Sunday, May 31, 2009

More testimony submitted for the Senate hearing: why eminent domain should be reformed

The issue of eminent domain and blight got short shrift at the hearing on Atlantic Yards held Friday by State Senator Bill Perkins.

One person who submitted testimony, but couldn’t attend, was Michael Rikon, an attorney since 1980 in private practice representing property owners in condemnation proceedings. (He also represents some property owners in the AY footprint.)

“In my opinion, it is fundamentally wrong to take someone’s property and turn it over to a private party,” Rikon said in his prepared testimony. “We understand that eminent domain is necessary on occasion. But the use of this most extreme power should be limited to a true public purpose. Atlantic Yards should be limited to a stadium site for the Nets.”

Interestingly enough, Rikon does not challenge condemnation for an arena whose profits would go to a private developer far more than any public entity.

After Kelo

As a result of the Supreme Court’s widely-criticized 2005 Kelo v. New London decision, which narrowly upheld eminent domain for economic development--something long permitted in New York, Rikon pointed out--42 have enacted legislative reform.

While a task force of the New York State Bar Association called for the legislature to create a Temporary Commission on Eminent Domain, “nothing has been done to further the task force’s many recommendations,” Rikon noted.  (I wrote about this issue on Thursday.)

Deck is stacked

Rikon pointed out that those challenging a condemnation have very little chance in court--which is why the plaintiffs in the Atlantic Yards eminent domain case first went to federal court.

“There is no real or effective procedure to stop a condemnation,” he said. “ Our law has a procedure, Article 2 of the Eminent Domain Procedure Law–but it is virtually impossible to win a challenge.”

Moreover, he said, “There is not a concrete definition of what is blight. Indeed, blight is in the eyes of the beholder. And blight often follows the cloud of condemnation and the purposeful neglect of a sponsor.”

Recommendations

“The Eminent Domain Procedure Law should be amended to take into account and correct the inconsistencies in the existing statutory provision,” Rikon suggested. “More importantly, the law should focus on the need to define and perhaps limit the definition of public purpose and permissible acquisition in the wake of the public outrage following Kelo... The time is at hand for a thorough study of New York Eminent Domain Substantive Law and Procedures, particularly how New York defines “blight.” How can a building which was converted to luxury apartments be deemed ‘blighted?’”

He made several other recommendations regarding how compensation is determined and cited the many recommendations of the task force.

“The last recommendation was that a Temporary State Commission on Eminent Domain should be established, resolving issues such as defining public use, the appropriate level of judicial scrutiny, just compensation, and others will be accomplished through study by a variety of stakeholders represented," he stated. "This was two years ago. Nothing has happened to put the task force recommendations in place. The Temporary Commission must be created now.”

Brutally weird: for "Brooklyn," substitute "Forest City Ratner"

The Daily News editorial today cites "a new basketball arena for Brooklyn."

But the arena wouldn't be for Brooklyn.

Forest CIty Ratner would get the naming rights and the revenues. Brooklyn would get a chance to buy tickets.

Pinamonti predicted it

Brutally weird? Well, John Pinamonti predicted it, in "The Burrow":

Makes me sad, yea it's such a pity
They're trying to rename Brooklyn "Forest City"


Devils owner far less bullish than Newark mayor about Nets moving to The Rock

Though Newark Mayor Cory Booker is a huge cheerleader for a potential Nets move to Newark, it appears that New Jersey Devils owner Jeff Vanderbeek, operator of the Prudential Center, is more concerned about having the competing Izod Center close so the Rock can attract lucrative concerts.

The Record reports:
The Nets basketball team continues to play at Izod Center on a year-to-year basis as it awaits groundbreaking on a proposed new arena in Brooklyn. Asked if he would rather the Nets move to Brooklyn or to Newark, Vanderbeek replied, "Personally, I guess I would marginally rather see the Nets in Newark."

The team's financial experts are "about 50-50" on whether the added revenues and public attention for the arena from Nets games would offset losing some flexibility for the Devils on desirable weekend home dates, Vanderbeek said. He said the uncertain fate of the Nets has allowed state officials to postpone making a decision on Izod's future.

"I just want the Nets off the fence," Vanderbeek said. "The biggest problem for us is that the Nets are being used as a pingpong ball [by the sports authority]. For a while they wanted to throw them out, then they love them."


The numbers

The Record reports:
Vanderbeek said closure of the Izod Center would boost the Prudential Center and the Devils' collective bottom line by at least $10 million annually, with about $2 million of the new money going to Newark. The monopoly on North Jersey arena offerings would bring the Devils from a loss of a few million dollars annually to around break-even or better, Vanderbeek estimated, depending on postseason success and ticket sales.

Daily News to MTA: compromise with Ratner (and ignore all else)

The New York Daily News, ostensibly the newspaper of the city's working class, is owned by a real estate developer and has maintained blinkered support for Atlantic Yards, today editorializing that the Metropolitan Transportation Authority should compromise on a deal with Forest City Ratner.

In an editorial headlined Net the Nets: New York must get behind a new basketball arena for Brooklyn, the newspaper urges the MTA to be "flexible... in getting the deal done."

Missing reality

While the Daily News cites an extension on the Hudson Yards deal as a precedent, the newspaper neglects to point out that an adaptation to changing conditions might also require a new assessment of costs, benefits, and subsidies, as City Council candidate Brad Lander, among others, points out.

After all, if the Independent Budget Office now thinks that the arena would be a money-loser for the city in terms of new tax revenue, maybe "netting the Nets" deserves a bit of reconsideration.

Fair process?

The Daily News suggests that the MTA would get "revenue it would otherwise lose." 

Remember, Forest City Ratner's proposed payment would be even less than half the appraised value--and stretched over a longer period of time. Rival Extell bid $150 million, rather than Ratner's $50 million, later upped to $100 million. 

One reason for the MTA's willingness to negotiate exclusively with FCR was the developer's promise of a new railyard--apparently more elaborate than the one incorporated in Extell's bid. But now FCR promises to scale that back too.

Given that only one bidder emerged after an RFP was issued 18 months after Forest City Ratner was anointed the site, can we assume there was fair competition for what Chuck Ratner, CEO of parent Forest City Enterprises, calls a "great piece of real estate"?

Council candidate Lander, in testimony prepared for Senate hearing, gets tougher on AY, saying deal should be canceled

It was notable that, at the State Senate hearing Friday, the only legislators to appear in favor of the project were three (one via proxy) from Southern Brooklyn, far from the project site and the area from which Forest City Ratner executive VP Bruce Bender can always call in chits. Even Borough President Marty Markowitz neglected to show up or send an emissary.

And, though there was much extraneous testimony that had nothing to do with the hearing's ostensible purpose of government oversight, there were several people who didn't get to testify.

One would-be elected official, 39th District Council Candidate (and urban planner) Brad Lander, submitted testimony calling for legislators to pressure Governor David Paterson and the Empire State Development Corporation to cancel the AY deal. The issues he raised were ones the legislators barely touched.

(In photo, Lander is talking with State Senator Velmanette Montgomery.)


His reasons: 
  • a need for a full accounting of public subsidies
  • a need for a new economic and cost-benefit analysis
  • a need to investigate whether land valuation for the PILOTs (payments in lieu of taxes) deal would be as questionable as the one for Yankee Stadium.
Changed position

Lander, the fund-raising frontrunner for the seat held by Bill de Blasio, has long had a more nuanced position on Atlantic Yards, previously taking a more BrooklynSpeaks-ish position, on his web site stating that "we should use the opportunity to either fix the flaws or reconsider the project." (Lander, former director of the Pratt Center for Community Development, is now a senior fellow there.)

Recently, in debates, Lander has ramped up his criticism of AY. Lander told me that, when he wrote his position a year ago, "I imagined that the economic crisis (which was then just beginning to become clear) might be an occasion for a renegotiation between ESDC/MTA/City/State and FCRC that might include the opportunity to fix some of the fundamental flaws. But as has become clear over the past year, and was evident at the hearing, that is not the case."

Lander's position also might be seen as an effort to compete with Josh Skaller, who's second in fundraising and has long been fundamentally opposed to the project, allying himself with Develop Don't Destroy Brooklyn.

Excerpts from Lander's testimony

In 2005, the Pratt Center released
a report that was highly critical of the Atlantic Yards proposal. We found that:

The process through which the project was advanced was not accountable. Planning for the project was initiated by the developer, despite the fact that this is a major site, with a majority of the land publicly-owned. 

Public subsidies – which run into billions of dollars when direct and indirect subsidies are included – were never sufficiently accounted for... To put it simply, ESDC bought this project without any clue of what the taxpayers would pay for it.

The cost-benefit analysis of the project was insufficient and misleading. One particular problem that is amplified today is that the commercial components and residential components were not separated.

There was inadequate information and insufficient planning around traffic, transportation, and parking issues. 

The urban design of the project was deeply flawed for the site (scale, interiorizing the park, lack of attention to context) …

We identified these flaws when we published our early planning assessment in March 2005. None of those issues were sufficiently addressed, and several grew worse as the process proceeded.

Atlantic Yards was not the right project when it was proposed in 2004. It was not the right project when ESDC approved it with insufficient information and through a flawed process in 200x. And it is not the right project now.

I urge you to bring pressure to bear on Governor Paterson and the Empire State Development Corporation to explore options to cancel the [MOU/general project plan/”deal”]. Let’s go back to the drawing board.

A few particular questions that are critical at this moment:

A full accounting of public subsidies is needed more than ever, as the State and City face extremely difficult fiscal situations. We must know the true cost of the project.

A new economic and cost-benefit analysis is required for the project that FCRC actually intends to build, and in light of today’s economic realities. The condo sales prices projected for the market-rate units on the site were probably unrealistic in 2006; today, they are simply fantasy. The challenges and costs of securing financing have risen enormously. It does not appear that the office space will be constructed. 

Land valuation: Information recently came to light that the land valuation for the PILOT in the Yankee Stadium deal was misleading and perhaps criminal. How is land valuation being handled here? 

What is the process for renegotiating or canceling the deal between FCRC and ESDC, as the project shifts and changes and is not completed as contemplated?

ESDC should face up to the reality that the project that was approved is not going to be built in the current economic climate, and that the project that the developer seems to intend to build is not what was approved (and has not been subject to meaningful public review).

Updated report on Senate hearing

For those who'd like another look, I've updated my long report on the Senate hearing Friday with photos from three photographers.

See legislators in action, government officials parrying not-so-tough questions, and the Rev. Herbert Daughtry heckling.

It also has links to all the press coverage, including Neil deMause's incisive piece in the Village Voice.

Stay tuned for some analysis Monday.

Ratner's hardball pays off: construction resumes at the Beekman Tower

The construction workers cheering for Atlantic Yards on Friday probably don't embrace the developer's hardball tactics to reduce construction costs at two extant projects.

After all, FCR stopped work halfway through the construction process of the Beekman Tower in lower Manhattan, what the New York Times calls an effort to "desperately sought to cut costs on the project."

In an article Friday headlined Savings on Labor Allow Work on Residential Skyscraper to Resume, the Times reported that work resumed this week, just as abruptly as it stopped.

The key: a cut in labor costs and cheaper construction materials and appliances. Among the other projects helped by a new agreement with unions is the tower under construction at 80 DeKalb Avenue.

Depends on the price

While proponents of the new agreement say it's worth a 20% discount, the Times suggests that's under debate:
Still, some developers say the agreement is worth far less, perhaps only 8 percent in savings, and not enough to get some stalled projects moving again, especially in cases where they paid high prices for land.

“God bless them,” said Steven Spinola, president of the Real Estate Board of New York. “But I don’t think they’re going to save much money.”


That would seem to bode well for Atlantic Yards, given that land was not so costly.

The city gave Forest City Ratner $100 million for land acquisition and it looks like the developer will not have to pay (at least at first) the MTA the $100 million it pledged for the Vanderbilt Yard. And that $100 million was less than half the appraisal of $214.5 million.

Saturday, May 30, 2009

Times takes semi-skeptical look at Brooklyn arena plans, doesn't question professed 2011 opening

Well, the New York Times didn't cover the hearing yesterday, but in a long article in tomorrow's Sports section, sports business reporter Richard Sandomir asks, Will the Nets ever play basketball in Brooklyn? and concludes: maybe.

For one thing, the Nets have some $500 million--albeit over 20 years--in sponsorship commitments for the arena, notably from Barclays Capital, which bought naming rights. 

(Hm--one question no one asked--and I didn't think of: why exactly does the Empire State Development Corporation let Forest City Ratner sell naming rights to an arena that is nominally publicly-owned? The fig leaf of public ownership is necessary for tax-exempt arena bonds; FCR gets to keep the revenues.)

The cost of the arena was approved at $637.2 million in 2006, ballooned to $950 million, and now may be cut by $200 million. The Times reports that Forest City Ratner hopes to have $600 million in tax-exempt bonds sold, which would imply some portion of taxable bonds.

The Times reports that Develop Don't Destroy Brooklyn is committed to lawsuits that could continue to delay the project, though it's not clear they can stop the crucial exercise of eminent domain and thus stop the sale of bonds.

Arena, 2011?

The Times, however, doesn't look skeptically at the claims that the arena will open in 2011:
“It’s done, inevitable, it’s imminent, it’s going to happen this year,” said Brett Yormark, the Nets’ chief executive. After a number of failed predictions for when the Nets would move into the arena, he said: “We’re on schedule. There’s more certainty than there’s ever been.”

The failed predictions include regular claims from Yormark.

As I pointed out Thursday, arenas designed by Ellerbe Becket, which is apparently in charge of the arena design, must break ground in June or July to open for an NBA season some two years later. (The original Frank Gehry design was to take 32 months.)

That's almost impossible, especially if a new Modified General Project Plan, with an accompanying hearing, is necessary. If construction is to begin at the end of the year, as the Empire State Development Corporation indicated yesterday, there's no way the arena could open in 2011.

Issues of stasis

The Times reports:
No work has been done since the end of last year on land that is a hodgepodge of empty lots and buildings and the Long Island Rail Road’s Vanderbilt Yards. Forest City has neither begun to pay the Metropolitan Transportation Authority the $100 million they agreed to for development rights over the yards — and is, in fact, negotiating the price sharply downward — nor begun to move the tracks to a far end of the site.

However, as we learned yesterday, the developer is planning to resume work, and the MTA is getting ready for a compromise.

Arena bonds

Not only is Forest City confident about lawsuits, the Times notes that the recession is abating, making it easier to sell bonds. Goldman Sachs' Gregory Carey said financing has gotten easier, and the publisher of The Bond Buyer said that a deal like that for bonds for the Yankees’ and the Mets’ stadiums would work.

Forest City has a December 31 deadline for both issuing bonds and for the naming-rights agreement. While the Times doesn't say so, I believe that bonds can be issued even if there's no construction--there's just a layer of additional cost.

Unmentioned: whether and how the assessments for arena land would increase sufficient to generate phantom property taxes used to pay off construction bonds via PILOTs (payments in lieu of taxes). That issue was raised yesterday by George Sweeting of the Independent Budget Office.

FCR vs. DDDB

The Times offers a point-counterpoint:
Forest City is not surrendering and believes only a restraining order can stop the eminent domain process and construction. But Yormark’s confidence is mixed with testiness that Forest City cannot rid itself of Goldstein or the legal aggressiveness displayed by Develop Don’t Destroy.

“I have no admiration for anyone who puts his personal interests before the people’s interests,” Yormark said.

Goldstein said, “ The selfish party is his boss, Bruce Ratner, who wants public land for a song, private property confiscated by eminent domain and the taxpayers to pay hundreds of millions of dollars toward his enrichment.”


It's clear that the arena is a priority. The Times notes the team's relatively low attendance—not pointing out that gate count is far lower--as well as $353 million in pretax losses for the team's dozens of investors. In the past year, Forest City Enterprises took on additional responsibility for losses, not 54%.

What about Gehry?

Will Gehry's name still be on the arena? The Times reports:
Yormark said that the arena would reflect Gehry’s vision but that the savings would come mainly through cutting square footage, particularly in storage areas. “As of now, Frank is still in,” he said.

The Times reported two weeks ago that Bruce Ratner would decide in 60 days whether to keep Gehry's original design. That seems highly unlikely. So the question is whether Gehry would agree to be part of a changed design.

Would he? The Times asked:
Gehry, who declined to comment through a spokesman, recently cast doubt on the Atlantic Yards, for which he is the master architect, ever coming to fruition. He quickly retracted his statement. But if the shape and look of the arena changes enough to meet economic needs, it may not meet Gehry’s standards.


Well, if Gehry won't talk to the Times, he can't be very enthusiastically involved in the project.

Friday, May 29, 2009

Senate hearing: no tough questions for ESDC; MTA yields on yard; IBO calls arena a loss; arena 2012; raucous AY supporters make for 8/23/06 flashback

(Update as of 10:38 am 5/31)

In some ways, the State Senate hearing held today on Atlantic Yards was eerily reminiscent of the epic 8/23/06 hearing on the Draft Environmental Impact Statement: the house was packed--I’d estimate at least 2/3 of the crowd at Pratt Institute’s Higgins Hall--by union members and Community Benefits Agreement signatories, many wearing "Atlantic Yards Now" buttons, who raucously disrupted the hearing and, when some of their members testified, repeated old arguments for the project.

Though this was supposed to be a fact-finding hearing, the representatives of city and state agencies emerged almost completely unscathed by questions posed by the panel led by State Senator Bill Perkins, despite testifying for some two hours.

No one asked about the current timetable or cost of the project, nor challenged a stale, purported cost-benefit analysis. (Forest City Ratner, though it helped orchestrate the turnout and had uberflack Joe DePlasco in the aisles, did not testify.) More than 200 people were present in the main hall; more people were in two overflow rooms.

As shown in the photo, project supporters targeted Perkins and fellow state Senator Velmanette Montgomery, and took personal swipes at Daniel Goldstein of Develop Don't Destroy Brooklyn, the most public opponent. (Photos by Adrian Kinloch and Jonathan Barkey have their names embedded. The others are by Tracy Collins.)

You might say the afternoon was "brutally weird." Here's more from Noticing New York's Michael D.D. White on "manufactured chaos," noting that some of the people who appeared as construction workers were BUILD supporters who got to leave as a group at 5 pm.

IBO: arena now a loss

But there was some significant news later on in the hearing: George Sweeting (below left) of the Independent Budget Office, which in a 2005 report concluded that the arena would be a net positive for the city, said that additional subsidies--from $100 million to $205 million--nearly double the present-value cost to the city. (He had previously hinted at a potential loss to the city but hadn't provided calculations.)

“This change alone therefore eclipses the $25 million net positive benefit to the city that we previously estimated for the arena,” Sweeting testified dryly, as the crowd remained quiet. (Updated: He didn't provide the math, but it's apparently a $60-70 million loss.)

The bottom line, Sweeting told Perkins, was that all the assumptions about benefits touted by the city and state officials need to be recalculated based on current numbers, and they’re not available yet. Notably, most of the gains in tax revenue come from commercial space, and there are no plans to build an office tower as of now.

Indeed, all indications are that the city and state will bend to Forest City Ratner's requests for more time or more money, thus decreasing the public benefit. Officials acknowledged there was no firm timetable to start affordable housing.

Perkins, who plans to look at the performance of state development agencies around the state, said there would be further hearings on AY; perhaps at that time, more clarity will emerge.

(Here's the Observer's coverage, which notes that governmental benefits haven't been updated, even though the project has changed. The Post focused on the reduced railyard and a lower payment from Ratner, noting that project opponent Goldstein was booed when he said--quite correctly, though the Post didn't acknowledge it--Atlantic Yards as approved does not exist.

The Daily News ignored the IBO and focused on the construction workers and cited 17,000 jobs, even though 12,000 would be construction jobs, in job-years, meaning 1200 a year over a decade--though note Raul Rothblatt's comment about construction workers insulting his baby daughter. The Record, from New Jersey, highlighted on the raucous crowd, though noting that officials appeared to be using stale financial estimates and pointing to the MTA renegotiation. Here's video from NY 1, which noted the IBO's new numbers. Neil deMause did a good overview for the Village Voice. The Times sent an intern from the blog The Local; no story is online yet, though the Metro section contains, among other things, a report on tours of the revamped Plaza Hotel. WNYC did a thin report, below, that at least gives a flavor of the atmosphere. WNYC later followed up with a meatier report and blog post.)

No timetable; arena 2012

As an example of the gentle treatment faced by witnesses, Empire State Development Corporation (ESDC) CEO Marisa Lago (right) straightfacedly maintained that the General Project Plan from 2006 was still in place--despite her recent acknowledgment that Atlantic Yards could take decades--and was not asked about the timetable for the project. She also maintained that the public benefits remain the same, even though a delayed schedule would obviously delay the benefits.

(Afterwards, I asked the ESDC about the timetable and was provided one factoid, that the construction is expected “to begin at the end of the year.” Translation: the arena, in a best-case scenario, would open in 2012, not 2011, as Forest City Ratner continually promises. FCR CEO Bruce Ratner has stated that construction would begin anywhere from this summer to October.)

Changed economics?

One key issue, Lago and others noted, is the changed economic environment requiring government agencies to renegotiate terms with the developer. That may be so, but it was before the economic downturn, in March 2007, when Chuck Ratner, CEO of parent Forest City Enterprises, said “we still need more” subsidies.

And it was in September 2007, again in happier economic times, when the ESDC signed a State Funding Agreement that gave the developer six years after the close of eminent domain to build the arena without penalty, and 12 years to build Phase 1, with no timetable for Phase 2, which would contain most of the affordable housing and all the open space. And the city at the same time signed the City Funding Agreement, which allows Forest City Ratner to build a 44% smaller Phase 1 without penalty.

New public hearing?

While Lago did not say it was certain, she noted that design and timing changes regarding AY would require a proposal before the ESDC board. "That will followed by a public hearing, and a second hearing before the ESDC, thus giving the community the opportunity to have input," she said.

So, perhaps there will be another public hearing this August.

MTA negotiations

Acting Metropolitan Transportation Authority Acting Executive Director Helena Williams (right, with Lago) did break some news, announcing that the MTA had completed negotiation with Forest City Ratner on a cheaper, less elaborate railyard--seven tracks rather than nine, a 22% decrease--and that negotiations regarding a delayed schedule for payments are ongoing, pending a June 24 MTA board meeting at which the public can testify.

The MTA’s willingness to deal with Forest City Ratner drew tough questions from Assemblyman Hakeem Jeffries (below left), who questioned whether the agency was performing its fiduciary duty on behalf of the public and suggested that the term "value engineering" connoted a bailout.


NYC EDC calls it a "fiscal impact analysis." It acknowledges no offsetting costs or subsidies, so it's not a "cost-benefit analysis," despite Pinsky's deceptive use of the term. Only the IBO has attempted a cost-benefit analysis, but limited it to the arena, not the project as a whole. Perkins also queried Williams briefly on whether the MTA was about to accept $50 million instead of $100 million for the Vanderbilt Yard, but didn't get an answer.


Deceptions from NYC EDC's Pinsky

Similarly, Seth Pinsky, president of the New York City Economic Development Corporation (above, in dark suit, with Mathew Wambua of the NYC Housing Development Corporation), in prepared testimony maintained that the project would produce more than half a billion dollars in new tax revenues to the city, but acknowledged later that he was using a study from 2005, which calculated new revenues on 2 million square feet of office space.

Only one office tower, with less than one-third of the previous square footage, is now part of Forest City Ratner's announced configuration, and it's on indefinite hold. He later added: "We’re in the process of updating that analysis… we expect it to still be an extremely positive number."

Keep in mind that a decline in office space led to a nearly one-third decline in the ESDC's own calculations of new revenue. (The ESDC never conducted a cost-benefit analysis, either.)

Arena cost-saving: fewer luxury suites

Forest City Ratner has publicly announced efforts to reduce the cost of the arena through value engineering, cutting perhaps $200 million from a price tag that had ballooned to $950 million.

One change Lago was willing to announce: fewer luxury suites. That likely would also reflect Forest City Ratner's calculations that, given the economic downturn, the market for luxury suites has declined.

Affordable housing: FC and ACORN in charge

Affordable housing was the subject of much discussion, with no guarantees as to when it might begin and an acknowledgment that only 300 units might be built in Phase 1, which could last 12 years. One stunning moment: Mathew Wambua (left) of the New York City Housing Development Corporation testified that the plan for affordable housing was up in the air, subject to ongoing negotiations between Forest City Ratner and its partner, New York ACORN.

Unmentioned was that FCR has bailed out ACORN’s parent organization; no one questioned why a developer and a community group (in hock to the developer) get to make the decision.

Wambua acknowledged, in a statement not caught by any of the panelists, that the AMI (Area Median Income) for the affordable units would go up slightly, thus increasing returns to the developer.

As approved, there would be 4500 rentals, half of them subsidized, with 900 apartments for low-income households, 900 for middle-income households, and 450 for moderate-income households. There would be 1930 condos. There was no effort at the hearing to establish the timetable--whether the 900 low-income units would arrive in a decade, as promised, or over many decades, as is more likely.

And while there was testimony that there would be a minimum of 300 subsidized units in Phase 1--meaning 120 low-income units--there was no testimony about whether all 2250 affordable units would be built.

FCR statement: no more debate

FCR's Bruce Bender--who was spotted outside the hearing helping coordinate the pro-project throngs--issued a statement.

(At right is BUILD's James Caldwell, wearing red hat, and some catered lunches.)

It said: “After five years of public debate and countless hearings, it is time now to get to work. The arena and an NBA team in Brooklyn will create jobs and excitement and the affordable housing is sorely needed in the borough. Opponents have significantly delayed this project, including the jobs, housing and tax benefits. Now is not the time for re-debating the project. It is time to get work.”

(Presumably he meant "get to work.")

Long day

The hearing stretched from 1 pm to 5:30 pm, with later panels of community representatives rushed through their testimony. Along with Perkins at the start was Montgomery. Two project supporters, State Sens. Carl Kruger and Marty Golden, showed up later, as did Jeffries, joining the panel. (Golden, as noted below, clashed significantly with fellow panelists.) City Council Member Letitia James, who showed up midway through the afternoon, testified at the end of the hearing.

(Perkins is pictured with Montgomery and Kruger.)

Montgomery is a longtime project opponent and Perkins is at least a skeptic; despite a road map of questions from AYR and other sources, neither pressed hard. At times, it seemed like Perkins was establishing basic information about AY rather than probing issues of controversy.

Jeffries, a lawyer, was tougher, leading the MTA's Williams as if she were a not-so-friendly witness, though he did not focus on some of the major questions about the project. Montgomery, while asking some basic questions about affordability, managed to elicit some jaw-dropping acknowledgments from NYC HDC's Wambua.

Outside and inside the hearing

Those arriving at the hearing saw union members rallying in the company of a giant rat--the typical protest symbol at non-union
construction sites, as at Pratt [updated 5/31], but an imperfect coincidence given the name of the developer. A table welcomed members of BUILD (Brooklyn United for Innovative Local Development) , whose president, James Caldwell, is shown speaking.

A handout from BUILD suggested that homeless people would benefit from the project, even though the affordable housing is years away, and there's no specific provision for the homeless, many of whom likely are below even the lowest income band, 30% of Area Median Income (AMI).

Inside the hearing, project supporters cheered loudly and raucously, as they did at the 8/23/06 hearing, at even boilerplate statements by the state officials describing the project.

Union members handed out whistles from a box, leading to sounds so loud that those waiting to go in plugged their ears (below). The Rev. Herbert Daughtry, who like other Community Benefits Agreement (CBA) signatories has seen his organization funded by Forest City Ratner contributions, regularly heckled, complaining at one point, "They're blocking the program, with these complicated questions." (Actually, the questions were pretty gentle.)


Though Perkins repeatedly asked the crowd to be quiet and respectful, he was unwilling or unequipped to take further measures to maintain order. (There have been construction workers supporting Yankee Stadium at hearings held by Assemblyman Richard Brodsky critical of the project, but Brodsky has not tolerated any disruption.)

Uneasy from the beginning

The tone of the hearing was set as Montgomery, in her introduction, apologized to Perkins (shown entering, below, wearing hat) for the raucousness. When Perkins declared, by way of orientation, that “I represent Harlem,” an audience member heckled, “What are you doing here?”

“I am also the chair of the Senate standing committee on Authorities and Commissions,” Perkins continued firmly. As he went through some boilerplate information about the project, noting it would “be the future home of the New Jersey Nets,” the crowd cheered and shouted “Brooklyn Nets.”

“Let me be clear: development as I see it, is generally a good thing,” Perkins said. “But the truth is that development does have a checkered history in New York, particularly in this city.” Too often, he said, “We have not taken into account the needs of all our legitimate stakeholders.”
“Our goal,” he said, “is to make sure
this project does not go off track,” seemingly acknowledging AY as a done deal, despite the numerous questions and uncertainties concerning it.

What about Gehry?

Perkins went on to read, not completely steadily, a host of headlines from news and editorials about AY, indicating the controversy about the project. One headline, concerning architect Frank Gehry, Perkins read as “Jerry expresses doubts,” hinting at his unfamiliarity with the architect.

There were no questions asked about whether Gehry is still on the project, despite signs that his role has receded.

ESDC testimony

Lago, in her testimony, said that Atlantic Yards was “about neighborhood redevelopment.” She offered a personal aside, saying she was born “just a few blocks away,” at Long Island College Hospital, and has memories of going to the dentist at the Williamsburgh Savings Bank building.

She described the AY site as one “that has the type of transit infrastructure that most cities could only dream about.” Why is ESDC interested in the project? She said it was “because of the public benefits,” starting with the housing, going on to mention retail space, commercial space, and the arena, which will “bring the same type of vitality that Madison Square Garden brings to Manhattan.” Big cheers.

The additional open space, she said, would be a boon. No one pointed out that the open space was not due until the unscheduled second phase of the project.

But most of all, she said, all the components “translate into one thing: jobs.” Nobody pointed out that the number of promised permanent jobs has declined significantly from the 10,000 office jobs initially promised in 2003, and there are no plans to start the commercial office tower.

Challenging economic times

“There is not one of us who works in economic development who isn’t aware of the impact the economy is having on economic development projects,” Lago said, seguing into the need “to be realistic.”

If there are significant changes, she said, there will be a clear and open communications process, allowing for public comment. Then, without having revealed anything of substance, she turned over the microphone to NYC EDC’s Pinsky.

Pinsky’s testimony

Pinsky, who has endured a grilling before Brodsky’s Assembly committee, had a much easier time of it today. He also offered an early personal aside, describing AY as a project “that, incidentally, is to rise about a mile from my home in Brooklyn.”

“Only by moving forward with projects such as Atlantic Yards that use millions of dollars from the public sector to leverage billions of dollars from the private sector” can jobs and infrastructure be created, he said.

He cited the benefits as stated when the project was approved in December 2006: more than 6000 new housing units, hundreds of thousands of square feet of new commercial and retail space, and eight acres of open space.

Repeating the Ebbets Field canard

All the benefits, Pinsky said, would come on “a largely vacant site with access to great public transportation that has remained underutilized since the days when it was proposed as a home for a baseball team...”

In that, Pinsky repeated the canard that the Atlantic Yards site was targeted by Brooklyn Dodgers owner Walter O’Malley for a new Ebbets Field; actually O’Malley was looking across Atlantic Avenue at the site now occupied by the Atlantic Center mall.

Real estate discounts

Besides the city’s $100 million in capital contributions and “additional money”--he didn’t specify $105 million--for “general infrastructure improvements in and around the Atlantic Yards and Atlantic Avenue,” he said, “Finally, the city has committed to contribute to the project at agreed-upon discounts certain real estate assets for which there are unlikely to be other opportunities for monetization… and to provide…a series of largely off the shelf housing subsidies...”

In return, he stressed, the city expects to realize many times more revenue than it is putting into the project. However, he didn’t offer any new numbers.

Sensitive negotiations

Citing the challenging economic times, he said, “It is perhaps not surprising that the developer has, in recent months, come back to both the city and state to discuss various ways in which the public sector can help make this project, and its associated benefits, feasible.”

“The simple answer is that we are still engaged in very sensitive negotiations with the developer,” he said, unable to offer specifics. (The Observer has reported that FCR wants the city to deliver pledged funds more quickly.)

Though current conditions make AY “substantially more difficult,” they “also underscore the need for us to succeed in our efforts,” he said. “These benefits would be hard to forego in the best of times and are nearly impossible to forego at a time like today."

MTA testimony

The MTA’s Williams, who also heads the Long Island Rail Road (LIRR) was introduced by Perkins as “Williamson” and, perhaps in an effort to maintain comity, she made no effort to correct him. (Lago later referred to her as “Williams,” as if helping Perkins along.)

Williams began with her own version of Brooklyn cred: the LIRR’s operation began in Brooklyn, in 1836, she said, provoking cheers and whoops at the history lesson.

Then, indicating that the MTA was fully onboard with the project, she said that the transportation improvements will help the Long Island LIRR achieve their mission. She noted that the project would include a new subway entrance of the arena, forming “a nice intermodal connection” with the LIRR, subways, and buses, providing a new opportunity for ridership growth. (She didn’t mention that there wouldn’t be any service growth.)

She cited Forest City Ratner’s “ambitious goals for minority and women-owned business participation,” noting that more than 40% of the contracts so far had gone to minority- or women-owned business enterprises and to Brooklyn-based firms..

MTA revises history

Williams described the MTA’s May 2005 Request for Proposals for the Vanderbilt yard, 18 months after city and state officials backed the AY plan, as “an opportunity to look at the yards” and become more like Grand Central Station, where a deck led to new development.

It wasn’t an opportunity to look at the railyard, since there had never been any effort to solicit proposals; rather, it was an after the fact response to a project that had already been awarded, in the eyes of the mayor and governor, to Forest City Ratner.

She inaccurately described the project as including “a new arena on the site currently occupied by the Vanderbilt Yard;” the arena site would extend below Pacific Street onto a block occupied by residential and commercial buildings and, now, more and more vacant lots.

Construction to resume

While Forest City Ratner began work on the temporary railyard in February 2007, she said, work was suspended in December. “Forest City Ratner informed me they were waiting for resolution of remaining litigation,” Williams said, and no one pointed out that the developer had claimed it could move forward on properties like the railyard no matter the progress of litigation.

“They have since informed me they will resume construction and will complete construction,” she said, though she didn’t offer a timetable.

Cheaper permanent yard

In early 2008--again, well before the real economic downturn--Forest City Ratner “came to me and said we need to go through a value engineering exercise” to reduce the cost of construction of the permanent railyard.

“I am pleased to announce we have reached a tentative agreement on that new design,” she said, explaining that “the new yard will have seven tracks plus an 8-car drill track, and will be sufficient to support future ridership growth.”

Change in payment schedule

The MTA is currently engaged in discussions with FCR concerning their revised proposal to some of the deal terms approved by MTA board in 2006. “They have proposed a smaller upfront cash payment for the land,” she said. “plus additional payments over time.”

She did not confirm that the developer offered $20 million rather than the $100 million due. She noted that “we haven’t agreed to new terms,” but are in the process of due diligence.

She said it was not up to her to approve the deal, but to present it to the MTA board, which would happen next month.

First questions

Perkins began the question session by asking panelists to explain value engineering.

Williams said they wanted to “meet the full needs of our train operations” at a lower cost. After a very long and very technical process, she said, the number of tracks was reduced from nine to seven.

How much is the cost reduction, Perkins asked, in a logical follow-up.

“I don’t have that kind of breakdown,” Williams said.

“We’d like to have that breakdown,” Perkins said.

Williams noted it was the developer’s responsibility to build the yard. So the cost reduction would be a saving to Forest City Ratner.

Perkins turned to Lago and asked a general question, about the procedures by which ESDC evaluates projects and decided to sponsor them.

Lago said, “We look for projects that will return a positive investment to the state,” citing the benefits such as those in the AY project.

Eminent domain

“One of the other areas of significant concern is eminent domain,” said Perkins, asking a rudimentary question: if it was contemplated from the start.

Lago noted that a “very significant percentage of site is owned by the MTA” and “much of the rest of the site has been assembled privately by Forest City.” Eminent domain, she said, is regulated by a law that requires public input and hearings before authorization by the ESDC board.

(Pictured are ESDC and NYC EDC staff in the front row.)

The use of eminent domain was challenged, she said, leading to lawsuits that have delayed construction. There were some cheers from project opponents, but bigger boos from supporters.

Perkins asked for calm, saying “we need to know what [the project] means.”

“It means jobs,” shouted one audience member.

“We want good jobs, but we want to make sure what that means, in terms of this project… as it evolves,” Perkins admonished. “You cannot know that unless you hear them.”

Perkins went on to ask an uninformed question: “Are the parcels involved in the eminent domain proceeding still a part of the project, or will those parcels no longer be a part of the evolving project?”

Lago confirmed that “the footprint of the project remains the same.”

She continued with a whopper: “The public benefits remain the same.” (It’s impossible for the public benefits to remain the same if they’re delivered over a much attenuated schedule.)

From $100M to $50M?

Perkins asked Williams about Ratner’s $100 million pledge for air rights, saying he’d heard a rumor that it would be $50 million.

“We’re in the midst of negotiation,” Williams said. “Between what you heard and what was in the paper, I like your number better.”

However, what was in the paper was a $20 million down payment, not a total payment.

“You would like even more, I would dare say,” Perkins continued.

Williams nodded.

Value engineering the arena

Perkins asked Lago to explain value engineering in terms of the arena. Lago offered what she called “very common sense terms,” likening the process to updating a 45-year-old kitchen and determining that the wish list comes in at too high a cost.

So a planned six-burner stove becomes a four-burner, she said, noting that the arena would remain the same, but the changes would be in reduced luxury boxes and the level of the finishes.

She then indicated that there could be a board meeting and public hearing.

Bonding questions

Perkins asked Lago a general question about financing for the arena.

“The risk is going to be on the private sector, not the public sector,” replied Lago. “The full faith and credit of state and city are not at risk.” Later, Develop Don’t Destroy Brooklyn attorney Jeff Baker was to disagree.

She said a Local Development Corporation, established by ESDC under state statue, would sell the bonds, and they would be paid off by a revenue stream coming from the arena.

Has LDC been established, Perkins asked, not knowing that it had been.

Yes said Lago, and when she pronounced the words “Brooklyn Arena Local Development Corporation,” she drew deafening cheers and whistles.

Perkins asked another general question about the LDC. Lago, not acknowledging that the AY arena had been grandfathered in under more lenient Internal Revenue Service rules, said the authority for this project expires at the end of December.

Some project opponents clapped.

“Obviously that affects the economics of this project,” Lago said. “For those of us committed to seeing the project go forward… we would not want to make the financing that much more difficult.” In other words, there’s a deadline.

Perkins asked if there were any obstacles to moving forward.

Lago said that, with a win in the Appellate Division on the state eminent domain case, “we believe that the last legal hurdle had been cleared to going forward with eminent domain,” which is a step along the away to the issuance of bonds.

Perkins, either not knowing or playing coy, asked if the case is still being appealed, or if it’s settled.

Lago acknowledged the possibility of appeal--in fact, one is pending--”but our sense is, giving the unanimous decision, it is not an impediment to the ESDC to obtain the order that will allow us to engage in the taking.”

Montgomery’s turn

Montgomery tried to remonstrate with the crowd. “I’d like to remind my constituents and others… the chair of the finance committee [Kruger] is here… What comes out of this hearing is very important.” She noted it was the first time to have “a real dialogue” and to look at the ESDC. “It’s not just about Atlantic Yards.”

“You trying to block it,” shouted a heckler.

“I hope that the union will speak to their members,” Montgomery said with a bit of edge in her voice.

“You trying to block the program,” heckled Daughtry (at right in photo, with a woman who appears to be his daughter Dawnique).

Montgomery, noting that Williams described several other MTA/LIRR projects besides Atlantic Yards, asked about minority- and women-owned business participation.

Williams said she’d have to get back to her on numbers.

Questioning Pinsky

Montgomery addressed NYC EDC’s Pinsky. “You’ve indicated the city has provided additional money for infrastructure improvements,” she said. “What is the additional money?” (The number has been widely reported at $105 million.)

“There have been several tens of millions of dollars in the city’s budget, used for area-wide improvement,” Pinsky said, not offering a figure. “Not just Atlantic Yards, but the area more widely.” (That’s in dispute, since it’s a line item called “Atlantic Yards.)
You don’t know the exact sum, Montgomery said, following up.

Pinsky acknowledged that it’s “a figure in the $100-$105 million range.. It’s been spent down… even as Atlantic Yards has not moved forward.”

Montgomery, as if in flashback to 2006, asked Pinsky “what is happening related to sewage, the overflow problem.”

Pinsky, not unreasonably, noted that “there was an environmental impact statement” that acknowledged impacts and required certain mitigation.

Daughtry heckled again.

What if AY dies?

What happens if Forest City Ratner does not complete the project as proposed, Montgomery asked, apparently unmindful of the gentle penalties and provisions in the State Funding Agreement and the City Funding Agreement. “If that doesn’t happen, what will ESDC do to ensure we do in fact get affordable housing?”

Lago noted the city and state financial commitments. “Forest City Ratner has invested significantly amount of money, in the hundreds of millions, not tens of millions,” Lago said. “The economic return to Forest City comes from the development of the housing.” So “we have a very useful alignment in the public sector’s interest.”

However, Forest City and other owners of the Nets are losing tens of millions of dollars on the team in the Izod Center, so a new arena is by far the priority.

(At left, Peter Krashes of the Dean Street Block Association listens. Behind him is Anthony Pugliese of the Carpenters Union, one of whose members is pictured below.)

Subsidy questions

To make housing affordable, subsidies are required, Montgomery noted. “Have you done a cost-benefit analysis, of just how much it’s going to cost us to make that housing work?

Lago turned the question over to Pinsky, who claimed, ‘We have undertaken a cost-benefit analysis, and it factored in all the benefits offered to Forest City.”

The analysis didn’t calculate benefits to the developer.

Over a 30-year period, the net present value was more than half a billion dollars, he said, noting that “we’re in the process updating that analysis” and expect it to “still be an extremely positive number.”

Housing subsidies, he said, were generally consistent with other programs.

Can you give a figure of per-unit subsidy? Montgomery asked.

NYC HDC’s Wambua (left in photo) said there will still conversations with Forest City regarding financing options. “The subsidies that would be received at any single development at the Atlantic Yards site would not exceed the subsidy any other developer would receive for a comparable project,” he said.

He described the additional mortgage subsidy at $55,000 to $85,000 per unit, but that did not encompass the full cost per unit.

Golden enters

And just as Montgomery began to ask about the definition of affordability, Golden strode imperiously down the center aisle of the hall (rather than the side), led by a union representative bellowing, “Senator Golden is here.”

Perkins admonished Golden for the disruption.

“I can’t tell people to leave me or not to leave me,” Golden riposted.

“I suppose these are Senator Golden’s people,” Montgomery said dismissively. “This is my district.”

She was met by cheers and heckles.

Changing AMI?

Montgomery went back to the question of affordability: who will be able to live there?

It was seemingly a gimme question, given that it has been known since 2006 that the range would be 40% of AMI to 160% of AMI--low-, moderate-, and middle-income households--though Forest City Ratner initially set 140% of AMI as the upper bound in its publicity.

“The programs we have discussed with Forest City and ACORN,” Wambua said, would range from 60% of AMI to 165% of AMI.”

In other words, a slight but not insignificant increase in the upper bounds of middle-income subsidized apartments.

Montgomery asked for specifics. Wambua began looking at some documents.

Daughtry took advantage of the pause to heckle again: “More delay, more delay, for a development as good as that.”

Wambua said that a family of four with an income of $30,000 would qualify under 40% of AMI.

Perkins began asking some seemingly basic questions about the number of affordable units, a mix determined in the housing Memorandum of Understanding and appearing in state documents.

Forest City/ACORN decision

Wambua, surprisingly enough, said “that’s not what I’m able to give you... Forest City is responsible for determining ultimate unit mix.” Forest City and ACORN, he said, were “deliberating.”

He said that the upper range of affordability--in HDC programs, not necessarily AY--was 175% of AMI, or $135,000 for a family of four.

“You have no idea yet when these negotiations would be finalized,” Montgomery asked.

“My understanding is that Forest City and ACORN are deliberating to what the ultimate mix is going to be,” Wambua responded.

Lesser impact?

Montgomery (shown with some attendees) asked if “we can now have a conversation with you similar to how the developer is having a conversations with you… about some possible improvements in what the community views as the scale and other aspects of the project.”

“We’d be more than happy to speak to you at any time,” Pinsky replied brightly.

“You and Assemblymember Jeffries had asked for a meeting a while ago,” said Lago, noting that she and others had visited Perkins at his offices.

“We want to talk to the other ear, that the developer isn’t talking to,” Montgomery said.

Downsizing = fewer subsidies?

Montgomery asked, if the project is being downsized, whether city and state investment would be lower.

Lago said no. While discussions have focused on how to make the project doable, “what has not changed is that the project will involve a reconstructed Vanderbilt Yard… will entail an arena.”

Perkins (pictured with Council Member James and Montgomery) followed up.

“At the risk of appearing confrontational, I don’t view it as downsizing,” Lago said, going back to her kitchen analogy. “You’re getting a new kitchen, just some of the shiny chrome finishes will be changed.”

Forest City absence

“Can you give me an idea of what value engineering means?” Perkins asked.

“The folks best positioned would be the folks driving the project from the private sector, Forest City,” responded Lago.

She cited the expense of luxury boxes.

(Later, Perkins asked if there was anyone from Forest City in the audience. He got no answer, though many attendees obviously were there at the behest of the developer.)

Kruger’s serenade

Kruger, known for his Brooklyn aria during the 8/23/06 hearing, bizarrely combined another invocation of his beloved borough with an attack on the MTA.

“It is very disconcerting to me as chairperson of the Senate Finance Committee,” he said, “to hear and know that the MTA was foot-dragging in developing a dialogue” that could advance the Atlantic Yards project.

In other words, Kruger was accusing the MTA of intransigence as Forest City Ratner tries to reduce its obligations to pay cash and provide and upgraded railyard.

As Kruger--a Democrat who often was allied with the Republicans when that party was a majority in the Senate--spoke, Montgomery looked at him with a chilly expression.

MTA negotiations

“Forest City needs assurances” that MTA is working with the project, said Kruger, a recipient of Forest City campaign cash.

As Kruger continued, citing gentrification in Harlem and Brooklyn, a heckler--presumably a project critic--shouted, “Ask questions.”

Kruger finally did. “How long is it going to take, what you call sensitive negotiations...?”

Williams, who must maintain a good relationship with the legislature, was extremely cordial. She first thanked the legislators for helping save the MTA budget.

“Let me say that I worked personally on the issue of the conceptual yard design, that I can protect train service to Brooklyn,” she said. “We set a deadline of the Friday before Memorial Day” and reached agreement on the upgraded yard.

Jeffries hones in

Jeffries then got a chance to ask questions. Citing displacement and gentrification in the areas around Atlantic Yards, he said that public benefits should be used to create affordable housing for the folks who have been pushed out. “Would you agree with that?”

Lago said that ESDC had a support for affordable housing, but “I’d place an equal emphasis on jobs.”

“It’s in the agreement,” heckled Daughtry.

Jeffries went through the housing numbers, identifying 1950 condo units--actually 1930--of which approximately 200 are supposed to be affordable. (That last promise came in last-minute concessions by Forest City Ratner, but are not in state documentation.)

“My understanding,” Lago said, is that there 600 to 1000 subsidized homeowner units, with 200 targeted on site. That’s in Forest City’s agreement with ACORN, but does not appear in government documentation.

“I personally think that 200 is not significant enough,” Jeffries said.


Then he did some math. If half the rental units are affordable, plus 200 subsidized condos, that would be about 37.5%. (Actually, 2450 of 6430 would be 38.1%.)

Jeffries asked how many units would be built in Phase 1.

Wambua said either 300 affordable units--13.3% of the total promised--or, if it’s a larger total, 30% of whatever’s built.

“Wouldn’t it be reasonable that community expect that the percentage be at least proportional to overall percentage?” Jeffries asked.

“Assemblymember, I actually think we’re on the same side,” Wambua said. He said that “the struggle on the Forest City side is how to calibrate the phasing,” given that the economy has changed.

Jeffries, who didn’t mention the previously established funding agreements, asked why ESDC wouldn’t require that Forest City maximize the number of affordable units

“We’re very focused on getting the project under way,” Lago said. “It has to be financeable [and] economically feasible.”

Even with generous federal, state, and city programs, a 100% affordable project isn’t feasible, she said.

“I haven’t suggested 100%,” Jeffries responded. “What I have suggested is proportional affordability.”

He asked if Lago wouldn’t agree the affordable housing is most economically feasible

“The balance has to be born by the project’s economics,” Lago said.

“Is it more economically feasible to build an arena,” Jeffries asked, or to build the housing?

“The economics of the arena will be borne by the folks who buy the bonds,” Lago said, not mentioning that most of the subsidies were tied to the arena.

Jeffries pressed on: “Forest City, they’re going to build the arena simultaneous to exactly how many units of affordable housing?”

“It’s not clear that they’ll be building simultaneously,” Pinsky acknowledged. “There’s a time period with which they have to build the arena and four towers.”

Jeffries didn’t ask about the time period. Actually, that 12-year time period does not require four of the five announced towers in Phase 1 to be completed without penalty, just a certain amount of space, which might be accomplished in three towers.

Questioning the MTA: bailout?

Jeffries pointed to proposed MTA fare increases of 26% as well as draconian service reductions. He asked Williams to guarantee no fare increases in the next three years.

Williams said she couldn’t offer such a guarantee.

MTA’s fiduciary duty is to the public, not any outside developer or entity, Jeffries said, asking, “Would that be fair?”

Williams agreed.

“I’m still struggling around the phrase ‘value engineering,’” Jeffries allowed. “It seems like a phrase created by corporate America... To some folks, it’s value engineering, to some folks, it’s a bailout.”

He asked about the $100 million Forest City owed.

Williams said the developer would still have to pay, over a longer period of time, including interest--like a mortgage.

“Isn’t it correct that that if you were given $100 million payment up front,” that would ward off a fare increase, Jeffries asked, in a bit of grandstanding.

Williams, in a steady voice, responded that the money was always directed at the MTA’s capital funds, not operating expenses.

Jeffries noted that there’s a shortfall in capital funding.

Williams agreed.

Fiduciary duty

Jeffries suggested it’s still in the MTA’ s best interest to hold the developer to its initial commitment “as a matter of upholding your fiduciary relationship.”

Williams, a lawyer herself, demurred. “I want to be very cautious about characterizing how that fiduciary duty is fulfilled,” she said. “There are lots of ranges for fulfilling it.”

"I think there is room to say the board’s meeting its obligation, the community is getting benefits of going forward, and we don’t have to demand the $100 million on closing,” she said. “At the end of the day, it’s got to equal the value of the $100 million.”

Daughtry offered an appreciative heckle: “Good answers.”

“I think we all would like a discount, but the question is: at whose expense would that discount” come from, Jeffries followed up. “I don’t think it should come from the community.”

Jeffries went on to ask about local hiring guarantees.

“It’s in the Community Benefit Agreement,” shouted Daughtry.

Lago cited goals in the General Project Plan (GPP), then went on to cite the CBA, which she said “I believe” local officials were a part of

“Neither of us were a part of it,” Montgomery commented acidly.

“There are some concerns about the enforceability” of the CBA, said Jeffries. Indeed, if Forest City sells the project, the agreement could be moot.

Jeffries asked about outreach.

Lago said the project was blocked by litigation.

"Legitimate duty"

Jeffries expressed skepticism that litigation precluded job training.

Summing up, Jeffries said that legislators were concerned because of substantial public investment of money, as well as a waiver of ULURP (Uniform Land Use Review Procedure), a state zoning override, and the use of the “extraordinary power of eminent domain.”

So, “despite the clamor that may exist, there’s a legitimate duty that we have to adequately represent the public interest,” Jeffries declared.

Daughtry stood up, and, like a broken record, heckled, “They’re blocking the program!”

Golden’s moment

Golden (right), given a chance to ask questions, said he’d request simple yes and no responses. “I think you’ve gone through enough torture today,” he said to the governmental witnesses, even though they’d been treated rather gently.

He recited some basic numbers in the project document: 6430 units of housing, 850,000 square foot arena, 900,000 square feet of office/hotel, 247,000 square feet of retail.

“Is that still there?” he asked.

“Please don’t hold me to every square foot,” said Lago, “but the GPP has not changed.”

It hasn’t changed, but it most likely will change.

Golden, a Republican long hostile to reform of rent regulation, noted 2250 affordable units negotiated by “ACORN, the premier low-income housing organization.”

Is the CBA still in place?

The CBA, acknowledged Lago, is outside the GPP.

Daughtry shouted out: “We can show it, we can make it happen.”

Bending over backwards

Golden noted that the legislative session is supposed to end on June 23. If any other state legislation is required after June 24, he said, he’d suggest that the legislature “stay in session, until this project goes forward.”

He was cheered.

He then went through several other elements of the agreement. The $6.5 billion in economic output from the project--is that correct, he asked.

“Nothing has changed, Senator, since the General Project Plan, and the documentation backing it up,” responded Lago.

“And the $5.6 billion in new tax revenues to the city and state over 30 years?” he continued.

“Nothing has changed from the GPP,” responded Lago.

That $5.6 billion figure appears nowhere in state documents. It is a figment from Forest City Ratner, though FCR lawyers have claimed it was a government statement.

Stimulus funds?

Golden asked if there was any stimulus money for the project.

ESDC “has not asked for stimulus dollars,” Lago said.

Golden asked why not.

“In looking at the project and the amount of public subsidy and the right way of getting it forward, we have not determined that stimulus funds are part of that package,” Lago responded carefully.

Golden asked if there was enough money as designated in the original agreement.

“As we’re looking at the project now, as all of us are engaged in the sensitive negotiation, they have not entailed a request for stimulus money,” Lago said.

“If that request were made, would you be willing to make that request?” Golden asked.

“That would be something that we would consider,” Lago said. “We would of course look at the overall project plan.”

Golden said he’d make a request.

The crowd erupted in cheers.

Golden asked the crowd to calm down. He said that, while it seemed things were “beaten to death,” times change and some questions have to be answered, so “I commend my colleagues.”

“They’re blocking the program,” heckled Daughtry.

Golden went on to say that two baseball stadiums had been built and the World Trade Center started. “It’s time, ladies and gentlemen, it’s time for the hearings to stop,” he declared.

He got a standing ovation.

Montgomery targets Golden

Montgomery, alluding to Golden’s disruptive entrance, said “I really am absolutely surprised at the disrespect that you have for the three elected officials sitting here.”

She got big boos.

She raised her hand to quiet the crowd. Perkins asked for order.

"It is not up to Senator Golden to determine what gets on the floor," Montgomery said, with an edge in her voice, alluding to the fact that the Democrats, after many years out of power, now control the Senate. The rest of her statement was drowned out by the bellowing.

Perkins, talking over the hubbub, thanked the panel, called it “informative and engaging panel,” noting that new information had emerged, and that more would be revealed as negotiations continue. Again, he presumed the project as a done deal, saying that he wanted to make sure that "the community will understand the benefits of this project and realize the benefits of this project."

It was past 3:30. The first panel had testified for some 2.5 hours.

Project opponents

When the hearing resumed shortly afterward, a good segment of the crowd had left, and Perkins advised the three-person panel of project to abbreviate their testimony to nor more than 20 minutes.

“Are these people pro or con?” heckled Daughtry.

Perkins said to listen to the testimony.

Jeffrey Baker (right, with Goldstein at left), attorney for Develop Don’t Destroy Brooklyn and community groups challenging the environmental impact statement, said “we do not question the need to develop the Vanderbilt Yards… and to provide affordable housing,” but “we do question the structure of this deal.”

Saying he respected the inability of the previous panel to provide details on a revised plan, Baker urged the panel to hold another hearing as soon as the Modified GPP was issued.

He was heckled.

Perkins admonished the crowd: “Everything you disagree with does not have to be sounded out.”

“I was born in Brooklyn,” one person heckled, reminiscent of the street cred shout-outs on 8/23/06. More people heckled. Perkins addressed Daughtry, saying he “might ask for a prayer in a minute.”

“It’s too important” Perkins said of the reasons for oversight.

“Let’s build it,” bellowed an audience member.

“The point of an additional hearing... is not to stall or delay the project but to elicit information,” Baker said. “I find it personally shocking and I imagine you find it insulting, that Forest City Ratner refuses to show up at this hearing to answer those question. Nevertheless, Forest City Ratner has no compunction about orchestrating the turnout by the trades councils and the unions to be the disruptive forces--”

“We’re not disruptive,” bellowed an audience member, thus proving Baker’s point.

Private bonds

Baker said Lago’s statement that the bonding will be private bonds is “a shockingly irresponsible” but technically legal answer. He noted that, in the 1970s, the city and state were on the brink of default, because organizations like the ESDC’s predecessor approved irresponsible loans.

While the lenders do not have direct recourse for the state to pay for the bonds, he said, “the fact is the moral obligation of the state supports those bonds, and if the state was not going to cover those bonds, the state would not be able to borrow any money, because the capital markets would be closed.”

“That is a fact,” he said emphatically. “And that is the reason why the Public Authorities Control Board [PACB] was instituted."

“For the ESDC to be going forward on the basis of approving a project and simply saying the risk is being borne by developer and is not a risk of the state, is not to hearken back to the relatively distant past of the 70s but the past of a couple of years ago, where we had irresponsible lending and lack of financial controls.”

“I strongly believe that if the MTA is going to renegotiate the deal with Forest City Ratner,” he said, “they have to go out for a new RFP and open the project up.”

Goldstein: blame FCR

DDDB’s Goldstein took the mike to low boos and he departed from his prepared statement to address the legislators and the crowd. “You guys want to boo me,” he said rhetorically. “I want construction [over the Vanderbilt Yard]. The chief impediment to construction is Forest City Ratner’s maniacal drive to build a 800 million-dollar arena that will sit empty most of the time.”

Forest City Ratner, he noted, likes to claim the the project was stalled because of litigation. “But today, they said, over and over, it was a financial issue, he said.

Actually, the ESDC maintained Forest City Ratner’s claim that litigation was to blame, but all the previous discussion about negotiation was an acknowledgment that financial issues remain unresolved.

The ESDC, he said, leaning forward to emphasize his words, could start condemnation tomorrow, but haven’t done so, “because they don’t have the financing for the project.”

“You guys can jeer me,” Goldstein said, challenging the disrespectful audience members, “but it’s Forest City Ratner” who's responsible.

Perkins advised Goldstein to “talk to us.”

Project a "charade"

Goldstein then made a statement that should’ve been made up front: “The project that was approved in 2006 doesn’t exist in reality, not the jobs, not the housing, not the arena.” He called it a “charade that this project can built as proposed... That is a fact.”

He said that the MTA made a sweetheart deal with FCR, given that the rights to the railyard were appraised at $214 million [actually, $214.5 million], with a competing bid offering $150 million.

“Besides it being a wired deal” he said the MTA was convinced because Forest City Ratner was "going to build a state of the art new railyard” while rival bidder Extell was not.

Now, he suggested, the “bid is nearly worthless... The MTA, which just got this bailout, is going to bail out Forest City Ratner.”

He pointed out that Lago could not say what the project benefits would be or how long it would take. A month ago, he noted, Lago admitted it would take “decades,” but it was proposed and approved at ten years.

Missing Urban Room

“She didn’t say what would happen with the Urban Room,” Goldstein said of the much-touted entrance to the subway and arena.

“It would not exist," he said, "because the commercial tower, which would provide the space and jobs, is not going to be built.”

Next controversy: PILOTs

The next controversy, he suggested, is that Forest City Ratner will inflate the assessment under the arena to meet the schedule for PILOTs (payments in lieu of taxes) to pay off the arena. (Actually, the city will make the assessment, likely at the developer’s nudging.)

“They are going to violate IRS regulations,” he warned. “Hopefully it will come before your committee.”

Perkins thanked Goldstein, indicating it was the end of his testimony. Goldstein added one more thing: “Forest City Ratner is driving this process, and no one, not even ESDC, can say what it looks like... [and] what it costs.”

He got substantial cheers from the project opponents in the audience, finally seeing someone counterpunch, but he also drew major boos.

(Above: Goldstein, with the IBO's Sweeting behind him.)

Short shrift to security

Alan Rosner, who has raised questions about arena security issues and the effects of shadows on access to solar energy, was asked to move quickly through his testimony.

Perkins had no questions. Rosner was incredulous: “You asked us to go quick so you could ask questions.”

Perkins had clearly already had a full day.

IBO testimony

Sweeting, who by rights should have testified with or right after the initial panel, then got a chance to provide his testimony, noting that the nonpartisan city agency’s estimates are neither an endorsement nor a condemnation of the project.

The Observer noted that the IBO numbers assume all the subsidy goes to the arena, though the project as a whole is larger. (Well, $100 million goes for land acquisition on the arena block, and $105 million goes to infrastructure improvements, many though not necessarily all go to the arena. We don’t have a full breakdown.)

Tax loss on arena bonds: $200M?

Sweeting also provided a revised estimate of the cost to the public of tax-exempt arena bonds. He noted that the estimated cost of the arena in September 2005, when the IBO did its report, was $555.3 million.

Now, using an estimate of $850 million--which Sweeting acknowledged was hypothetical--IBO estimates that the public sector cost in foregone tax revenue would be $200 million, with nearly all, $193 million, borne by federal taxpayers, and $4.5 million by city taxpayers. Forest City’s savings would amount to $191 million.

It was an implicit argument for additional federal scrutiny by Rep. Dennis Kucinich, who has looked at sports facility finance, concentrating on the new Yankee Stadium.

(Sweeting’s estimate may be high; Forest City Ratner has said it hopes to trim $200 million from the $950 million arena cost, which would put the tab at $750 million, and a somewhat decreased amount of foregone tax revenue.

Assessment issue

Sweeting also pointed to the need, as with Yankee Stadium, to get the PILOTs to work: “Relying on this interpretation also depends on the city’s Finance Department assigning a property tax assessment to the arena which results in a payment in lieu of taxes—supposedly equivalent to a regular property tax bill—large enough to cover the annual debt service. This assessment process for Yankee Stadium proved quite controversial, with the city’s assessment higher than those of several independent appraisers, and the process may prove controversial again at Atlantic Yards. In the case of the Yankees and Mets stadiums, the department indicated what the assessments would be prior to the start of construction. No similar announcement has been made for Atlantic Yards, but it is notable that the land assessments for the parcels under the arena have more than tripled in the last three years.”

That’s a tantalizing issue; expect more discussion.

Bottom line

Perkins drilled down: “What would you say is the bottom line?”

“The bottom line,” Sweeting responded, “is that, with the project substantially changed, many of the numbers that were used earlier today about how much the net benefit for the city would be, until we know how much they’re changing the assumptions that were, in terms of the amount of office space, the amount of commercial space, as those things change, it’s appropriate to go back and ask: how does that then change the estimated fiscal benefit to the city. It’s important to keep in mind that most of the new tax revenue that’s generated form the project comes form the commercial space, the office space. if the project that finally emerges has less commercial office space, then presumably that tax revenue piece that’s spun off from there will be lower.”

Project supporters

Daughtry (right, with James Caldwell of BUILD) led off the next panel, and began with personal history, saying that he put together the slate that ran Montgomery in her first political race. “Council Member Tish James was a member of my church,” he said. “She’s backsliding.”

Perkins advised Daughtry that he was eating up his allotted time.

Daughtry went on to explain that he is pastor of the House of the Lord Church, and , head of the Downtown Brooklyn Neighborhood Alliance (DBNA), not acknowledging that the group has been funded by Forest City Ratner.

He then proceeded to cite and elaborate on Errol Louis’s Thursday column in the Daily News, headlined “The damage done to Brooklyn,” augmenting it by calling project opponents and critics “the killers of the people’s hope of a better life.”

Showing Daughtry more respect than he showed others, the crowd refrained from heckling.

“Here we go again, with another charade you euphemistically call a hearing,” Daughtry declared, showing that he and DDDB’s Goldstein had diametrically different views on what constitutes a charade.

He went on to echo past testimony about the CBA, calling it a model and saying “there is a small minority that dissent.”

(Remember, the Rev. David Dyson of Lafayette Avenue Presbyterian Church told the Brooklyn Rail that the project had split progressives: “We feel that Reverend Daughtry and ACORN have been brought in by Ratner not as advocates for the community but as private business partners in the deal.”)

BUILD testimony

James Caldwell, president of BUILD (Brooklyn United for Innovative Local Development) began, as he typically does, by thanking Jesus Christ. (What would Christ have made of the heckling?)

Caldwell commended Perkins for being one of the few politicians who initially stood up for Barack Obama, but said “I was very hurt” when Perkins “made a trip to Brooklyn without even talking to the supporters.” He went on to cite the importance of the project to young men out of work.

“When you are assigned in the legislature to chair a committee,” Perkins responded, “you are assigned to chair that committee from the perspective of the state… you’re required to have oversight hearings.”

“With all due respect, we invited you and you responded to the invitation,” Perkins said, apparently addressing the hearing at issue rather than a preliminary meeting attended mostly by project critics.

A BUILD member, Lisa Holloway (right with Marie Louis), offered rambling testimony in support of the project, explaining that she had gotten her life together after “eight years in the penitentiary.”

Then BUILD COO Marie Louis touted the CBA’s “legally-binding strategies.” No one pointed out that the CBA is not, in fact, legally binding.

Shiffman: AY a "sham"

Ron Shiffman (right), founder of the Pratt Center for Community Development (and a member of DDDB’s board), cited his long history of working with low- and moderate-income communities.

While Shiffman said he has “a great deal of respect for groups that negotiated the CBA... I totally disagree with them on this project, because I have read and reviewed the plans.”

He pointed out that claimed 12,000 jobs would occur over a decade or two decades, not this year. “It’s a fraud to talk about this.”

All the funding for affordable housing is money “being transferred from other neighborhoods in Brooklyn, housing that could be built right away… at a more affordable rate.”

He noted that the environmental review “shows that more low and moderate income families would be displaced than will be housed” by AY. (Actually, it’s “risk” of displacement.)

As for issues of minority hiring and contracting and affordable housing, he said “it should be part of public policy” rather than part of a CBA because it “allows the developer to literally buy” support for the project. Rather, there should be a level playing field.

He added that the promised open space would be publicly accessible but not truly public space, “it’s the courtyards of the buildings.” (He didn’t mention that the open space wouldn’t come until the unspecified Phase 2.)

Closing by calling AY a “sham,” Shiffman was met by moderate applause and little heckling, given that many project supporters had left.

Questions about funding and blight

He was followed by Patti Hagan of the Prospect Heights Action Coalition, who in July 2003 “called a war against Bruce Ratner,” spotting plans for the project well before they were announced. Our questions then-how much does it cost, where does the money come from, what are taxpayers paying--”remain the same and largely unanswered.”

Perkins rushed her to finish as she began to list the curious characteristics that have been used to describe properties as blighted.

Affordable housing questions

Michelle de la Uz (left below, with Deb Howard of the Pratt Area Community Council) of the Fifth Avenue Committee cited her group’s experience in building and manage affordable housing and job training.

She said the legislators should ask the ESDC and NYC HDC about the cost of affordable housing, suggesting that the per-dwelling unit cost for Atlantic Yards is more than “twice the cost of what I build at FAC and what Deb builds at PACC."

Only 14% of the units would be “specifically affordable to residents of Brooklyn,” she said, apparently referring to the difference between AMI, set on a regional basis, and borough income. “For that level of subsidy, shouldn’t we be getting deeper affordability?”

It’s a little difficult, actually, to compare the cost of housing, given that it’s more costly to build at the AY site and the mix of units may be different. Also, there’s a difference between union and non-union labor, as noted below.

Howard said a Freedom of Information Law (FOIL) request showed that $1.9 billion worth of tax-exempt funds would be needed for the project.

(While FCR filed multiple documents regarding potential use of funding, document revealed in AY litigation said that $1.4 billion in bonds would be needed.)

How long would it take?

Howard drilled down to a question raised by AYR: how long would it take to fund the housing?

“What you need to be asking HDC is, what is their annual allocation of these bonds, so you’ll know what it realistically takes to finance the affordable housing?” Howard said.

Also, raising an issue pushed by the BrooklynSpeaks coalition, she noted that other comparable project have a local development corporation that takes on governance.

Near-final speakers

A representative of Sen. Diane Savino, whose district encompasses Staten Island and Southern Brooklyn, expressed support for the project. (FCR’s Bender long worked in Southern Brooklyn, home of Kruger and Golden.)

Ruth Payne, coach of a Double Dutch team supported by Forest City Ratner, lauded Bruce Ratner.

Henry Weinstein, who has in court prevailed against Shaya Boymelgreen’s attempt to transfer a lease to Forest City Ratner, read part of a statement.

Carpenters’ union rep Anthony Pugliese (left)commented that FAC builds non-union--a factor in building at less expense.

James: arena only

At 5:36 pm, after a long day, Council Member Letitia James got to speak. “It’s regrettable,” she said, that as the MTA is renegotiating with the developer, three nearby subway booths are slated to be closed. (Like Jeffries, she was conflating operating funds and capital funds.)

“It is regrettable that the state of New York, in cooperating with this developer, has chosen to override local land use,” James said, adding that it’s a false dichotomy to say that it’s this project or nothing.


“It is also my understanding that, according to a source at ESDC,” James said, that the project is now limited to “the arena and the arena only....If there should be any building... it should be housing, and housing alone.”

Her statement had essentially been confirmed by Pinsky, who had said, “It’s not clear that they’ll be building [the arena and housing] simultaneously.”

Targeting Golden, James continued, “It’s rather unfortunate that we had to bear the disrespect of a local politician who did not support Barack Obama and never supported affordable housing in his district in Bay Ridge.”

Montgomery's edge

Montgomery added, that it’s “not an issue, whether or not we are for or against development.”

Most developments, she said, she supports. “But there are principles involved in the relationship between the developer and the community,” she added, with an edge in her voice. “That’s what I am asking for.”

“We have an obligation to have some oversight over these authorities and commissions that are tieing us into billions of dollars of debt,” she observed. “All of us have an interest in making sure there’s some oversight.”

Gathering steam and an energy that might have been better deployed earlier, she concluded, “For those who are confused about the purpose, I’m very sorry… they’re still my friends… but they certainly don’t understand what the deal is… as long as we are paying our tax dollars, we need to have information.”