Friday, September 18, 2009

At ESDC board meeting, new revelations of ESDC's concessions to Ratner and forceful criticisms from opponents (with video)

The Empire State Development Corporation's (ESDC) approval yesterday of the revised Atlantic Yards plan was predictable, which is probably why a number of news outlets--including even the Brooklyn Paper and the Courier-Life, both on deadline--didn't bother to send a reporter.

But there was news, both in the statements made at the ESDC board meeting and in the board documents distributed later, which indicated a significant effort to advance government funding to Forest City Ratner, a hedging defense of the official ten-year project timetable, an acknowledgement that Forest City Ratner would only be required to build a project at 65% of announced square footage, and an "economic benefit analysis" that, even by the ESDC's lax standards, fails to come clean about the net tax revenues.

Moreover, as I'll detail below, the Response to Comments issued to the board evaded or disregarded some important questions.

And while there were renderings of the arena, in contrast to absence of images at the ESDC's board meeting in June, there were no renderings of the rest of the project, giving credence to project opponents' criticism that the project timetable was bogus and that a Supplementary Environmental Impact Statement (SEIS) was needed to assess the impact of the project over a much longer period of time.

(At left, ESDC Chairman-designate Dennis Mullen and board member Kevin Corbett. Neither could vote to approve the project, since Mullen hasn't been confirmed and Corbett had to recuse himself.)

Progress, and roadblocks

The decision by the board was a crucial step toward the use of eminent domain to acquire property for the project, and to have the state issue tax-exempt bonds for the arena. The latter is likely on schedule, though condemnation would have to wait until the results of the eminent domain lawsuit, to be heard October 14 by the Court of Appeals, is learned in November.

ESDC attorneys expressed confidence they would win that lawsuit, and that any other challenges--such as a suit charging the ESDC with failing to issue a Supplementary Environmental Impact Statement--would not deter the project.

Forceful comments

Despite the foregone conclusion, and the presence of some of the usual project supporters, project opponents were notably forceful in their comments, and later even cordially interrupted the board discussion.

"Those who have never worked in a public agency and experienced the integrity with which they can operate probably wonder whether this is “business as usual,” commented lawyer and urban planner Michael D.D. White acidly. "It is not. This is cynical corruption, the worst I have ever seen.

In his comment, Develop Don't Destroy Brooklyn spokesman Daniel Goldstein asked, "What is it with the ESDC and Forest City? You have candor outside of the official documents and then the predetermined party line within them. You say the project’s going to take ten years in the documents but in 2007 Chuck Ratner [CEO of parent Forest City Enterprises] said 15. [Project supporter] Kathy Wylde [of the Partnership for New York City], in 2006, said 15 or 20. Last spring, the head of this organization [Marisa Lago] publicly said “decades.” Just last week [FCR CEO] Bruce Ratner said 25 years. Why is that significant? It’s not because the duration of the project would be a crime if it was 20 years, or 25 or 30. It’s that state law requires, when such a substantial change to a project takes place… you have to do a Supplemental EIS."

"So, unfortunately, we all suspect you will approve this project today and then you are likely to be sued, instead of following the letter of the law," he said. "And that’s the decision you are making, not the opponents of the project."

Why now?

Senior Counsel Steven Matlin, the ESDC's point man on the project, gave a tantalizing explanation for the decision to not delay.

"The project will also generate significant revenues for the state and city," he said. "For project financing purposes as well as for other reasons, it’s important that we move forward now."

It's well-known that Forest City Ratner needs to have tax-exempt arena bonds issued before the end of the year to take advantage of Internal Revenue Service rules. Matlin did not mention "other reasons," nor was he asked about them.

In June, a Metropolitan Transportation Authority official acknowledged that the speeded-up timing of the revised railyard deal, with just two days for the board to consider it, "really relates to Forest City's desire to market their bonds as a tax-exempt issuance."

Cash flow to Ratner

Notably, new information made available confirmed that the revised agreements significantly help Forest City Ratner's cash flow.

In June, we learned that condemnation would be conducted in phases, thus delaying the need to pay fair market value for properties not needed for years, and that the developer would have to pay only $20 million for the part of the Vanderbilt Yard needed for the arena block, not the originally pledged $100 million for the entire railyard. (The rest would be paid off over 22 years, at a gentle 6.5% interest rate.)

Yesterday, the board was asked to amend the State Funding Agreement and the City Funding Agreement to allow the delivery to FCR of $25 million in pledged state funds and $15 million in city funds. (Board members asked no questions.) Beyond that, the document allows the city to direct planned spending on infrastructure directly to the developer, another aid to cash flow.

(I wrote initially about only the first $25 million and Eliot Brown of the Observer followed up with the larger story.)

ESDC's Matlin

Matlin led off the meeting, with a dry description of recent events.



"A public hearing was held over four sessions on July 29 and July 30 and written comments were received through August 31," he said. "There were 720 comments received at the public hearing and during the comment period. We estimated that 499 comments were in support of the project; 221 comments were in opposition to the project.”

"At the risk of generalizing, the comments in favor of the project tended to focus on the jobs that would be created as a result of the project, the affordable housing that would be created, and various benefits that would be recognized under the Community Benefits Agreement," he said. "The opponents of the project tended to object to the project density, the use of eminent domain, environmental issues, the process for project approval, and phasing issues. Many other comments … were received."

"Subject to the directors’ approval, the corporation would expect to move forward with the acquisition of the first portion of the project site within the next few months," he said, indicating the pursuit of eminent domain.

"In addition to the above actions, we are requesting authorization to amend, as necessary, the city and state funding agreements," he said, with no additional inflection. That referenced the speed-up in funds delivered to FCR.

He referenced “an updated economic benefit analysis" and the "confidential report prepared by KPMG" that concludes "that it’s not unreasonable to assume that the housing units to be developed can be absorbed in the marketplace during the projected development period."

Michael White

"A lot of you know me," began White, a former official at the New York State Housing Finance Agency. "I have more than a quarter century experience in government, entrusted with the same kind of responsibilities you now intend to abuse." (Here are his remarks and reflections.)



"You are approving a $220 million net loss for the city with more than $726 million in no-bid subsidies to a private developer," he said. "(We think these conservative Independent Budget Office figures for the arena actually understate its true cost, including the developer’s megalodonic ripping apart of the community.)"

"ESDC’s phantom arrangements involving no designs, leave ESDC with absolutely no negotiating leverage to insist on benefit or counteract Forest City Ratner’s future blackmailing of the public for subsidy," he added. "You shower Forest City Ratner now with additional multimillion dollar benefits such as excusing it from its railyard obligations, and we can expect that you will similarly shower more benefits upon them in the future, again without quid pro quo. What you are doing is destructive of neighborhoods, the city, our public finances, destructive of government and destructive of the basic fabric of trust required for a civilized society."

He made this statement before it was clear how the ESDC was speeding public money to the developer.

He concluded by quoting the words of a Leonard Cohen song, “Everybody Knows”, adding, "You're not getting away with anything."

CBN comment

Steve Soblick, on behalf of Council of Brooklyn Neighborhoods, noted that the Modified General Project Plan "presents the very real possibility that only the Arena will be built in the foreseeable future.



"Our local elected officials requested the New York City Independent Budget Office to produce a study of the financial benefits to the City and State of New York of the Arena portion of the project," he said. "The study concluded that the Arena would be a net loss for the City and produce minimal gains for the state, as well as very few meaningful jobs other than the construction of the Arena itself. Since the ESDC’s purpose is both economic development and job creation, the Atlantic Yards Arena does not qualify for the continued support of the ESDC."

He noted that two studies commissioned by CBN "cast serious doubt on the likelihood for a timely completion of the project. The first, 'Atlantic Yards: A Decades Long Project,' was produced by the noted firm Kahr Real Estate Investment Advisors. It concludes that the project as described, particularly the timeline, is simply not feasible. The second study, 'The Atlantic Yards Plan and Why a New Environmental Review is Required,' by Dr. Tom Angotti, Director of the Hunter College Center for Community Planning and Development, makes an incontrovertible case for the production of a Supplemental Environmental Impact Statement for the vastly altered Atlantic Yards Project."

"Certainly, adding fifteen years to the timeline of the project, which necessarily means that a substantial portion of the 22 acre project will remain undeveloped and blighted because of the developer's demolition and inaction for 15 to 20 years, significantly changes the adverse impacts on the environment. And because the developer has indicated that the undeveloped acreage will be used as a parking lot before it is developed, the impacts on traffic alone require a supplemental review," he said.

"If the ESDC board proceeds with approval of the Modified General Project Plan, it will have failed in its obligations to the public and will have ignored the clear requirements of State law. The board cannot expect that the community will sit by and allow this to happen. This Board should understand that if it does only the developer’s bidding, the community will ask the court to require the ESDC to do its job.'

DDDB's Goldstein

"I’m not going to quote Congressman Joe Wilson, because he spoke out of turn, but it’s my turn to speak, and you lie," began Goldstein.



"Mr. Matlin, you characterize these public hearings, which were comments on the MGPP, a technical document, by doing a tally of who opposes and supports the project. What does that have to do with anything?" he asked, going on to suggest that the results in the 35th Council District, home to the project site, were telling.

Incumbent Letitia James, the leading political opponent of the project, ran against the chairman of Community Benefits Agreement coalition, and "trounced her 81-13 [percent]," Goldstein said. The elected officials in surrounding districts either oppose or do not support the project. "So keep that in mind when Mr. Matlin talks to you about how many people showed up to shout at a hearing," he said.

"I mean, it's really funny. The community has a plan for the railyards, it's called the UNITY plan, there are models--you can see what it might look like," he said, pointing to the renderings. "Look at this, the buildings are invisible, or transparent. I mean, if you were going to build that, that would be pretty cool, and I might be into it. But it’s a farce. It’s a joke. We're told we don't have a vision. Look at this. What’s the vision? Nothing. 16 towers written in a modified plan, and a picture of a pretty arena. And you’re going to approve that. If you were renovating your house or building a new one, wouldn't you want to see a picture? Really, wouldn't you? I think you would."

"The project is supposed to remove blight, you say," he said. "There wasn’t blight there—but putting that aside whether there was or wasn’t, a 22-year project, and this is written into the MTA agreements, will leave the site blighted and exacerbate whatever blight existed there. The purpose of the project therefore has been abandoned. There are numerous reasons why litigation is around the corner because of decisions you’re making today. You could've done it right."

"The benefits everybody wants of affordable housing and job creation" would be delayed, he said, and closed by quoting Judge James Catterson, who in a concurring opinion in the EIS case, said the ESDC was being "used as a tool by the developer" to destroy a neighborhood.

Supplemental EIS

Does the ESDC have to do a Supplemental Environmental Impact Statement (SEIS), asked ESDC board member Mark Hamister, on a video link from Buffalo.



General Counsel Anita Laremont responded, "We did in fact, staff and consultant, consider all the modifications that are being made to the GPP. It was our conclusion that those changes did not give rise to the need for a Supplemental EIS. We considered the changes in the context of a Technical Memorandum."

The Technical Memorandum was issued in June. She didn't mention the ESDC's responses to all the comments submitted since then arguing for an SEIS.

ESDC board deliberation

The board deliberation lasted about ten minutes. The discussion included the SEIS (above), the matters below, and a brief discussion about the Independent Budget Office report on the arena, which I will reserve for a separate post.



"What is in your view the likelihood that the whole thing would be built?" asked board member Derrick Cephas, who was serving as acting chairman for the meeting. "And the second question is, are there any incentives for the developer to complete the project or disincentive for him not to?"

"I suspect everyone is making projects and assuming certain events take place in the general economy," responded Matlin. "We've looked at this and, in fact, we retained the services of KPMG to see if whether or not the residential piece could be absorbed in the market in the ten-year time frame…. They came back and they concluded that it was not an unreasonable assumption."

"What folks are counting on is that the markets, including the residential markets, are cyclical," he said, citing Brooklyn's growing population and the substantial amount of affordable housing, for which "there will always be a need." (I'll address that further below, given the question about the levels of affordability.)

Matlin didn't answer the question about incentives.

Board member Richard Neiman asked about legal issues.

"We've prevailed in the previous litigation," Laremont said. "I think it's is realistic to expect after that today that there will be more challenges. We believe we are on very sound footing."

Cephas brought up the complaints made by speakers about how they felt there was insufficient information for them to adequately make public comments. "Can somebody just comment on that?" he asked.

Matlin described the documents issued by the ESDC, the public hearing, as well as the comments, in raw form, and with summaries and responses.

"So you would say that criticism is invalid?" Cephas followed up.

"We went out there with a project plan that's very detailed and the public had an opportunity to comment," Matlin said, not addressing the criticism that the second community information session came after the public comment period close. "You can't have an endless process. At some point you take those comments and present them to the directors and then ask the directors to make a decision."

Goldstein, in the audience, interjected: "G (interjects): There's no rendering of the project, that's the point of that speaker. I'm out of turn, I understand, but there's no renderings, that's what they meant. The public can't see what the project looks like. It's absurd."

Laremont responded, "I want to point out that there are design guidelines that this project is being built in compliance with… we are not obligated as a board or a body to opine on the absolute full extent of the design. We are just required to ensure that they comply...."

"After it's built," muttered Goldstein.

Peter Krashes of the Dean Street Block Association then interjected, noting that information about a loading dock he learned at the meeting Monday apparently contradicted previous information. "That may not be a very significant thing to this board," he said. "But it is significant to those who live near the project."

Project supporter the Rev. Herbert Daughtry, who was sitting next to Krashes, got up and urged decorum. "If people are going to be allowed to disrespect the wishes of this board, we are going to open up a Pandora's box," he said.

It was a not unreasonable criticism of a meeting that had gotten somewhat out of control, but Daughtry was hypocritical in delivering it, given that he loudly heckled multiple times at the May 29 state Senate oversight hearing.

Before the vote, Neiman, who had asked no hard questions, acknowledged the audience: "I would like to comment and thank all of the individuals who spoke today. I've been on a number of boards, and I've never seen the level of passion and commitment on both sides and the articulate format in which it was been presented. I appreciate those who've been involved over the years who've written comments. I assure you that members of the board take this extremely seriously and have reviewed not only the analysis provided by our staff but the various inputs from all community groups and stakeholders. I thank you for that, just to confirm the seriousness with which we take our responsibilities."

Then came the pro forma vote, 3-0, with one abstention.

Other speakers

Those speaking in favor of the project included Daughtry; Travis Lock of the Salvation Army; John Holt of the Carpenters Union; Joe Chan of the Downtown Brooklyn Partnership; a representative of the NIA Community Services Network; Pat Boone of ACORN; and James Caldwell of Brooklyn United for Innovative Local Development (BUILD).



Those speaking in opposition included Krashes; security critic Alan Rosner; Prospect Heights resident (and first AY opponent) Patti Hagan; and footprint landowner Henry Weinstein, who saw his effort to get the ESDC's deceptive property map finally corrected in board documents.

Also, Jim Vogel spoke critically on behalf of both the East Pacific Street Block Association and his employer, state Senator Velmanette Montgomery (below). A representative of City Council Member Bill de Blasio straddled the fence, though with a larger nod to critics: “The benefits of the project, however, should not come at the expense of transparency and public review.”

Montgomery's comments

"I invite you to change my mind about the Atlantic Yards Arena and Redevelopment Project and the role of the Empire State Development Corporation in its progress," said Vogel, speaking for Montgomery. "I am troubled by the project and by the behavior of the ESDC. I think it is wrong; I think it is a dangerous inversion of our government’s intent and its reliance on honest participation by the governed.

"I have opposed this Project from the beginning because of the abuse of process that lies at its heart. I continue to oppose this project for those abuses."

"Here is how the process of planning and development are intended to proceed. The city and the state consult with the public to determine their needs, their dreams and goals. The City and the State, responding to the needs of the people, generate development guidelines for an area. The guidelines are shared publicly. A Request for Proposals is circulated and offers from many developers responding to the guidelines are entertained. Proposals are evaluated and sent to the public for comment, and modified in response to those public comments."

"That was not the process for the Atlantic Yards project. Atlantic Yards came out of one developer’s idea, and the process for its approval was a study in the backroom deal. Public participation in the process has been reduced to the occasional “Public Hearing,” which is treated as a meaningless exercise in public theater, a quaint custom, a formality."

"Why do I say this? Today the ESDC is declaring a close to an official Public Comment period on the proposed modifications to the Atlantic Yards General Project Plan. And what was the Public supposed to comment on? They were asked to again voice their opinions of the proposed changes to a project that should not have been approved in the first place, to again experience being ignored. And incredibly, during this Comment Period the Public was not only again told by the ESDC what constitutes “meaningful comments,” they were told no significant information would be released for them to comment on until the Comment Period had closed! No designs, no real timelines (despite what the developer says), no financial documents, no evaluations of environmental impacts. Comment on gas, because that’s what we are being given."

"The Public is asked to speak to the changed details of the project, but the changes are defined by the ESDC so the public cannot respond. And not just the Public! I and several other elected officials formally requested to see the amended Atlantic Yards Financial plans, documents that are a matter of public record. We were told, politely, to go jump in a lake. FOIL for them and maybe we’ll be shown them after the comment period is over. You did this to us 3 years ago, and you are trying it again."

"The ESDC maintains that the project, and I quote, 'Remains remarkably the same.' They say the changes being discussed are simply a matter of timing. They ignore the realities of a project so totally different from the unacceptably monstrous development that should never have been approved, that the only thing remaining remarkably the same is the abuse of the public process by a state agency to benefit one developer, and public be damned."

"And the ESDC says 'But it’s all legal.' We all know about that! That’s just saying 'We bet we can outlast you in court while we bulldoze over your rights.' Legal, maybe, but is it ethical? When the public process has been so twisted to suit the whims of people working out back room deals,'legal' doesn’t cut it. The Atlantic Yards travesty is a cry for long overdue reform of Public Authorities. It is a foghorn through the procedural smoke they keep blowing at us. Senator Perkins and I had a Public Hearing on the process of this project in May, and certain people didn’t like that. They brought in folks to shout down what their bosses didn’t want heard."

"I work in government. The REAL government. I’m elected and answerable to the people of my district. I will represent them and make sure that their rights are respected, and that their system of government is not twisted into an unrecognizable tool for private interests. And I will defend my vision of America against this degradation."

"Again, I invite you to change my mind. You can start to change my mind about the sincerity of the ESDC by admitting this process is flawed, and that the project being proposed is not the project that was approved. Order a Supplemental Environmental Impact Statement to address the questions. Conduct an honest process and get things where they should be."

Response to Comments

In a 36-page document, the ESDC attempted to summarize the most relevant comments, and respond to them.

Project Financies

Comment 6: Numerous comments requested that a new cost-benefit analysis be prepared for the Project and stated that more information about project finances, including subsidies, tax exemptions, and payment-in-lieu-of-taxes (PILOTs), should be made available to the public.

Response: The Project’s financing program is described in the MGPP. The MGPP sets forth all tax exemptions and PILOT obligations with respect to the Project. The economic and fiscal benefits set forth in the MGPP have been updated and
included in the ESDC Board materials.


As noted, those numbers are very sketchy.

Affordable housing

Comment 9: A number of comments questioned the Project’s ability to secure financing for its affordable housing component or whether such tax-exempt bonds would be available under the City or State housing programs in light of today’s challenging economic climate.

Response: The MGPP does not include any modifications that would affect the availability of financing for the Project’s affordable housing.


This doesn't address whether they would be available--or whether the ESDC had ever considered whether they'd be available.

Timetable feasibility

Comment 10: A number of commenters questioned the economic feasibility of the Project and the likelihood of completing the Project by 2019.

Response: ESDC believes that the Project is financially feasible and that the relatively modest changes included in the MGPP do not warrant changing the original 10-year construction period for the Project approved by ESDC in 2006. ESDC and its construction consultant have reviewed the updated construction schedule and determined that it is reasonable.

The 10-year schedule set forth in the FEIS approved by ESDC in 2006 and the Technical Memorandum is based on the assumption that FCRC will proceed with substantial construction promptly after closing and continuously pursue construction to completion of the Project. Those assumptions are reasonable, since: 1) FCR has made a substantial investment to date in acquisition costs, soft cost and preliminary construction activities, and can be expected to seek to recognize a return on those expenditures as soon as possible; and 2) it is reasonable to expect that the market will absorb the additional residential units onstructed by FCR in accordance with the schedule. The phased condemnation allowed by the MGPP is intended to facilitate the commencement of the Project and does not change the 10-year construction schedule.

ESDC recognizes that market conditions may impact the Project schedule, but a number of factors support not only the viability, but the need, for the Project on the anticipated 10 year horizon assumed in 2006.
• Population Growth...
• Housing Crises: According to the Furman Center Report “Key Findings on the Affordability of Rental Housing from New York City’s Housing and Vacancy Survey 2008” dated June 2009 (the “Furman Report”), Brooklyn currently has the lowest housing vacancy of the five Boroughs at 2.3 percent. This vacancy rate is far below the national vacancy rate of 8.0 percent...
• Lack of Affordability: Another indication of the general housing shortage in New York City is the high cost of housing in the City. According to a recent report by the Center for an Urban Future, a smaller share of homes in the New York City region are affordable for those earning the median income than any other metropolitan area in the United States. According to the same report, the City’s average effective rent is nearly triple the U.S. average, pointing to the need for additional housing supply. Similarly, the Furman Report found that in 2008, 53% of New York renters were rent burdened (paying more than 30% of their monthly income on gross rent). The demand for affordable housing remains very high. The Furman Report states that the number of affordable housing units in New York City declined between 2002 and 2008, notwithstanding the construction of many new residential units during this period. The anticipated population growth, extremely low vacancy rates and shortage of affordable housing imply a significant demand for new housing, notwithstanding the contrary assertions by commenters. The Project is needed to meet the City’s housing goals (as described in PlaNYC 2030), and there is ample demand to absorb the incremental housing stock added by the Project. Although the Project contains more than 6,000 housing units, New York City contains approximately 3,190,000 housing units, according to the Furman Report. The Furman Report states that Brooklyn alone contains 927,472 housing units and that 26,272 housing units were built in the Borough between 2002 and 2008.

The Project plan also includes flexibility to meet the demands of an evolving market over the 10 year build-out. The large affordable housing component –2,250 units – provides a housing type that is largely impervious to market downturns and could be front loaded in the first phase to address current economic conditions.

Finally, the Project is located at a transit-accessible site, convenient to employment centers in downtown Brooklyn and in Manhattan...


This response does not recognize the 22-year buildout implied in the Metropolitan Transportation Authority deal for the Vanderbilt Yard. Nor does it respond to the Kahr report commissioned by CBN, which points out the market-rate rentals--2250 of the 4500 planned--were expected to rent well above the current market, and one slice of the subsidized housing was also expected to rent above market rate.

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