Monday, March 30, 2009

More criticism of the Atlantic Yards Community Benefits Agreement: it (mostly) doesn’t apply if Ratner sells the project

The Atlantic Yards Community Benefits Agreement (CBA), proclaimed Brooklyn Borough President Marty Markowitz in 2005, is “so comprehensive and far-reaching that it puts Brooklyn in a class by itself, at the forefront of the corporate responsibility movement.”

And Forest City Ratner executives have trumpeted “substantial legally enforceable penalties for a failure by FCRC to fulfill its obligations.”

However, a national expert on CBAs, speaking at a conference in Brooklyn Friday, identified three serious flaws in the AY CBA: it (mostly) doesn’t apply if Forest City Ratner sells the project; there are several roadblocks to enforcing the current obligations; and structures to implement the plan have apparently not been set up.

The two latter criticisms have been aired in the past, as have other concerns about enforceability, but I've heard little about the issue of successorship.

Importance of enforcement

The criticisms were raised at a panel titled “Community Input in Megadevelopments,” part of a Brooklyn Law School symposium, Getting It Right: Government’s Role in Housing and Economic Development.

Ben Beach works with community groups as a staff attorney at the Community Benefits Law Center, the legal program of the Partnership for Working Families, said enforceability and enforcement matter for several reasons.

They include: realizing benefits in a timely way, ensuring political integrity, empowering community groups, and professionalizing the community benefits movement, so signatories are not seen as “charity cases” but rather as participants in a fair exchange.

Key elements of enforceability

He cited several elements of enforceability, including specificity and clarity in the provisions, a timetable for performance, particularly on the part of a developer, and the importance of assigning the obligations to a developer’s successor.

AY CBA & successors

In part of his presentation, Beach took a look at the Atlantic Yards CBA, which he praised for the “broad slate of purported measures.”

However, he asked rhetorically, “are those enforceable measures?”

The CBA only applies to the developer and its affiliates. “This does not appear to bind the developer’s successors,” he said.

CBA language

After Beach's presentation, I took another look at the CBA, which states that Forest City Ratner would at least try to convince its successors to maintain the CBA, but is not required to guarantee it:
The Developers shall have the right to assign their interest in this Agreement to any Affiliated entity; provided, however, the obligations of the Developer shall be personal to the Developer and its Affiliates and shall not bind any non-affiliated entity that acquires an interest in the Project. In the event a non-affiliated entity acquires a majority interest in the Project, the Developer shall arrange and attend a meeting between the Coalition members and the prospective acquiring entity at least thirty (30) days before the sale. At such a meeting, the Coalition members and the Developer will discuss with the prospective acquiring entity the economic benefits and community stabilizing effects of this Agreement in order to encourage the prospective acquiring entity to undertake the terms of this Agreement. If the Coalition members and the Developer are unsuccessful, then the Developer shall support the Jobs Development and Local Employment Initiatives in the form of liquidated damages provided in Section IV of this Agreement; and shall have no further obligations.

(Emphases added)

That means that Forest City Ratner would pay Brooklyn United for Innovative Local Development (BUILD) $500,000 for a Pre-Apprentice Training initiative.

Also, a state Memorandum of Environmental Commitments states that 2250 affordable rentals--as promised in the Affordable Housing Memorandum of Understanding (which is incorporated into the CBA)--would be built, and 30% of housing in Phase 1 would be affordable.

However, the City Funding Agreement allows for a much smaller Phase 1 than originally promised, and there’s no timetable for Phase 2.
Other provisions

So what isn’t guaranteed? The CBA promises a minimum of 35% of the jobs will be for minority workers and another 10% for women workers, and, during the construction phase, 20% of contract dollars for minority-owned firms and 10% for women-owned firms.

The State Funding Agreement cites those goals, but offers considerable wiggle room, stating, “Developer shall endeavor to cause the work with respect to the Infrastructure to achive this Project goal to the degree practicable.”

Also, 20% of total contract dollars (including Arena concession activities) are supposed to go to minority-women owned businesses for purchasing and service contracts. FCR hs pledged to build a health care center and inter-generational facility, to make the arena available to community groups for at least 10 events a year at a reasonable rent, to provide 50 upper bowl tickets, four lower bowl tickets and one suite for community use.

The CBA specifies that residents of public housing will be given priority in "all aspects of this agreement." The developer is supposed to sponsor annual job fairs serving six public housing projects in the area. The developer is also supposed to work with a CBA signatory in developing four schools.

Judicial enforcement

During his presentation, Beach walked through the challenge facing a CBA signatory seeking to enforce one of the obligations. After obtaining a report from the Independent Compliance Monitor--who, I might add, has never been publicly announced--that goes to the CBA Executive Committee for review. (Nor have other reports been publicly issued.)

Then the complainant can allege default, with the developer having 60 days to cure the default. Then the Executive Committee tries to resolve the disagreement. If that doesn’t lead to resolution, the ICM is required to select an independent mediator.

“Only after that entire process runs its course am I permitted to go to binding arbitration or pursue judicial review,” commented Beach, who called the right “fairly encumbered.”

Who’s the community?

Another panelist Friday, professor Patricia Salkin, who directs the Government Law Center at Albany Law School, defined a CBA as “a private contract between a coalition and a developer, where government is not involved” and the “product of substantial community involvement.”

“The key is developing a legitimate coalition of community groups/interests who can ‘speak for the community as a whole,” she said, citing labor, environmental, neighborhood, religious, and advocacy groups. (For an overview of CBAs, see Amy Lavine’s Community Benefits Agreements blog.)

While CBAs can seem to be a win-win--offering benefits not achievable via government, and helping developers by removing obstacles--broad-based support is essential, Salkin said, and can be hard to achieve in the case of controversial project.

The absence of broad-based support has been a common criticism of the AY CBA, including Columbia University urban planning professor Lance Freeman, who noted that “there is no mechanism to insure that the “community” in a CBA is representative of the community.

Growth of CBAs

Salkin attributed the growing interest in CBAs to several factors, including increased urban redevelopment (at least until the recent recession); shrinking federal aid to cities and tight municipal budgets; increased interest in smart growth and environmental justice; and increased public concern about developer accountability and the use of public subsidies.

Community groups, she noted, may be able to negotiate for more than what a government entity can achieve. A typical CBA can include social justice issues (living wage, first source hiring, job training, afforable housing, minority hiring, responsible contracting); environmental provisions (site remediation, mitigation of impacts, green building practices, smart growth provisions, public health support); and monitoring and enforcement (advisory committee, compliance monitor, public oversight, reporting requirements, injunctive relief).

Relationship to government

In a previous paper on CBAs, Salkin contrasted the AY CBA with agreements reached in California, noting that it “is not incorporated into a development agreement with the city, making enforcement possibly more difficult.”

Still, she said it was her opinion that government should not a party to a CBA, noting that it could distort the planning process.

Beach noted that other CBAs in New York have “featured a prominent and some might say overwhelming role of government,” which can distort the process.

While it is most common for CBAs to proceed via a private contract, in Los Angeles, there have been both private agreements as well as a separate development agreement with the city, both of which contain same set of benefits.

Failure to disclose

Later, with the examples of Brooklyn Endeavor Experience and Public Housing Communities in mind, I asked Beach if it was appropriate for CBA signatories to accept funding from the developer and, if they do, if they should disclose it.

(Both have received at least some funding from Forest City Ratner, but won’t say where they get the bulk of their money.)

“I’m generally not in favor of signatories accepting money,” Beach said, saying it “undercuts the integrity of the deal.” However, if they do get money from the developer, yes, they should disclose it, he said.

Similarly, John Goldstein, National Program Director of The Partnership for Working Families, has said, “As a matter of principle, groups in our network don’t take money from developers. We want to avoid any appearance of a conflict of interest.”

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