Sunday, January 31, 2010

Could the Atlantic Yards arena open in 2011-12? The Times won't publish a correction

It's a little like something out of Beckett, the attempt to get the New York Times to acknowledge errors in its Atlantic Yards coverage. Sure, the Times sometimes prints corrections when the evidence is overwhelming.

But too often the Times goes through gyrations to avoid such acknowledgments. Unfortunately, the readers are still misled.

Below is the latest.

The 2011-12 arena?

I sent a request for a correction to the New York Times Senior Editor/Standards Greg Brock on Friday:
Today, the Times reported in Seeking Fans in 2 States, Despite a Record of 4-40 (1/29, Metro) that "the move [to Brooklyn] is not expected to take place for at least another full season."

The current season ends in the spring of 2010. The next season ends in the spring of 2011. Today's article leaves open the possibility that the move could take place during the 2011-12 season.

However, the Times reported last month that "[t]hey hope to open the new arena by June 2012."

That's after the second full season.

And just the other day an executive from Forest City Ratner said construction of the arena (which hasn't yet begun) would take 28 months. See the end of the second video embedded here.

I recognize that the statement that "the move [to Brooklyn] is not expected to take place for at least another full season" is not technically inaccurate. But it is misleadingly imprecise. As you in October 2007 told an interviewer: I don’t know if you read our corrections much, but we often say we referred “imprecisely” to something, which means that we weren’t 100 percent wrong.

I think that this is one of those cases.
The Times's response

Brock responded promptly:
You are correct that it is not technically inaccurate. We were careful to say "at least" another full season. That much we are certain of. They may get their wish and have it going BY June 2012 as we said. Or it may be 2014, who knows what problems might be ahead. "At least" another season conveys to our readers -- who are fairly sharp little cookies -- that it's not going to be anytime real soon and that we, nor anyone, really knows.

I don't agree that this was imprecise. No correction is warranted.
My response

I wrote back to Brock:
Thanks for your prompt response.

If they get their wish, as you note, they will have it going by June 2012, which would be at least another two full seasons. (Seasons run Oct.-April.) Hence my initial communication.
He didn't respond.

Today's correction

Today's Times contains this correction:
Correction: January 31, 2010
The 36 Hours column on Jan. 17 about Whistler, British Columbia, referred imprecisely to some nonstop flights between New York and Vancouver. Under a code-share arrangement, Continental sells tickets for flights to Vancouver operated by Air Canada, not by Continental. (Continental does offer nonstop service between the two cities in the summer.)
The bottom line is that you can get to Vancouver by doing business with Continental.

The bottom line regarding the Nets' planned move to Brooklyn is that it won't happen within the second full season, despite the Times's willingness to leave that suggestion open.

In the Times this week, photos of the Nets (one supplied by the team) but not the empty Izod Center

Photos don't lie, right?

Two photos of the New Jersey Nets were published in the New York Times in the past two days, and both were more generous than they had to be. They didn't convey an essential fact of the team's season: very few people are coming to the Izod Center to watch the league's worst team.

At left is the photo that appeared (cropped somewhat, in black and white) in yesterday's print New York Times, to accompany an article headlined Wizards and Nets in One Unenchanted Evening.

It's a perfectly good photo of hoops action. But it doesn't say quite enough.

Overestimated attendance

A section of the article amplified the headline:
But for spectacles, this matchup was not one to be highlighted, not with a terrible team hosting another poor team engulfed by the worst scandal of the year. If for three hours the N.B.A. could pretend one of its games never happened, this would probably be the occasion.

The Nets have the third-lowest attendance average in the N.B.A., listed generously at 13,484 per home game. At their previous home game, against the Clippers, they announced fewer than 10,000 fans, but people at the game estimated there may not have been half that many.

Perhaps because it was a Friday night, the Izod Center was surprisingly well populated for this game, with an announced attendance of 11,384 who witnessed the Wizards denying the Nets a chance at their first winning streak of the season. Washington prevailed, 81-79, on Earl Boykins’s pull-up jumper with four-tenths of a second remaining.
"Surprisingly well populated"?

If the Nets' announced average attendance is 13,484, isn't an announced attendance of 11,384 not "surprisingly well populated"?

Rather, the Friday night game could be considered "surprisingly well populated" only in contrast with--as would seem typical--a weeknight game.

At right is another photo of the game, from Getty Images. It shows that most of the seats in the lower section--the most expensive seats--were empty, as were a good number of those in the upper decks.

At the previous home game

Maybe it's all relative. Consider that the Times suggested that the announced attendance at the previous game might have been cut in half. That means that perhaps only 5000 people watched the Nets play the Clippers.

Check out the photo at left, also by Getty Images.

Not only are the lower decks mostly empty, one section of the upper deck is covered with a tarp.

The puff piece

But what photo did the Times publish on Friday? One supplied by the Nets as part of an article, published Thursday on the CityRoom blog and later in print, about a couple of players visiting a hospital in Brooklyn.

Remember, Nets CEO Brett Yormark is a "Yormarketing Genius" only if the press complies.

Saturday, January 30, 2010

Video: lawyer fighting condemnation for Atlantic Yards talks about case heard January 29 before Justice Gerges

After the hearing Friday in Kings County Supreme Court on eminent domain for Atlantic Yards, Matthew Brinckerhoff, attorney for those challenging eminent domain, answered a few questions at a brief press conference outside on Jay Street.



(Video courtesy of Michael Galinsky, who's working on the Battle of Brooklyn documentary.)

Expectations from hearing

Had he had expected Justice Abraham Gerges to transfer title, as had been sought by the Empire State Development Corporation (ESDC) or had he expected the judge to put the condemnation on hold, as he did.

"I did not expect him to issue an order today; I would've been very surprised," responded Brinckerhoff, noting the flurry of legal arguments that had been submitted in just the past few days. "He has to at least consider in some way, shape, or form all the arguments we submitted.

The Leichter case

I pointed out that ESDC lawyer Charles Webb had told the judge that a case known as Leichter, regarding change in the plans for Times Square, controls the issue and that Brinckerhoff's clients had no case.

"He's really wrong about that," Brinckerhoff responded. "That's in the EDPL [Eminent Domain Procedure Law] 207 context. All that case says--it recognizes there can be some changes [in a plan]... If they had done their findings in December 2006 and three months later there were some changes, that alone wouldn't require them to start all over again."

"The question ultimately that that case doesn't address and no case addresses," he said, "is at what point do the changes become so significant that they have to result in an amended finding? As I said in court today, I think that we really can all agree that there is a point. What nobody knows is what that point is. 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."

(The latter was a reference to revelations, in the master closing documents, of extended deadlines and lenient demages for delays.)

New case

What about the additional case against the ESDC that was revealed in court, having been filed ten days earlier?

"That case is an Article 78 proceeding, filed on behalf of all the same entities and parties as I was representing today," Brinckerhoff said. "Basically, it's a defensive proceeding. We knew the ESDC was going to say today what it said... that 'you're in the wrong place.' As you heard today, we're happy to be in any place, and we're trying to be in every place."

"We feel some place should listen to us and actually rule on these arguments," he said. "If this court were to rule we're in the wrong place... we still have another place to go."

Procedural questions

What would happen if Gerges agreed to a transfer of title and Brinckerhoff's clients or project opponents win a case?

"This is like a proceduralist nightmare," Brinckerhoff said. "We would defnitely be in a court, seeking to have title transferred back."

He said that if his clients win the most recent case, or if Develop Don't Destroy Brooklyn (DDDB) and other community groups win their case challenging the ESDC's approval of the 2009 Modified General Project Plan (pending before Justice Marcy Friedman), they will request--in some court--that the title be transferred back.

Candace Carponter, DDDB legal chair, pointed out the importance of addressing pending issues before title transfers, because that would lead to removing people from homes and businesses--well, not for at least three months--further demolition and then construction. So it could become meaningless.

"It could be a completely pyrrhic victory," Brinckerhoff added, saying that's why Gerges should decide, "because he's the one who's the trigger for the actual transfer of title."

Carponter said that, it's not unusual, "in the general scheme of litigation," for a judge to give time to get other issues decided before a ruling.

Fewer names

Brinckerhoff is only representing five or six people/businesses (in multiple entities), none of them residential renters. A couple of previously occupied buildings, according to a map shown in court, are now empty; one may have had renters who were plaintiffs in the eminent domain case. (I'll check.)

"The people I'm representing now are all the people who had a fee property interest that are therefore appropriate respondents in this case," Brinckerhoff said. "Residential tenants would not be."

Condemnation on hold after judge promises prompt review of claims; streets unlikely to close on February 1

No, the Atlantic Yards condemnation case was not going to be simple, after all.

After nearly two hours of oft-contentious oral argument Friday before Kings County Supreme Court Judge Abraham Gerges--argument that, according to counsel for the Empire State Development Corporation (ESDC) went well beyond the proceeding at hand--the judge chose not to rule on the motions and counter-motions filed in the last two days.

"While the court will proceed promptly, the parties are entitled to a review of their claims," Gerges said at the end of the hearing, promising to "proceed expeditiously." (Gerges, at left, in photo by Kate Emerson/Brooklyn Paper. Photo above and set by Tracy Collins.)

Gerges's focus is on the narrow law of condemnation, so it would be unusual for him to allow argument on claims that the project has changed so much--and after the chance for public comment on such changes--that the ESDC should issue a new Determination & Findings.

So he could simply dismiss the new claims filed by property owners and leaseholders. Or he could ask the ESDC to revise the petition because of technical defects. Or--the longer shot--he could look at the broader claims, or hold this case in abeyance while another court examines those claims.

Streets to stay open?

At the least, it's likely that streets planned for closure February 1 will not close, even though developer Forest City Ratner wants Fifth Avenue between Flatbush and Atlantic avenues to close for sewer work needed before arena construction will go forward. In fact, an FCR executive has said that the street should be closed even if the case was delayed.

That seems to be on hold. "We will not even ask that [streets] be closed until after vesting [of title]," ESDC attorney Charles Webb told the judge.

I sent a query to the ESDC for further confirmation regarding the street closing plan, but didn't get an answer Friday afternoon.

The ESDC did say that its real estate consultant, the Cornerstone Group, "continues to meet & work with footprint occupants" as a prelude to relocation.

(In the photo, ESDC attorney Philip Karmel, who did not participate in the oral argument, trundles out some of the legal documents necessary for the case. In the background is Forest City Ratner attorney Jeffrey Braun. Photo by Jonathan Barkey.)

Large crowd

The case drew more than 100 spectators and had to be moved to a larger courtroom. Among those present were executives from Forest City Ratner (headquartered just a few blocks away) and ESDC, and City Council Member Letitia James, the project's leading political opponent. No other elected officials were there.

The courthouse, in fact, is part of the MetroTech complex developed by FCR; see Building 7. (Photo by Tracy Collins)

Filling the room were numerous project supporters and opponents, wearing, variously, buttons saying "Jobs Housing Hoops" and "Develop Don't Destroy Brooklyn."

Among the supporters were members of construction unions and the Community Benefits Agreement signatory Brooklyn United for Innovative Local Development (BUILD), which had a sign-in for its members.

(Here's coverage of the case in the Times--which chose not to put it in print, unlike fluffy coverage of the Nets--and the Brooklyn Eagle. Here's the Courier-Life's untimely brief, published as a preview after the hearing.)

Proper venue?

Gerges was not unskeptical about the claims raised by attorney Matthew Brinckerhoff, representing several footprint property owners and a leaseholder, who argued that changes in the project after the ESDC's 2006 approval of the eminent domain Determination & Findings (D&F) were so significant that a new D&F was required.

Weren't such issues supposed to be dealt with in other cases, the judge asked.

Brinckerhoff pointed out that other courts considering AY-related cases had relied solely on the record as of December 2006. "The fact that they changed the project so much has to be considered by someone," he said.

(He's pictured with Develop Don't Destroy Brooklyn legal chair Candace Carponter. Photo by Tracy Collins.)

Brinckerhoff suggested, by way of example, a situation in which a D&F had been approved but there was absolutely no financing for a project. In such a case, despite the D&F, he said, a condemnation court would not have transferred title.

He said: "The question is: where on the continuum from nothing changing to everything changing do we get heard?"

As noted below, Webb relied on a case known as Leichter, which he suggested disposed of all of Brinckerhoff's claims. However, as the excerpt at bottom shows, it could point both ways.

Interview with Brinckerhoff

Below is a post-argument interview with Brinckerhoff; here's a link to a summary.



(Video courtesy of Michael Galinsky, who's working on the Battle of Brooklyn documentary.)

New case

Webb pointed out, and Brinckerhoff confirmed, that footprint property owners and leaseholders, had just last week filed another case--not previously announced--raising similar claims outside the eminent domain process. (See case at bottom.)

In these cases, Brinckerhoff represents condo resident Daniel Goldstein, commercial property owners Henry Weinstein (via two separate entities) and Peter Williams, and Freddy's Bar & Backroom. In the new case but not the condemnation case, he also represents a homeowner facing condemnation in the second round of takings. In neither case does he represent residential renters, because their rights are "subservient" to owners.

Not all of those facing condemnation were there to oppose the petition; some others were there to negotiate the process of compensation.

A long morning

The case was scheduled to be heard at 9:30 am, or so we thought, and those of us who arrived at the courthouse at 9:25 am took more than 20 minutes to get through security.

With the security line snaking back around I several times crossed pass with ESDC attorneys and was within a few feet of the Forest City Ratner cluster of Maryanne Gilmartin, Jane Marshall, and David Berliner.

In Gerges' courtroom, there was a bit of anticlimax. He decided to hear some shorter, more routine condemnation cases first, telling the crowd, "I know there's a lot of people here on Atlantic Terminal"--a rather inexact description of the case.

He moved the case from a 17th floor courtroom to a larger courtroom on the second floor, a transition that took no short while.

Leading off

Webb, a ruddy, white-haired man, began by reading, fairly methodically, the boilerplate description of the required procedures for eminent domain, among them the description of the project and a public hearing. He noted that challenges to eminent domain in both federal and state court had been dismissed.

At his direction, an associate unveiled two large maps of the footprint, showing first the lots at stake and then those lots occupied by businesses or residents--a much smaller number.

(The only three businesses, he said, are a gas station, a storage facility, and Freddy's Bar & Backroom, though he didn't mention that, until recently, Henry Weinstein's building at Carlton Avenue and Pacific Street has been occupied.)

Of 58 total lots sought for the first stage of condemnation, only 12 are owned by private entities, he said.

"We're asking for title today, not vacant possession," he said, a reference to a situation that would obtain, at best, 90 days later.

He didn't get it.

He mentioned that the ESDC had received two answers to its petition to condemn, a brief one sent by the law firm Goldstein, Goldstein & Rikon, which specializes in condemnation. It did not oppose the condemnation but asked for three years to resolve valuation claims.

Webb said ESDC opposed that, given the need to pay a 9% increase in its condemnation award (funded by the developer) each year.

"We are requesting 120 days," Webb said. "After five years of knowing this is going to take place, they certainly should know they have a claim."

To the challenge

"The second answer"--that filed by Brinckerhoff--"raises a whole host of issues, nearly all of which are not properly raised in an Article 4 proceeding," Webb declared.

Gerges asked if there were any issues in the filing not raised in the Court of Appeals decision on eminent domain for Atlantic Yards.

Brinckerhoff, from his seat, nodded.

Webb mentioned a few elements dismissively, and charged that Brinckerhoff's clients "needlessly complicate this matter... Their whole point is to cause delay from Day 1."

He then aimed to trace for Gerges the litigation in the case, to "demonstrate their strategy to abuse the judicial system by bringing lawsuit after lawsuit."

He ran through a series of cases, some of which had not been filed by Brinckerhoff's clients nor organized and funded, as this case is, by Develop Don't Destroy Brooklyn.

Webb asserted that the 2009 Modified General Project Plan (MGPP) did not change the boundaries or the public purpose of the project; "the principal difference is the phasing of the property acquisition." Rather than have the entire project site be acquired in one condemnation, there would be two or more phases--thus saving Forest City Ratner tens of millions of dollars.

On January 19, the last day possible in the four-month window to challenge the MGPP, six condemnees filed an Article 78 petition (below) in state Supreme Court alleging that the MGPP should have contained new findings of public benefits. "We haven't been served [the petition]," he said, decrying "last minute tactics."

As for the potential condemnees' claim that the court should hold off until the Columbia University eminent domain case is considered by the Court of Appeals, Webb was dismissive, citing a "two-judge plurality" in the lower court, a decision that conflicts with the Court of Appeals' decision in the Atlantic Yards case. (One other judge joined the result, but not the reasoning.)

Going through the motion

Webb, maintaining a general air of indignation, responded to several of the affirmative defenses raised by Brinckerhoff. No, he said, a complete copy of the petition need not be served on each respondent; the map need only concern the specific property at hand.

"That's the first and presumably best foot forward defense," he said dismissively.

As for the claim that the condemnation petition was filed too late, more than three years after the D&F, he noted that the clock can be stopped while challenges to eminent domain are considered in court.

What about the respondents' claim that the petition does not set forth "the public use, benefit or purpose for which the property is required"?

Webb said that the fourth and fifth paragraphs of the petition did exactly that, stating that the project "involves the renewal and redevelopment of a blighted area in the Atlantic Terminal section of Brooklyn through the clearance, replanning and reconstruction of the area and the construction thereon of a major mixed-use development." The project, pursuant to the MGPP, calls for a new arena, 16 towers, and a reconfigured rail yard.

And that project, he said, is "absolutely a public use," confirmed by court decisions.

The respondents argued that the D&F fails "because the public use, benefit or purpose therein has changed materially" from that described in December 2006.

Webb said no, that the "public use, benefit, or purpose has remained the same."

Brinckerhoff began taking vigorous notes.

Webb dismissed as an oversight the charge that the petition did not contain a list of the initial properties sought for condemnation.

As for the seeming contradiction between two parts of the petition, which state variously that respondents have 90 or 120 days to file a claim for damages, Webb called it an "inadvertent error," charging that "they're really grasping at straws."

The Leichter case

The respondents argued that if property is condemned in stages, it must be proposed as a staged acquisition at the public hearing stage.

Webb said a public hearing was not required, pointing to a 1989 Appellate Division case regarding the Times Square redevelopment known as Leichter v. New York State Urban Development Corporation. "Perhaps they overlooked it," he said, handing a copy to Brinckerhoff. "That decision directly addressed changes in a project from one stage."

There would be more discussion and disagreement later about Leichter.

Other issues

The respondents argue that condemnation, according to the 2009 MGPP, should not occur until there are guarantees that Forest City Ratner would promptly build the arena, but the bond document states that an additional $324.8 million is required to complete the arena, with no assurances that it would arrive.

Webb said the issue was irrelevant to the eminent domain proceeding.

As for allegations that the taking is barred by the doctrine of unclean hands or that it would unjustly enrich Bruce Ratner, he said, neither were appropriately raised, nor was there any support for the assertions. (Indeed, to stand up in any proceeding, significant evidence would have to be provided.)

"And that is the end of their affirmative defenses," Webb said.

The counterclaims

As for the counterclaims raised, "they're totally inappropriate," he said. "However, we have, in an exercise of caution, prepared a reply."

He did not, in oral argument, detail the reply to charges, for example, that the primary public benefit in the D&F was the elimination of blight, which likely would persist due to no development over most of the railyard.

"They have no semblance of an issue that can be raised here," he said, proceeding to read from the final paragraph of the Leichter case, which states, in full:
Our holding is further supported by a consideration of the practicalities surrounding a project of this scale. As appellants point out in their brief, during the time that this project has been delayed due, in no small part, to attendant litigation, "the real estate market in Midtown Manhattan dramatically changed." In addition, several developers withdrew from the project for financial and other reasons. It is clear to this court that if respondent is required to start the hearing process anew, conditions will very likely have changed again by the time the amended plan emerges from the approval process with the attendant legal challenges, thereby extending the review procedure ad infinitum. The hearing requirements set forth in the Eminent Domain Procedure Law and the Urban Development Corporation Act are designed to solicit community involvement in the planning process, not to serve as a vehicle by which public development can be effectively foreclosed.
Webb closed by asking the court to approve the condemnation order.

Brinckerhoff's turn

Brinckerhoff rose to speak, saying that Webb's criticisms fell into two categories: that the claims were not appropriately raised and "that this is all about delay and abuse." (Photo at right by Tracy Collins.)

"I take real umbrage at that," Brinckerhoff said, saying "this is about people's properties, homes, and businesses."

(Well, it's also about the larger issue of the project; DDDB hasn't raised money for lawsuits just to help a few people but to challenge the project as a whole.")

As for the issues being inappropriately raised, Brinckerhoff said they all arose since the D&F and that the ESDC, endorsed by courts, has repeatedly said that claims were limited to the record from 2006.

"If we can't raise it here, we can raise it nowhere," he said.

"There is no public purpose," he said, asserting that the promised benefits were illusory. (Surely they have been significantly diminished, but not vanished.)

"Did the Court of Appeals find there was a public purpose?" asked Gerges.

"They didn't make any finding," Brinckerhoff replied, noting that the court, like others, deferred to the "self-serving record" complied by the ESDC. "Almost everything in the finding has changed. We have to be able to raise this somewhere."

"The accusations that we are somehow gaming the system are really incredible," declared Brinckerhoff, noting that details about the timing and scope of the project were revealed only in September--after the MGPP was approved--and in master closing documents this week.

"We were told in 2006 that it would take ten years," he added, but now it could take 25 years, thus vitiating blight removal as the primary public purpose.

"The developer has carte blanche to ultimately not build a unit of affordable housing," he said in a stretch; there is an option, renewable for eight years, to not build affordable housing in Phase 1, thus potentially extending the process to 18 years, but it sure looks like at least one building would be built, thanks to an unusual combination of subsidies.

He said the project, approved at 7.9 million square feet, could be only about 4 million square feet--actually, the project could be less than 4.5 million square feet, plus an arena that would be 675,000 square feet, still significantly less than the project as approved.

On firmer ground, he said that the findings of economic benefit were no longer valid, because of increased public subsidies--and, I'd add, the extreme unlikelihood that the announced office tower would be built in a timely manner.

"All of these issues are new issues," he said insistently.

He addressed Webb's recital of the official public purpose. "It doesn't mention jobs. It doesn't mention blight," he said. Given the likelihood of extended interim surface parking, he asked, "Is that remediating blight or creating blight?"

While Webb said that Forest City Ratner has bought most of the property it needs, Brinckerhoff noted that his adversary failed to point out that the developer did so thanks to $131 million in city subsidies.

He suggested that, "at barest minimum," Gerges should grant a stay until the Court of Appeals rules on a motion for reargument in the eminent domain case, a ruling that wouldn't come until at least February 9.

Gerges asked if they'd asked the Court of Appeals for a stay.

Brinckerhoff said no, because he'd anticipated the decision would have been issued already.

He offered a caution about a potential messy scenario in which title is transferred, then required to be transferred back if the Court of Appeals or Justice Marcy Friedman rule against the ESDC.

Whose call?

Brinckerhoff moved on to his analogy regarding the court's presumed unwillingness to transfer title if no financing were available. "What has happened is the fundamental equivalent of the project being abandoned," he said.

Gerges pointed out that courts are supposed to defer to legislative agencies.

"There are limits to that deference," Brinckerhoff said, pointing to the unelected three ESDC board members who approved the plan, based on blight findings--including sidewalk cracks and underutilization--made by environmental consultant AKRF, which was slammed in the Columbia case.

"The reason we have courts is so they can rein in agencies when they go too far," he said.

"The only thing we know we're getting is an arena," he said, failing to acknowledge the one promised housing tower.

"And we know the arena is not a benefit to the public," he continued, pointing to New York City Independent Budget Office cost-benefit analysis that it would be a net loss to the city--a study to which the ESDC responded by pointing to its less rigorous benefit analysis, based significantly on taxes from that phantom office tower.

"We are entitled to raise these issues," Brinckerhoff said. "No court should stick its head in the sand. We'll go [to court] where we're told to go."

Valuation issue

The energy in the courtroom calmed a bit as attorney Joshua Rikon explained why his clients needed three years to establish valuation, a timetable parallel to that in the Court of Claims. There are a limited number of experts who can assess the valuation of trade fixtures, he said.

"One of my clients is under duress, because of complex financing terms and the tenant is no longer paying rent," Rikon said, referring to the owner of the building housing the privately-run Pacific Dean homeless shelter, now vacated.

Webb said that, once a vesting order is issued, advance payment--potentially a good portion of the final value--could be made within 30 days. Gerges pointed out that, to save on the costs of interest, it's wise for the government to get that advance payment out as quickly as possible.

Attorney Bruce Lederman, who represents the operator of the homeless shelter, said all families had been relocated. He asked for a year from vesting to file a fixture claim.

Street closings

Rikon said that the planned closing of streets would impede one client, Pack It Away Storage.

"We ask that streets remain open," he said.

Gerges said that, as long as residents and business were there, they'd need access. "I would presume that the city of New York has to get involved." (Indeed, access to even the closed streets would remain for those still there.)

Webb said that the request for closure would not be made until after vesting.

Pack It Away occupies a piece of the otherwise demolished Ward Bakery building; the September 2007 photo shows both the still-extant business and the now-demolished building.

Webb's response

Webb, somewhat exasperated, said that "I'm responding against my better judgment" to issues raised in Brinckerhoff's motion.

The 2009 MGPP and 2006 MGPP are "virtually identical," he said, including the same 17 buidlings, the same uses, the same eight acres of open space, the same subway entrance--not quite, given that a temporary canopy might last ten years--and a new Long Island Rail Road yard (which would not be the same size, actually).

"The principle change is that the project [site] will be acquired in phases," he said. He returned to the Leichter case, suggesting that the changes there were much more dramatic--not merely the sequential rather than simultaneous acquisition but also the expansion of use for a site originally designated as a wholesale facility mart to encompass a commercial office tower.

He offered evidence to back up his contention of project opponents' strategy of delay, in both cases reading passages from news articles that relied on paraphrasing.

A 5/31/09 New York Times article, attributed a strategy of delay to DDDB:
Daniel Goldstein, a leader and spokesman of Develop Don’t Destroy, said he did not believe Forest City would meet the deadline, not with his group’s appeal of the eminent domain decision and intention to file more lawsuits to delay the project until its death.
He also quoted a 5/19/09 Brooklyn Daily Eagle article in which delay seemed to be as much news analysis as attribution:
“We will oppose [that proceeding] because the pieces aren’t in place,” said DDDB Legal Director Candace Carponter. This will lead to perhaps more litigation and cause Ratner further delays. There will also need to be a determination made by the court as to what “just compensation” is and how much the residents who are being displaced will be paid for their land and buildings."
In closing

Webb told Gerges that the closing of Fifth Avenue was needed for ongoing sewer work.

And, in the kind of straining that he attributed to his adversary, he offered a not-so-convincing factoid. "I attended every public hearing," he said, indicating that "seventy-five percent of the people [there] were looking for jobs and wanted the project to proceed.... This record should be closed."

Gerges demurred, noting that, despite the years of litigation on the project, it was new before this court, including the most recent motions. He promised to proceed expeditiously.

A look at Leichter

The Leichter case seems to offers support both for Webb's position and for Brinckerhoff's position. It states, in part:
Appellants' position is based on a selective reading of the Eminent Domain Procedure Law. They argue that the law "contemplates that a Project will not be altered significantly once the condemning authority's determination and findings are published." They cite the provisions of EDPL 205 for the proposition that "after hearing and publication, the condemning authority shall have the right to make amendments or alterations in its proposed public project only in the event that further study of field conditions [warrants]' [emphasis supplied]." They conclude, "Unless the proposed amendment accommodates such field conditions', the amendment requires further review under the EDPL."

The provision of EDPL 205 which petitioners fail to cite is the sentence which states, "Such amendments or alterations shall not require further public hearings nor invalidate any acquisition for the proposed public project." It is clear, therefore, that this section governs only those amendments in the plan which may be instituted without further hearings. It does not govern the situation, in issue upon this appeal, where a plan is modified and a public hearing is held concerning the modification.
A public hearing was in fact held concerning the modifications in the 2009 MGPP. However, as the comment notes, it was not a public hearing for the purposes of the Eminent Domain Procedure Law.)

But the issues raised by Brinckerhoff--the potential for a significantly smaller and delayed project--did not surface until after the project was approved and were not in the 2009 MGPP. The potential for a delayed buildout was in a Technical Memorandum issued by the ESDC, but the penalties and incentives did not surface until after the master closing, in documents made public this week.

The new lawsuit

Art78PetitionEDPL

Friday, January 29, 2010

Motion to dismiss condemnation raises procedural issues and larger argument that no findings were made for significantly changed (and delayed) project

The condemnation hearing today in state Supreme Court could result in the Empire State Development Corporation (ESDC) taking title to property it needs in the Atlantic Yards footprint.

But attorneys for the property owners and leaseholders, in a case organized and funded by Develop Don't Destroy Brooklyn, are pressing both narrow and broad issues in their motion to dismiss the case. Most notably, they argue that the project has changed so much that the 2006 Determination & Findings (D&F) no longer stands.

It's an unusual challenge, breaking new ground, and thus hard to assess. Judges usually grant condemnation petitions. And judges usually hesitate to substitute their judgments for agencies like the ESDC

But AY has always been complicated, and the motion to dismiss (reproduced at bottom) makes some serious claims.

So, unless Justice Abraham Gerges decides that none of it is relevant, it could be a long hearing and/or a reason to allow much more time for further argument or an opportunity to consider dueling legal arguments.

The larger issue

The potential condemnees argue that the petition should be dismissed because the 2006 D&F is no longer valid, because the 2006 Modified General Project Plan (MGPP) was superseded by a 2009 Modified General Project Plan, "thus vitiating the 2006 D&F."

Another issue: that 2006 D&F and MGPP provided for the acquisition of all properties simultaneously, but now the 2009 MGPP provides for the acquisition of properties in two stages.

Another issue: "the factual underpinnings of the determination of public use, benefit and purpose set forth in the 2006 D&F have materially changed."

Also, they argue that condemnation, according to the 2009 MGPP, should not occur until there are guarantees that Forest City Ratner would promptly build the arena, but the bond document states that an additional $324.8 million is required to complete the arena, with no assurances that it would arrive.

The respondents, citing AYR, also ask to investigate "the revelations just this week that firmly establish that Petitioner has consistently misrepresented the timing of the Project."

The motion to dismiss states:
Given this development, and Petitioner’s steadfast resistance to allowing a court to consider the many changes to the Project over the course of more than three years – changes that have utterly eviscerated any legitimate claim that the Project will serve anything other than Ratner’s singular desire to increase his and his shareholder’s wealth – while turning a large swath of Brooklyn into a wasteland for decades, if not longer, this Court should grant Respondent’s leave to conduct discovery, pursuant to CPLR 408.
Narrower issues

The narrow issues involve procedural issues, such as the contention that the eminent domain case has not fully been resolved.

Though the Court of Appeals ruled in December against the eminent domain plaintiffs (who are technically the respondents in the condemnation case), they have filed a motion to reargue it and/or hold it abeyance in light of the appeal in the Columbia University eminent domain case, and that motion has not seen a ruling, which, at the earliest, could come February 9.

They have also asked for a stay because of pending cases challenging the 2009 Modified General Project Plan, which won't be resolved until the end of February, at least.

Another issue: the eminent domain petition does not state “the public use, benefit or purpose for which the property is required,” as required.

Another issue: the 2006 D&F attached to the Petition is incomplete, because the state "intentionally omitted the list of properties contained in the 2006 D&F in order to conceal the fact that the 2006 D&F was premised upon a single acquisition, which was recently changed to a staged acquisition." (This, of course, links to the larger issue.)

Another issue: the petition "does not contain true and complete copies of the proposed acquisition maps."

Another issue: the petition in different places is contradictory, saying that condemnees would have 120 days or 90 days to file a written claim for damages.

Atlantic Yards Motion to Dismiss Condemnation

Atlantic Yards Condemnation Answer

For AY photographer Collins, a not-so-enticing offer of a t-shirt

Photographer Tracy Collins, who has done yeoman work chronicling the physical state of the Atlantic Yards footprint and civic events related to Atlantic Yards, doesn't make much money for his efforts.

His work often gets used, without permission.

Sometimes commercial entities ask for permission but won't pay.

Other times they offer the smallest, and least enticing, of carrots. Read how he turned down a t-shirt from a Kansas City company putting together a proposal to construct the metal outer shell for the Barclays Center.

It is a testament to Collins' professionalism that, whatever his position on the project (and he's clearly an opponent) his work is such that metal companies in the Midwest might want to use it.

Times sinks toward irrelevance as it uses scarce Metro section space for Nets fluff

When I read this cutesy New York Times story yesterday headlined A Marketing Quandary: How Do You Sell a 4-40 Team? about a media event--a couple of Nets players coming to Brooklyn--I figured it would appear only online, in the CityRoom blog.

Surely they wouldn't put that fluff in the paper, not when there's real news about government accountability and Atlantic Yards, like the gap between the promised ten-year timetable and the more generous deadlines in the master closing documents.

But that 18-paragraph article appears in today's paper, headlined Straddling Two Arenas, Nets Woo Fans for Both.

Timetable issues

It contains the not-quite-inaccurate-but-imprecisely-generous statement that "the move is not expected to take place for at least another full season."

Had someone read the comment I posted early yesterday, they might have been reminded that a Forest City Ratner executive said the other night that the arena would take 28 months to build.

And construction has not yet begun.

Civic role?

The Times's willingness to publish promotional articles about the Nets--remember that puff piece about Devin Harris?--contrasts with its unwillingness to look carefully at the drastically revised (after being hyped) naming rights deal or the larger issues regarding the project.

The reporter on the latest piece is one A.G. Sulzberger, son of the publisher and a member of the family that controls the Times and made a deal with Forest City Ratner to build the Times Tower. (No, this article contains no disclosure of the business relationship.)

A reporter named Sulzberger should be the last one allowed to write about anything connected to Forest City Ratner. Still, another reporter given the dubious assignment likely would've turned in similar copy; the bad judgment started not with the reporter but whichever editor agreed this was worth the Times's time.

Thursday, January 28, 2010

As condemnation hearing approaches Friday, plaintiffs organized by DDDB file challenge, aiming to stop process of taking property

Develop Don't Destroy Brooklyn (DDDB) is inviting supporters to Come Out for the Condemnation Hearing Tomorrow, at which the Empire State Development Corporation (ESDC) will pursue what is usually a simple procedure: taking title to properties in a condemnation case.

Property owners and leaseholders organized by DDDB, as noted below, have filed a challenge to the ESDC's petition.

The hearing will be at 9:30 am before Judge Abraham Gerges in Kings County State Supreme Court, IAS Part 74, 320 Jay Street, Room 17.21, Brooklyn.

Complication and challenges

Though developer Forest City Ratner and others assume that title will pass tomorrow, paving the way for street closings and more, nothing with Atlantic Yards has been simple.

Indeed, the attorney representing some of those facing condemnation will not be there to argue about valuation--usually the main variable at issue--but about fundamentals.

Attorney Matthew Brinckerhoff last month said that "we will challenge the petition. It is defective in many respects."

DDDB statement

DDDB today issued a statement:
Develop Don't Destroy Brooklyn continues to offer its full support to the property owners and leaseholders in their ongoing legal effort to defend their homes and businesses against Forest City Ratner's ill-conceived, politically corrupt project. Today, their attorney, Matthew Brinckerhoff, has filed an answer challenging both the substance of the petition and the procedure by which the Empire State Development Corporation is attempting to seize title to their properties, which, unfortunately for Forest City, continue to stand in the way of its taxpayer-subsidized basketball arena and its thousands of parking spaces.

The respondents' answer points out, among many defects in the ESDC's papers, that the ESDC seeks to condemn this property to support a plan long ago abandoned by the developer in favor of a much-altered project that the state freely admits - but not in front of a judge - could take 25 years to build. The answer also demands dismissal of the proceeding because the ESDC has failed to set forth the public benefits of the project, although it's expressly required by the law to do so.

DDDB and the property owners and leaseholders continue to hold out faith that the judicial system will finally expose the gross, irreparable flaws in the Atlantic Yards project, and in the governmental abuse of the public trust, and will refuse to grant Forest City Ratner the private property that it covets.
Other cases

No other legal case specifically stops condemnation nor, should it go through, subsequent construction by the developer.

However, state Supreme Court Justice Marcy Friedman, who last week heard the challenge to the ESDC's Modified General Project Plan, refrained from ruling on a preliminary injunction to block site construction specifically because only ongoing utility work and demolition work was planned. Her ruling on the case is expected in about two months.

Jeffries: "less than cautiously optimistic" on AY, waiting for Paterson response, says ESDC hasn't explained why governance structure isn't needed

At his third annual State of the District address, held last night in the Pratt Institute's Higgins Hall, 57th District Assemblyman Hakeem Jeffries spoke to a supportive crowd about three main issues, none of them Atlantic Yards, though he did answer questions about the project afterward. (See video below.)

His bottom line on AY: after initiating dialogue with the Empire State Development Corporation (ESDC), he's "less than cautiously optimistic" about progress on most issues, including the use of eminent domain and the commitment to build affordable housing expeditiously. (He mentioned a letter to Governor David Paterson that he hadn't released when it was sent in December. It is reproduced at bottom.)

Nor has the ESDC convinced him why Atlantic Yards, unlike such other large projects as Queens West or Brooklyn Bridge Park, does not deserve a separate governance structure to provide oversight over the long term. He was most animated in his frustration over that issue.

Jeffries, unlike other local legislators (City Council Member Letitia James, Assemblyman Jim Brennan, Assemblywoman Joan Millman, and state Senator Velmanette Montgomery), has not gone to court to challenge decisions by the ESDC and the Metropolitan Transportation Authority. He's said that doing so would compromise his advocacy.

Thus he walks a careful line: expressing opposition to eminent domain but not standing with the main groups fighting eminent domain for the project; hoping to ensure that, if the project goes forward, there are jobs for community residents and sufficient affordable housing; and hoping to ensure that, if the project goes forward, there's a credible governance structure.

At the address

Jeffries, in his 25-minute State of the District address, focused most on Project Reclaim, his effort to nudge the state and banks to transform failed market-rate condominiums into affordable housing.

He also talked about the need to ensure that recipients of aid from the federal Housing and Urban Development department, under Section 3, provide job training, jobs, and contracts for housing project residents.

And, citing the still-unresolved case of Shem Walker, an unarmed black man who was shot and killed last July 10 on the steps of his house by a man he apparently mistook for a drug dealer but was an undercover police officer, Jeffries reminded the audience of the need for the police to offer communities mutual respect.

A curious intro

Jeffries was introduced in a promotional video report hosted by a faux-anchorwoman, apparently a production of the Assembly's public relations shop the uncredited Elizabeth Koenig, television and radio analyst on the Assembly channel in Albany.

It included excerpts from three videos: Jeffries testifying in July at an ESDC hearing on Atlantic Yards (originally on AYR, also repurposed on his YouTube channel); Jeffries speaking during a legislative debate about the need for tenant protections; and Jeffries talking about the Walker case before the National Action Network.

Interestingly enough, the excerpt from the ESDC hearing was referred to as testimony about development, but the term "Atlantic Yards" was not mentioned. (Albany ignorance or deliberate obfuscation?)

And the excerpt, in which Jeffries likened the hearing process to a circus, focused not on his criticism of the project but on his attention to his constituents: "And then the circus leaves... but who's left... people desperate for employment opportunities... people gentrified and displaced... who's left when the circus leaves town?"

The Q&A, on video

After the State of the District address, Jeffries met well-wishers and answered questions from four reporters; I got him to step aside to shoot a few minutes of video.



Relationship with FCR

I asked Jeffries if he'd been in contact with Forest City Ratner or the state about the current status of the project.

"I have not had a formal conversation with the developer in months," Jeffries responded. "To tell you the truth, I can't tell you the last time we sat down at the negotiating table."

It's not like there's much to negotiate. However, Jeffries' 2006 achievement--getting the developer to commit to 200 affordable for-sale units onsite--was never formalized in the General Project Plans approved in 2006 and 2009, which includes 2250 affordable rentals.

A commitment to build 600 such for-sale units on or offsite is in the final development agreement, but the enforceability is vague. (The developer agreed with ACORN in the Housing Memorandum of Understanding to build 600 to 1000 such units.)

Dialogue with the state

Jeffries continued: "I have, however, initiated dialogue with the ESDC chair as well as with the governor's office to try to get some of the unresolved issues resolved in a manner that satisfactory for our community."

"I'm less than cautiously optimistic that we can make some substantial progress," he said, "but I'm still hopeful, particularly in areas related to governance of the project, moving forward, and getting the structure in place that gives our communities the same protection as the communities where the Brooklyn Bridge Park is being developed, Queens West, as well as Moynihan Station."

Eminent domain

He said: "I've also made clear to them in a letter that I think that eminent domain should not be used, reiterated that concern, and I'm hopeful that the governor would recognize the passions around this issue and the great uncertainty connected to the Atlantic Yards project that I believe still remains so the situation here doesn't turn into the situation in New London."

After the Court of Appeals decision in November, he said: "The power of eminent domain is extraordinary and should only be authorized in limited circumstances where, unlike in this case, there is a clear and robust public benefit. The use of eminent domain to benefit a private developer to build a basketball arena for a team owned by a foreign billionaire is an abuse of this extraordinary power, and I hope that Governor Paterson will choose not to exercise it."

However, a scenario exactly parallel to that in New London, site of the property at issue in the Supreme Court's controversial 2005 Kelo v. New London decision, is unlikely, since Forest City Ratner and affiliates do plan to build an arena and at least one tower with affordable housing, even if it has no low-income units.

I pointed out that the ESDC plans to go to court on Friday, January 29, in pursuit of condemnation (which property owners and leaseholders will try to resist).

Jeffries responded: "I said we're less than cautiously optimistic and unfortunately in this area I believe that ESDC and the governor have not been sensitive to the concerns that have been voiced by the community around this eminent domain issue and several other issues, and I can only be hopeful that there will be a last minute change of heart."

There's no sign of that.

Gubernatorial review

I asked Jeffries what he'd asked of Paterson.

"The Governor promised to conduct a review of the finances of the project," Jeffries began.

More precisely, Paterson in early December said he'd met with with "a committee of advocates who are opposed to the Atlantic Yards decision... And I have promised them an objective and fair hearing on the issue."

The Governor seemed to be focusing on the decision by the Court of Appeals in the Atlantic Yards eminent domain case rather than the project as a whole, but, given that he acknowledged that the decision couldn't be reversed, left open the possibility of a broader look, even though, in the words of Council Member Letitia James, Paterson has indicated to staffers that "he can't rescind the state's commitment."

Jeffries continued: "In a letter that I sent to him in early December, I said he should halt movement on this project until he is able to convince us that a comprehensive review has been undertaken. Because it makes no sense to have the project move forward on a parallel track with his review, because it essentially makes the review worthless."

I asked if he'd received any response.

"There's been no response to me, with respect to the precise nature of where the review is, other for them to say that it's ongoing," Jeffries said.

Well, the documentation in the master closing sets up damages said to be negotiated at arm's length, which seems to have precluded review.

Back to governance

I asked Jeffries if the governance structure he discussed is the one that groups in BrooklynSpeaks have advocated.

"There's the governance structure that the BrooklynSpeaks folks talked about, which turned into a bill that Velmanette Montgomery and I introduced last session and will reintroduce this session," he said, "but there's also the precedent that has been set by the Local Development Corporation subsidiary context, in projects like Brooklyn Bridge Park, Queens West and Moynihan Station, and ESDC has never given me a good answer as to why our community is treated differently than these other communities, never given me a good answer."

Timetable

I pointed out that, while the state and Forest City Ratner promise to build the project in ten years, documentation provides much looser deadlines.

"I made the point to ESDC that I'm not convinced that the developer will commit to doing this project in a manner that builds the affordable housing to deal with the crisis that we currently are facing right now, or even commit to building the entire thing in the time frame set forth in the four corners of the agreement," Jeffries said. "They have assured me that that agreement will penalize them and obligate them to do it within the time frame that has been set forth. I'm not necessarily convinced right now."

Maybe he being diplomatic or maybe he hadn't looked that carefully, so I asked about the penalties--which, for example (though I didn't mention it), kick in for the third building only after about a decade.

"That's precisely my point," he responded.

The letter to Paterson

December 21, 2009
Hon. David Paterson
Governor
The State of New York
State Capitol
Albany, NY 12224

Dear Governor Paterson:

As you know, I met on December 5 with Larry Schwartz, Jay Walder of the MTA and Dennis Mullen of ESDC regarding the proposed Atlantic Yards development in the Prospect Heights neighborhood I represent. It is my understanding that a few days prior to the meeting, you had the opportunity to meet with other community leaders and residents who share many of my concerns about the project, particularly the utility of continuing to expend substantial state resources on an initiative that may not yield the promised public benefits.

Given these concerns, many in the community have been heartened to learn that you have committed to an objective review of the project’s finances. I respectfully urge you to proceed expeditiously with this review and ask that you restrain the State’s public authorities from moving forward with any further actions related to the construction of the arena until the review has been completed. Otherwise, the independent review will be inconsequential.

Specifically, I request that you delay execution of the agreement between the MTA and Forest City Ratner for the rights to build over the Vanderbilt Yards, and direct the ESDC not to issue bond financing by the Brooklyn Arena LDC. The ESDC should also be prohibited from the exercise of eminent domain to condemn property required for the arena until the review of the project has been completed. Indeed, as we recently learned from the situation in New London, Connecticut, prudence dictates that the extraordinary and irreversible power of eminent domain should be exercised with an abundance of caution.

Thank you for your leadership and consideration.

Sincerely,

_________________________________________________
Hon. Hakeem Jeffries, New York State Assembly, 57th District

On Fox in November

I and others missed this video, which appears on Jeffries' YouTube channel, but he joined attorneys Matthew Brinckerhoff and Rebecca Rose Woodland in discussing the Court of Appeals decision in Brooklyn on the Fox Business Network on Tuesday, November 24th.



The segment began with footprint resident and plaintiff David Sheets saying that the courts should know better than to say the decision is a legislative function.

Given Fox's sympathy to eminent domain critics, the segment was titled "Russian Oligarch and Developer Win Ruling To Take NY Homes," even though Mikhail Prokhorov has not been part of the case and the official defendant was the ESDC, not Forest City Ratner.

Woodland pointed out that, according to the decision, the beneficiary is not merely the developer but the public, because of tax revenues and public uses.

Brinckerhoff responded that the lesson of Kelo is that doesn't come true.

Woodland said, "I don't know that Ratner's going to give up." She suggested that "they're going to build some residential and office towers." (Well, more likely an arena and at least one residential tower.)

Jeffries joins in

Jeffries joined the segment, on the phone: "Eminent domain is an extraordinary government power and it should only be used in limited circumstances... a clear public benefit or an absolute public use."

He said that the record with sports arenas is that "it's just not clear that the eminent domain benefits that some may claim will result."

No appeal, but argument in condemnation case

Brinckerhoff, responding to a question from the moderator, said the case could not be appealed to the U.S. Supreme Court, because a similar case had already been attempted in federal court, but "we will defend the actual taking."

"The court said it was ruling based on the record as it existed three years ago," Brinckerhoff said, but the prospects for the project are very different now, with the arena, according to the New York City Independent Budget Office, seen as a net money loser for city and "all the other properties... contingent on there being a market... all we know is we're getting an arena and 12-14 acres of parking lots."

Well, at least one tower is likely. But we'll have to see that argument in court tomorrow.

Wednesday, January 27, 2010

Despite promise of ten-year AY buildout, ESDC deadlines allow 12 years for Phase 1, 15 years to start platform, 25 years for full project

Copies of documents have been added at bottom.

So, what kind of leverage does the Empire State Development Corporation (ESDC) have to get the Atlantic Yards project completed in a decade, as promised in the 2009 Modified General Project Plan and defended in a court hearing last week and in legal documents?

Not much.

The developer faces generous deadlines before damages--hardly painful--kick in, and in several cases the deadlines can be extended. Among the deadlines:
  • six years to build the arena
  • three or four years to start construction of the first tower
  • five or six years to start construction of the second tower
  • ten years to start construction of the third tower
  • 12 years to build Phase 1 (which can be much smaller than officially promised)
  • 15 years to start construction of the platform over the railyard
  • 25 years to finish the project (which can be much smaller than officially promised)
The damages Forest City Ratner faces in most cases--less than $10 million for an arena that's up to three years late, $5 million for each of three buildings if they're late--don't represent a lot of money, especially given that the developer just got a cash flow boost of $31 million to buy land.

[Update May 28: Note that, in legal papers, FCR and the ESDC point to clauses in the Development Agreement that point to daily fines for delays of $1000 or $10,000--more likely the former--and say those are not trumped by larger penalties for delays in three towers. An opposing lawyer disagrees. Also, the differences in fines set up contrasts: $3.65 million (at $10,000/day) vs. $365,000 (at $1,000/day) over one year; $36.5 million vs. $3.65 million over ten years; and $54.75 million vs. $5.475 million for a 15-year delay.]

And while the developer is still supposed to build the promised 2250 units of affordable housing, an Affordable Housing Subsidy Unavailability can be claimed (added: for up to eight one-year periods), thus continuing to stretch the deadlines.

Note that the timetable clock does not start until property is delivered via eminent domain.

The documents support the wide belief, even among project proponents and state officials, that the project could not be built at the promised timetable. Last April, Marisa Lago, then-CEO of the ESDC, said that the project would take "decades."

(Update 5/10/10: Also see discussion of court papers that argue that delay beyond ten years leads to finds of $10,000 a day or $1,000 a day.)

Promise in court case

In court papers, ESDC attorneys sneered at the petitioners challenging the official timetable as unrealistic, writing:
What they apparently fail to apprehend in painting their dismal picture of the future course of the Project is that there will be an entirely separate set of agreements between FCRC and ESDC, and that under those agreements FCRC will be contractually committed to implementing the 2009 MGPP. (Fact Statement 39.) Among other things, FCRC will be required to use "commercially reasonable efforts" to complete the Arena and certain Phase 1 buildings in accordance with a specified schedule, and to bring the Project to completion by 2019, with sanctions imposed for any failure to do so.
(Emphasis added)

Now those separate agreements have surfaced, as part of the Atlantic Yards master closing documents, first made available Monday.

Despite claims in the development agreement that the damages were negotiated at arm's length, there's reason to believe that the relationship between the developer and the ESDC is rather more cozy, especially given the relatively light damages.

The documents are maddeningly complex, written in legalese with Rube Goldberg-ian formulas, and multiple documents address some of the same issues. So it's certainly possible that some of my analysis is flawed. However, given the absence of any official statement of damages and sanctions, consider this a good first pass.

And the documents in the master closing clearly contradict the 2009 Modified General Project Plan approved by the ESDC in September 2009, which states:
The build-out of the Project is likely to occur in two phases, with the Project elements on the Phase I Site and the Upgraded Yard (collectively, "Phase I") anticipated to be completed by 2014 and the Project elements on the Phase II Site (collectively, "Phase II") anticipated to be completed by 2019.
The Effective Date

The Effective Date means the date on which all litigation has been concluded to permit financing and construction to proceed, as originally stated.

There's another requirement: it's also the earlier of two dates: when ESDC delivers vacant possession of the Phase 1 Properties to the developer, or the date on which the developer tells the ESDC that it is waiving the requirement that ESDC deliver possession of such properties.

In other words, the Effective Date hasn't yet arrived, though it may come soon. A hearing on condemnation is scheduled for January 29, but some property owners and renters are expected to challenge the taking.

Damages payable for arena delays

So, what are the damages payable to the state? They're much greater if the arena doesn't get started, but they're quite light if the arena doesn't open within six years.

If the project Effective Date does not occur and the developer fails to pursue litigation with due diligence, or if the Effective Date does not occur prior to 9/12/17, or if the project's abandoned, the developer must pay $100 million. (It's not clear if this is in addition to repayment of the $100 million advanced by the state.)

If arena construction doesn’t start before Outside Arena Commencement Date, which is one year after the Effective Date, Brooklyn Arena LLC (BALLC) would pay $75 million to the state. However, this deadline can be extended for Unavoidable Delay, the failure to deliver property via eminent domain, and the failure to "obtain financing... on then commercially reasonable terms," though this date can't be extended beyond the fifth anniversary of the Effective Date.

If the arena is not substantially completed on time, meaning the sixth anniversary of the Effective Date (subject to Unavoidable Delay), BALLC would either have to pay the $75 million (if construction didn't begin on time) or a schedule of liquidated damages exactly the same as those payable to the city, indicated below.

Damages for late arena: less than $10M by 2019

The liquidated damages begin as of that Arena Outside Date, six years after the Effective Date. (Note that the graphic below references the city, but the same formula applies to state damages.)

An Arena Multiplier would increase annually: 2%, 3%, 4%, 6%, 7%, 8%, 16%, 17%, 18%, and 19%. This sum would be applied to damages set forth in Column B of Schedule A.

The Year is calculated from the date city and state funding began: 2007 (I believe) for the city and 2008 for the state.

So, if arena construction were to begin in 2010 and not be completed in 2016, the damages would start in 2016 at 2% of a sum in Column B, applied to $115 million, the figure regarding Years 7-9, the elapsed time since city and state funding begins.

Bottom line: 2% of $115 million = $2.3 million.

Apply that sum to both city and state damages, that's $4.6 million for an arena that doesn't open by 2016.

Delay the arena another year, and the damages are 3% of that $115 million, or $3.45 million to both city and state, or $7.9 million.

Add another year, and the damages are 4% of that $115 million, or $4.6 million to both city and state, or $9.2 million total for an arena that opens in 2019.

Phase 1 timing and size

The developer has 12 years to build 1.5 million square feet of Phase 1, excluding the arena, "subject to Unavoidable Delay" as well as "Affordable Housing Subsidy Unavailability" and "Market Financing Availability."

That 1.5 million square feet in Phase 1 was set as a minimum in the City Funding Agreement signed in September 2007 which surfaced in April 2008. It represents likely three towers, or maybe four, rather than the five in the project design.

Conspicuously omitted is an office tower for which there's no market, though the second and third buildings are described as "flexible," which presumably allows for office space.

It is some 44% smaller than the 2.69 million square feet “expected” in the General Project Plan approved by the ESDC in December 2006. The 2009 Modified General Project Plan (MGPP) approved by the ESDC in September 2009 includes similar language, though both have wiggle room, mentioning "up to 2.1 million gsf of residential use." All the project benefits, of course, have been premised on the full buildout.

According to the latter MGPP, Phase I would mix rental and condominium housing, with approximately 1,005 to 2,110 residential units, with 30% of the units on the Arena Block (but no less than 300 units) affordable.

Damages for first three towers

Construction of the first tower must occur within three years of the Project Effective Date, "except in the event of a City Excuse," which is defined as the denial of housing subsidies and which would add one year. That starting date--three or four years after delivery of Phase 1 property by eminent domain--is known as the First Commencement Deadline.

The affordable housing in the first tower (but not the others) would have to conform to one of six possible scenarios--which include several scenarios with no low-income units.

If the building has not begun on time--subject of course to the major caveats noted above--the developer would have to pay the "3-4 Year Liquidated Damages" by the First Commencement Deadline.

What's the payment? $5 million, paid monthly over a year, with the amount $100,000 in each of the first two months and escalating to $1 million in each of the last two months.

The second tower would have to begin construction no later than the second anniversary of the First Commencement Deadline--or five to six years after property is delivered via eminent domain. That new date would be known as the Second Commencement Deadline. The same $5 million penalty would apply.

As for the third tower, it would have to begin construction no later than the second anniversary of the Second Commencement Deadline, or seven to eight years after property is delivered via eminent domain and the tenth anniversary of the Effective Date. The same $5 million penalty would apply.

(The Second Commencement Deadline would seem to come sooner than ten years, but if it is delayed because of unavailability of subsidies, presumably the tenth anniversary of the Effective Date would come first.)

Deadline extensions

The Affordable Housing Subsidy Unavailability lasts for a year, and must be substantiated again one year later.

To the extent that the developer substantiates. a Market Financing Unavailability, the deadline could be extended on a month-to-month basis as long as the developer substantiates the continuation of a Market Financing Unavailability.

Urban Room delay

The Urban Room would have to be completed by the end of Phase 1, or within 12 years. If not, the developer would face a penalty of at least $10 million. (It's possible that the penalty is double that sum, but the contract language is confusing. I'll look into it at a later date.)

Consider that the Urban Room would be attached to an office building for which there is no current market, or a reasonably foreseeable one. But a $10 million or even $20 million penalty would be relatively modest, again compared to the $31 million recently advanced to the developer for land purchases.

Phase 2 Construction

There's no state penalty for delays in Phase 2 other than the possibility of property being taken away from the developer. There are no city damages for a delay in Phase 2--perhaps because most city funding is aimed at arena land and infrastructure.

The developer or affiliates must complete at least 2,970,000 square feet of development for Phase 2, including a school (if applicable), a day care center, no less than eight acres of open space, and the Platform, within 25 years following the Project Effective Date, subject to Unavoidable Delays.

And what are such delays? The continuation of an Affordable Housing Subsidy Unavailability.

Note that the total square footage of Phase 1 and Phase 2--less than 4.5 million square feet, plus an arena that would be 675,000 square feet--would be far less than the 7.9 million square feet initially approved and, as noted, the basis for analysis of benefits such as tax revenues and jobs.

Termination option

If the project is not completed within 25 years, Section 17.2(a)(vi) states:
ESDC or its designee shall have the right to terminate (the "Termination Option") the applicable Project Lease as to any portion of the Project Site which construction of Improvements has not commenced in accordance with this Agreement and the Applicable Project Lease as of the date the Terminal Option Notice is given by ESDC (the "Unimproved Parcels"). The Termination Option will be exercised by ESDC in according with Section 17.5.
And what's Section 17.5?
Termination Option
(a) If ESDC elects to exercise the Termination Option, ESDC may deliver a revocable written notice (“Termination Option Notice”) to AYDC, Interim Developer and each Tenant under a Project Lease, as applicable, within two (2) years following the Event of Default giving rise to the Termination Option. ESDC may exercise the Termination Option with respect to all or a portion of the Unimproved Parcels, and any partial exercise shall not waive or otherwise invalidate ESDC’s right to exercise the Termination Option with respect to any remaining Unimproved Parcels. In the event ESDC does not deliver a Termination Option Notice with respect to all or any Unimproved Parcels within such two (2) year period, the term of the Project lease demising such Unimproved Parcels shall be extended for an additional five (5) years. Within one (1) year following the expiration of such five (5) year period, ESDC shall again have the right to deliver a Termination Option Notice with respect to any then Unimproved Parcels. The preceding cycle of five (5) year extension terms of Project Leases and one (1) year periods for ESDC to deliver a Termination Option notice shall continue until the earlier of (i) the commencement of Development Work on all Unimproved Parcels pursuant and subject to the terms and conditions of one or more Development leases or (ii) the occurrence of a Conveyance Date with respect to any remaining Unimproved Parcels.

(b) The closing of the Termination Option shall occur on the date fixed in the Termination Option Notice (but in no event sooner than sixty (60) days following the date of the Termination Option Notice nor later than six (6) months days [sic] following such date) (the "Conveyance Date"). The Conveyance Price shall be paid (i) first to any Recognized Mortgagee under the applicable Project Lease, in an amount equal to the indebtedness secured by the Recognized Mortgage of such Recognized Mortgagee and (ii) the balance, if any, to AYDC, Interim Developer or the Tenant under the applicable Project Lease or the designee, as applicable, by wire transfer of immediately available funds on the Conveyance Date. All closing costs and expenses of such transaction (other than the Conveyance Price) shall be borne exclusively by AYDC or Interim Developer....
Platform construction

The developer must begin construction of the platform over the railyard no later than the 15th anniversary of the project Effective Date, "subject to Unavoidable Delays," which include infrastructure failures, inability to procure labor, equipment, materials or supplies (but not customary delays), which are not attributable to improper acts or omissions by the developer--or any litigation.

Unavoidable Delay does not include failure to obtain financing or mortgages--except in the case of clauses relating to housing, where it does include failure to obtain financing.

However, no penalty is assigned for the delay--or, at least, none that I could find.

Phase 1 late: city damages

In terms of city damages for a Phase 1 delayed more than 12 years, the annual Phase 1 Base Multiplier--2% for the first year, then 3%, 4%, 6%, 7%, 8%, 16%, 17%, 18%, and 19%--applies to Column C at right.

That's a much smaller penalty than for a delayed arena.

Remember, the Year calculation applies to when city funding begins, so the penalty for a late Phase 1 likely would be applied to the sum in Column C associated with Years 13-15. However, that $55 million would be modified by not one but two percentages.

According to the Rube Goldberg-ian formula, the one year delay--to which 2% is attributed--would then be modified by a percentage associated with the total amount of square footage less than the required 1.5 million square feet.

So, in the example at left, 1.1 million square feet has been completed by Year 14, and the completion multiplier is 53.3%, which is calculated by the excess of 1,100,000 divided by 750,000. As noted, the first year penalty would be under $600,000.

The developer would have to deliver a Phase 1 LOC (Letter of Credit) equal to three years of Liquidated Damages. That adds up to a little more than $2.6 million in penalties that would kick in after three years of penalties. That date would be 15 years after Phase 1 construction began and would be Year 16 (at least) after city funding began.

City penalties for abandonment

And what if Forest City Ratner abandons the project? Well, the City Funding Agreement states that, if the project is abandoned or terminated before the Arena Outside Date, the ESDC would repay the Disbursements, up to the $131 million total, to NYCEDC, plus Liquidated Damages.

Depending on the date of abandonment, the Liquidated Damages could be modest. For example, if the project were abandoned within six years of the first city disbursement, the Liquidated damages would be $29 million. That sum would jump to $54 million if the abandonment came seven to nine years after the first disbursement.

If the project is abandoned: the Call Date

The amended State Funding Agreement now sets up a Call Date, whichever is earlier: September 12, 2017, or the date Developer abandons the Project, or 30 days prior to the state expiration of the Condemnation Letter of Credit (LOC), which covers "the cost of acquiring a portion of the Project Site."

Then, if ESDC has not received an order vesting title in the Phase I properties, it can draw the State Repayment Amount from the Condemnation LOC, and if ESDC has received an order vesting title in the Phase I Properties as of the Call Date, then Developer shall promptly pay to ESDC the State Repayment Amount.

State Repayment Amount

What's the State Repayment Amount? It's equal to $25 million less the difference between $100 million and the sum of (X) Eligible State Project Costs plus (Y) Approved Soft Costs actually incurred by developer up to an aggregate of $15 million, in each case as of the Call Date.

So if Eligible State Project costs and Approved Soft Costs add up to $90 million, that sum would be subtracted from $100 million, leaving $10 million to thus be subtracted from $25 million. And the developer would owe just $15 million.

City Damage Amount

A similar sum might be owed to the ESDC as the City Damage Amount.

If the Effective Date has not occurred on or prior to the Call Date and if ESDC has not received an order vesting title in the Phase 1 properties by that time, ESDC shall be entitled to draw up to $15 million (the City Damage Amount) from the Condemnation LOC.

If ESDC has received an order vesting title in the Phase 1 properties, on or prior to the Call Date, then Developer shall, after notice and demand therefore by ESDC, pay the City Damage Amount to ESDC.

The City Damage Amount would not be more than $15 million; it would be equal to the difference between $100 million and the aggregate of Certified Costs (as defined in the City Funding Agreement) plus Total Project Costs.

Atlantic Yards Development Agreement Section 8

Atlantic Yards Development Agreement Section 17.1

Atlantic Yards Development Agreement 17.2