Saturday, September 08, 2012

WSJ: Public benefits for big projects like Atlantic Yards lag without "carefully drawn contracts;" actually, the AY contract was carefully drawn, just with provisions giving the developer 25 years

The Wall Street Journal published a round-up yesterday headlined When Big Projects Stall: Brooklyn's Atlantic Yards, Like Others Across the Country, Brings Mixed Results. It's got some insight, but I have to think that when reporter Eliot Brown was writing for the New York Observer, he was allowed to be a wee bit more skeptical:
...But as the borough gears up for the brown, metal-wrapped arena's opening event, a Jay-Z concert on Sept. 28 before the Nets take court this fall, the surrounding neighborhood still is waiting for housing and other benefits once touted by the developer as part of a planned $4.9 billion real-estate project known as Atlantic Yards.
As one of the largest mixed-use projects under way in the country, Atlantic Yards was meant to transform a swath of Brooklyn. But the missing pieces of the project highlight the challenges many U.S. cities face with large-scale real-estate developments that have become stalled amid a slow economic recovery, leaving them without taxes, jobs and amenities once pledged to the public.
Historically, such delays or loss of pledged benefits have been common for large private and public projects alike, said Jerold Kayden, an urban planning professor at Harvard University. "Too often, without carefully drawn contracts, the project gets built without these things," Mr. Kayden said of public benefits to large developments, "and the public ends up with the short end of the stick."
Well, there is a carefully drawn contract with Atlantic Yards. It was just carefully--and quietly--drawn  so Forest City Ratner would have 25 years to build the project. The failure to study the impact of that buildout was ruled illegal, but nobody gets sanctioned for delaying the benefits.

Moreover, nobody gets sanctioned for providing cost-benefit scenarios that assumed a full buildout within a decade, rather than a range of scenarios, from optimistic to pessimistic.

The deferred benefits

The article continues:
...In the case of Brooklyn's Atlantic Yards, benefits were crucial to tempering a vocal community opposition when the project was approved in 2006. As the centerpiece of the development, the arena was supposed to be designed by famed architect Frank Gehry with a roof adorned with grass and a running track. The New York-based developer, Bruce Ratner, also pledged to reserve nearly one third of 6,400 planned apartments for low and middle-income families, along with a community health-care center and other givebacks.
But these and other selling points have been deferred, or in a few cases scrapped, as the company has struggled to get the larger project off the ground amid a chilly climate for new development...
The company has yet to choose the auditor it had agreed to hire to monitor whether it has complied with a package of agreements it made with community groups.
The company has yet to choose the auditor? That sounds like Forest City is faced with the difficult challenge of choosing among numerous candidates.

They were supposed to hire an Independent Compliance Monitor shortly after the Community Benefits Agreement (CBA) was signed in 2005. They had an RFP in 2007. Since then, they've been self-reporting statistics.

Forest City's commitment

The article continues:
Forest City executives say they are committed to building the housing and living up to their promises as fast as they can in a real-estate market far more inclement than they had anticipated. They note that the developer has come through on numerous promises like renovations of local basketball courts and the creation of a costly new subway entrance.
The key, of course, is as fast as they can, because that depends on the developer's expected profits, surely a larger margin than, say, a not-for-profit.

What are renovations of local basketball courts? I don't think that's a major promise. They agreed to build a comfort station at the nearby Dean Playground as (indirect) mitigation of the noise created by the project's impact. As part of the Barclays Nets Community Alliance, their rather modest charitable contributions have helped fund playground renovations.

As to the costly new subway entrance, well, they'd better build it: it delivers people directly to the arena. That's self-interest as much as a promise to the community.

The first tower

The article states:
Ms. Gilmartin, of Forest City, says the company is in talks with a group of lenders to finance the first 350-unit building, and it expects to break ground by the end of the year, although it has been delayed before,
"We're still very much in this project, deeply committed," she says.
Which is why Forest City wanted $10 million in additional subsidies to get the tower started.

Indeed, it has been delayed before; as of last January, I counted more then ten times.

Past predictions

Forest City's been optimistic but evasive for years.

At a 7/22/09 public meeting, Gilmartin declared, "Today, undeterred by an anemic economy and a relentless campaign of a few to delay the benefits to many, Forest City stands committed to building the project as quickly as the market will allow.” (Videos by Jonathan Barkey.)

As suggested, as quickly as the market will allow also means "as long as we make our required rate of return."

At a 9/29/10 public meeting on the arena plaza, in the video below, Gilmartin again explained the firm's strategy.

"We explained the possibility that the project might be delayed by economic conditions and be built over a longer period than ten years," Gilmartin said. "That being said, Forest City's plans for the buildout are as follows. We are currently working on moving forward with the three residential buildings on the arena block. We anticipate having the funding in place to start the first building at Dean and Flatbush in the spring of 2011, the second six to nine months later, and the third about the same time after that."

Obviously, that timing didn't work out; they now have a deadline to get the first tower started by May of next year before facing penalties.

"And then we move on the Phase 2, the development of the project east of Sixth Avenue," Gilmartin concluded, speaking firmly. "Let me be clear. Forest City is a company with great determination and deep roots in Brooklyn. We are 100% committed to delivering the entire Atlantic Yards project and all of its benefits, to the borough of Brooklyn."

All of its benefits? As I wrote in October 2010, the modular option had emerged on Forest City’s radar screen in late 2009, which would save Forest City money and deliver a less expensive building, but not share as many benefits with the construction unions that rallied so vigorously for the project.

And the delays suggests that the commitment is also contingent on delivering the profits promised to shareholders. After all, as parent Forest City Enterprises said proudly in November 2008 about Atlantic Yards, "we control the pace."

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