Saturday, January 31, 2009

CBA signatories seek federal stimulus money for AY; ESDC flatly says project is not "shovel-ready"

In this week's issue of the Courier-Life chain, Stephen Witt, who in the past has found Atlantic Yards Community Benefit Agreement (CBA) signatories calling project opponents "the real-land-grabbers", now finds two, not unpredictably, suggesting that Atlantic Yards should get a share of the federal stimulus money.

The article quotes James Caldwell of the job-training group BUILD (Brooklyn United for Innovative Local Development):
"The way it [stimulus money] is being proposed is that it will go through the government and they will give it to unions and not to community based organizations that train and prepare people in our community," he added.

I don't think the plan is to give the money to unions.

(The article is not yet online.)


The article continued:
Rep. Yvette Clarke, whose district includes the 22-acre project footprint, said stimulus money going toward the project is a possibility, but must go through the city and state, and not her office.

But that requires "shovel-ready projects" and, guess what, ESDC spokeswoman Lisa Willner said AY is not shovel-ready.

And Forest City Ratner officials refused comment.

That's not to say AY couldn't become shovel-ready at some point (Round 2 of the stimulus?) but it's notable that, rather than deferring comment on a sticky issue, ESDC was declarative.

That was the real news here.

Friday, January 30, 2009

At State of the District Address, Jeffries again talks housing, says economy has “slowed down the AY streamroller”

With his preacher’s cadences, lawyer’s acumen, and Brooklyn pol's sense of strategy, 57th District Assemblyman Hakeem Jeffries is an elected official worth watching, both for what he says and what he doesn’t say, as he begins his second two-year term in office.

In his second annual State of the District Address, delivered Wednesday night before an enthusiastic audience of more than 150 at the Pratt Institute’s Higgins Hall, he barely mentioned Atlantic Yards--though, compared to his glancing mention last year, he was more critical, an indication that the center of gravity regarding the project has shifted.

And, as I explain lower in this report, he thinks it’s likely that the legislature will hold a hearing on Atlantic Yards.

On video, three issues

Well, after a student musical performance--always good to draw a crowd--we first saw Jeffries on video, speaking eloquently against the repeal of term limits for city officials. Then again, the bill he’s proposing in the legislature wouldn’t impose term limits on entrenched Assemblymembers like Speaker Sheldon Silver, one of the fabled "three men in a room."

Then he argued that it’s time to close upstate prisons, challenging the "prison-industrial crisis" and for ending racial profiling. Only the latter has passed the legislature, though the state’s fiscal crisis looks like it will lead to the closing of some prisons and a rethink of past policies.

(The video, with a faux-anchorperson doing the introduction, was more polished than the one last year. Perhaps that indicates help from Jeffries' longtime friend Lupe Todd, now a consultant with George Arzt Communications, who was thanked publicly along with his in-house aides. She's a former staffer for Newark Mayor Cory Booker and, before that, Dan Klores Communications, where, among other things, she worked on the Forest City Ratner account.)


Deb Howard of the Pratt Area Community Council introduced Jeffries, praising him for his work on legislation that helped bring a bank to an underserved strip on Fulton Street, and for his work establishing Operation Preserve, which provides legal counseling for those threatened with displacement.

It also includes an effort--always popular in the Assembly, but stymied by the Senate, which was Republican until the last election--to better protect rent-regulated tenants.

The range of issues

Jeffries talked of town halls he’d held on public safety, affordable housing, and mass transit, the latter culminating in additional service on the B38 bus. Unmentioned was his opposition to congestion pricing, which might have done much for his district and the city. (Was he triangulating because a reasonable number of his supporters do have cars?)

Despite the economic crisis, he declared there was reason for hope, “because of the change in occupancy at 1600 Pennsylvania Avenue. I’m not usually so happy when someone loses their home,” he said, in one of several lines that generated laughter.

(Jeffries didn't lob any humor at the state legislature itself, nor say the word “dysfunctional,” which is the Brennan Center’s description.)

(Update: As a reader points out, Jeffries should also be credited for efforts to gain tax credits to hire ex-prisoners and for holding "office hours" at subway stations. Even if the latter's something of a gimmick, but he shows up, and a lot of other elected officials don't do it.)

Affordable housing

As he said last year, the most significant issue in the district is affordable housing, a response to the “twin evils of gentrification and displacement.” (Some would call gentrification a mixed bag, certainly benefiting existing homeowners.)

He cited reform of the city’s 421-a law, but didn’t give it nearly as much time as last year, perhaps because--as he didn’t mention--the previous version subsidized much luxury housing but the reform has, with the economic downturn, created very little affordable housing.

He cited Operation Preserve, noting that there are 20,000 rent-stabilized apartment units in the area. He cited the effort by "predatory equity"--a term that has been used too infrequently--to squeeze profits out of such buildings.

The single greatest threat to affordable housing, he said, is vacancy decontrol, which lets landlords deregulate vacant rent-stabilized apartments if the rent reaches $2000--a figure enshrined in 1997 and not adjusted for inflation--a not-so-tough threshold to meet.

“The days of working families being thrown out of their communities are coming to an end,” he declared, to big applause.

Indeed, the single most important legislation for his district may be reform of rent regulation, an achievement dependent less on the Assembly, which has long supported such measures, but the newly-Democratic Senate.

Project Reclaim

Then Jeffries hit the sweet spot of his sermon. “And then when it comes to some of these developments--”

The crowd murmured “uh-huh.”

“--for all these vacant luxury condominium buildings across our community, we’re coming after you too. You can run--but you can’t hide.”

The audience laughed.

“Because it makes no sense to have all these vacant empty luxury apartments. You can’t sell ‘em because you’re charging too much in a bad economy. When so many people in our community need housing.

“That’s why we’re launching Project Reclaim,” he said, pledging to work with city, state, and federal agencies, “as well as local developers to figure out a way how we can take some of these vacant luxury apartments and figure out a way we can transform them into affordable housing for our community.”


“We’re gonna reclaim them.”

How exactly that might work remains to be explained, but Jeffries and other local elected officials are having some conversations.

Greed and hope

“We have an opportunity to change the culture from “Greed is good” to “It is better to give than it is to receive,” Jeffries declared, getting deeper into his cadences.

“There is hope in the valley. For more than a decade, working families, middle class folks and senior citizens in our community have been under assault, victimized by high rents, abusive landlords, the subprime mortgage crisis, and a real estate market that was spiraling out of control. But the collapse of the economy has actually given us an opportunity to preserve the racial, social-economic, and cultural diversity that we care so much about in our community.”

So, it turns out, there’s a big silver lining.

Jeffries marched toward a conclusion:
“The economy has slowed down the gentrification.
The economy has slowed down the predatory equity.
The economy has slowed down the luxury condominium explosion.
The economy has slowed down the Atlantic Yards steamroller."

There were some murmurs and titters from the crowd, perhaps because Jeffries has been cagey about AY, perhaps because the most prominent AY opponent, his sometimes-ally, sometimes-rival Council Member Letitia James, was in the second row.

“The economy has slowed down the displacement of working families and middle class folks from our community. There is hope in the valley.”

An AY hearing?

After his address, and as the crowd enjoyed some free food--always a good lure for events like these--I asked Jeffries whether an Assembly hearing on Atlantic Yards would ever happen. I reminded him that last May he’d called for a hearing, but it hadn’t happened, perhaps--as I speculate--Speaker Silver, an ally of Forest City Ratner, has looked askance at the idea.

“I do think, since Assemblyman [Jim] Brennan, Assemblywoman [Joan] Millman and Assemblyman [Richard] Brodsky, the chairs of the three relevant committees, have committed to holding a hearing, there still is a good possibility it’s going to happen,” Jeffries said.

(I hadn’t gotten any indication that Brodsky, who’s been focusing on Yankee Stadium, was ready to touch Atlantic Yards. He once indicated that a hearing would encompass the AY arena, but Yankee Stadium was a big enough target. When questioned directly last May, he was noncommittal.)

“I’ve re-raised the issue with them; they’ve given me their commitment that they want to move forward with the hearing,” Jeffries continued, “and collectively we’re going to approach the leadership to raise the possibility of having a hearing sometime in the near future, certainly within the next six months.”

Maybe in the Senate

Given new prominence of State Senator Velmanette Montgomery in a majority-Democratic Senate, a hearing, Jeffries said, might be held in the Senate, or as a joint Senate-Assembly hearing.

“Daniel Squadron chairs the Cities committee, we plan to approach him,” Jeffries said. “I’ve spoken with State Senator Bill Perkins, who chairs the Corporations, Public Authorities committee on the Senate side. He’s interested." (Perkins has been a major critic of eminent domain.)

He concluded, "So I think that the relevant individuals, at the legislative level, in terms of the committee chairs, in both the Senate and the Assembly, are ready to move forward. We just have to be active and vigilant with the leadership, and eventually I’m confident we can persuade leadership to move forward.”

“They’ve had other priorities,” he said of the committees, citing Yankee Stadium and World Trade Center construction. “But I’ve constantly said to them we are just as relevant, as important as those other projects and we also have to shine a spotlight on the Atlantic Yards project to make sure that we have transparency and can get to the bottom of what’s happening now and where we go in the future.”

Jeffries’ call for transparency was no endorsement, but it wasn't out on a limb, either. Similarly, while calling for a hearing, he's been careful not to push too hard. It's the prudent posture of a legislator allied with Brooklyn Democratic machine head Vito Lopez--who’s clashed with James and would support Jeffries for Congress--and not about to derail his career by suicidally challenging kingpins in Albany.

IBO official: time for another look at AY incentives (but not for a cost-benefit analysis, yet)

The Brooklyn Paper quotes George Sweeting, Deputy Director of the New York City Independent Budget Office (IBO), says, according to the Brooklyn Paper, "It may be time for the city to take another look at the mix of incentives.”

He elaborated: “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 cost-benefit calculation. Some of the benefits to the public may now be less than originally assumed."

In fact, once the city's contribution was quietly doubled, Sweeting acknowledged that the revenues to the city might not offset the expense.

The implication of his more recent remarks is that the city should reduce rather than increase subsidies.

Second look?

Still, it doesn't look like the IBO is ready to perform another cost-benefit analysis. (The initial one had its flaws, since the IBO mainly focused on the arena.) In September 2007, Sweeting told me, "It remains unlikely that we will re-work the entire fiscal impact analysis, given other demands on our resources."

When I queried Sweeting yesterday, he responded, "We don’t have anything underway on Atlantic Yards at this time. As the plan evolves we may take another look--but we have to consider that in light of our own limited resources and other demands on them."

Indeed, the plan is hardly firm. However, that hasn't stopped Forest City Ratner from pursuing additional indirect subsidies. Shouldn't someone be calculating how this cuts into the originally promised benefits?

So, the Nets are the metro-area exception, giving tickets away

In a piece yesterday on public radio's The Takeaway headlined Sports teams slash ticket prices to keep fans, Jeff Beresford-Howe observed the extent to which teams nationally are desperately trying to fill seats, and offered a contrast: "The extent to which none of this has reached New York yet is remarkable."

Well, as DDDB and many others would point out, it sure has reached the New York metro area, where the Nets are actually giving tickets away--and even giving away corporate sponsorships, in a scheme NLG deems worthy of The Office.

On Wednesday night, the Izod Center was barely half-full, as the Nets drew an announced 10,138 for a game against the Toronto Raptors. Photos suggest the arena was even more empty.

Update: The New York Times this morning reports that the Knicks, indeed, are getting on the discount bandwagon--though, I'd point out, a 40% discount is not the same as a freebie.

Kucinich asks Citigroup to give up Citifield naming rights deal

Representatives Dennis Kucinich (D-OH) and Ted Poe (R-TX) have asked Treasury Secretary Timothy Geithner to demand that Citigroup dissolve its $400 million naming rights contract for the New York Mets, known as Citifield.

Citigroup has received more than $350 billion in taxpayer money from economic stabilization efforts and loans, the letter notes.

"In every state, American homes are foreclosed and people put on the street. At Citigroup, 50,000 people will lose their jobs. Yet in the boardroom of Citigroup, spending $400 million to put a name on stadium seems like a good idea. The Treasury Department, which forced Citigroup corporate executives to give up their private jet, should also demand that Citigroup cancel its $400 million advertisement at the Mets field and instead begin to repay their debt to the taxpayers," stated Kucinich.

Essentially, the naming rights agreement is a marketing expense, and even banks that take federal money aren't being asked to stop marketing, are they? (Can egregious marketing expenses be regulated?)

But it's probably not a marketing expense--at least at $20 million a year--that the bank would make today.

Barclays Capital has so far avoided nationalization. But the discussion about the Atlantic Yards arena naming rights deal might get interesting if the U.K. government does end up bailing out the bank.

Thursday, January 29, 2009

Brennan to ESDC/FCR: here's Atlantic Yards blight, so listen to BrooklynSpeaks

Shortly after BrooklynSpeaks asked Gov. David Paterson to address multiple aspects of the stalled Atlantic Yards project, Brooklyn Borough President Marty Markowitz and Assemblymember Jim Brennan both sent letters requesting developer Forest City Ratner and the Empire State Development Corporation (ESDC) to respond.

There are distinct differences between the two letters, however, with Markowitz's tone hedged, friendly, and conciliatory, and Brennan's approach more pointed, accusing the developer of having created blight. Both are posted on the BrooklynSpeaks web site.

Brennan: here's blight

Brennan's letter, addressed to ESDC CEO Marisa Lago and FCR Executive VP MaryAnne Gilmartin, is more formal, essentially endorsing the elements of the BrooklynSpeaks letter, which, among other things, asked that further street closures and demolitions be halted, that viable vacant buildings be repurposed, that the Carlton Avenue Bridge be returned to service, and that interim public open space be created.

He writes:
As a follow-up to our discussion, I am enclosing for your response and comment an urgent letter sent by BrooklynSpeaks sponsors to Governor Paterson on December 31st and calling for a number of immediate steps to mitigate the blight and disruption to surrounding neighborhoods caused by the Atlantic Yards project and to improve communication with the community and its elected officials. Enclosed as well are photographs detailing the extent of the blight caused by demolition associated with the project.
(Emphasis in original is underlined; click on graphics to enlarge.)

I haven't seen the photos he sent, but the slideshow above, with photos by Tracy Collins, probably serves as a representative example.

Markowitz: "a number are... meritorious"

Markowitz wrote only to Gilmartin, not to the ESDC, and used her first name in a more familiar tone:
I enjoyed our conversation today regarding the proposal and many ideas put forward by BrooklynSpeaks. In reviewing the list, it seems to me that a number of them are meritorious. And it's my hope that Forest City Ratner will move quickly to implement those that will mitigate any of the problems associated with the project in the opinion of this group which speaks for so many who reside in the immediate area of Atlantic Yards.

Markowitz did not specify which ones are meritorious. And his third sentence, which essentially endorses the "opinion of this group," could be read to suggest that all are meritorious.

Perhaps Markowitz thinks it's practical and possible--and good p.r.--to "create interim public open space as play areas or community gardens," as BrooklynSpeaks requested.

But does he really think the developer would "[m]ake publicly available current expected and worst-case construction timelines" or "[r]eturn the Carlton Avenue Bridge to service"?


Who speaks?

As to whether BrooklynSpeaks "speaks for so many," well, it certainly speaks for some, including most of the elected officials who represent the area around the project. But the Council of Brooklyn Neighborhoods (CBN) and Develop Don't Destroy Brooklyn (DDDB), both of which have gone to court to challenge the project, probably speak for more.

DDDB has kept the pressure on, pointing to the lack of transparency on the part of the developer and the state. And CBN has called for an audit of public monies spent. They, apparently, don't think that asking nicely will get them anywhere.

Wednesday, January 28, 2009

Despite announced two-year timetable to replace Carlton Avenue Bridge, contract gives FCR three years (and maybe more)

The Carlton Avenue Bridge, closed on 1/23/08 and currently half-demolished, was supposed to to be closed two years for reconstruction.

However, the contract for bridge work--which I obtained via a Freedom of Information Law request--gives developer Forest City Ratner three years before penalties kick in, and even longer in case of unavoidable delays. (Excerpt below.)

That three-year window has never been made public, as far as I know, and I got only a cursory explanation of why it was allowed.

“We negotiated an agreement with FCR which met our mutual needs," New York City Department of Transportation (DOT) spokesman Seth Solomonow told me. "The project end-date does not preclude the possibility of earlier completion.”

That's true, but it doesn't explain why no one announced that 36 months might be an end-date.

Moreover, as I describe below, "unavoidable delays" could extend the deadline to 60 months, or five years, to finish the job, without penalty--and loose contract language could stretch that deadline even more.

(Photo by Jonathan Barkey. Click on all graphics to enlarge.)

Reaction: "completely unacceptable"

I informed Terry Urban, co-chair of the Council of Brooklyn Neighborhoods, a plaintiff in the lawsuit challenging the AY environmental review, of the deadline and asked for comment. "It is completely unacceptable that the DOT gave Forest City Ratner three years, plus possible extensions, to re-open the Carlton Avenue Bridge, while representing to the electeds and the community that the work would only take two years," she said.

"But it is shocking that the ESDC [Empire State Development Corporation] represented to the appellate court that the work would be completed in two years, although as the lead agency on the project, it was unquestionably aware that the DOT contract gave FCR three years," she added. "Now work on the bridge has completely halted, without explanation or a restart date, and it is clear that there is no government authority with the will or desire to protect the community from Forest City Ratner."

Two-year estimate

The two-year estimate was in the Final Environmental Impact Statement (p. 17-23 of the Construction Impacts chapter, above) produced by the ESDC. And was cited in an ESDC Memorandum of Law (p. 13, PDF) filed 1/25/08 in the case challenging the Atlantic Yards environmental review.

The DOT says the work is "scheduled for completion January 2010."

No timetable

No timetable, however, was provided in the community notice (right) the ESDC issued last year regarding the closure and reconstruction of the bridge.

Maybe they were on to something.

Asked to comment, City Council Member Letitia James, who lives north of the bridge in Clinton Hill, contended, "The reconstruction of the Carlton Avenue Bridge is related to the now doomed Atlantic Yards project. The reconstruction of the bridge was not necessary. The bridge provided me and others safe passage to Prospect Heights and Park Slope. Governor [David] Paterson should return the bridge to a state of good repair and reopen it immediately to the community."

I noted that the bridge reconstruction is a city, not a state project; James pointed out that the state has overall responsibility for Atlantic Yards. The ESDC, of course, says reconstruction was necessary to enable a new railyard in the project. Then again, if there's no project, there's no need for a new railyard.

Contract questions

In a legal document filed 1/25/08, Forest City Ratner attorney Jeffrey Braun stated:
The Carlton Avenue bridge is being closed and dismantled in accordance with a contract between FCRC and the City of New York. FCRC is contractually obligated to the City to rebuild the bridge...

After I filed a FOIL request, the DOT provided the Carlton Avenue Bridge Construction Agreement. (First page at right.) It allows for up to 36 months for completion, with extensions possible for "unavoidable delay."

It was signed 12/17/07, a year and nine days after the ESDC approved the project. Similarly, the State Funding Agreement for the project, signed in September 2007, provides far more lenient deadlines than in project documents approved nine months earlier.


What are the penalties if the bridge isn't rebuilt? The document states:
Subject to Unavoidable Delay, in the event that Developer fails to Substantially Complete Developer Work by the Date of Substantial Completion, Developer shall pay DOT liquidated damages of ten thousand dollars ($10,000) per day until the Bridge is Substantially Complete...

However, those damages might not kick in after three years.

"Unavoidable delay" and a five-year limit

That's because damages could be precluded by an "unavoidable delay," defined as:
[A]ny circumstances beyond the reasonable control of the Developer, including... the pendency of litigation challenging the approvals for, or seeking to enjoin the development of, the Atlantic Yards project (provided that Developer establishes to DOT that such litigation prevents Developer from proceeding with the Developer Work)...
anding the foregoing, Developer shall be responsible for Substantially Completing the Bridge no later than sixty (60) months from the date of this Agreement, regardless of any such unavoidable delay, unless the unavoidable delay directly and specifically precludes the Developer from Substantially Completing the Bridge. Developer shall make best efforts to take all necessary and reasonable steps, including legal action, to overcome any unavoidable delay in the Atlantic Yards Project required to Substantially Complete the Bridge.
(Emphasis added)

In other words, if "unavoidable delays" extend past the three-year deadline, the developer would have only a two-year grace period for such delays--unless the "unavoidable delays" are really, really unavoidable.

That strikes me as giving the developer a lot of leeway.

Unanswered questions

When I posed questions to the ESDC, I was told to ask DOT. The DOT's response, as noted above, was brief.

I asked both ESDC and DOT why the more generous deadline wasn't announced, and whether the there's any current estimate on when the bridge would be reconstructed. No answers were provided.

Target date, "probabilistic date"

Another unanswered question I posed: why aren't such projects announced as, for example, "expected two years, with up to three years contractually possible"?

After all, when pressed by Paterson about Ground Zero, Port Authority of NY/NJ Chairman Christopher Ward, according to the Times, presented two dates for each project: a target date and a “probabilistic” date, based on computer analysis of all the many random things that might go wrong.

Tuesday, January 27, 2009

Learning from Rockefeller Center: building during a downturn, the role of p.r., and the difficulty of effective urbanism

The late New York Times architecture critic Herbert Muschamp, in an unaccountably gushing 12/11/03 essay headlined Courtside Seats to an Urban Garden, heralded the just-announced Atlantic Yards project as "A Garden of Eden grows in Brooklyn."

He later offered another superlative:
Those who have been wondering whether it will ever be possible to create another Rockefeller Center can stop waiting for the answer. Here it is.

Well, aside from the unending delays in the project, another Rockefeller Center? As I've pointed out, the Atlantic Yards plan demaps city streets and creates a superblock, while Rockefeller Center (right) actually added a street, creating more liveliness for pedestrians. Muschamp, shamelessly, had it backwards.

What Muschamp didn't say--and I didn't know until recently--is that Rockefeller Center occupies 22 acres, the size of the current Atlantic Yards footprint (announced at 21 acres). Rock Center has 19 commercial buildings; Atlantic Yards would have an arena, an office building or two, and the rest of the 16 towers would be housing.

Despite a distinct difference between a complex with no housing and another that would mostly contain housing, there are some interesting comparisons and contrasts, as a reading of Daniel Okrent's terrific Great Fortune: The Epic of Rockefeller Center, published in 2003, suggests.

So some relevant issues, as I'll discuss below, include the shifting costs and program; the drumbeat of public relations; the relationship with holdouts; the role of zoning; the capacity to gain tax breaks; and the opportunity to build during an economic downturn.

Ultimately, however, the message is clear: even if Atlantic Yards gets built as proposed, which is enormously unlikely, Rockefeller Center would be a very difficult standard to meet.

Book summary

The book is a saga that encompasses architecture, finance, politics, law, and public relations, among other things.

The protagonist is not John D. Rockefeller Sr., the oilman and best-known Rockefeller, but rather John D. Rockefeller Jr. (aka Junior), who took on the project as an effort to build a new home for the Metropolitan Opera. The midtown site, leased from Columbia University beginning in 1929, was steered by a cast of characters including developer John R. Todd, real estate negotiator Charles O. Heydt, and architect Ray Hood.

While the National Broadcasting Company provided Radio City Music Hall and the name "Radio City," it took aggressive marketing and internal favors--the family's Standard Oil of New Jersey was an early tenant--to get Rockefeller Center going during the Depression years. But it became an enormous post-war success and an urban icon.

Richard Lacayo, in his 10/6/03 Time magazine review, offered a comparison not to Atlantic Yards but to an even more high-profile and controversial project:
More than just a supremely entertaining book, Daniel Okrent's cartwheeling account of how Rock Center came together is indispensable for anyone looking for reason to believe--and who isn't?--that we can pull off the same miracle where the World Trade Center stood... All they had to do was undertake a project that would have stumped the pharaohs, fight like pit vipers, face down the Depression, fend off naysayers on all sides and still produce what Okrent calls an "aesthetic, commercial, and--there's no other word for it--emotional success."

Political clout

Early in the book, we learn of the family's political clout:
The frenzy of acquisition was only part of Junior's campaign. At the same, according to the civic reformer William H. Allen, his representatives used political and economic muscle to keep tax appraisals substantially below market value. And now, in early May 1928, Heydt's attention was turned toward a skirmish taking place in the regulatory labyrinths of the city's zoning laws. Property owners on 53rd and 54th Streets who were not Rockefellers had petitioned the city to rezone the street for business, arguing that without such a change they'd go broke On May 11, when the Times reported the remarkable outcome, the story ran across two columns at the very top of page one. even though thirty-eight of forty-five non-Rockefeller property owners supported the rezoning, Junior prevailed.

As with developers today, the Rockefellers managed to make the zoning laws work to their advantage. Atlantic Yards would go one step farther, with the state overriding the city zoning.

An ear to government

Later in the book, Okrent explains that Rockefeller Center was treated gently by City Hall:
Close ties with Fiorello La Guardia's City Hall had been cemented so thoroughly... Once in office the mayor came close to appointing a tax commissioner whose candidates for the job terrified Charles Heydt. Pleading to lawyer Raymond Fosdick, Heydt said, "You know the animus which he has for my principal. Is there nothing to be done to prevent this calamity?"

There was. Heydt and Fosdick weren't the only men interested in blocking the appointment of William H. Allen; few in the real estate community liked Allen, a good-government reformer who was both well intentioned and highly outspoken. Consequently, Allen had to launch his attacks on junior from outside city govenrment. He used cannons. Allen called Junior the city's "Chief Tax Dolee," and noted how the assessments for the Center's Fifth Avenue lots had decreased after the land was developed. An Allen computation indicated that ridiculously low assessments enabled Junior to escape something between one and two million dollars a year in tax obligations. The land the Music Hall stood upon, he pointed out, was assessed at a lower rate than the land beneath a theater in Jamaica, Queens. In an oral history he prepared in 1950, a still apoplectic Allen explained how this had all happened: "Go to almost any group or person in this town," he told his interviewer. "A reference to Rockefeller tax favors will bring this: 'Maybe, but look at that skating rink, look at the tallest Christmas tree, look at the tulips!'"

That echoes the apparently gentle tax treatment of Yankee Stadium. As Assemblyman Richard Brodsky has said, "[T]here is nothing like professional sports to make public people nutty."

Perhaps the same goes for Rockefeller Center.

(Photos by WallyG via Flickr, reproduced according to a Creative Commmons license.)

Building around holdouts

Unlike with Atlantic Yards, the Rockefeller Center program was flexible around the edges:
The Rockefeller willingness to build around holdouts was a last warning to the few remaining recalcitrants: ask too much and you'll get nothing.

Dealing with the neighbors

Later, Okrent describes the down side of demolition:
Pedestrians flinched at the detonation of each dynamite charge, and despite the introduction of a new device called the Dust Eliminator a powdery mist hovered over the site like the shadow of an unseen giant. Mrs. Vanderbilt wasn't the only neighbor who complained about the ceaseless noise. The reluctant operator of a neighboring rooming house... wrote pleadingly to John R. Todd, "We are having an awful time keeping tenants in the building on account of your building operations..." Before passing the letter on to his field supervisors, Todd scribbled a note across the bottom that he would have done well to have run off on a printing press and handed out as needed over the next seven years. "Let the men on the job show some interest and an effort to be neighborly," Todd wrote, "even if they cannot do very much."

That sounds a little like the Atlantic Yards Community Liaison Office, circa 2008.

An architectural competition

Okrent writes:
A supervising trio of architects was selected to oversee proposals from seven invited architectural firms.

That's a distinct contrast with the choose-a-starchitect-and-don't-let-him-hire-other-firms Atlantic Yards plan. Maybe it makes more sense, given Frank Gehry's recent disappearing act.

In the profession

Rockefeller Center was way bigger than Atlantic Yards or even Ground Zero to architects:
It was a sign of the development's importance to the architectural profession that the magazine [Architectural Forum] would run a ten-month series describing every aspect of its design and its planned construction.

A moving target

The Atlantic Yards plan has switched office space to condos to market-rate rentals, but Rockefeller Center went through way more gyrations, given its more complex design.

Okrent writes:
Nearly all architectural projects begin with what the trade calls a "program," the systematic delineation of the project's intent and its requirements.... It would likely be posited in terms of a budget, and would also set forth the particular requirements of tenants already committed to the project.

The Metropolitan Square program articulated by Todd in November 1929 became a moving target. The first major change occurred when the opera house was dropped, but even the advent of RCA and its million-plus square feet of theaters, studios, and offices didn't stabilize matters. Todd and his architects would alter their course with each perceived change in the economy; with the appearance on the horizon of each potential major tenant; and with each explosion of imagination that detonated in the Graybar offices. These last events, generally but not exclusively sited somewhere in the skull of either Hood or Todd, confirmed a wise variation on a famous dictum. Louis Sullivan said, "Form follows function." Architectural historian Carol Willis's version: "Form follows finance."

If "Form follows finance" with Atlantic Yards, that's why there's nothing going on right now.

Siting and zoning

Okrent writes:
And why was the largest building sited on the Sixth Avenue end of the site?
It was obvious that the Fifth Avenue frontage was the best spot for retail businesses, which ideally would be contained in low buildings; no one liked to take elevators to do their shopping....

All of this would additionally enable the architects to capitalize on the zoning laws, which allowed the transfer of the low buildings' "tower rights" to other portions of the site. Consequently, the RCA Building could borrow from the Fifth Avenue buildings and the open plaza to soar to the sky without the burden of broad-shouldered setbacks; it could be whatever the architects wanted it to be.

When zoning is in play, architects have to work under certain constraints. With Atlantic Yards, yes, there's an effort to have relatively smaller street frontages, for example, at the eastern end of Dean Street. But there's no official constraint.

Big-time demolition

Perhaps four times as many buildings were demolished for Rockefeller Center as on the Atlantic Yards site. Okrent writes:
Fourteen months after demolition began, more than 200 buildings, most of them barely 50 years old, had been reduced to rubble.

Still, most of those buildings were small, the project didn't gain acreage by demapping streets, and there were no large industrial buildings like the Ward Bakery.

The role of the press

Maybe it was because little else was going on, or because there were so many newspapers, or because the New York Times covered New York City more attentively, but the project got a lot of press. Okrent writes:
For the next eight months nothing emerged from the Graybar for public viewing... The Times, which had published eight separate articles on the progress of the design during a single week in June 1930, went all but silent on the subject until the following March.

That picked up later:
From the beginning, coverage was constant. Over the three months just before construction began, the Times averaged more than three-quarters of a column about the development each day.

Variety of coverage

Okrent explains the context:
The press representatives invited to the design's debut were primed for the event. The Depression, more than a year old by now, had pushed most upbeat stories--expansive stories, optimistic stories--out of the newspapers. But in the three years since it had first popped into print, in May of 1928, the saga of John D. Rockefeller Jr. and Columbia's midtown land had never been far from the city's front pages. Even during those quiet months in the second half of 1930 when the Times had nothing to say about the design plans, its pages regularly featured speculation on subjects as varied as the prospects for television broadcasting from the new studios or whether Leopold Stokowski was really ready to abandon the Philadelphia Orchestra for a new podium in Radio City, the name by which the whole project was not generally known. On March 2, 1931, the paper of record announced that the plans for Radio City would be revealed three days later, and if that wasn't an adequate introductory drumroll, a longer story ran on the designated day itself, this one informing readers that the design "will be disclosed tonight when a model of the project will be shown for the first time in the office of Todd, Robertson & Todd."

Funny numbers

We've learned to take Atlantic Yards numbers with a grain of salt, and such skepticism has a pedigree. Okrent writes:
Amid all this activity, Junior could open his Times on June 14 [1930] to read this front-page headline: "ROCKEFELLER PLANS HUGE CULTURE CENTRE; 4 THEATRES IN $350,000,000 5TH AV. PROJECT."... Still, this number--three hundred fifty million dollars--was something new not only to the rest of the Times's readers, but to Junior himself.

No one--not Junior, not even Todd--had any meaningful notion of what the project would cost. Three days later, when the office Todd- and Sarnoff-approved version appeared on the paper's front page, the number had been modulated down to $250,000,000, a milder figure but every bit as arbitrary.

... No one--anywhere on earth, at an point in history--had ever tried to build anything like this, much less attempt to put a price tag on it.

The credulous press

As with Atlantic Yards, the press often reported what it was told:
Crowds of newspapermen and magazine writers mingled with Todd, the architects, and various RCA officials, and unquestioningly swallowed their assertions that the whole development would cost $250 million (double Todd's actual estimate); that it would be completed by the end of the following year; and that television programs would be broadcast from its studios immediately thereafter.

The power of p.r.

Okrent describes a major public relations effort:
Just in case the editors he wished to influence were unimpressed, [Merle] Crowell backloaded his opening phrase with dynamite. This was "excavation work," he wrote with insouciant immodesty, for nothing less than "the largest building project of all time." And--well, what the hell, why stop there?--here was a price tag for literalists who wanted their hyperbole buttered with statistics: the project was, Crowell proclaimed, a "$1,000,000,000 undertaking."

Soon enough, the man hired to tell the world about Junior's development dialed back his official estimate to a modest $250,000,000, which itself was a gross exaggeration but at least within the realm of human arithmetic. It may have been the only compromise with reality Crowell would ever make in his tenure as Rockefeller Center's head cheerleader, drumbeater, minnesinger, and mythmaker.... for the thirteen years Crowell presided over a publicity effort that ranks as one of the most effective campaigns since the evangelists wrote the gospels.

..The catchall locution Crowell eventually settled into was "the largest building project ever undertaken by private capital," those last three words an acknowledgment of the existence of, say, the Pyramids or the Great Wall of China.

With Atlantic Yards, it wasn't just the announcement of a $2.5 billion (now $4 billion) price tag and 10,000 jobs (now many fewer), it was an act of mythmaking: the return of professional sports to the site (or area) where Walter O'Malley wanted to build (with much government help) a new stadium for the Brooklyn Dodgers.

A critic sets the tone

A New Yorker critic set the tone:
Of all the people who hated the plans for Radio City--and almost everyone did--none hated them more than Lewis Mumford....

He assaulted its "absence of scale," its promotion of "super-congestion," even a perceived moral turpitude evidenced by its "failure to recognize civic obligations." ... "If Radio City is the best our architects can do with freedom," Mumford thundered, "The deserve to remain in chains."

Tempered criticism had begun to appear right after the press showing--a Times editorial was exquisitely balanced, applauding the effort while questioning its aptness--but Mumford's attack seemed to provide intellectual justification for the blizzard of criticism that soon filled the air...

The lay response was no kinder. The plans "aroused the public as no architectural undertaking has ever done," said a surprised writer at one of the architecture magazines.

By contrast, the initial enthusiasm by Muschamp and then Nicolai Ouroussoff for the Atlantic Yards plan has been replaced by dismay.

Mumford comes around

Mumford, as Okrent explains, came around, not so transparently:
Even that wasn't the last word, as a new Mumford polemic seemed to pop up in The New Yorker with the opening of each new Rockefeller Center building. Even when he found something to praise, Mumford couldn't quit pounding on the same themes... At last, as th 1930s concluded, and the project was nearly complete, when it had established itself as the heart of Manhattan... Mumford delivered his semifinal judgement: "This group of buildings has turned out so well".... A little more than a year later came the definitive thunderbolt: "architecturally", Mumford wrote, Rockefeller Center was "the most exciting mass of buildings in the city."

For some reason he declined not only to tell his readers why he had changed his mind, but that he had ever thought anything else.

Building during the Depression

Okrent describes the importance of the project in an economic downturn, an argument that may yet be made for Atlantic Yards:
In the construction business... well, there really wasn't any construction business left, at least not until the New Deal began providing federal dollars for various bridges, tunnels, post offices, and other public projects. But that was still more than two years off, and in December 1931 parts of New York looked as if God had gotten bored with the Creation business in the middle of the sixth day and simply walked off the job... The president of the American Institute of Architects urged recent graduates not to come to New York--there weren't any jobs.... Sixty-four percent of the city's construction workers were unemployed.

There is no way of knowing exactly how many people found employment during the Depression through the creation of Rockefeller Center, but it may have been a number exceeded only by the federal government's various job creation programs. Estimates emerging form the Center's press office over the years hovered in the range of 40,000 to 60,000, with occasional spikes to 75,000...


Rockefeller Center earned praise even as its builders drove a hard bargain:
As president of the American Federal of Labor in the nineteen fifties, George Meany... said he "could never forget what [Rockefeller Center] meant to the workman in the depression" and considered the project "a real act of patriotism on [Junior's] part."... To know what the union men were grateful for is to know just how bad the Depression was for the construction industry in New York: while other employers were demanding larger cuts, Junior was being thanked by the union officers for "the magnanimous spirit you displayed in favoring only a 15% reduction in our wages."

For Rockefeller Center, this was the other, salutary side of the Depression equation: sellers can get extremely cooperative when there's only one buyer in sight. Junior's concern for the working public was genuine, and his satisfaction in providing jobs was merited. But the delight of those who were spending his money and building his buildings was boundless. For them... the Depression was a lever that saved tens of millions of dollars, accelerated work schedules by months, and made the Rockefeller Center buildings the finest, hardiest, and eventually most valuable office buildings in New York.

Should Atlantic Yards go forward, there might be some significant savings from the previously inflated cost estimates.

Good timing

Building during an economic downturn can pay off. Okrent writes:
In 1940 the gross national product stood at $101.4 billion; five years later... it reached $215.2 bilion. Cash from redeemed war bonds, added to the smoldering fire of four years of pent-up consumer demand, accelerated a boom like none the country had ever known. In the heart of the commercial capital of the richest and most powerful nation on earth stood the only first-class office space... built in New York since the opening of the Empire State Building in 1931. Over those same fourteen years a transportation infrastructure... had been put in place... The private development and the public development made a fertile coupling.

Naming the project

While these days a project's name is decided before it's announced, back then, things were different. Okrent writes:
The Empire State Building, lifeless and teetering near bankruptcy, was a constant reminder of how failure begat more failure; once it had been hung with the nickname "Empty State Building" there was no saving the place. Whatever rental difficulties Rockefeller Center endured, it had an asset that came with the deal: it had the Rockefellers, in name and flesh.

The name wasn't an automatic. The idea of having his own surname "plastered on a real estate development" had never occurred to Junior, and when it was first broached it appalled him. Metropolitan Square had the virtue of bland anonymity and, at the same time, a descriptive connection to the opera company. Radio City came from the RCA lease... But Metropolitan Square had become an atavism, and Radio City would not do for the whole development, tainted as the words were by the scent of showbiz.

..Although many would claim credit for the idea, including Ivy Lee's main competitor in the public relations racket, Edward Bernays, it was Lee who first suggested "Rockefeller Center" to Junior, in the summer of 1931.

The impact of shadows

While Atlantic Yards defenders like Borough President Marty Markowitz scoff at concerns about shadows from some AY towers (considerable shorter than the tallest Rock Center building), it was a mainstream concern back then:
Some of [Junior's] neighbors were more troubled by the shadow the 850-foot building cast over the West 50s for six months of the year; The New Yorker called March 13, the day when the sun finally reached the south-facing windows on 53rd Street, "the Rockefeller Equinox."

Expressing its Age?

Okrent recounts an oracular observation:
"Architecture never lies," Hugh Ferriss once wrote. "Architecture invariably expresses its Age correctly." He was right, but in the Manhattan of the 1920s, the age took a while to define itself.

So, if Frank Gehry's Atlantic Yards design is built, does that express our Age? Is our time one of fallow sites? Or of belatedly value-engineered designs?

The ineffable question

Near the end of the book, Okrent wonders why Rockefeller Center is so singular:
But why had no one been able to successfully duplicate it? Why had none of the scores of office or cultural complexes all over the country, every one of them inspired by Rockefeller Center, even approached the original's aesthetic, commercial, and--there's no other word for it it--emotional success? "An infinite number of superimposed and unpredictable activities on a single site," as Rem Koolhaas phrased it, guaranteed a life that a dedicated cultural center or shopping center or business center never could... It was also evident that Rockefeller Center's placement right in the heart of Manhattan, part of the city's grid, made it real in the way that, say, a waterfront development never could be. Pedestrians didn't just go to Rockefeller Center, they went through it.

It wasn't a destination in the city; it was, organically, the city itself...

Despite what Muschamp said, it's hard to imagine a similar fate for Atlantic Yards.

Some quibbles

Adam Cohen's 9/28/03 New York Times review praised Great Fortune but raised some questions:
A greater flaw is the book's failure to situate Rockefeller Center in a larger historical context, or to extract deeper meaning. It would be interesting to get more of Okrent's thoughts about the project's impact on the development of New York City. How important a role did it play in making Midtown Manhattan the center of world business it was to become? How influential was it on development in other cities?

Also, like me, he thinks Okrent played down some of the unsavory side of building:
The book also has a light touch -- too light -- with the most unsettling parts of the story... Workers, represented by a toothless company union, were routinely mistreated. And the city was robbed of its fair share of this undertaking, since Junior, called by one critic New York's ''Chief Tax Dolee,'' had a knack for keeping assessments low.

Anthony Bianco's 11/3/03 Business Week review similarly praised the book but found flaws:
The author reliably locates the fun in his tale but tends to skip lightly over its dark side -- the predatory leasing tactics, the systematic chiseling of suppliers, the abortive attempt to interest Hitler's government in sponsoring a German building. On balance, though, Okrent's obvious admiration for Rockefeller Center and its creators is easy to forgive.

Rockefeller Center is an example in which product trumped process--in gauzy retrospect, the ends, many agree, justified the sometimes questionable means. Atlantic Yards, for now, has shifting ends, and increasingly suspect means.

Monday, January 26, 2009

Arena LDC emerges; why would it be used to pay for infrastructure for broader AY project?

Even as the Atlantic Yards project seems stalled, state officials have organized a local development corporation (LDC) to oversee tax-exempt bond financing for Forest City Ratner’s planned Barclays Center arena.

But the odd thing about the Brooklyn Arena Local Development Corporation (BALDC) is that its scope contemplates financing for infrastructure improvements beyond the arena—a function not mentioned in the Atlantic Yards General Project Plan (GPP).

That could help get the city and state off the hook for providing additional infrastructure while allowing Forest City Ratner favorable terms to pay for the infrastructure.

Keep in mind that the GPP (excerpt at right) budgets $544.4 million on project infrastructure, while, as of now, $205 million would come from government funds, with no particular source for the rest. As the project approached approval in December 2006 by the Empire State Development Corporation (ESDC), no one--as far as I know--raised questions about full funding for infrastructure.

And while the LDC appears to provide a vehicle for Forest City Ratner to pay for that infrastructure, other language in project documents opens up the possibility of additional governmental contributions.

The above analysis is preliminary, because the ESDC would provide only partial answers to my queries and was unwilling to explain whether such infrastructure financing was contemplated in the GPP.

LDC emerges

News of the LDC emerged via State Senator Velmanette Montgomery, who posed questions to Forrest Taylor, the ESDC’s Atlantic Yards ombudsman. Taylor explained that BALDC, which would raise funds via tax-exempt and taxable bonds, was formed pursuant to the New York State not-for-profit law on 11/6/08. While the BALDC is not ready to sell such bonds, such bonds must be issued by the end of 2009 to qualify under grandfathered-in Treasury Department regulations.

The BALDC was authorized by the New York State Job Development Authority (JDA), a sibling agency of the ESDC, “to facilitate financing for the arena and certain infrastructure improvements related to the project.”

Why the JDA? “ESDC and JDA have differing statutory powers,” spokesman Warner Johnston explained. “JDA has the authority to create LDC's; ESDC is more limited.” (See background below on the JDA.)

However, the BALDC is not a subsidiary of either agency; rather, the structure is similar to that of the Liberty Bonds Development Corporation. Its role, according to Taylor, will be limited to the financing of arena bonds and possibly the financing of project infrastructure. Project decisions will be made by ESDC.

The BALDC’s six board members are all state officials. (See details below.)

Neither the State, ESDC or JDA will have any obligations to the bondholders. No bond sale would occur until ESDC acquires the site by condemnation—and while ESDC targets 2009, that likely depends on lawsuits.

Paying back the bondholders

According to Taylor, “The bondholders will look to be repaid from (i) PILOT payments to be made by the Forest City affiliate that will be leasing the arena (with respect to the tax exempt arena bonds); (ii) rent payments to be made by the Forest City affiliate leasing the arena (with respect to taxable arena bonds); and (iii) a development fee to be paid by Forest City affiliate(s) leasing certain development parcels (with respect to the infrastructure bonds).”

What if the bondholders aren’t paid? They could exercise leasehold rights, which would be subordinate to the ESDC's rights, which means any lien holder could develop the project only in accordance with the ESDC’s General Project Plan. (Then again, the GPP could be amended, as noted in the City and State Funding Agreements.)

Hints in the GPP

As I wrote last April, some language on p. 27 of the GPP hints at future government reimbursement to the developer.

It defines advances of pledged State and City funds ($200 million at the time) under the Funding Agreements as "Additional Fundings" that would go to a variety of uses until the announced contributions are exhausted. Then, the document continues:
In addition, Additional Fundings shall be made taking into account monies expended by FCRC, provided that (1) at no time will (i) the costs reimbursed to FCRC by the City and State, in the aggregate, exceed fifty percent (50%) of the total costs incurred and paid by FCRC, and (ii) the amounts funded by the State exceed the amounts funded by the City, and (2) such Additional Fundings shall be made upon other terms and conditions to be agreed upon by the parties.

In other words, the term "Additional Fundings" is first used as a definition for pledged contributions, then used as a definition for further new contributions.

I had commented that the money might go to "extraordinary infrastructure"--an undefined term that I thought pointed to the railyard--but now that looks more open.

Develop Don't Destroy Brooklyn (DDDB) in 2005 belew the whistle on the "extraordinary infrastructure costs," pointing out that the term appears in the Atlantic Yards Memorandum of Understanding (MOU) signed by the city and state, leaving room for further reimbursement by public parties.

Both the city and state, according to the MOU (right), agreed to “consider making additional contributions for extraordinary infrastructure costs relating to the mixed-use development on the Project Site (excluding the Arena Building Site)." DDDB calls this a “blank check.”

About the infrastructure

I asked Johnston if the infrastructure financing would be limited to the arena. “It is envisioned that the Infrastructure financing will be for the project as a whole (certain parcels - including the arena parcel - may be excluded),” he replied.

Was it in the GPP? As far as I can tell, no.

According to the Atlantic Yards Modified General Project Plan (p. 23):
In the case of the Arena site, ESDC would lease the land for $1.00 to a Local Development Corporation ("LDC") organized under Article 14 of the Not-for-Profit Corporations Law. Subject to compliance with applicable Internal Revenue Service regulations, the LDC, which is expected to be organized at the direction of ESDC, will issue one or more series of tax-exempt "PILOT" bonds to pay the costs of constructing and fitting-out the Arena and its ancillary facilities.2 An FCRC affiliate ("ArenaCo"), as agent for the LDC, will use the bond proceeds to construct and fit out the Arena. The LDC will lease the land and Arena to ArenaCo, and ArenaCo will agree to maintain, operate and lease the Arena for professional basketball and other sports, entertainment and community events for an initial term of not less than 30 years and not more than 40 years. Certain costs of constructing the Arena will be financed through issuance by the LDC of taxable bonds; debt service on these bonds will be paid by assignment to the bond trustee of rent to be paid by ArenaCo under its lease from the LDC.

ESDC will retain ownership of the land under the Arena through the initial term of its lease to the LDC, and, under the financing arrangements described above, ESDC or the LDC will retain ownership of the Arena during the initial term. As a result, the land and improvements will be exempt from real estate taxes throughout the initial term. ArenaCo would enter into a payment-in-lieu-of-tax ("PILOT") agreement with ESDC and the LDC under which it would agree to make payments not to exceed the amount that full real estate taxes would be if the land and improvements were not exempt from such taxes as a result of ESDC's ownership thereof. ESDC will assign these PILOT payments to a PILOT trustee who, in turn, will assign to a bond trustee so much of the payments as is needed to pay debt service on the tax-exempt bonds. PILOT bonds will be payable solely out of PILOT payments by ArenaCo. Excess PILOT payments during the life of the bonds would be used to defray the cost of operating and maintaining the Arena. It is expected that ArenaCo's obligations under the PILOT agreement will be secured by PILOT mortgages on its leasehold interest; the taxable bonds will also be secured by a mortgage on the leasehold.

None of the City, the State or ESDC will be liable on the LDC bonds which will be non-recourse obligations of the LDC, payable solely out of PILOT payments from ArenaCo. None of the City, the State, ESDC or the LDC will be liable to make PILOT payments. PILOT payments under the PILOT Agreement will be the sole obligation of ArenaCo.

Development fee for infrastructure?

Johnston explained that PILOTs would not be used for infrastructure: “The LDC arena bond financing is distinct from the proposed LDC infrastructure bond financing. A ‘development fee’ (similar to a rental payment) will be the source of repayment of the infrastructure bonds."

The GPP (p. 22), however, contemplates only a $1 fee:
ESDC (directly or through a special purpose subsidiary) will hold fee title to the Project properties acquired by it, at least through construction of the improvements on these properties. The 73 tax lots to be acquired by ESDC will be subdivided and/or combined, at the sole expense of FCRC, to create the individual development parcels contemplated in the plan for the Project. It is expected that each development parcel will comprise an individual tax lot which, except for the Arena parcel, will be leased back to a special purpose FCRC developer affiliate for $1.00.
(Emphasis added)

“The development fee is an additional payment that flows from the developer to the LDC to repay the infrastructure bonds,” Johnson explained. “The structure is justifiable/desirable as it allows for additional project financing without cost/liability to ESDC or the State.”

Maybe so, but I posed several follow-up questions that got no answers:
--whether there was mention of the proposed LDC infrastructure bond financing in either the GPP or Final Environmental Impact Statement (FEIS)
--how the development fee would fit with the $1 lease
--what the dollar value of the infrastructure might be
--whether this model has been used in other projects.

“At this point, all I can tell you is that the proposed infrastructure financing structure has not been finalized," Johnston responded. "If and when it is - we will address further questions on this topic."

There's no mention of infrastructure funding in Chapter 11, Infrastructure, of the FEIS, nor in Chapter 0, Executive Summary.

After that, I took another look at p. 29 of the GPP:
FCRC shall be required to remit payments in lieu of sales taxes to ESDC under the lease or access agreement for each portion of the Project Site equal to all sales and compensating use taxes, if any, which FCRC would have been required to pay in connection with the development of such portion of the Project Site absent ESDC's ownership thereof, other than the Arena Sales Tax Exemption. After completion of construction, the fee interest to each development parcel will be conveyed for $1.00 to the development entity established for that parcel.

That looks like PILOTs of a different kind--in lieu of sales taxes, not real estate taxes--but directed to ESDC, not to bondholders.

Board of Directors

The board of directors consists entirely of state officials:
Frances Walton (ESDC CFO and BALDC President)
Laura Anglin (Director of Budget)
Andrew Kennedy (Budget Office staff person)
Peter Kiernan (Governor's counsel)
Robert Godley (ESDC Treasurer)
Anita Laremont (ESDC General Counsel)

About the JDA

According to the ESDC web site: Empire State Development is the parent organization for New York’s two principal economic development financing entities: the Empire State Development Corporation (formerly known as the Urban Development Corporation), and the Job Development Authority. In 1995, these agencies, which had previously functioned independently, were consolidated in order to increase efficiency, reduce overhead and enhance the delivery of the State’s economic development initiatives. Reorganized as Empire State Development, the combined agencies now function as a streamlined economic development organization whose primary mission is the facilitation of business growth and job creation across New York State.

As part of this economic development role, Empire State Development Corporation oversees the issuance of debt under the programs of both the Urban Development Corporation and the Job Development Authority. On the UDC side, bonding programs include Corporate Purpose, Correctional and Youth Facilities, Sports Stadium Assistance, and various educational and civic related project revenue bonds. The Job Development Authority issues both taxable and tax exempt bonds to finance its business lending programs. These programs are designed to promote job growth by providing loans to assist New York companies to build and expand facilities and acquire machinery and equipment.

Sunday, January 25, 2009

Ex-Net Mourning on Ratner: owner prioritized move over team's success

NLG notices this article from the Palm Beach Post quoting ex-Net Alonzo Mourning on team majority owner Bruce Ratner:
In July 2003, Mourning departed the lowly Heat - remarking he didn't owe the franchise anything - and signed with title-contending New Jersey as an unrestricted free agent. But things soon went awry in New Jersey (owner Bruce Ratner didn't want to pay to keep center-forward Kenyon Martin or swingman Kerry Kittles) and when it seemed the Nets were finished throwing money around in pursuit of a title, Mourning, who went there to win a title, forced his exit.

He made life miserable for the Nets, spouting off to the media at every opportunity. Remarking on a conversation he had with Ratner, Mourning said, "I asked him, 'Other than your investment in this team for financial purposes - obviously getting a significant return - what's the reason why you bought the team?' " "And you ask anybody in here," Mourning continued, "he said, 'To move it to Brooklyn.' I mean, I didn't hear, 'To win a championship.' "I just shook my head."

And yes, NLG (and AYR) are a heck of a lot better at keeping up on Atlantic Yards than, say, Brownstoner, despite the New York Times's attentions.

Outward Bound: Forest City Ratner also gives to NY Times publisher Arthur Sulzberger's favorite charity

There's a lot of charitable money coming out of 1 MetroTech. Some, as I've detailed, comes from the Forest City Ratner Companies Foundation. Some, as with the loan/grant to ACORN, comes directly from Forest City Ratner itself. And some comes from Bruce Ratner.

Let's take a look at New York City Outward Bound, which lists Forest City Ratner among those supporters contributing $50,000-$99,999. This comes from the company, not the foundation.

There's an interesting potential synergy; the contributors at that level also include The New York Times Company and publisher Arthur Sulzberger, Jr., who is on the Outward Bound board.

In fact, Sulzberger "helped found and serves as chairman of the New York City Outward Bound Center," according to his official bio. A 12/19/05 New Yorker profile of Sulzberger, headlined The Inheritance, began with an anecdote about Outward Bound, which gave Sulzberger an award for furthering “the Outward Bound mission” Sulzberger said that, when he was a teen, Outward Bound changed his life.

Ratner's motivation?

That's good reason for Sulzberger to give back.

We can't be sure why Bruce Ratner gave--maybe Outward Bound holds a special place in his life, too--but it can't hurt relations with New York City's most powerful publisher, whose opinions are reflected in the Times's editorials (and silences).

Revisiting an editorial

Let's go back to the Times's last editorial on AY, published 8/6/06:
Some $40 million, for example, is for land acquisition for the arena, which should be a developer expense.

Well, that turned into $100 million, and Forest City Ratner may have saved an additional $55 million.

The Times editorial page hasn't seen fit to revisit the issue.

Saturday, January 24, 2009

New York Times criticized for a deal with (Mexican) tycoon; could those criticisms apply to its deal with Ratner?

With an investment of $250 million in the New York Times Company, Mexican billionaire Carlos Slim Helu has gained more than the newspaper, contends former Times editorial writer Andres Martinez, whose piece in Slate is headlined Slim's Pickings: Will Carlos Slim use the New York Times to bolster his reputation?.

A major stock investment is more impactful than a business deal to build a Renzo Piano tower, and Slim has an even larger impact on his nation's economy than fabled John D. Rockefeller. Still, Martinez's criticisms do not sound out of place when applied to developer Forest City Ratner, whose CEO Bruce Ratner, like Slim, has been described as personally modest and philanthropic.

(Ratner's been called a billionaire but is more likely not so flush. USA Today in 2005 reported his net worth at $400 million and, while his shares in parent Forest City Enterprises later skyrocketed, they've recently sunk well below 2005 levels.)

Looking at the criticisms

As I quote some excerpts from Martinez's essay, I'll suggest some similar criticisms may apply to the Forest City Ratner deal.

Whether a weak Mexican state can develop and implement muscular antitrust policies to rein in the likes of Slim and foster greater competition is one of the keys to our neighbor's prosperity, which shouldn't be a minor story for an American newspaper.

Whether major projects like Atlantic Yards can be built in New York City via a transparent and fair process, including the role of eminent domain shouldn't be a minor story for New York's leading newspaper, especially given that the Times Tower itself was an example of such challenges.

The point is, Slim doesn't have to interfere at all. I know from experience that publishers do intervene in the editorial process, as is their prerogative. And I can assure you that Slim's investment will be a factor, even if unspoken, in editorial decision-making henceforth at the Times. Perhaps Mexico's crony capitalism will remain a mostly neglected topic—but now conspiracies will be read into the neglect.

I'll take the Times at their word that the publisher doesn't interfere in the news coverage. (Michael Wolff suggests Ratner is "protected" and, while there's no proof of that, and there has been some tough reporting, there's been a lot of weak reporting, too, and never a major investigative piece.)

But surely the Times's editorial page support for Atlantic Yards--awkward, amnesiac, and, crucially, absent--reflects the "spirit of the Times and the opinion of the publisher," as an editorial writer put it.

As for the Times, the newspaper is taking on an untenable appearance of a conflict, if not the reality of one, of the type it typically rails against in other institutions.

The prestige of the New York Times is such that it wields an unparalleled moral suasion... But from now on, any Times utterances on Mexico will now be interpreted, fairly or not, through the prism of Slim's stake in the company.

The Times could have tried to avoid that appearance of conflict, via rigorous reporting and committed editing regarding anything Ratner-related, and even the hiring of freelancers. It still could do much, much better.

Friday, January 23, 2009

The Edolphus Towns succession, Darryl Towns, and Forest City Ratner's interest and intervention$

City Hall News has an interesting piece on the potential race to succeed 74-year-old, 14-term 10th District Rep. Edolphus Towns, who in 2008 easily beat back a challenge from activist Kevin Powell though in 2006 was challenged more forcefully by City Council Member Charles Barron, whose impact was diluted by the spoiler role of Assemblyman Roger Green.

The article, headlined Big Egos and Ambitions Set To Collide in Prospective Race To Succeed Towns, doesn't mention the Atlantic Yards angle on past races nor the prospective one.

Still, Forest City Ratner has an interest in this race, part of the unwritten story about the developer's impact on Brooklyn politics. That interest includes a previously unreported Bruce Ratner campaign contribution to Assemblyman Darryl Towns and a surprise appearance by Towns himself at a recent AY-related meeting held by the Empire State Development Corporation.

Contrasts and contradictions

But first, some contrasts and contradictions suggested by the article.

First, though it had long been thought that Rep. Towns--whose questionable record includes an effort to block a smoking ban on passenger flights and a posture toward transparency that makes Forest City Ratner look like a sieve--was ready to retire, he said he's running again.

That means that two likely aspirants for the seat--his son, Darryl Towns, and Assemblyman Hakeem Jeffries--would put their potential candidacies on hold.

That would leave Barron as the strongest challenger, should he work out a deal with Powell to stay out of the race. However, as the article suggests, if City Council Member Letitia James--who denies interest in the seat--steps up, she could garner some of the anti-Towns vote that Powell got in the western part of the district. But she might want to wait her turn.

The article, using some curious passive voice, claims that James "is thought to lack the depth of a base in the black community that Barron has, the middle-class base that Jeffries has, or the name recognition of Towns." Well, she got reelected pretty easily in 2005, and got a boost in name recognition (and praise) from the recent term limits challenge.

Would Barron have a shot straight up against the incumbent? Maybe, but Towns would have the resources of incumbency. More interesting would be a multi-candidate race without the incumbent.

While Jeffries may be something of an insurgent in black politics--supporting Barack Obama early on, unlike some more established black leaders with ties to Hilary Clinton--he's got the support of Brooklyn Democratic kingpin Vito Lopez, which is an advantage, but could be targeted, as well, by an opponent.

James is expected to run in 2009 for her second full Council term, while Barron, though saying he wouldn't run for a third term should term limits be extended, has left the door open. It would be easier for Council Members to run in 2010 or 2012 for Congress, because they wouldn't give up their seats. Jeffries and Darryl Towns would be taking more of a risk.

The FCR connection

So what's Forest City Ratner's interest in the race? FCR certainly wouldn't want to lose an elected official who's been a reliable supporter, so reliable that Edolphus Towns endorsed the $6 billion lie.

That's likely why Bruce Ratner's brother Michael and his wife Karen Ranucci each gave $2000 for Towns's 2006 race. Also, an FCR executive contributed to Green's spoiler candidacy, as did people connected to the AY Community Benefits Agreement.

Last year, four members of the Ratner family, including FCR CEO Bruce Ratner, as well as the Forest City Enterprises Political Action Committee, contributed a total of $12,300 to Towns's re-election campaign.

Enter Darryl Towns

Darryl Towns, who in 2007 chaired the minority caucus of state legislators and got a special salute from Forest City Ratner, is a reliable voice of Atlantic Yards support. He in turn saluted the Barclays/Nets alliance. He spoke at the Brooklyn Day rally last June. He endorsed the $6 billion lie. He championed Barclays.

According to state filings, Bruce Ratner gave Towns $3000 last September. (So much for Ratner's one-time retreat from giving political contributions.)

Crashing the ESDC meeting

At a meeting December 22 at the offices of the Empire State Development Corporation (ESDC), Forest City Ratner and several local officials were present. City Council members David Yassky, Bill de Blasio (via a representative), and James, Rep. Yvette Clarke, State Senator Velmanette Montgomery, and Assemblymembers Jim Brennan, Joan Millman, and Hakeem Jeffries.

Also invited by Forest City Ratner to tilt the balance in a meeting in which nearly everyone would be at least a mild critic of Atlantic Yards were Darryl Towns and State Senator Marty Golden, another reliable AY supporter who happens to be ethically challenged. The ESDC, I'm told, wouldn't let them attend because the project would not directly impact their districts.

(After all, if Forest City Ratner were allowed to bring ringers to every meeting, then State Sen. Carl Kruger, he of the "Brooklyn" aria, would be at the next one, right?)

If not Towns?

So, if not Edolphus Towns, then Darryl Towns would seem to be the developer's choice. Barron and James (and, to a lesser extent, Powell) are Atlantic Yards opponents, so, if for some reason no Towns candidacy (or alternative candidate) emerged, Jeffries might be seen by FCR as the least unfavorable candidate.

Jeffries has been cautious and cagey on the Atlantic Yards issue, saying he opposes eminent domain to build a basketball arena but never opposing the project, instead leaning more to the BrooklynSpeaks "mend-it-don't-end-it" posture.

He's criticized the density of AY and called for affordable housing to be built first, even though the developer's design requires the arena at the center. He's called for an Assembly hearing on the project, though nothing's happened with that, likely because all-powerful Assembly Speaker Sheldon Silver, an AY supporter (and FCR beneficiary), hasn't favored it.

A federal role?

The critical bodies for oversight of and support for Atlantic Yards are the City Council and the state Legislature, not Congress.

However, it's possible that federal stimulus money could assist the project, and surely Forest City Ratner prefers to have high-profile elected officials supporting AY, not opposing it.