Monday, April 27, 2009

Waiting for the judges to rule in both major AY cases (and watching Forest City Ratner repeat a discredited lie)

Within a matter of weeks, if not sooner, two important but not final rulings should emerge from two departments of the Appellate Division of the New York State court system. The cases challenge eminent domain and the Atlantic Yards environmental review.

Should the defendants, predominantly the Empire State Development Corporation (ESDC), prevail, that would suggest further momentum for the wounded Atlantic Yards project.

Other obstacles

Still, even victories in court may not affect the financial obstacles facing the Atlantic Yards arena, for which tax-exempt bonds must be issued by the end of December, unless the Internal Revenue Service extends a deadline.

Indeed, while Forest City Ratner, in legal papers regarding the second case, asserted that the project would have important public benefits (and maintained a previously-discredited lie that AY would bring $4.4 billion in new tax revenue), a lawyer for the appellants responded that the “supposed public benefits” are “grossly overstated,” given reports by even project proponents that AY would be significantly delayed.

Eminent domain

On February 23, more than two months ago, the Appellate Division, Second Department heard oral arguments in the long-shot case challenging the use of eminent domain for Atlantic Yards.

The case had been filed originally in federal court, where plaintiffs and lawyers anticipated an opportunity to cross-examine witnesses and gather documents during the discovery process--but it was dismissed at the trial court level. That dismissal was upheld by an appellate court, and the U.S. Supreme Court refused to hear an appeal.

A new version of the lawsuit was in state court, with the argument that the state constitution requires a stricter evaluation of public use than does federal constitution. The judges of the Second Department--where eminent domain cases are heard (as opposed to the state Supreme Court, a trial court) in the interests of expedience--seemed skeptical, as case law gives great deference to decisions made by condemnors.

Still, the legal process did show the ESDC backing off one point. While in legal papers the ESDC claimed (without foundation) that a document quantified the private benefit to developer Forest City Ratner, an ESDC lawyer conceded no such analysis comparing private and public benefit was performed, but quickly argued that no such analysis was required.

Should the plaintiffs lose, plaintiffs’ attorney Matthew Brinckerhoff said in February, the plaintiffs will appeal to the Court of Appeals, the highest court. That’s likely discretionary, but Brinckerhoff expressed confidence the court would want to clarify the issues. If so, that step could last from two to seven months

Environmental review

In an effort to reverse an appeals court’s February decision rejecting an appeal of a trial judge's dismissal of the environmental review case, Develop Don’t Destroy Brooklyn (DDDB) and 25 co-plaintiff community and civic groups on March 30 asked the Appellate Division, First Department, to allow the state’s highest court to review the decision.

I previously wrote about the plaintiffs’ arguments. Below I look at the responses by the ESDC and Forest City Ratner, as well as the plaintiffs’ response.

Note that, in this case, the arguments have been made before the court that issued the ruling. Should the request be denied, the plaintiffs will directly ask the Court of Appeals to consider accepting the appeal. They will have 30 days to file that appeal, and the process should take several weeks longer.

If the case does go to the Court of Appeals, that would push the timetable for briefing and argument to the fall, further delaying the developer's stated plans to break ground this year and open the arena in 2011.

James Catterson, one of the four judges on the panel, filed a concurring opinion that read like a dissent, and the petitioners relied significantly on this, arguing that Catterson’s inability to formally dissent, despite major misgivings, was a reason the Court of Appeals should step in and “determine the boundaries of judicial review.”

Standard of review

The appellants note that the court relied heavily on two cases that required it “to afford a high level of deference” to the ESDC’s decision. 

The ESDC responded via an affirmation by attorney Philip Karmel. None of the five questions identified by the appellants, he wrote, warrant review, as none identify any decision by the Court of Appeals that conflicts with the unanimous Appellate Division decision. “Appellants simply disagree with this Court’s application of well established law to the record in this case,” he wrote.

One question regards the standard of review. The appellants argued that the court’s “highly deferential” standard of Kaskel v. Impelitteri was wrong, but the ESDC said that Court of Appeals has consistently applied those principles to blight determinations, and that the appellants’ contention that Kaskel is applied only in taxpayer actions is wrong.

The ESDC said that not only has the appellate court found that the Blight Study “adequately establishes the substandard and insanitary conditions of the project site,” so have judges in the federal system.

“Appellants decry the Blight Study as biased, deficient and even corrupt... but these wild allegations spring from desperation rather than the record,” Karmel stated. “Each and every objection made to the Blight Study during the course of this appeal was thoroughly answered and rebutted by ESDC in its brief to this Court.”

“In essence, Appellants would like the Court of Appeals to conduct yet another review of the same Blight Study,” Karmel argued

Baker responded that ESDC mischaracterizes the appellants’ motion as seeking another review of the Blight Study; instead, they seek review and clarification of the legal standards of review of ESDC’s findings and determinations.

Economic trends

Another question involves whether the ESDC was biased and corrupt in denying economic conditions and trends in the project area--and in ignoring the market study it apparently commissioned.

The ESDC, argued the appellants, was “purposefully disregarding the contrary economic conditions and development trends which it asked its own consultant, AKRF, to study; knowingly misrepresenting the effect of the Vanderbilt Rail Yards on the non-ATURA [Atlantic Terminal Urban Renewal Area] portion as impeding development, while the non-ATURA portion and adjacent areas were enjoying substantial, desirable private redevelopment and rapidly rising property values; and knowingly misrepresenting the crime rate in the non-ATURA portion as higher than surrounding areas, while its own data showed just the opposite.”

“Appellants misrepresent what is ‘uncontroverted’ in this matter,” Karmel responded. “Although Appellants allege, without probative record evidence, that the area is experiencing a ‘housing boom,’ the Blight Study documents extensive, longstanding blight on the project site and significant impediments to the site’s redevelopment.”

Issue of study a “strawman”?

What about that study? “This question is a strawman,” the ESDC responded, explaining, “An area may be ‘substandard and insanitary’ based on its present and longstanding blighted condition, regardless of whether a market study would show that market forces might some day eliminate the blight. No ‘market study’ of the kind Appellants have demanded is required in such cases. By contrast, when ESDC is engaged in a project at a site that is not presently blighted but which is predicted to deteriorate, a market study to predict the future might be appropriate, because in such circumstances, the issue is not whether the property is blighted today but whether it might become blighted tomorrow.”

“In the instant case, ESDC found that the Atlantic Yards project site is presently blighted and that these conditions have existed for many years,” Karmel concluded. “Under such circumstances, no study of future trends is required by UDCA [Urban Development Corporation Act].”

“Appellants seek to bolster their argument by citation to the consultant’s initial scope of work for the preparation of the Blight Study, but this scope of work preceded the preparation of the Blight Study and does not reflect its analysis or conclusions,” the statement continued. “Since ESDC made the requisite statutory findings, the only issue is whether the record is adequate to support them.”

Baker responded: “Incredibly, ESDC continues to deny that the neighborhood in and around the Project site experienced rapid, desirable, private residential development both before and after the Project was announced even though, as this Court plainly acknowledged at oral argument, and as Justice Catterson discussed in his concurrence, the evidence of the redevelopment trends in the blocks in and around the non-ATURA portion of the Project site is obvious and insurmountable. ESDC knew its repeated statements proffered as justification of the Project, that ‘blighted conditions... are unlikely to be removed without public action,’ were false when it made them, and Appellants submit that ESDC’s knowing reliance on false justifications for the Project renders its findings impermissibly biased....”

Dollar-a-year arena

Another questions is whether a sports arena leased for one dollar per year to a private, for profit entity to be operated as a professional sports facility, with de minimis civic benefits, may be a “civic project.”

“This question is premised upon multiple errors of fact and a mischaracterization of the record,” the ESDC responded. “The Arena will not be leased for ‘one dollar per year.’ The tenant will be required to pay tens of millions of dollars to pay off the tax-exempt bonds to be sold by ESDC’s Local Development Corporation to finance the Arena’s construction. Nor will the facility be used exclusively as a sports arena,” given that basketball games would be some 41 events out of 225 a year.

Supreme Court Judge Joan Madden did not find the arena’s civic benefits to be de minimis, but rather used that term to refer to the commitment to make the arena available to community groups for ten events a year.

Moreover, a commercial lessee can carry out a “civic purpose” if operated as a recreational, sports, and cultural facility.

Karmel’s affirmation concluded with a nod to the original language of the Urban Development Corporation Act, set up to help clean up the ghetto. Land use improvement projects like AY set up to address blighted conditions “are not only encouraged but required to ‘afford [] maximum opportunity for participation by private enterprise, consistent with the sound needs of the municipality as a whole.’”
(Emphases added by ESDC)

Baker responded, “Regardless of whether a professional sports arena can rationally be deemed to serve a civic purpose under the UDCA, ESDC’s plan to lease the entire operation of the Barclays Center Arena to a private, for-profit entity with no obligation to carry out any ‘civic purpose’ violates the plain language of the UDCA.”

FCR: “enormous” judicial resources

Forest City Ratner attorney Jeffrey Braun filed a separate affirmation ("under penalties of perjury") that both agreed with the ESDC arguments but added “two practical considerations that we ask this Court to bear in mind in its deliberations: first, that the Atlantic Yards project at issue in this litigation is intended to achieve important public purposes; and second, that the petitioners in this case already have consumed an enormous amount of judicial resources, and have received an enormous amount of judicial attention, in this and other litigations with which they have bombarded the courts in a thus far unsuccessful campaign to defeat this project.”

Baker responded, “Regarding FCRC’s contentions set forth in Mr. Braun’s affirmation, I submit that it is grossly in appropriate [sic] for FCRC to try to disparage Appellants’ exercise of their right to seek judicial review, given that FCRC has utilized its special relationship with ESDC, as Justice Catterson stated in his concurrence, to turn the UDCA into its own private redevelopment tool.”

Public purposes

As for public purposes, Braun listed what’s in the record: eliminating blight, bringing an arena to Brooklyn, remediating environmental contamination, building mass transit facilities and improvements, creating 2250 units of affordable housing.

A lie, redux

Braun also asserted that AY would serve as “a powerful engine of economic growth,” claiming that that the environmental impact statement (EIS] estimated that the project would create 15,000 construction jobs and between 1300 and 6400 permanent jobs, as well as “$4.4 billion in net tax revenues for the City and the State over 30 years.”

Except the EIS said no such thing. In January 2008, Braun used the same language, then, after AYR and Baker called him out on it, admitted he was “mistaken.” (See graphics below, by Abby Weissman.)  It's time for him to amend the affirmation he filed in court earlier this month.

The CBA

Braun also states that, ‘pursuant to an innovative Community Benefits Agreement [CBA],” the developer’s affiliates “are contractually bound to provide a wide array of far-reaching benefits.”

Unmentioned is that, should the project be sold, the CBA is not mandatory.

Emergency demolitions establish blight?

Braun also argued that the court’s previous decision to allow Forest City to proceed with emergency demolitions “by itself demonstrates that, contrary to DDDB’s contentions, there was substantial blight in the project footprint.”

Public benefits overstated

“Moreover, the statements by Mr. Braun touting the supposed public benefits of the project are greatly overstated and largely no longer operable,” Baker argued, citing the recession, lack of market demand, and “inability to obtain sufficient financing.”

In arguing that courts should prevent “the prolonged pendency of litigation from aborting projects that should proceed,” Braun cited a case known as Society of Plastics Industry Inc. v. County of Suffolk.

Baker argued that the cases are different, given that “Appellants are not pursuing this case to obtain an economic benefit. Rather, Appellants are striving to preserve the character of their community against a state agency which has usurped the local approval process and the protections of local land use laws. Having had the political process taken away from them, Appellants, all neighborhood organizations, should not have the door to the courts also barred, simply to assist the economic needs of a private party which is facing obstacles of its own making.”

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