Thursday, July 19, 2012

A confounding HDC hearing on first Atlantic Yards tower: public testimony without clarity about financing; Forest City denounced, supported; FCR’s housing partner says first building falls short but should proceed

There was something dismaying, but not so surprising, about the public hearing yesterday held by the New York City Housing Development Corporation (NYC HDC) regarding up to $92 million in tax-exempt bonds for the first Atlantic Yards tower, a 32-story, 363-unit building at the corner of Flatbush Avenue and Dean Street, adjoining the Barclays Center arena.

It wasn’t simply that no board members were present for the hearing in Lower Manhattan, just three agency lawyers, plus an intern, observed by fewer than three dozen people, some of whom warned the agency about going forward, while others said, however flawed, it was a good start.

It was that no official presentation went beyond the contents of a developer-created handout (bottom) provided a day earlier, describing 150 studios (41%), 165 1-BR (46%) and 48 2-BR (13%), 50% of them subsidized, over five income bands.

Then again, the project does not have a transparent history.


We know developer Forest City Ratner seeks nearly $92 million in tax-exempt bonds, which offers crucial savings over taxable financing. We don’t know the full cost of the building nor the full mix of financing. We don’t know whether the tower, known as B2, would be built using modular construction, which is Forest City Ratner’s goal.

We don’t know how the subsidies compare to other projects in the so-called 50/30/20 program, with 50% market, 20% low-income, and 30% moderate- and middle-income units. We don’t even know the rents, at least beyond my unofficial calculations, which suggest that the top subsidized rungs easily track the market.

We weren't told the size of the units, though NYC HDC's Mixed-Income Program term sheet indicates they could be small, with the subsidized studios at 400 square feet minimum, 1-BR units at 575 sf, and 2-BR apartments at 775 sf.

We didn't learn the NYC HDC’s criteria for decisionmaking, though the building's skew toward smaller units actually goes against agency preference, which went unmentioned.

(According to the Mixed-Income Program term sheet, "HDC will approve unit distribution; preference will be given to projects with 50% or more 2+ BR units OR 30% two-bedrooms and 10% three-bedrooms.")

Also, there was no mention of modular plans.  Would construction of what would be the tallest modular apartment building in the world be welcomed as a cost-saving tactic, or does the agency, and those who might insure the bonds, have any wariness about an experiment?

Watchdog stymied

“I would like to comment on the validity of this project, but unfortunately this agency has not released enough information to have a true, genuine open process about how we should be spending its precious resources,” commented Bettina Damiani of subsidy watchdog Good Jobs New York. (Here's the written testimony.)

She called the announcement of the meeting a “bare minimum effort” and an it “insult to open government,” given that there was an advertisement in the June 30 New York Post, but no notice, or backing information, on the agency’s website.

(Damiani learned about the hearing after I wrote about it, having learned about it from a Forest City announcement at the District Service Cabinet meeting.)

Opposition and hope for disclosure, change

The purpose was to take testimony to be compiled into a report to be submitted to the mayor’s office Written statements can be submitted by the close of business July 25 to the Legal Department at HDC, 110 William Street, 10th floor, NY, NY 10038.

While one long-time Atlantic Yards opponent called granting subsidies to Forest City "immoral," another project critic requested recognition of the need to evaluate the impact of construction after the arena opens, a plan not contemplated in documents approved by the Empire State Development Corporation.

Council Member Letitia James, a project opponent who surely has trouble opposing "affordable housing," did not indicate opposition so much as request an adjustment in the formula to better serve larger, lower-income families.

Supporter: apartments could be larger, cheaper

Even one supporter of the bonds, Ismene Speliotis, Executive Director of Mutual Housing Association of New York (MHANY), the longtime housing arm of ACORN, agreed the plan for the building was flawed.

She cited a lack of larger apartments--the now-defunct ACORN had, in the housing Memorandum of Understanding with Forest City, established a goal that 50% of affordable units, in terms of floor area, would be 2-BR and 3-BR. She also cited the decreasing affordability created by the ever-rising Area Median Income (AMI), which takes in affluent suburban area, given that renters pay 30% of household income in rent.

Both Speliotis and former ACORN head Bertha Lewis, now of The Black Institute but also representing MHANY, blamed city agencies for prioritizing smaller units. After I heard this from Lewis weeks ago after the SLA hearing, I contacted the city Department of Housing Preservation and Development (HPD) for an explanation but never got an answer.

So I’ll conclude, for now, that Lewis and Speliotis have a point. After all, as the Bloomberg administration strives toward an affordable housing target, the number of units, not the total bedrooms, is crucial.

Then again, the unit mix in the building is partly a Forest City Ratner decision, and that’s subject to adjustment.

After I wrote that Forest City's initial plan was that only 20 of 175 affordable apartments would be 2-BR units, and Council Member James raised it publicly, Forest City in March promised 35 affordable 2-BR units, a significant increase but still well below the pledge of 50% floor area.

So we don't know what's feasible.

Presumably ACORN/MHANY was not pleased with the initial mix either, but didn't say so publicly. And Forest City Ratner hasn't hired a Independent Compliance Monitor, promised as part of the Community Benefits Agreement (which incorporates the Housing MOU), to track promises.

What approval would mean

Both Lewis and Speliotis urged HDC approval of the bonds, saying it would send a message to other developers unwilling to pursue so-called 50/30/20 programs--which add 30% middle- and moderate-income to 20% low-income among subsidized units. Most affordable developments are 80/20, while there are many luxury buildings that have taken advantage of rezoning without any reciprocation.

Then again, until and unless we know how much Forest City is making--and, actually, we won’t even know construction costs until the modular decision--it’s tough to evaluate whether the developer is justified in not meeting the goals of the MOU.

Beyond that, wasn't the zoning override Forest City achieved, gaining the right to build as large as it wanted, to help cross-subsidize the affordable housing?

And we don’t know the mix of subsidies. In March 2011, the outgoing HPD Commissioner, Rafael Cestero, said the agency had declined an additional request for subsidies from Forest City.

It’s unclear whether the developer has made a new request. (By the way, in July 2009, Forest City executive MaryAnne Gilmartin said, “Forest City does not expect to ask for more subsidy.”)

Forest City’s presentation

Gilmartin, sitting briefly at the table in front of the room, led off the session with a speech that lasted about three-and-a-half minutes. She cited jobs and basketball, and declared, “Today is a critical milestone for Atlantic Yards, and for the creation of high rise affordable housing for low- and middle-income New Yorkers in the borough of Brooklyn.”

“Working closely with CBA [Community Benefit Agreement] partners, in particular Mutual Housing Association of New York, MHANY, we have worked to move our housing vision forward through one of the toughest economic cycles in memory,” she said. “The road has been long and challenging. Today, with the bond authorization hearing we take an important step forward in realizing the first residential building at Atlantic Yards.”

Gilmartin provided details already known about the unit mix.“It is Forest City's plan to break ground on B2 before the end of this year,” she said, leaving some wiggle room about whether the plan will be achieved. (Forest City has announced such plans frequently.)

“The project will be financed with a combination of sources, including bonds, not to exceed $91.96 million, along with housing tax credits, HDC second mortgage, and developer equity. Lender discussions for the financing are well underway.”

The only thing new in that last paragraph regarded “lender discussions.”

“New York City is in the midst of a housing crisis,” Gilmartin said. “It is extremely difficult for low-, moderate, or middle-income people to rent or buy a home. This trend is only going to continue as the city's population continues to rise in the coming decades. New York is the center of the world, and the city is stronger than ever. But to thrive, the city must grow and improve the quality of its affordable housing, especially near the urban core and centers of commerce.”

“We need new housing at wide varieties of income levels, and Atlantic Yards, beginning with B2, will help to fulfill that need,” she concluded.

Some facts deduced

Nobody explained why, unlike in previous fact sheets for the buildings, the apartments would now come with washers and dryers. Not that that’s a bad thing, but is it because founding arena partner Haier, said to seek to supply the apartment units, wants a marketing opportunity?

We weren’t told why the building would have 20,000 square feet of “arena storage.” After the meeting, Speliotis explained that it would be a section of the building abutting the arena, with no windows, and therefore unsuitable for apartments.

A jeremiad

Given that three hours were allotted for a hearing, the HDC lawyers, seeing a fairly short list of people aiming to testify, felt comfortable not imposing a time limit. They must have regretted that when Michael White, a lawyer, former state housing official, and Noticing New York blogger, delivered a jeremiad that stretched 20 minutes. (Below is partial video by Raul Rothblatt; note the presence of Joe DePlasco, Forest City Ratner spokesman, in the foreground.)



“Financing this project is immoral,” he declared. “This project is immoral because tax-exempt bonds and subsidies should not be used to reward, buttress and facilitate eminent domain abuse, crony capitalism, government-sponsored monopoly building and grossly out-of-scale development."

White suggested bonds should be blocked because the project “has been brought about by the abuse of eminent domain” (the courts, however disagree), because it was not subject to competitive bid, and because it furthers a monopoly.

He cited Forest City’s building of bond-subsidized 8 Spruce Street, originally known as Beekman Tower, as a warning to the agency:
It blackmailed the local community board for additional subsidy and it also stopped construction on the building, blackmailing the construction unions. Both of these incidents, particularly the latter, should have been considered threats to HDC as well.
He brought up modular construction, and the attendant broken promises to unions, as “emblematic of how the Forest City Ratner dishonestly ignores commitments respecting its mega-project.” (In the audience, Gilmartin kept an unsmiling visage and checked her handheld.)

“None of us has amnesia about Ratner’s misdeeds and we are not about to get it,” White declared, several times returning to an angry reprise:
Well, it’s just not so. . .
And it’s so NOT just.
The missing SEIS

Dean Streeet resident Peter Krashes noted that, while Gilmartin said the project was about jobs and housing, it was, from his perspective--apparently channeling the official state posture--”to eliminate blight and build a community and neighborhood on 22 acres. "That really means there needs to be an emphasis on building a project on an ongoing basis, for the people inside the development and outside the development.”

At the time the project was approved in 2009, Krashes said the state and city failed to conduct a Supplementary Environmental Impact Statement (SEIS) to analyze the potential adverse impacts caused by changes to the project plan: construction, parking, open space, loading dock, entrance on Sixth Avenue.

And now, even though the courts have ordered an SEIS, he said, “the city is assisting the developer in moving forward while and SEIS continues to be delayed.” (The SEIS is officially about Phase 2 of the project, but surely other changes would be raised in testimony.)

Krashes pointed out that an SEIS evaluating delayed timetable--note that the ESDC specifically said that, of all buildings, Building 2 would not be delayed--would have assessed the neighborhood impact of construction while the arena is in operation. (Forest City has stressed that modular construction would be faster, with lesser impact than traditional methods.)
From June 2009 Atlantic Yards Technical Memorandum, from ESDC
Beyond that, Krashes said, evaluation was needed about smaller sidewalks, a decline in open space, and parking plans.

He also asked if the city and the developer had come to “any understanding or agreements about governance” of the project, given community efforts, via the BrooklynSpeaks initiative and support from several legislators, to establish a governance entity like a local development corporation to channel local input.

Lewis blames opponents

Lewis, given her time to comment, was typically combative, declaring, “This project is in a seven-year delay, a seven-year delay brought out on by its very opponents.” (Note that Bruce Ratner said that the long-professed ten-year timeline was"never supposed to be the time we were supposed to build them in.”)

“We started out with an AMI of $62,800," Lewis said, indicating the relative affordability of six years ago. "Now it's $83,000.” (Unstated but implied was that local incomes surely haven't risen.)

Lewis returned to the fundamental justification for ACORN's involvement: “No one else, not one developer that we've dealt with in 25 years, has said, or was even willing to consider the amount of affordable housing that this project will ensure.”

(Then again, Forest City needed state support for an override of zoning, so the developer also got to build at the size it required. And other developers, outside Brooklyn, have participated in the 50/30/20 program, with the first loan for the Aspen in Harlem closing in 2002, before Atlantic Yards was announced; the building opened in October 2004.)

Lewis accused “even the same agencies that worked with us to develop the 50/50 development plan... these are the folks who decided to shy away because of the delays. And who, not the developer, but agencies charged with affordable housing development reneged." How exactly they've reneged was unclear, but it seems to relate to the unit mix.

“I heard something earlier today that people are fakes,” she said, referencing White's’ accusation of “fake community organizations,” a reference not to ACORN but to other CBA partners. “I'm not a fake.. I will put my record up against anyone in development of affordable housing.” She went on to accuse project opponents of not joining ACORN in preserving public housing.

“Granting this bond funding is the first step in ensuring that promise and that commitment is kept, and also ensuring that we change”--she chuckled slightly--”the way we do affordable housing in this city going forward, that we ensure that Downtown Brooklyn isn't glutted with luxury condominiums, and that the rest of the city, such as Hudson Yards and Hunters Point South, do not have favored developers... who have, again, no commitment at the level of this project.”

(Hunters Point South would have 60% affordable units, but from 80-165% of AMI, without any low-income housing.)

Council Member James

James, who can’t be against affordable housing, spoke in relatively subdued manner. "I agree with Ms. Gilmartin--there’s a crisis in affordable housing” and suggested that the agency use taxpayer dollars for the highest benefit.

She suggested that the AMI “really needs to be changed”--subtracting suburban areas--to make units more affordable to local residents.

James said she’d prefer more lower-income housing.

“I am very, very disappointed we have a significant number of studio apartments,” she added. “What is needed is units that can accommodate families, not single adults.” The agency, she said, “should change your regulations to ensure that the needs are met on the ground.”

Speliotis on income diversity

Speliotis was also relatively low-key. “When Forest City Ratner first floated this idea of Atlantic Yards, ACORN at the time and Mutual Housing, then known as New York ACORN Housing Company, stepped up at the time and made a conscientious decision, and a conscious decision, to sit at the table with Forest City Ratner and work to apply everything that we believe in, in order to influence and try to achieve the best outcome in terms of affordability,” she said.

“As Bertha mentioned earlier, we had actually come up with this idea of bands to generate more affordability before we know of the Forest City Ratner Atlantic Yards project," she said. "We had worked very closely with the city, and the city, even before Forest City, had started to consider that banding--creating income bands was going to create more affordability and diversity in a neighborhood.”

(What's interesting about that is how, at least at current AMI and even at earlier versions, a good chunk of subsidized units would not be serving ACORN's core constituency of low-income households.)

“We may--and anyone who knows me and knows MHANY--knows that we can always do better, and we always want know developers to do better, and we want Forest City to do better," she said. "But until Forest City starts, they can't do any better.”

“So I am here to support the issuance of the bonds," Speliotis said a bit wearily. "I have been waiting for them for a very long time, over six years. We agree, more needs to be done. We need more affordability, we need more larger apartments. We need to take the example, and the step Forest City started, where other developers refused to go.. So we need to get started. At the crossroads of Atlantic and Flatbush, there is an arena being built, and it will be open. And then there's a big hole in the ground and it is calling for housing. It is calling for affordable, diverse, income-banded housing for families.”

“There are too many studios, and there are too many one-bedrooms in Tower 2,” she said in closing. “We are begging that HDC, and the other agencies involved work with Forest City and us and make sure that the resources are allocated, and that we learn from Tower 2, and we develop a more diverse, and more well-rounded community at the crossroads of Atlantic and Flatbush.”

More dismay

Not everyone was so hopeful.

Raul Rothblatt of the Prospect Place (Flatbush to Underhill) Block Association addressed the panel directly: what is the level for subsidies versus other projects in the city? (He also asked if they read Atlantic Yards Report. Doubtful.)

Deputy counsel Melissa Barkan reminded him this was an opportunity to make a statement and that agency staff would not be responding to questions.

So that was that.

Giovanni Puello, representing Fifth Avenue Committee, another affordable housing developer and member of the BrooklynSpeaks coalition, pointed to the failure to deliver many of the promised benefits of Atlantic Yards.

He noted that, though the building was 50/30/20, the rents for the moderate- and middle-income are close to current market rate.

Puello's testimony called for greater affordability, a mix that includes larger units and greater oversight, such as the local development corporation requested by BrooklynSpeaks.

Sen. Montgomery’s rep

Jim Vogel, representing Sen. Velmanette Montgomery, was the final speaker.

He also criticized the minimal notice. “In something as important as shaping the housing in New York City, it is the responsibility of government not only to play fair but to go to the highest rung possible.”

“Atlantic Yards is a sponge that is sucking public resources from other places where they could be used,” he said. “The story that was first sold to the people... Bruce Ratner said, 100% private money... I believe that statement held for two-and-a half weeks.” (Actually, Ratner said “almost exclusively privately financed.”)

As for statements about Ratner’s openness, Vogel declared, “The Ratner organization twisted the concept of a CBA. They had eight organizations, four of which they created, sign this thing.”

He added that that Montgomery was concerned whether the insurance agency for this bonds has been informed that the building would be an experimental modular tower: “It's very important for the safety of New York City money.”

That hang in the air as the hearing closed.

My calculation of estimated monthly rents

Rent is based on Area Median Income (AMI), which encompasses not just New York City but affluent suburban counties. The current AMI is $83,000 for a family of four.

As indicated in the graphic at right, some 40% of the affordable units (and 20% of the building) would be low-income, up to 50% of AMI.

The rest would be evenly divided among three moderate- and middle-income bands.

"Affordable" simply means a household pays 30% of its income in rent. Based on previous documents, I've calculated rent at the midpoint of the band, not the top. So, for example, rent in Band 3 is calculated at 80% of AMI. These are unofficial calculations.

For a four-member household in a 2-Bedroom, these are the rents:
  • Band 1: $726.25
  • Band 2: $933.75
  • Band 3: $1,660
  • Band 4: $2,490
  • Band 5: $3,112.50
For a four-member household, these are the income ranges:
  • Band 1: $24,900 / $33,200
  • Band 2: $33,200 / $41,500
  • Band 3: $49,800 / $83,000
  • Band 4: $83,000 / $116,200
  • Band 5: $116,200 / $132,800
One-bedroom units

For a two-member household in a 1-Bedroom, the rent/income, as per a 2006 Forest City Ratner document, was adjusted at 80% of a four-person household:
  • Band 1: $581
  • Band 2: $795
  • Band 3: $1328
  • Band 4: $1992
  • Band 5: $2490
For a two-member household in a 1-Bedroom, these are the income ranges:
  • Band 1: $19,920 / $26,560
  • Band 2: $26,560 / $33,200
  • Band 3: $39,840 / $66,400
  • Band 4: $66,400 / $92,960
  • Band 5: $92,960 / $106,240

Atlantic Yards B2 Fact Sheet July 2012

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