Monday, August 09, 2010

In court Tuesday, a continuation of the lawsuit charging that AY benefits have changed so much the eminent domain findings should be reissued

It looks like not one but two judges will have to grapple with a fundamental charge regarding Atlantic Yards: that the project has changed so much since its approval in 2006 that the findings at that time--regarding both the environmental impact of the project and its expected benefits--are no longer valid.

That doesn't mean the judges will rule in favor of those challenging the Empire State Development Corporation (ESDC). That, we've learned, is not exactly how courts in New York State work.

But it does mean they have to think about it. And tomorrow, in state Supreme Court in Brooklyn, Justice Abraham Gerges--however distracted and uninterested he was during the first part of the case on August 6--should not think the issues were resolved in similar case he dismissed in March.

(The hearing will be at 10 am at Kings County State Supreme Court, IAS Part 74, 320 Jay Street, Room 17.21, Brooklyn. Here's the map.)

Does change in pace change benefits?

Let's recap. As reported March 2, Gerges rejected challenges by condemnees and upheld the process of condemnation for the Atlantic Yards project.

"Whatever the pace may be for the delivery of the many public benefits of the Project, the nature of those benefits remains the same," insisted the ESDC, a statement cited in Gerges's opinion.

That, of course, is poppycock.

Even if you take the ESDC at its word and assume that Atlantic Yards would be built in full as promised--a low-percentage bet--the pace for the delivery of public benefits surely can change their nature.

For example, 2250 units of affordable housing delivered over a decade would be far different than the same amount of housing delivered over 25 years. (And, of course, a much smaller project would produce even less housing.)

Tax revenues based on a full buildout of the project (including an office tower) over a decade are far different from those for a project it takes 25 years to build. (And, of course, a much smaller project would produce fewer tax revenues.)

ESDC: partial assessment of delay

In fact, the ESDC's June 2009 Technical Memorandum recognized both the potential for a Delayed Buildout and a Delay of Building 1 (the office tower).

In both cases, such delays were not seen as triggering a Supplemental Environmental Impact Statement.

However, neither the state nor the city offered alternative (and lower) estimates of tax revenues, based on the potential for delays. Is that responsible stewardship?

It raises a parallel with the exotic financing deal adopted by the Denver Board of Education, as reported August 6 by the New York Times:
The issuer made a simple financing highly complex and took on substantial risk without knowing how large its downside could be,” [Joseph S. Fichera, chief executive of Saber Partners] said, referring to the Denver deal. “The advisers and bankers may have disclosed that there were risks, but apparently did not help the issuer truly understand them. They typically present economic outcomes to the issuer only on projected savings and assume away any chance of the risks happening.”
(Emphasis added)

Issue moot?

In his earlier decision, Gerges discounted new evidence proffered, such as the Independent Budget Office's finding that the arena would be a net loss to the city, that a revised deal with Metropolitan Transportation Authority would produce a smaller replacement railyard, and that the affordable housing would be contingent upon housing subsidies.

Gerges saw the issue as moot, since previous courts, ruling on eminent domain, had declared that the 2006 General Project Plan and the eminent domain Determination & Findings (D&F ) were valid.

The Development Agreement and delays

However, in that case, he had no chance to consider the Development Agreement, which, as part of master closing documents not revealed until January 2010, give the developer six years to build the arena, 12 years to build Phase 1, 15 years to start construction of the platform, and 25 years to finish the project.

In court Friday, attorney Matthew Brinckerhoff, who represents three entities (two owned by the same person) challenging the D&F, charged that the Development Agreement "was intentionally withheld in bad faith" and that "We now know [the ten-year project timetable] is complete, utter fantasy."

In a parallel case heard in June by Manhattan Supreme Court Justice Marcy Friedman, community groups organized by Develop Don't Destroy Brooklyn and BrooklynSpeaks asked Friedman to reconsider her decision that the ten-year timetable was valid. They cited the timeframe in the Development Agreement.

The KPMG report

The ESDC said not to look to that document. Ratner, a KPMG report on the likelihood that the 6430 Atlantic Yards housing units could be absorbed in a decade, attorney Philip Karmel said in court, “was probably the most important factor” in the ESDC’s decision in 2009 to re-approve the project without an SEIS.

So it's likely Karmel will bring up the KPMG report on Tuesday.

However, it's a deeply flawed document. First, the report only addressed the 15 residential towers; it said nothing of the likelihood that the office space would be built--and that office space would be crucial to new tax revenues.

Second, it's bogus. Not only does the report plagiarize from Corcoran, more importantly, it relies on lies about the sales figures regarding at least three buildings: the Oro, the Toren, and On Prospect Park. It simply shouldn't be trusted.

The pressure on the judges

Friedman, who's yet to issue a ruling on the reargument she heard in late June, faces some pressure to be intellectually consistent, even if she's reluctant to throw a wrench into a project that's under way.

After all, in her March ruling on the case she chastised the ESDC for a "deplorable lack of transparency." And that was before the damning Development Agreement was finally released.

So, Friedman might order the ESDC to produce a new report on the impacts of the project--a report that would not necessarily put a wrench in the arena or the first buildings.

But she has shown herself reluctant to insert a judicial role in a project she deems so far along, so it's more likely she won't. If so, she'd have to chastise the ESDC for an even greater lack of transparency.

Gerges is a condemnation judge. He typically doesn't get into these things. And, as Karmel argued August 6, a case known as Leichter stands for the proposition that even significant changes to a project plan do not trigger a new Determination & Findings.

Brinckerhoff said in January, "The question ultimately that that case doesn't address and no case addresses, is at what point do the changes become so significant that they have to result in an amended finding?"

And, noting that the Development Agreement had just surfaced, he added, "Obviously I feel very strongly we've gone well past it over the course of the last four or five months, particularly in the past week."

Gerges didn't agree in that earlier case. But he never let the Development Agreement be part of the record, either, and Brinckerhoff wants to add it to this later case.

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