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Qualms about AY from IBO and FCE’s new warnings of potential setbacks cited in appeal of case that called for new hearing

A lawsuit filed against the Empire State Development Corporation (ESDC) by residents in two buildings in the Atlantic Yards footprint may gain new life, should a state court consider an Independent Budget Office representative’s statement questioning the benefits from the current version of the project, as well as a financial document filed by Forest City Enterprises admitting new potential setbacks.

George Locker, who represents residents of two buildings in the Atlantic Yards footprint, today will file a motion to enlarge the record for his planned appeal of a case, dismissed last September, which argued that the ESDC was violating a provision of state law that requires disposition of properties within a decade and should hold another hearing because the project has changed considerably.

Justice Jane Solomon, despite expressing surprise in a court hearing last June, that eminent domain had not commenced despite “all of this publicity” about the project, quickly dispatched the petitioners’ argument, concluding that “there is no evidence that the challenged agreement is not consistent with the contemplated project and existing general project plan so as to bring into play the need for a public hearing.”

In her ruling last September, Solomon did not address the prediction in court by ESDC co-counsel Charles Webb that condemnations would begin “in October or November of ’08,” a date that seemed unrealistic and proved to be so.

Fewer plaintiffs

The appellants are eight rent-stabilized tenants living at 624 Pacific Street and 473 Dean Street. Originally, there were 13 plaintiffs, but five have settled with the developer and moved away--a sign, as with the purchase of a building on Dean Street, that not everyone’s willing to wait out an uncertain situation. 

(The tenants, living in a building owned by the developer, faced a more immediate threat to their future; the building on Dean Street was owned by a union, and was ultimately threatened by eminent domain.)

A shifting project

The motion points out that the Atlantic Yards project that was analyzed for its public purpose and environmental impact, and approved by the ESDC in December 2006, was to take ten years.

However, according to the State Funding Agreement, signed in September 2007, the developer has six years to build the arena after the delivery of property by eminent domain, 12 years to build four towers in Phase 1, and no timetable for Phase 2.

“The amendments represent an enormous loss of the Project’s stated public benefits - most of the housing, open-space, and construction job/years - and portend decades of developer blight, vacant lots, and ever-mounting public costs,” the motion states.

New doubts from IBO

The motion points to a 1/29/09 statement by George Sweeting, deputy director of the IBO, as reported in the Brooklyn Paper, “If amenities are scaled back and the overall scale of the project is reduced, it’s reasonable to stop and look at whether the city’s contributions and the MTA land deal still show a positive in the calculation. Some of the benefits may be less than originally assumed. A lot has changed since 2005, when we found that the arena was basically a break-even proposition.”

Locker, who notes that Sweeting has personally confirmed the accuracy of the quote, argues that the suggestion that AY be reexamined is consistent with a previous court decision regarding reconsideration of projects.

New warnings from FCE

The motion notes that the Forest City Enterprises  Form 10-K offers new warnings about “deteriorating market conditions” and a “challenging” economic climate, which were not present in similar documents issued in past years.

Also, the motion states that “the billion-dollar sports arena is no longer described as having 850,000 square feet, or any other size.” (He doesn’t point out that the developer has been trying to cut costs, which means the arena likely would bear a considerably lower price tag.)

The Form 10-K acknowledges that the developer may be unable “to retain the current land acquisition financing,” may not “meet required equity contributions” and may lose “arena sponsorships and related revenues,” as noted in the motion.

New hearing

“No one knows what Atlantic Yards-2009 has become,” the motion states. “Consequently, no one knows the public benefit of the project, and no one, particularly ESDC, knows or can know whether proceeding with the exercise of eminent domain is lawful and appropriate, given the drastically reduced, or non-existent, benefit to the public and the high risk of non-completion and default.”

Thus, Locker writes, the record should be enlarged so the contents of the 10-K and Sweeting’s statement can be considered in an appeal.

Logistical issues

Locker told me that the motion will be granted or denied before the appeal is briefed or argued. That means the Appellate Division can order a new hearing without addressing whether his clients have standing--Judge Solomon said no--or whether the project has to be completed in ten years.

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