Wednesday, September 12, 2012

The Culture of Cheating: after Forest City claimed "We do not expect to ask for more subsidy," they started asking for more

It wasn't a lie, but it sure doesn't look like forthrightness, either. Consider it part of the "culture of cheating" that pervades Atlantic Yards.

Let's go back to a July 2009 Q&A sponsored by the Empire State Development Corporation (ESDC), as a prelude to a public hearing on re-approval of the Atlantic Yards plan, and one of the few times Forest City Ratner executives have been subjected to challenging questions from the public.

"Has Forest City Ratner asked the city and/or state for additional subsidies, including 'extraordinary infrastructure costs'?" asked moderator Craig Hammerman, District Manager of Community Board 6, reading a question from the audience. "If so, how much and, to Forest City Ratner, do you anticipate asking for more subsidies?"

ESDC attorney Steve Matlin responded, “I think on every project that ESDC has been involved in, the developer always asks for more, and there’s always a dialogue and always a negotiation. The level of state commitment has remained the same; it’s a hundred million dollars.”

He did not answer whether FCR hac asked the city for additional subsidies; indeed, the city, not the state, had already increased its commitment. (The new sum was originally announced at $105 million but city officials later claimed it was $79 million.)

Querying Forest City

Hammerman followed up: “Does Forest City Ratner anticipate asking for more?”


(Video by Jonathan Barkey)

A union member in the audience heckled, “If these guys keep holding the project up, up, they’ll need more.”

FCR Executive VP MaryAnne Gilmartin smiled as she took the microphone and waited for the hubbub to die down.

“Forest City does not expect to ask for more subsidy,” she responded carefully, then put the microphone down. There was no follow-up.

Yes, there was no mention about housing subsidies. But housing could certainly qualify.

Asking for more

Indeed, some 16 months later, it was clear Forest City had changed its tune regarding housing subsidies.

As I reported Aug. 26 in an article for City Limits' Brooklyn Bureau, in November 2010, Gilmartin, who oversees Atlantic Yards, sent a note to Marc Jahr, head of the New York City Housing Development Corporation, and Rafael Cestero, then the Commissioner of the city Department of Housing, Preservation, and Development (HPD).

"I continue to believe that if HPD successfully addresses our $10m subsidy request, we can convince our [Board of Directors] to rally behind a 2011 start date," she wrote.

As reported, HPD did not add $10 million, but city agencies made other concessions. And it's quite likely that $10 million request had been pending for a while.

Part of a pattern

Forest City Ratner tends to ask for more from the government.

Indeed, a telling episodes in the Atlantic Yards saga came in a 4/2/08 earnings conference call that parent Forest City Enterprises (FCE) held with investment analysis. Then-CEO Chuck Ratner expressed satisfaction in the developer’s relationship with local government, and said he expected more support.

At the time of the call, Forest City Ratner, FCE's New York subsidiary, had gained $105 million in city subsidies on top of the initially pledged $200 million from the city and state. (City officials now say total city subsidies are $179 million or $171.5 million, not $205 million.)

Since then, FCR gained (beyond other stated subsidies and tax breaks):
  • a speed-up in delivery of pledged state and city subsidies
  • an additional $31 million for land purchase (allegedly from infrastructure funds)
  • a revised deal with the Metropolitan Transportation Authority for the Vanderbilt Yard, with only $20 million down (instead of $100 million), a smaller permanent yard, and a generous 6.5% interest rate to pay back the remaining $80 million
  • a Development Agreement with gentle penalties and generous deadlines (12 years for Phase 1, 25 years for Phase 2)
Upcoming--and hinted at in the call--was the developer's effort to claim scarce subsidies for affordable housing.

Registering success, looking for more

"[J]ust in these past six or eight months, we got the various governmental agencies, state, city, borough, in New York, to increase their commitments to Atlantic Yards by $105 million on top of the 200 [million] they committed," Ratner said. "We still need more."

We still need more.

That's has nothing to do with being a "civic developer," a phrase Bruce Ratner likes to say. That has to do with delivering for shareholders.

"So you look at New York and you realize it’s a huge city, with, obviously, huge challenges and issues, but there’s very few major things that are happening, that are gonna happen," Chuck Ratner continued. "We’re one of the few in these places that continue to offer opportunities for development, in these major urban markets. They clearly have the resources to support them and I think they’ll put them toward these projects."

Then-COO Joanne Minieri chimed in: "With respect to New York, the city and the state, they really put an emphasis on affordable housing programs… a project like Atlantic Yards, of such significance, really furthers their commitment to the housing program. So as I said… we work very closely with them, because it’s a public-private partnership that will enable us to all come together."

In other words, she hinted, Forest City would be asking for more subsidy for the housing program.

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