Sunday, November 29, 2009

In error-filled editorial, Crain's says elected officials should reassure arena bond investors

In a Crain's New York Business editorial, headlined Affirming Atlantic Yards: In every decision so far, the courts have held for Mr. Ratner, the errors start with the headline.

The state eminent domain case case was filed against the Empire State Development Corporation (aka Urban Development Corporation), and the courts have held for the state, not the developer.

Public good?

The editorial begins:

New York's highest court did more than affirm the right of the state to use eminent domain in last week's crucial ruling on the Atlantic Yards project. The Court of Appeals endorsed both the public good the project offers and the right of elected officials to implement development plans over the objections of a few holdouts. If bond investors are willing and New York politicians steadfast, Forest City Ratner will break ground in the coming months.

The basic rationale for building Atlantic Yards has been forgotten amid financing problems, legal challenges and orchestrated opposition. It is nothing less than a bet that New York has a bright future—that the surging growth of the city's population will require new residential neighborhoods near transit hubs. The sports arena is designed to kick off a project that will bring thousands of new residential units to an underdeveloped area and give Brooklyn's prestige a worldwide boost.
The Court of Appeals, in its decision November 24, did not endorse the public good. It chose not to substitute its judgment for the ESDC's questionable--but still "rational"--determination of the public good.

Nor have "elected officials" implemented development plans. The ESDC is an agency of gubernatorial appointees.

Yes, new residential neighborhoods near transit hubs may be needed, but a rezoning could do the trick. The sports arena wouldn't necessarily "kick off" anything, given that the ESDC's delayed buildout scenario contemplates just one residential tower and there's ample reason to doubt the announced ten-year timetable.

Public opinion

The editorial continues:

Also not well-understood is that opposition to the project has been grossly overblown. A 2006 Crain's poll found that two-thirds of New Yorkers—and two-thirds of Brooklyn residents—supported the project. There is no reason to believe that much has changed. The mayor and governor—whether Spitzer or Paterson—have never wavered. A few Brooklyn politicians have defected, but others remain behind the project. Develop Don't Destroy Brooklyn and its earnest but small band of allies essentially demand that they dictate the terms of development in the area, not elected officials.
The questions in the Crain's poll were stunning generalities, leading the uninformed to a positive opinon. One example: "The project will provide 2,250 low-, moderate-, and middle-income rental apartments."

Not only would the project itself not provide the apartments--for that we need to scarce tax-exempt bonds, the timetable and total of apartments is in question, while a slice of the subsidized apartments would be more than market-rate.

Develop Don't Destroy Brooklyn (DDDB) has raised $1.25 million from more than 4700 donors. Numerous local groups have signed on to lawsuits; just recently, several members of the BrookynSpeaks coalition, recognizing the futility of the "mend it don't end it" position, filed a lawsuit very similar to the one filed by DDDB and adopting similar rhetoric.

The financing issue

The editorial continues:

One major hurdle remains for Forest City. The company must sell tax-exempt bonds by the end of the year in a difficult market or lose access to that source of inexpensive financing. Investors must be willing to buy the bonds despite at least three new lawsuits filed in recent weeks against Atlantic Yards that theoretically could end the project and cause them to lose their money.

The idea of mounting a successful legal challenge is far-fetched. All the court decisions so far—and there have been 24—have turned back the lawsuits against Mr. Ratner. The strategy of Don't Destroy Brooklyn and its allies isn't even about the law anymore; it is about trying to scare the investors away.
While it's fair to say that clouding the investment climate may be one part of the strategy, the lawsuits, backed in several cases by local elected officials, aim to do much more than that: to hold government accountable.

Political leaders

The editorial concludes:

That's where political leaders should come in. It is up to the mayor, the governor, the borough president and other elected officials in Brooklyn to reconfirm their support and their commitment to making this project happen in order to reassure those investors.
What does that mean? No local elected officials had a voice in deciding the project. Now Crain's says they should affirm their support to help investors and, not coincidentally, a project that would benefit Russia's richest man.

Why, for example, should local officials commit to assigning tax-exempt housing bonds for Atlantic Yards without comparing the cost per unit to other affordable housing projects?

And doesn't Crain's, the voice of the business community, have the slightest qualms about endorsing arena bonds that might--despite state assurances to the contrary--leave the state on the hook?

2 comments:

  1. I don't think "error" is the correct word. These are purposeful obfuscations of the truth.

    It is truly ironic that the poll Crain's points to in this editorial about the eminent domain lawsuit, did not inform poll takers about the use of eminent domain for an arena, let alone question them about it.

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  2. How come every time someone editorializes in favor of the project, they have to bend the facts to fit their point of view?

    If the Atlantic Yards is as terrific and needed as they all say, why not just tell the truth?

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