Thursday, April 14, 2011

ESDC CEO Adams, asked about AY at third Senate Committee, calls arena the project's "core," fully supports project, expresses optimism about buildout

This updates and corrects my coverage of last week's set of state Senate hearings on the nomination of Kenneth Adams as President and CEO of the Empire State Development Corporation (ESDC).

I mentioned two committee hearings on 4/5/11, but missed another, that involving the Corporations, Authorities and Commissions Committee. And at that hearing, unlike the other two, Adams was asked briefly about Atlantic Yards.

Adams expressed optimism that the delayed project would proceed, spoke vaguely about ensuring community voices would be heard, and, when asked about eminent domain, changed the subject to explain how, with incentives for projects smaller than Atlantic Yards, the state does better to ensure that promised results be delivered before benefits are paid out.

He described Atlantic Yards as a project that his agency fully supports. No one challenged him on how such support, manifested in contracts like the Development Agreement that give the developer a long leash, can be harmonized with incentives that ensure promised results are delivered.

Questions from Perkins

At 8:58, state Senator Bill Perkins (D-Harlem), who, when the Democrats controlled the Senate held a hearing on Atlantic Yards and another on eminent domain reform, brought up both issues.

He pointed to a recent Wall Street Journal article on developer Forest City Ratner and Atlantic Yards, "and how that project, which was heralded as a great opportunity for some important development, very controversial... doesn't seem to be quite getting there."

"So I'm wondering, what is your take on that situation--how do we avoid that kind of debacle, that it's ultimately turned out to be, at least as it's been reported in recent news articles?" Perkins asked.



Adams: arena, "core," moving forward

"I think with respect to Atlantic Yards, I'm new to this obviously," Adams responded. "But it is my sense that the core of the project, the arena, is certainly moving forward. I actually live near the project site and I've seen the construction. So I think the essence of that project--which, this agency, we fully support--is still moving forward. That's not to say it doesn't have its challenges, as you mention."

Given that the project benefits (tax revenue, open space, blight removal, new railyard) have been premised on much more than the arena, it's dubious to refer to the Barclays Center as the "core" of the project, and Perkins later called him on it.

Listening to the community

Adams then turned pensive. "Y'know, one thing that I think could make a difference in projects of that scale is a renewed commitment, which I'm certainly prepared to make, to really listening to the communities affected by large-scale projects. Atlantic Yards is a $6 billion project--it's a very, very big project... as you well know, Senator."

Either Adams is a little fuzzy on the detail or he's privy to details on cost inflation; officially, Atlantic Yards is a $4.9 billion project.

"And I know," Adams added, "because I just coincidentally live within walking district of the project site, I know many of the leaders of community groups that feel... that they haven't always been heard."

"I wasn't engaged--I wasn't involved, I don't know if it's right or wrong"--presumably he was referring to the criticism--"but the point is, as an agency, as an interface between a private sector developer and a major initiative, in this case Downtown Brooklyn but we have other projects like this across the state, it's our job to make sure that the voices of the community are heard and that there's appropriate engagement and discussion of all the aspects of the project."

That's palliative talk, but Adams didn't get to the issue: does the ESDC support any new governance structure to oversee the project and institutionalize community voices?

Beyond the arena

Perkins, rather than follow up on governance, cordially corrected the nominee. "The heart of the project may have been the arena, but the scale of the project was so substantial that the arena, relatively speaking, was insignificant," he said.

"So I'm concerned because--can we accept that as a success if the arena goes up and the rest of the project does not materialize?" asked Perkins, who noted that people were displaced and forced to sell their property, and "promises were made for employment."

That, he said, has left some people "very cynical about the project, because it appears that the only promise to be kept will be that of the basketball arena. The affordable housing, the employment opportunities, the other economic opportunities for small businesses--those seem to be sort of gone by the wayside."

Adams: "eternal optimist"

Adams replied, "I just want to quickly respond that--and, as my colleagues get to know me, they know I'm the eternal optimist--so I believe there are aspects of Atlantic Yards that will be fully built out beyond the arena. In fact, it's been reported to me that the first of the housing--the affordable housing projects--will break ground later this year."

Note that the first affordable housing tower has steadily been postponed, so the report to Adams should be taken with some skepticism. He was not asked about the developer's proposal--risky and innovative--to save money via modular construction at an untested height.

ESDC: "very supportive"

"Undoubtedly, there are aspects, because of the slowdown in the economy and the national recession, big projects like this sometimes get slowed down," Adams continued, "but again, the optimist in me says, over time the goals of the project will be fulfilled. It will probably take longer than what was originally proposed, but the elements are there, we're going to be very supportive."

What does "very supportive" mean? If the state relaxes deadlines, offers more subsidies, or encourages dubious efforts like raising money via the EB-5 program, that suggests the ESDC aims to ensure Forest City Ratner's bottom line ahead of protecting the public trust.

"I'll be optimistic and say to you that I think most if not all of that plan will eventually be built out, it just may take longer, but the communities affected should still get the benefits that they've been promised," Adams said.

But the pace of benefits affects their value; for example, 2250 subsidized housing units over ten years is very different than the same number delivered over 20 or 30 years.

Eminent domain

Perkins moved on to a related issue, "It's about 10 years since the Kelo case"--he chuckled--"and it turns out that community went through the eminent domain process and property was taken and, guess what, nothing has been done."

(The Supreme Court's Kelo v. New London decision came in 2005, but the case began years earlier.)

Noting that Adams is in a position to restore community confidence, Perkins asked how he could "assure folks... that the kind of Kelo situation, ten years later, the kind of situation we're seeing at Atlantic Yards" would be dealt with.

Adams responded, "I think the short answer would be that we have to be very careful when we deploy the special tools that we have as an agency, the tools that you're mentioning, and deploy them in ways where we are guaranteed that, as they are used, the results that have been promised will be fulfilled."

Guaranteed results?

Adams then pivoted to address a related but different subject: "As an example, most of our new--and not for the bigger projects like Atlantic Yards, but things like our Excelsior [jobs] program and other tax credits and benefits--almost all of what we do in terms of economic development tools, require that the company or organization receiving those meet certain milestones in their project before a check is cut. Rarely do we actually do something upfront. So the more we can put those controls in place in the projects that we're supporting, the more we guarantee that the promised result is delivered before the benefit is paid out. And more and more, our programs are structured that way, to protect taxpayers, frankly, and to protect affected communities."

Such controls, of course, were not attached to the use of eminent domain for Atlantic Yards. And, as written in the Development Agreement, the penalties for delays and non-performance are relatively gentle, and kick in late.

Perkins thanked Adams and said he was looking forward to working with him, especially on reform of eminent domain.

"I think that is a very sensitive area that undermines the credibility of government," Perkins said, as people believe such tools don't benefit them but rather special interests.

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