that, while the city paid for maintenance of the old stadium, now the Yankees will pay, a $40 million savings to the city.

He concluded by responding to Kucinich: “I don’t recall ever declining an invitation on all the previous scheduled matters.” Indeed, it was the city, not the Yankees, who balked.

Pinsky: city proud of deal

IDA head Pinsky presented the city as proud of the deal. He noted, “One of Mayor Bloomberg's first acts upon taking office was to terminate previously-negotiated deals between the City and the Yankees -- deals that would have provided for a new stadium funded almost entirely out of City capital funds.” The PILOTs financing deal emerged after “nearly four years of difficult, sometimes contentious.”

He said the structure “is consistent with nearly 100 years of federal tax policy,” and cited other tax-exempt bond deals used to build sports facilities

Then, in a sly jab, he continued, “In fairness to the opponents of this project, though, there is one difference between all of these projects and the Yankee Stadium project. Namely, unlike in the cases cited above, the Yankee Stadium project succeeded in deploying this federally-created tool to encourage economic development in what the 2000 census determined to be the single, poorest Congressional district in the United States.”

He also cited the validation of the project in one of the most thorough and transparent approval processes in the history of New York City, New York State, and likely the nation.”

He described the methodology behind the tax assessment as both standard and appropriate, suggesting that a earlier appraisals were “for totally different purposes and based appropriate on entirely different sets of assumptions,” such as diffferent permitted uses and different levels of investments.”

“Claiming that a marked disparity between these valuations is a sign of malfeasance is no more logical than drawing the same conclusion from the assertion that the canvas on which a work of art is painted by a great master would be worth less if it instead contained a work by an artist with far lesser talent,” he asserted, in an intriguing comparison that was never addressed in the hearing.

“The bottom line is that the new Yankee Stadium represents a $1 billion plus investment in the South Bronx, backed entirely by payments from a private organization,” he said. "Projects like this are the reason that this type of financing exists. Absent the use of this tool, this project would have either created substantially fewer public benefits, not have happened in the South Bronx, or simply not have happened at all.”

Stark: the DOF defense

DOF commissioner Martha Stark first expressed her sense of honor at being able to testify. She noted, with a dig at Brodsky’s home district, that New York City, unlike most jurisdictions and parts of Westchester County in New York, assesses each of its properties every year.

The city uses three universally accepted methods of valuation, she said. Small homes typically are valued on the “sales approach,” based on comparables. Office buildings and residential apartment buildings that generate income are valued on the “income approach.”

However, DOF values new construction for specialty properties such as stadia, utility property, museums, court houses, and churches are based on the “cost approach,” the spending on construction.

The cost approach required DOF to estimate the cost of construction as well as the value of the land. DOF validated the costs by comparing the submitted costs to industry-published cost guidelines and to other stadia, then adjusted the costs by two factors: when the stadium was completed (time) plus the add-on cost of construction in New York City (location).

“Our estimated value for the new stadium was $1.025 billion if the stadium were completed in January 2006,” she said. Initially assessors valued the land as a vacant parcel, she said, not explaining why they made such an error. However, she said, DOF values a developed property by taking a percent--typically 15%-25%--of the overall property value. “As a result, the Finance team realized that they had not done the value correction.”

Her explanation: “they used vacant land rather than land that had benefited from government infrastructure improvements and investments.” What exactly are comparable infrastructure improvements and investments remained an issue of debate.

(Neil DeMause writes: I don't have any appraisers on speed-dial, but I did just call Independent Budget Office economist George Sweeting to get his response to all this. His reply: The city keeps two "baskets" of value for determining property taxes - land value and improvements value. "Thinking about it logically, the economic value of the land should show up in the land value," he says, while any value of stuff that's dropped on top should show up in the "improvements" line. The land under the original Yankee Stadium, Sweeting notes, is valued by the city at a mere $7 million - despite having a baseball stadium on top of it, not a housing complex.

The DOF correction

“The assessors identified 11 lots that were more appropriate comparables because they reflected land in similar neighborhoods, including Harlem, which are less than a half a mile away and where the land value had been enhanced because of significant government investment, like the investment that would be made here,” she said.

Using the median sales figure of $275 per square foot and multiplied by the 17-acre size lot that was under consideration at the time, the land value became $204 million. Adding the building and land values, DOF estimated market value for the new Yankee Stadium at $1.229 billion, later reducing the lot size and lowering the market value for the land to $175 million.

“It’s an absolute honor to be here,” said Stark, closing her testimony with a personal note. “I can only say I wish my parents were alive to see the day, their daughter from the housing projects testifying here before you.”

“We did it with the utmost sense that it was the right thing to do,” she said.

Brodsky fights back

As if coming from an alternate universe, Brodsky then got his licks in. First, he noted that “the Yankees, after initially agreeing to provide information, have flatly refused to do so,” pledging additional inquires before his Assembly committee issues a Final Report.

He said the committee stands by conclusions: “that there was no measurable economic benefit to the region or the community resulting from massive public subsidies... that the public, not the Yankees, were paying for the new Stadium, that the actions of the New York City IDA were at variance with the requirements and purposes of State law, that the binding promises made to the IRS as a condition of receiving the tax exemption were broken, that the assessments of the land and Stadium were knowingly inflated, that the public interest in affordable ticket prices had been ignored, that fundamental decisions about these subsidies were made in secret and without effective participation by elected officials, that the securitization of PILOTs was a dangerous practice which was part of an explosion of public debt....”

“The Interim Report set forth at length the unusual, inappropriate, and indefensible practices of the Department of Finance,” he said. “These included the use of comparable’ parcels in Manhattan, the failure to make required adjustments, unusual and unexamined categories of value, and the use of uncertified representations of value by an investment banker.”

“We can now add to that list the use of valuation methodologies that artificially inflated the value of the new Stadium itself,” he said, citing the issue of “Reproduction” cost (rebuilding exactly) vs. “Replacement” cost (rebuilding functionality) for determining the value of the Stadium over time--an issue that did not get much traction during the hearing..

He said that DOF requested that replacement cost be used, but agreed under stress to reproduction cost.

Did DOF lie?

While DOF claimed it was unaware of the City’s representation to the IRS, Brodsky said that was not true: “DOF was aware of this unfair and special treatment given the Yankees, at first protested that decision, and then agreed to it:

He said: “NYC DOF Assistant Commissioner Dara Ottley-Brown wrote in an e-mail to Peter White of Nixon Peabody, the lawyer for the City, that DOF ‘would like to substitute reproduction with replacement cost everywhere reproduction cost is mentioned.’ Mr. White responded asking “would it be okay to proceed without changing the language?” to which Ms. Ottley-Brown responded ‘As long as we are not held to a strict interpretation of reproduction cost new.’”

He scoffed at the DOF’s description of land valuation. If the value of Yankee Stadium were to increase the underlying value of land at the site, he said, it should increase the value in the surrounding neighborhood. But Yankee Stadium land is valued at $275/sf, while land at the nearby Bronx Terminal Market is $9/sf. He suggested that the use of land in Manhattan as a comparable to land in the Bronx “is unheard of”--which isn’t clear. “While I appreciate the reference to Harlem, they chose parcels on the Lower East Side.”

He noted that DOF cited adjustments for time and other elements, which were appropriate. However, he charged, DOF didn’t make such adjustments for the size of the parcel or the location of the parcel. “I know that, because I met with the people who did the appraisal. In the end the evidence that the assessment of Yankee Stadium was cooked was overwhelming.”

“I want to acknowledge the personal comments made by Mr. Levine about me,” he said in conclusion. “The bullying and blustering tactics of the Yankees and Mr. Levine are well known, and it will be irrelevant to the work we do, but I have never found it useful to allow personal attacks to go unanswered.”

Inappropriate action?

After about an hour, Kucinich finally got to question the panel. He repeatedly questioned Stark about possible improprieties and undue pressure from the IDA and the Yankees, but could not get her to admit to it.

He cited an email a DOF deputy commissioner reporting that a city lawyer had noted that an attorney for the Yankees wanted to know how DOF was planning to assess the stadium site. Later, the city lawyer requesting a meeting with DOF and Yankees, noting that the Yankees had “an interest in seeing the assessed valuation will be high enough to generate as much PILOTs as is lawful and appropriate.” The lawyer also wrote that the deal was “on the fast track.”

Kucinich asked Stark if it was appropriate for DOF to factor in that “interest” expressed by the Yankees, and whether it was a typical consideration.

Stark remained cool. “As I said in my testimony, and even the email you quoted, we were asked to do what is lawful and appropriate,” she said.

“Is it typical for the city attorneys to convey to DOF officials that a property owner has an interest in a certain DOF assessment?” he asked.

“I wouldn’t say it was coming from City Hall at all,” Stark responded, arguably evasive in content if not tone. “What was going is, because I believe city was preparing an application, they needed to understand how we’d value the stadium if it was completed.”

She said it was “not atypical for people to ask us how will we value property when it’s completed and when it’s done. There was no pressure on us.” She cited the DOF’s recovery, under the Bloomberg administration, from a tarnished reputation, including tax assessors who took bribes.

“A lot of times we are contacted to let us know if there is something going on,” she said.

Kucinich asked for examples.

Stark cited the former Board of Education building in Brooklyn, now the development known as 110 Livingston Street. “We were contacted because the building was hopefully going to be redeveloped, and we were asked what will be the value of that building if it were redeveloped.”

[Neil DeMause notes that it was a publicly owned building.]

Kucinich asked her to prepare a list of other examples.

“Did it seem strange to you that a higher assessment was being sought, rather than a lower one?” he asked.

“It seemed to me an appropriate assessment was being requested and that’s what we provided,” Stark responded unflappably. “We came up with a value that we believe was lawful and appropriate consistent with widely acceptable appraisal methodology.”

Did DOF know

“Were you aware that the reason Yankees had an interest in a higher assessment was to support a higher amount of PILOT-based bonds?” Kucinich asked.

“No, sir, I was not,” Stark replied. “People on the finance team do not at all get involved in how PILOT is calculated. We leave that to EDC people.”

Cannon vs. Brodsky

Cannon challenged Brodsky, asking, “Isn’t it largely up to the states to how they use those bonds?”

“My plea is that you put some common sense restrictions on that,” Brodsky said. “There’s no value to the economy of the United States when the state of New York buys off a corporation to move from Pennsylvania.”

(Indeed, a city main justification for the Nets arena is that it would capture tax revenues that currently go to New Jersey, though that’s hardly an argument for a federal subsidy.)

Why should the federal government limit what states want to do, Cannon asked.

Brodsky, who usually has the opportunity to occupy the seat of the questioner, considered his language. “Well,” he said, “because once in a while states would choose to do things that are not a good use of national resources.”

“Good use implies somebody is much wiser than someone else,” suggested the conservative Congressman.

“That happens all the time, Congressman,” Brodsky responded tartly. “That’s your job. That’s my job.”

Cannon suggested it was a clash of philosophies. He said choices should be made at the lowest levels of government rather than imposed from above.

“Respectfully,” Brodsky riposted, “Congress sets standards for the expenditure of federal dollars all the time.”

Stark’s defense

Cannon asked Stark about reproduction vs. replacement costs.

“The difference in what Mr. Brodsky suggested is pretty odd to me,” Stark said. “We use replacement cost 10 to 15 years down the road if we have to value the stadium as it is. When you use reproduction costs, you have to take a calculation off for depreciation... The distinction is irrelevant for this stadium, and the reason is, we had actual cost numbers to estimate the value.”

Cannon asked about the email statement regarding not being held to “a strict interpretation.”

The latter, she said, would require calculation of depreciation. “My understanding is that reproduction and replacement costs are interchangeable in IRS regulations,” she said.

Cannon asked if there was anything inappropriate in the email.

“Absolutely not,” Stark responded.

What about the distinction between the $275/sf and $9/sf valuations, he asked.

Bronx Terminal Market, she said, is valued not by the cost approach, but by the income and sales approach.

Pinsky’s defense

Cannon then used his allotted time to let the other panelists respond.

Pinksy wanted to provide some context to an email Kucinich cited, in which the IDA head was seeking the projected assessment for the stadium.

“Are you saying you needed ‘a number’ or 'the number,’” Kucinich asked.

“We needed a number,” Pinsky responded.

Diplomatically, Pinsky said he wanted to “point out an error,” which, arguably, was a skewing. He noted that Kucinich quoted his email, which said “I’d like to understand what DOF’s projected assessment is before it is released publicly to make sure it conforms to our assumption.”

While that sounds suspicious to some, Pinsky allowed, he said it continued with these words: “and if it doesn’t, to understand what the implications are.”

Kucinich presses on

“What would the implications be?” Kucinich asked, unapologetically.

“That the PILOT may have been lower than what we were projecting,” Pinsky said, “and that could’ve created an issue with the underwriting.”

“Fortunately, the number that came out of DOF, through no pressure on our part,” he said, “was not that far off from what we projected.”

Kucinich pressed on: “Did you or anyone working with you or at your behest have any contact with anyone who was instructed to contact DOF relative to the number that was needed to correspond to the specific PILOT?”

“I am not aware of that, no,” Pinsky said. “Let me be clear. There was contact with DOF,” he said, but it was not pressure.

Kucinich offered, a bit sarcastically, “I would just say, before we move on, luckily, everything worked out, it’s really quite amazing.”

“No I wouldn’t call it--” Pinsky started to respond.

Kucinich cut him off and turned to Cummings.

Cannon, Kucinich’s ideological opponent, interjected jocularly, “I’m thrilled you have so many tickets at 25 bucks.”

Kucinich responded sharply, “If I may say this to my colleague, this isn’t about baseball.”

Brodsky: “smoking gun”

Cummings asked Brodsky what concerns him the most.

“The documents the Chairman read into the record are a smoking gun,” Brodsky asserted. "Using the normal methods of assessment, the department came up with value of the land under the stadium of about $26 million. That got reversed by the use of extraordinary and I believe illegal methodologies, which include use of land on the Lower East Side to measure the value of land in the South Bronx."

“They could not generate enough money to pay the PILOTs with the assessment that was coming, so they changed it,” he said. “That is a violation of sworn promises to IRS by the IDA. If you’d like, sir, I’ll prepare a brief.”

“You’ve basically said somebody did something that was illegal,” Cummings continued. “Did I hear you wrong?

“I said precisely, Congressman, what I said,” Brodsky responded. “My committee is not charged with making determinations of legality... But what we saw and the inquiry showed and what the sworn documents show, is that the promise to use the same processes to assess the Yankee Stadium project that were used for other properties in the same class were not used. Those facts I am absolutely certain of.”

Stark responds

Cummings turned to Stark: “You heard what he said, didn’t you?”

“I did,” she said, with an edge in her voice.

She offered a defense of the DOF’s choice of the Lower East Side, one that I think was questionable and certainly would get more scrutiny at a hearing held in New York City.

“The Lower East Side is not a very wealthy part of the city,” she said, noting that “only two of the sales came from there. “The majority came half a mile away, from Harlem.”

When looking for comparables, she said, “you look first and foremost” in proximity to the site of the property.

That answer did not explain fully why the Lower East Side was chosen at all.

Stark suggested that Brodsky meant that most people think of Manhattan as having high-value real estate in Midtown. “The Lower East Side in this regard is much more analogous to Harlem and the South Bronx, the reason being, in order to generate any kind of investment in those communities, the city had to step in and do infrastructure improvements, whether by investing in housing, taking over abandoned buildings and the like. The Lower East Side is not one of the better neighborhoods in New York City--that is the point I was making. It is more analogous to Harlem, more analogous to the South Bronx.”

Well, the Lower East Side is certainly more analogous than midtown, but it has gentrified much more considerably than the South Bronx. (In fact, when she cited Alphabet City, the location is not the Lower East Side but the likely more valuable East Village.)

While Stark said the “significant government improvement and enhancement” in the areas chosen for comparables constituted investment in housing, for the Yankee Stadium plot, the investment was the new MetroNorth station.

While her statement may have sounded plausible, panelists could have pointed out that the city already had made significant housing investments (and one of the poster children for prudent use of eminent domain) in Melrose Commons, just a 20-minute walk east of Yankee Stadium.

Stark insisted that there was nothing inappropriate and nothing illegal. “Again, [Brodsky’s] own district doesn’t revalue property on a regular basis, and we do.”

Kucinich presses on


Kucinich tried multiple times, to get Stark to acknowledge that DOF acted in recognition of the PILOT issue, and she kept saying no.

“Did anyone have any communication with you, either Mr. Pinsky or [city official] Mr. [Joshua] Sirefman, relevant to the financing structures that rely on the PILOTs?” he asked.

“No sir,” she said.

Then he played prosecutor. “I’d like to give you a chance to reconsider your answer, in light of an email--”

Pinsky had turned to Stark, and Kucinich interrupted, with an edge in his voice: “Excuse me, Ms. Stark--”

“Sorry, sir,” she responded.

“What did Mr. Pinsky just say to you?” he asked, then addressed Pinsky: “Are you her counsel?”

“No, I’m her colleague,” he responded a bit abashedly.

“What did Mr. Pinsky just say to you?” he continued tensely.

“He said he through there might have been an email where they said they thought the PILOT was going to be calculated,” Stark said. “I’m assuming you’re going to read me a relevant portion and I’ll look through my files.”

Kucinich pointed to a March 20, 2006 email from Sirefman to Stark, under the subject line “Quick stadium question,” asking whom Pinsky should speak to about the issue. Another email, from Pinsky to Sirefman, stated, that he wanted to understand the assessment “before it is released publicly to make sure that it conforms to assumptions, and if it doesn’t, what the implications are,” then asking for a contact person at DOF.

“Now that you’re aware of this exchange,” Kucinich asked Stark, is there anything she wanted to add, and were there any other contacts?

Stark remained calm. “You read the full text of the email,” she said. “Nothing in there tells us other than it relies on PILOTs, which are limited to what the real estate taxes would be... This doesn’t change anything I said.”

Kucinich pressed on: “There was a communication where you learned that something was at stake with the assessment.”

“Sir, I don’t agree with you,” Stark responded, not implausibly. “It seemed to me what was at stake is they needed to now how we’d value the property, when we’d finish valuing the property. That was all that was at stake.”

Going to the overheads

DOF, however, had provided the subcommittee with five versions of a document titled “estimated market value for proposed Yankee Stadium,” prepared in just one month, between March 10 and April 10 of 2006. Kucinich had the documents projected on a screen.

The March 21 document, which valued the site at $26.8 million, used land sales in the Bronx, Staten Island, and Brooklyn, at $24-$52/sf, with the DOF choosing $33.50.

The March 22 document used $275/sf, with comparables solely from Manhattan.

“Ms. Stark, can you tell the subcommittee what accounts for sudden and dramatic difference in the site assessments?” he said, pointing to a “flurry of email traffic.”

Stark responded, “Typically, there are two ways in which you verify the accuracy of land value over the building value... One way is you look at overall value and take a percent to arrive at land.... Once it’s constructed, the value of the stadium actually enhances the value of the land... We wanted to look at properties that were enhanced by government investment and improvement. Washington Heights, Harlem, Manhattan Valley, these sales prices were more consistent with what we were asked to value.”

A balm for the defense

Cannon then got a chance to lob some softballs at the panel. He asked Pinsky about the many different bodies of government that approved the contract, the number of jobs, and the IRS private letter ruling that enabled financing.

Questioning Brodsky

Then he turned to Brodsky, asking if he’d voted in favor of the project.

Brodsky said state law required a vote on alienation of park land, not a vote on the merits of project. “I’d still vote yes,” he said, saying it wasn’t the legislature’s job to substitute its judgment for local government as long as the parkland was restored.

Not transparent?

“Why you think this was not a transparent process?” Cannon asked.

“It’s a fair question,” Brodsky responded. “It was a busy process.” The meetings cited “did occur. They were framed by public announcements that were not true. The vigilance that the community would normally have applied because they accepted some of these at the beginning was not what it should’ve been.... The bottom line was that the processes were formal and in many cases manipulated.”

Cannon asked if the Bronx was better off without the stadium.

Brodsky said no.

Was it a net benefit to the area?

Yes, acknowledged Brodsky. “It is not, however, a requirement to pour probably close to $2 billion of public money into that to rebuild it when the primary issue was: could the Yankees have afforded to do this without taxpayer money?”

What’s socialism?

“This is socialism, Congressman, of a kind which, as you described your district, that they would not easily take to," Brodsky continued. "There’s got to be a public return. There’s no public return.”

Cannon tried to debate Brodsky: “That’s when when an individual substitutes his judgment for what people want.”

“No, socialism is when community pays for private enterprises,” Brodsky said.

“No it is not,” Cannon responded. “Socialism is actually a well-defined concept that starts with the public contract...” He lost his train of thought before recovering by changing the subject: “The short of it--the issue here is tax policy.”

He asked if Brodsky had ever been opposed to public assistance to sports activities.

“Yup,” Brodsky said, citing legislation 15 years ago to restrict drunkenness at Yankee Stadium. He also said he questioned subsidies regarding electricity for Madison Square Garden. But he didn’t say anything about the larger issue of tax-exempt bonds for sports facilities.

Losing track?

Cannon gave Levine a chance to respond. The Yankees official noted that Rep. Jose Serrano, whose district includes the stadium, is “a very strong supporter, as are all of Mr. Brodsky’s colleagues from the Bronx.”

Cummings tried to refocus the panel: “There’s been a lot of discussion about all the wonderful things that the stadium is doing. That’s nice, but that ain’t the issue. Not for me, anyway. What I want to make sure is that there’s been integrity in the process.”

Kucinich presses on

Kucinich continued to analyze email communications among city and IDA officials regarding the DOF assessment.

Pinsky told a staffer he believed “it would be helpful to have directive from the top that we should be cooperated with.”

“It appears Mr. Pinsky called [the DOF’s] Ms. Ottley Brown at least once, the afternoon of March 22,” Kucinich said, noting that, during the same same afternoon, a DOF assessor forwarded Ms. Ottley-Brown a new list of land sales to be used as comparables. That evening, the assessment leaped.

He asked Pinsky if he remembered the phone call.

Pinsky said he had “a recollection of the phone call,” noting that he discussed “the need for us to receive this number because it was a part of the Yankee Stadium transaction,” the timing, and to make sure “we were coordinated on the announcement of the figure that was provided by DOF. In the event it was a number that was different from what we expected that we could react accordingly.:

“Do you have any explanation for the fact that the estimate went up so substantially?” Kucinich asked.

“I think we heard an explanation from Commissioner Stark, namely that the DOF looked independently at the numbers... and realized they didn’t make sense,” Pinsky said. “I can also say that the change had nothing to do with the conversation we had.”

“Did you explain to Ms. Ottley-Brown that, to support the planned PILOT paid by the Yankees, and the planned bond issuance, that the assessment had to be revised upwards?” Kucinich asked.

“I have no recollection of the specifics, but I can tell you for certain in no event I would’ve told her or anyone else from the DOF--” Pinsky said

Kucinich continued contentiously: “On the one hand, you said you had no recollection.”

“You asked a specific question,” Pinsky responded calmly. “I don’t recall how I phrased it. But--”

Kucinich, cutting him off, turned to Stark: “Do you have any knowledge of the phone conversation between Mr. Pinsky and Ms. Ottley-Brown?”

“I don’t have specific knowledge,” Stark said.

Other than the communication in which DOF was asked to coordinate on the announcement of the number, because of an upcoming City Council hearing, “I know of no other conversation between my staff and Mr. Pinsky’s staff,” she said.

She also noted that DOF “never released the number you cite, the $26.8 million... It was being reviewed internally... and that has been provided to this committee based on your request."

Cummings, in the tone of a country lawyer, interjected: “I’m just listening to all this. You had a figure in mind, didn’t you?”

“To be honest, I was not really working on the financing side,” Pinsky responded. “I knew there was a figure we had projected would be the figure.”

“That’s the figure I was talking about, the one you projected,” Cummings said.

“We absolutely had a figure,” Pinsky replied.

“How’d you come up with that figure?” Cummings asked.

“I believe that it was projected by the underwriters for the bonds,” Pinsky acknowledged.

“Was that figure communicated to anybody in Ms. Stark’s office?” Cummings asked.

“I don’t remember having communicated it,” Pinsky said, avoiding a flat denial.

It shouldn’t be strange, he said, that the numbers were similar, “if our underwriters were applying DOF’s standard methodology and DOF went and... came up a similar number.”

(That begs the question: how exactly did the underwriters apply DOF methodology? Isn’t it more likely they figured the assessment needed to match the PILOTs?)

“Ms. Stark," Cummings continued. "I want to make sure there’s nothing where somebody says, ‘Y’know, we’re going to come up with a 26.8 [million-dollar] figure and then somebody from your shop says ‘Wait a minute, that’s not going to work, it should be ten times that.’ That goes against the integrity piece... nothing like that happened?”

“That’s correct, sir,” Stark responded.

What about the L.E.S.?

Cummings asked Stark to describe the Lower East Side.

“It’s a neighborhood in Manhattan outside the Central Business District,” Stark responded. “It’s a part of town that has not done as well as Central Manhattan, more analogous to Harlem and the South. Bronx... it’s called Alphabet City, it’s kind of more of our bohemian sort of neighborhood.... It’s come back, in large part, because of the city’s investment in making sure all of the abandoned housing has been much improved.”

“For the record, we absolutely were not told what was the number or any number,” she insisted.

Cummings asked what specific part of the Lower East Side was involved.

“Down in the Sixth Street area, and over east,” Stark responded.

“Assemblyman Brodsky, you look you’re going to fall over in your chair,” Cummings observed.

“I want to explain once for the record what we found, why the practices were inconsistent with promises made and standard practices,” Brodsky responded. “First, the location of the comparables... The notion that the Lower East Side and Manhattan Valley is comparable to the area around the stadium, which you just referred to as the poorest community in New York, is laughable. It was chosen for a reason--the values are higher, much higher.”

Strategic adjustments for value

Then he pointed to the sizes of the lots chosen for comparables, including 4000 sf and 8000 sf. Yankee Stadium is 742,000 sf. “It is customary practice to adjust for parcel size when doing this kind of assessment,” Brodsky said, in high dudgeon. “They did not do that. It is also customary and required that they adjust for location... No, they did not.”

It is also customary to adjust for time, given that values go up. In this case, they did.

“Where an adjustment required by standard practice raised the assessment, they did it," Brodsky concluded. "Where an adjustment required by standard practice would've lowered the value, they did not do it."

As the hearing continued, there was no rebuttal.

Kucinich observed that the documents withheld are in the categories "that most likely will reveal if any improper inflation occurred and who directly pushed for the inflation."

Honing in

In the last round of questions, Kucinich pressed Stark about the “seemingly mutually contradictory explanations” about the increase in land value.

He noted that she contended the earlier $26.8 million assessment was incorrect, because it was based on value of a vacant parcel, and that DOF values developed property at typically 15% to 25% of overall value. “DOF indicated to IRS and bondholders that it is following the cost approach,” he noted. Thus, is it appropriate to value at a percentage of land value, or should it derive from comparable sales?

Stark clarified that DOF did not certify anything to IRS or bondholders: “The IRS ruling letter was made and requested by IDA and EDC.”

“Didn’t you make it to IDA and they accepted it” asked Kucinich.

“We let IDA know what we estimated,” she said.

“I was asked, how do we validate that number: we wanted to make sure we had checks and balances to make sure the land value as a percent of overall value made sense,” she said. “We looked at sales of land that were enhanced or improved by government investment.”

“I’d also beg to differ with Mr. Brodsky,” she said, noting that sales figures from the Lower East Side, $383/sf, were adjusted, given that DOF used $275/sf.

“How does this percentage method, even if it’s allowable under the cost approach and feasible, without knowing total value,” asked Kucinich, “square with the fact that, for both initial and final assessment, DOF valued land using comparable sales and not a percentage method. And, in fact, there’s absolutely no indication, from the documents produced, that a percentage method was the appropriate methodology, until we received your testimony yesterday."

“I wish the property tax were not as complicated as it is,” Stark responded. “I’ve spent an entire lifetime--”

Kucinich, cutting her off, asked for a direct answer.

“We arrived at overall land value using a comparable sale approach, then as a test,” Stark said, “What you do is check it as a percent of overall building value and the overall total value. We did not use that approach to value the property, we used it to validate the resulting land value that we got from using comparables.”

What improvements?

Kucinich asked Stark about the infrastructure improvements she had referred to, asking for another example where DOF increased a valuation sixfold. He also asked why commercial property nearby is assessed at such a lower rate.

Stark again pointed to the difference between the cost approach, used for stadiums, and the income approach used for other nearby properties.

While the $26.8 million value used sales from every single other borough, she said, it “was not specific to vacant land sales that had been enhanced by government improvements and investments.” In Harlem, she cited a new supermarket and the rehabilitation of abandoned housing.

Kucinich asked why distance has anything to do with the appropriateness of comparables, noting that East Harlem abuts the Upper East Side. He noted that the “site of the Columbia University expansion and trendy Alphabet City” weren’t comparable.

“Do you expect me or this subcommittee to believe that this... was anything other than cherry picking?” he asked.

“Everything in real estate is location, location, location,” Stark said, adding that, in “Harlem, yes, absolutely, there has been a boom.... sales less than half a mile away are absolutely appropriate to use.” (She didn’t defend the Lower East Side properties in the same way.)

She said she knew nothing of the May 2006 parks appraisal until Brodsky released his report. Other appraisals, she said, “were irrelevant to us.”

No negotiation

Cannon gave Pinsky a chance to flesh out the remarks he was about to make before he was cut off.

“The question was: was there any sort of negotiation between EDC/IDA and the DOF? I wanted to say, categorically, there absolutely was not. We were not aware of the 26.8 number or any other number until the numbers were presented to us as final.”

He added that the figure sent to the IRS for the assessment of the property, $204 million, was later cut to $175 million when DOF realized that a portion of the lot used for a garage should be excised.

“I think you all have responded to complicated questions,” Cannon said approvingly. “You’ve been very consistent... If the hearing is about whether is there is perfidy, I think the laundry has been aired entirely.”

Who pays for the stadium?

As the hearing wound down, the panel got to the question of whether PILOTs represent a total public subsidy or not--an issue of debate regarding the AY arena, as well.

“Congressman, the private payments are the taxes they owe,” Brodsky said. “It’s as though you built an extension on the house and you said to the taxing authority: send my payments to the bank to pay off the mortgage. The notion that this is being paid for by the Yankees is delusional.”

Levine responded, “Mr. Brodsky, he really knows better. We don’t pay taxes now. We’re a tenant. We don’t pay taxes at the old Yankee Stadium. As I said before, there would not have been a new stadium, unless this mechanism was put into place.”

The new facility will be owned by a city entity, and “the money we will pay this entity will go to service the bonds.” There’s no money coming out of the city treasury that could go to schools or hospitals, he said, leaving out the various infrastructure improvements and other costs.

Cannon seemed pleased. “Fundamentally, I don’t think taxes are owed,” he said, adding, “I’m anxious to get it done and get up there and watch a game.”

Would they leave?

Cummings focused on the threat by the Yankees. “Where were you all going to go, Mr. Levine, Baltimore?”

“We’d love to have you in Salt Lake City,” offered Cannon.

“It’s been no secret, for many years,” Levine said, “the New York Yankees said, if they didn’t have a new stadium, they’d have to move elsewhere. There were no shortage of suitors... We wanted to go the extra mile to stay in the Bronx.”

The Times reported today that Levine after the hearing refused to be specific but said New Jersey has wooed the Yankees. A representative of the New Jersey Sports and Exposition Authority, however, said no such conversations had occurred. (Brodsky's report, issued in September, indicated that no evidence has been offered.)

Having it both ways?

Cummings pointed to an analysis, made in the past by Neil DeMause of Field of Schemes, that “Mayor Bloomberg and you seem to want it both ways. You tell city and state audiences that the stadium PILOTs are not in fact foregone tax revenues, but are instead private payments...Then you turn around and tell the federal government that PILOTs are tax revenues, and thus public money.”

He pointed to a quote from Bloomberg: “Others use public money; we build these stadiums with private money and the state and city put in a relatively small amount for infrastructure.” At Brodsky’s hearing in July, Cummings pointed out, Pinsky testified that “the entirety of each stadium is being financed entirely by payments from the teams themselves.”

Pinsky, he noted, had testified that, because the stadium had always existed on city owned land, it never had been subject to real estate taxes and the structure represented no net loss of expected revenue.

“I have to commend you, your elegant argument is precisely the one that we’ve been trying in vain to get the Treasury Department to accept,” Cummings said. “PILOTs in this context aren’t taxes, they don’t replace taxes. Economically they function as private payments. The IDA didn’t display such common sense when it requested a tax exemption from the IRS. You said “the city has determined to use its property taxes, in this case PILOTs, to finance the construction and operation of the stadium.”

“Mr. Pinsky, which is it: are PILOT payments private or public money? Are they a private payment and therefore not generally applicable taxes? Or are they a tax payment and therefore not the Yankees’ money, but the city’s?”

Pinsky responded calmly, “They are a payment in lieu of generally applicable taxes, which is exactly what we explained to the IRS.” He added, “What made this project particularly attractive to the city of New York was the fact is that currently we receive no real estate taxes from the Yankees... Here we were able to impose a tax on the Yankees, which is a generally applicable tax, and use that money to finance the stadium.. the net effect of that is that the City of New York ended up in same place it had been previously... but Yankees were in a materially less profitable position, in that they were paying taxes, and that those taxes or PILOTs were financing the stadium.”

No one pointed out that the “materially less profitable position” allows the Yankees to gain significant new revenues.

[Neil DeMause observes: This is a clever sleight of hand that Pinsky is attempting: The city "imposed" a tax on the Yankees, but it's not a special tax (which can't be used for tax-exempt bonds), but rather a generally applicable tax that just happened not to be applied to the Yankees before now. So it's not money the city would have gotten otherwise, but it's still public tax money for IRS purposes.]

Cummings asked if the revised regulations, as issued this week, would have affected the deal.

Pinsky said a fixed PILOT would be banned, but “it doesn’t necessarily mean the project couldn’t have happened... The important thing to note is: IRS isn’t saying you can’t use PILOTs. It’s also not saying you can’t use fixed taxes... the reason why the city and state of New York objected to the proposed regulations... in certain states, you’re actually able to fix taxes.... but we can only fix PILOT payments, that’s the only change... IRS is saying you can’t use PILOT-backed bonds.”

And what if Treasury Department had not grandfathered in the three New York projects?

“The only option for the city would’ve been to impose a floating PILOT, rather than a fixed PILOT,” said Pinsky, not explaining that it likely would’ve been much harder to sell.

Circling back to AY

“Just to clarify one thing,” Pinsky added. “The regulation that was imposed and that was issued, with all due respect to Randy [Levine], although it helps potentially the Yankees and Mets, it was most important to us was because of the impact that the new regulation would have had on the Atlantic Yards project in Brooklyn, which is a major economic development initiative of the city and the state... that has not gotten under way yet.”

Closing the hearing, Kucinich again expressed disappointment “that the city has not produced 70%” of the documents requested. “This subcommittee is not in the business of ‘gotcha.’ We have provided reasonable time for witnesses to be able to respond, to be able to tell their story,” he said. “But it would be helpful if the city were ready to be more helpful than it has.”

Thanking the witnesses, he concluded: “We’re going to continue our work here, make no mistake about that.”