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Flashback: ESDC attorney once assured court that Forest City have "to bring the Project to completion by 2019, with sanctions imposed for any failure to do so"

Way back in January 2010, as the last major Atlantic Yards legal case faced its first hearing, I pointed to a key point of dispute. In retrospect appears to be either a glaring untruth or, more charitably, an incredibly misguided prediction about the state of New York's capacity to negotiate with Atlantic Yards developer Forest City Ratner.

It's worth another look. (Tomorrow I'll write about the legal battle over the appeal in the aftermath of the convoluted case.)

Timetable challenge

Two coalitions of civic groups had challenged the Empire State Development Corporation's (ESDC) September 2009 approval of the Modified General Project Plan (MGPP), asserting that the project could last some 22 years--because of the revision of the Vanderbilt Yard deal, allowing much slower payments--rather than the promised ten year.

The ESDC said no, and countered by pointing to a set of documents that, at the time of the November 2009 filing of legal papers, had not yet been signed. They were signed in December 2009, but withheld by the agency until after the January 2010 court hearing.

A state judge ruled in favor of the state and Forest City, thus allowing financing for the arena to proceed. Had the documents actually been released, the financing--or at least the release of proceeds--instead might have been stalled.

Only after the documents released was the case reopened and the result reversed--the state would have to conduct a Supplemental Environmental Impact Statement (SEIS). The result was upheld by an appellate court, but the ESDC and Forest City are trying to appeal to the state Court of Appeals.

The ESDC contention

The ESDC Memorandum of Law made an entirely inaccurate prediction:
Petitioners' errors in describing the purpose and effect of the MTA term sheet are compounded by the fact that they look only to the transaction with MTA to discern FCRC's obligations. 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. (Fact Statement 39, AR 4692, 7979.)
(Emphases added; click on graphics to enlarge)

Yes, there would be an entirely separate set of agreements, but there were no sanctions imposed for a failure to bring the project to completion by 2019. Rather, the sanctions for Phase 1 would kick in after 12 years and for the project as a whole would kick in after 25 years.

Still under negotiation

What was in the cited Fact Statement 39, used as backup for the legal claim? According to the ESDC's legal Answer:
As required by the 2009 MGPP, the Development Agreement being negotiated between ESDC and FCRC will require FCRC to "use commercially reasonable efforts... to complete the entire Project by 2019." (AR 4692.) (As used herein, the term "Development Agreement" encompasses the development agreement, interim leases, development leases and ancillary agreements being negotiated between ESDC and FCRC to implement the project. (AR 7067-79.)) In the unexpected event that FCRC were to renege on its contractual commitments to ESDC and abandon the Project, the 2009 MGPP would remain in full force and effect, and would not be rendered unlawful as a plan for the Atlantic Yards site. In the event of such a default, ESDC could seek to recruit another developer to finish the work.
What was said in court

In court, as the transcript showed, ESDC attorney Philip Karmel admitted, "Well, the penalties are not set forth in the record." That's because the record did not include the Development Agreement, even though it had been signed during the interim period between the filing of legal papers and the court hearing.

And, indeed, there would be no sanctions for failure "to bring the Project to completion by 2019." Instead, the deadline is 25 years.


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