Thursday, January 12, 2012

In new briefs, ESDC and Forest City ask appeals court to overturn decision ordering new environmental review for Phase 2 of Atlantic Yards

The battle over the last remaining Atlantic Yards lawsuit continues in court, with new briefs from the Empire State Development Corporation (ESDC) and developer Forest City Ratner.

The state agency, decrying an "unprecedented judicial usurpation of agency discretion," slams state Supreme Court Justice Marcy Friedman for imposing what it says are her views on how to analyze the potential impact of an extended project buildout lasting 25 years, rather than the officially announced ten years.

Similarly, Forest City denounces "an unprecedented expansion and distortion of SEQRA [State Environmental Quality Review Act], and an improper substitution by the court of its judgment for that of ESDC." 
 
Thus, contends the agency, her decision, which required the ESDC to conduct a Supplemental Environmental Impact Statement (SEIS) regarding Phase 2--the eleven towers outside the arena block and Site 5--should be reversed both because judges should defer to agency decisions, as well  as "the record here, which makes clear that ESDC took multiple SEQRA 'hard looks' at the impacts of the Project under various construction schedules."

The briefs by ESDC and Forest Citywill get a response from the two coalitions (led by Develop Don't Destroy Brooklyn and the Prospect Heights Neighborhood Development Council/BrooklynSpeaks) that brought the (now-combined) lawsuit.

The twist

But the whole thing's a bit surreal.

Why? Because statements made outside the record by developer Bruce Ratner make a mockery of the agency's longstanding claims the project would last ten years. Moreover, a regular pattern of construction-related abuses means that the mitigation plan created by and cited by the state is less "robust" than asserted.

The ESDC is fighting Friedman's decision to order an SEIS, it is nonetheless conducting one, as a spokeswoman explained last September, "to ensure that the impacts to the surrounding community are minimized to the maximum practicable extent."

Or, perhaps,  the agency is hedging its bets; if the appellate court does not overturn the lower court's decision, at least an SEIS will be in place.

And if the decision is overturned, then there will be no need to hold the public hearings associated with an SEIS. Nor would it have to make “further findings on whether to approve the MGPP [Modified General Project Plan] for Phase II of the Project.”

The back story

The case was initially argued 1/19/10 and decided 3/10/10 (a day before the arena groundbreaking). In that decision, Friedman criticized the ESDC’s “deplorable lack of transparency” and acknowledged that the ESDC’s use of a ten-year timeframe for the project buildout in the Modified General Project Plan (MGPP) was supported “only minimally.”

In that case, the main ammunition against the decade-long promise was an agreement with the MTA that allows 22 years to pay for Vanderbilt Yard development rights.

However, there was much more reason for skepticism. The Development Agreement, signed in late December 2009, was not released until January 25, after oral argument in the case.

Friedman did not allow it to be entered into the record for the case. It showed a clear contradiction with the professed time frame.

So, both sets of petitioners asked Friedman to reopen the case, which she did, acknowledging a misapprehension--though not quite a mistake on her part--about the Development Agreement.

In November 2010, Friedman remanded the proceedings "to ESDC for findings on the impact of the Development Agreement and of the renegotiated MTA agreement on its continued use of a 10 year build-out for the Project, and on whether a Supplemental Environmental Impact Statement is required or warranted."

The ESDC responded by issuing findings that said no such SEIS was needed. Friedman, after hearing oral arguments on 3/15/11, issued her ruling 7/13/11.

The court ordered ESDC to prepare an SEIS “assessing the environmental impacts of delay in Phase II construction of the Project” and make “further findings on whether to approve the MGPP for Phase II of the Project.”

Friedman wrote that the ESDC's Technical Analysis does not provide technical studies of the effects of "significantly prolonged construction" but "appears to take the position that it is a matter of common sense that less intense construction will result in lower impacts for conditions such as traffic, noise, and air quality. "
  
Last September, an appeal was announced, and the ESDC and FCR filed briefs on 12/5/11. Response briefs are due tomorrow, 1/13/11.

The case and the issues

Did the ESDC act arbitrarily or capriciously or abuse its discretion in not preparing an SEIS with respect to Phase II of the Project? Did ESDC act irrationally in its assessment of environmental impacts in light of the uncertainty that existed with respect to the Project’s construction schedule?

No, says the agency.


As noted by the ESDC, after Friedman initially questioned the construction schedule analyzed by ESDC in the 2009 Technical Memorandum, the agency performed a 2010 Technical Analysis, "which affirmed the determination of the 2009 Technical Memorandum that a delay in the construction schedule would not result in new environmental impacts not previously disclosed in the FEIS."

The agency says it also explained "its discretionary decision not to prepare an SEIS."

However, the court "did not identify any specific errors in ESDC’s environmental analysis or any new information that an SEIS would yield that would have been pertinent to ESDC’s decisionmaking." Thus, it "exceeded the proper scope of judicial review."

The 2009 revisions: who "commenced a process"?

There's a curious use of verbiage in the ESDC brief:
In June 2009, two and a half years after the Project was approved, ESDC and MTA commenced a process to modify the 2006 approvals to allow the Project to move forward in the face of a serious downturn in the real estate market. The principal change to the plans was that instead of requiring FCRC to pay for the acquisition of the entire 22-acre Project site up front – in some cases years before particular development parcels were needed – ESDC and MTA agreed to allow the property to be acquired in phases. A
(Emphasis added)

I'm pretty sure the agencies didn't commence the process on their own; Forest City Ratner requested the revisions to save money: it had to put up only $20 million of the $100 million promised for the MTA's Vanderbilt Yard and, rather than pay for condemnation of all the footprint properties it didn't own, it got the ESDC to agree to pursue eminent domain in stages.

The 2010 process

In late 2010, the ESDC issued both a "Response to Remand” and a “2010 Technical Analysis.
The ESDC board, on 12/16/10, approved a resolution finding (i) that the Development Agreement and MTA Agreements did not have a material effect on whether it was reasonable to use a 10-year construction schedule to assess environmental impacts; (ii) that it appeared unlikely that the Project would be constructed on a 10-year schedule, because of delays and the economy; and (iii) that the analysis of a potential 25-year buildout confirmed the 2009 conclusion an SEIS was not required or warranted.

Taking a "hard look"

ESDC argues that it took the appropriate "hard look" at the issues raised by construction. But there's a curious description of what's happened:
As a result of its extensive analysis, ESDC found that construction of the Project would result in a number of significant environmental impacts, particularly with respect to traffic, noise and neighborhood character in the immediate vicinity of the site. To address these impacts, the FEIS identified a robust mitigation program, which was included in the SEQRA Findings Statement and imposed upon FCRC in an enforceable “Memorandum of Environmental Commitments”...
Robust? Not so much, as Atlantic Yards Watch indicates.

Could it get built in a decade?

ESDC, with the help of an independent construction consultant, first reviewed whether the project could be constructed in ten years, by 2019, and was told it was viable.

The brief adds:
ESDC also took several additional factors into account, including FCRC’s financial incentive to recognize a return on the substantial investment it had made in the Project as soon as possible, the current severe housing shortage in Brooklyn, projected population growth and the need for additional affordable and market-rate housing in Brooklyn in the coming decades and the Project’s transit-accessible site. Moreover, prior to affirming the 2009 MGPP, ESDC was advised by its independent financial consultant (KPMG LLP) that it would not be unreasonable to assume that the Brooklyn market would absorb the Project’s residential units over a 10-year period.
Well, that financial incentive is now diminished, thanks to a $249 million low-interest loan from immigrant investors that gives the developer a seven-year grace period, meaning that it could take 19 years to complete the arena block, without penalty.

And the KPMG report is notorious for its dubious (and secondhand) work.

Looking longer

The 2009 Technical Memorandum looked at a five-year delay, to 2024, with respect to traffic, transit, pedestrian and parking conditions upon completion. That, to the ESDC, was sufficiently thorough, but, in response to Friedman's Remand Order, ESDC and its technical consultants examined a scenario lasting until 2035.

For example, ESDC "examined seven successive stages of Project completion" and found "that significant new construction-related impacts would not arise" because, among other things, construction would be spread out and less intensive.

So the same conditions would continue on a number of development sites.

Did ESDC consider duration?

The brief states:
The keystone of the court’s Final Decision is its conclusion that ESDC failed to consider the duration of construction-related activities in its assessment of the potential impacts of a delay in Project construction. Thus, the court held that ESDC failed to consider the duration of impacts resulting from prolonged construction with respect to: neighborhood character (Final Decision at 11-13, 18), air quality (id. at 11-12), noise (id. at 11-12), traffic (id. at 11-12), open space (id. at 11, 14), socioeconomic conditions (id. at 11-13) and land use (id. at 11). The court also emphasized this holding in its summary at the end of its opinion, stating that the “Technical Analysis assumes, without any corroborating studies, that the environmental impacts will largely be independent of the duration of construction.” 
That's not so, says ESDC. The FEIS noted that “[c]onstruction activities would be disruptive and concentrated on some blocks for an extended period of time” but "no portion of the project site, and thereby the immediately adjacent neighborhood, would be subject to the full effects of construction for the entire 10-year period.”

Yes, that would affect adjacent Dean and Pacific Streets "through the prolonged construction period,” but that “[a]s with the FEIS, these impacts would be experienced in a small area adjacent to the project site and would not affect the character of the larger Prospect Heights neighborhood.”

In other words, if you live nearby, you're out of luck.

Similarly, ESDC did consider duration regarding air quality, with respect to specific periods of time (3-hours, 24-hours, one-year), the agency said.

Noise

The agency, it says, also modeled noise and "imposed, numerous measures to mitigate, to 'the maximum extent practicable,' the noise from construction activities."

Not quite. In recent months, noisy and disruptive generators and jackhammers have prompted complaints, leading to new and better techniques to be identified after the fact.

The ESDC brief states:
In preparing the 2009 Technical Memorandum, ESDC was aware that the FEIS already had identified any receptor location that would experience significantly elevated construction noise for two or more years as within the area that would experience significant adverse noise impacts and thus require mitigation. Accordingly, the 2009 Technical Memorandum reasoned that stretching out the construction period for more than 10 years would not result in any new significant adverse noise impacts. ESDC noted that “[t]he effects of [the] delayed construction scenario on … noise would be spread over a longer period of time but the level of impact would not be greater than that presented in the FEIS.” The court did not discuss this analysis and did not explain why new noise modeling should be performed in light of the extensive noise modeling already performed in the FEIS.
However, the court did speak to the issue of whether duration, in itself, has a higher level of impact: "the duration of construction activities is a factor that is required to be taken into account."

Traffic and timing

The ESDCC brief states:
Because construction activity generally begins at 7 AM and ends at 3 PM, the FEIS construction traffic analysis considered three peak hours (weekdays 6-7 AM and 3-4 PM and Saturday 3-4 PM). A quantitative analysis was performed for three peak construction periods (Phases 1A, 1B and 2B) and concluded that “significant adverse traffic impacts would occur at numerous locations throughout the construction period.” The analysis identified 19 specific intersections that would experience significant adverse impacts from construction activity and prescribed mitigation.
That's already out of date. Construction activity has begun at 6 am since April 2011.

Vacant lots

While the "court also held that ESDC failed to consider duration in assessing the impacts of vacant lots, the surface parking lot on Block 1129 and construction staging," the FEIS did so, according to the ESDC; the traffic and noise impacts would be no worse than that after a larger, underground parking lot was created.

It states:
In the 2009 Technical Memorandum, ESDC considered whether the construction period impacts identified in the FEIS would be materially different if they were to be extended as a result of Project delay. It determined that the nature of the impacts would not change, but that they would be prolonged. 
Essentially, the question is whether prolonging the impacts changes their nature.

The brief states:
In the Response to Remand, ESDC synthesized the information provided in the 2010 Technical Analysis with reference to vacant lots, surface parking and construction staging, and explained the basis for its decision not to prepare an SEIS on these issues. It is clear from that discussion, which the court did not cite in its decision, that ESDC did consider duration in its decision-making very carefully. The discussion focuses on each of the Phase II building sites, specifically examining how they would appear in the event of a construction delay. In general, ESDC found that a delay would either (as in the case of the rail yard building sites) perpetuate long-standing conditions or (as in the case of the surface parking lot on Block 1129) perpetuate site conditions that had already been thoroughly analyzed and addressed through screening, landscaping and other mitigation measures. ESDC’s discussion acknowledges that these conditions would be in place “for a longer period of time” but explains why an SEIS would not be likely to provide information that would be helpful either in limiting the extent of any delay or mitigating its impact.
In other words, maybe it'll be worse, but there's nothing more to say about it.

The precedents

The brief says Friedman was off base:
Citing three reported cases, the court stated that SEQRA determinations will be set aside “where the agency’s review of the environmental impacts is unsupported by studies and data or is conclusory.” But in two of the cases, the court identified specific environmental impacts that the agencies had failed to acknowledge or address in any way. In the third case, the agency failed to undertake any environmental review at all.
The build year

The brief states:
In preparing the 2009 MGPP, ESDC recognized explicitly that adverse economic conditions gave rise to uncertainty as to the timetable for construction of the Project. Consequently, ESDC looked carefully at whether it was reasonable to continue to assume that the Project would be constructed over a period of 10 years, going so far as to retain construction and financial experts to provide advice on construction logistics and the economic factors that would affect the pace of the development. Ultimately, based on such independent expert advice, ESDC concluded that it was reasonable to consider, as one important component of its assessment, a 10- year build-out as the reasonable worst-case condition, as it had in the FEIS. At the same time, ESDC acknowledged that the Project could be delayed for years beyond the 10-year period, and took a hard look at the potential impacts of such a delay.
The impact of the Development Agreement

Does the Development Agreement, which has outside dates giving Forest City 25 years to compleate the project, necessarily mean a 25-year buildout? The ESDC states that "the Transactional Documents are entirely consistent with the two-track approach ESDC took with respect to the build year." It states:
ESDC explained that the Transactional Documents were not intended to extend the construction schedule but to: (i) require construction to proceed towards completion of the Project at a commercially reasonable pace, with the goal being completion in 2019; and (ii) in addition, establish deadlines to define the outer allowable limits for Project completion ESDC noted that “FCRC has invested hundreds of millions of dollars in the Project and has a significant incentive, separate and apart from ESDC remedies, to pursue it to a successful and speedy conclusion because undeveloped land, the acquisition cost of which has been borne entirely by FCRC, does not earn any substantial return.” 
Actually, the cost of acquiring land has been borne significantly by the city, which contributed $100 million. Moreover, Forest City's capacity to replace a high-interest land loan with low-interest immigrant investor funds--and seven years to repay it--gives them much less incentive to move quickly.

What was the right time frame?

ESDC states:
Indeed, had ESDC simply relied upon the 2035 build year favored by the lower court, it would be subject to criticism for failing to analyze the “reasonable worst-case scenario” that the FEIS had identified as having the greatest potential to result in concentrated traffic, air quality, noise and certain other quantitative impacts. ESDC’s consideration of both a 10-year schedule and a delayed schedule in the 2009 Technical Memorandum was reasonable under the circumstances and should not have been second-guessed by the court in the Remand Order.
Note that the 2009 Technical Memorandum addressed a 15-year buildout, not a 25-year buildout. Only a 2010 Technical Analysis assessed the latter.

Were technical studies needed?

Beyond mistakenly saying ESDC failed to take the issue of duration into account, the court should not have rejected the 2010 Technical Analysis "for an unspecified failure to present 'any technical studies' to further corroborate those findings," because no such level of detail was necessary, according to the agency.

There was no need to conduct an SEIS to yield new information:
ESDC concluded, in light of the extensive analyses that had already performed, the extensive mitigation measures that had already been imposed, and the fact that the potential construction delays would be due to economic conditions rather than Project changes under the parties’ control, that an SEIS would not yield such information and that the delay and expense of preparing another massive environmental review document would not be helpful to agency decision-making
Forest City case

According to the brief from Forest City Ratner:
the motion court twisted a partial change in the timing of property acquisition for the Project into a change in the Project itself, and used it as the basis for requiring further environmental study of part of the Project notwithstanding the exhaustive FEIS completed in 2006, and notwithstanding the fact that the change in property acquisition did not modify any actual components of the previously approved Project and merely resulted from the intervening deterioration in global economic conditions.
In addition, although ESDC performed a robust environmental review of actual Project changes in 2009, the motion court improperly used post-review contractual documents to second-guess and impeach the hypothetical “build year” that had been used by ESDC in its environmental review. Having been directed to reconsider its prior determination that no supplemental EIS was required, on remand ESDC conducted a further environmental review of the adverse impacts that reasonably could be expected if the Project was constructed over 25 years rather than 10 years. This review was thorough and well-reasoned and led ESDC to adhere to its prior determination that no supplemental EIS was warranted.
A derelict swath

While the ESDC and FCR briefs largely cover the same ground, the lawyers for Forest City sometimes push the envelope, such as this rather tendentious description of the project site:
These proceedings are the latest of numerous legal challenges to the Atlantic Yards Project, an ambitious public-private undertaking to transform central Brooklyn by redeveloping a derelict 22-acre swath of underutilized land.
Black's Law Dictionary defines derelict as "Forsaken; abandoned; deserted; cast away." Chuck Ratner, then CEO of parent Forest City Enterprises, called it a "great piece of real estate."

What were key changes?

FCR attorneys write:
Although couched otherwise, the motion court’s requirement that  ESDC prepare a supplemental EIS for a project that previously was approved in  compliance with SEQRA is based on changes in the general economic climate, not  changes to the Project.  The court’s decision is an unprecedented – and entirely  wrong – expansion of SEQRA’s scope, because it uses the approval of  inconsequential changes to the Project as a pretext to require a supplemental EIS that examines the impact of changes in over-all economic conditions.  The motion court’s decision also cannot be reconciled with this Court’s decision in Wilder v. N.Y.S. Urban Dev. Corp....  The change in property acquisition reflected in the 2009 MGPP is essentially identical to a change in ESDC’s Times Square redevelopment project that was considered by this Court in Wilder. There, similar to here, project opponents claimed that a change in plans for the project’s implementation that substituted “phased acquisition and construction of building sites” for “simultaneous acquisition and construction” necessitated the preparation of a new EIS.  This Court disagreed, and held that the change did not warrant further environmental review. 
Is there a difference?
The motion court sought to distinguish Wilder by asserting that the “directive to ESDC to prepare an SEIS” in these cases “is not based on the mere fact [of] phased acquisition” or even “routine delays in the construction process or delays occasioned by the SEQRA review process,” but because “the phased acquisition” and the Development Agreement “made a major change to the construction schedule for Phase II of the Project”.  This distinction is a false one, because the “change” in these cases is not a change in the Project and is not different from the change from simultaneous to sequential acquisition in Wilder. In fact, the change in Wilder was more substantial than the change at bar, because, while acquisition of the entire site for the Atlantic Yards Project initially had been contemplated as simultaneous (like the Times Square project in Wilder), actual construction of the Atlantic Yards Project (unlike the project in Wilder) always had been expected to be sequential.
The Development Agreement

What about the changes in the Development Agreement? FCR says it was improper to use it:
So far as we are aware, the motion court’s use of the terms of  subsequent contracts for project implementation to impeach the assumed build year that previously was used in the project’s environmental review is without precedent under SEQRA.... Furthermore, the use of subsequently negotiated business terms to impeach the build year previously used in an environmental analysis is inconsistent with a fundamental goal of SEQRA, which is “to incorporate environmental considerations into the decisionmaking process at the earliest opportunity ....” 
A real incentive?

FCR states:
The contractual obligation imposed upon FCRC to use “commercially reasonable effort” to complete the Project within 10 years is a real one, and encompasses both Phase I and Phase II of the Project. While the motion court denigrated this provision, the parties to the Agreement negotiated it at arm’s length and considered it to be important.  A review of New York case law shows that the phrase “commercially reasonable efforts” is commonly used in contracts in a wide range of contexts.
(Emphasis added)

I've already questioned, in a 1/26/10 post, whether the Development Agreement was truly negotiated at arm's length, especially when the developer pays for the agency's outside lawyers and consultants.

FCR adds that it was unprecedented for a court to require proof of Forest City's intent and capacity to "comply with its commitment to use commercially reasonable effort to complete the Project in 10 years."

What's missing

FCR adds that "neither the motion court nor petitioners ever identified any “technical studies” that might be performed as part of an additional analysis of the impacts of prolonged construction on a neighborhood," nor were any "significant adverse impacts, not previously examined, that should be studied in a supplemental EIS."

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