Friday, November 08, 2013

In second report, right-wing watchdog group Cause of Action packages Atlantic Yards record as "political profiteering" (FCR spokesman still blames "lawsuits")

Atlantic Yards is not really a left-right issue, it's about good government and corporate accountability.

Even though, in its second part of a three-part series (coverage of Part 1), the right-wing watchdog group Cause of Action again comes up with rather conclusory results, the spotlight is still important.

The report, Political Profiteering: How Forest City Enterprises Makes Private Profits at the Expense of America’s Taxpayers, essentially repackages known information, and the graphic at right even uses the term "corruption."

There's no legal corruption, just much sketchy behavior (I call it the Culture of Cheating), as well as a pattern of negotiation--and renegotiation--with government entities that means that, whatever the public promises, subsidiary Forest City Ratner is not in violation of any formal agreement.

Thus, Cause of Action's conclusion--essentially, clawbacks--sounds like it could come out of any good-government playbook:
In order to better protect taxpayer money, communities dealing with developers should ensure that they receive commitments in legally-binding agreements that require subsidies to be returned if developers fail to meet its obligations.
Forest City: blame lawsuits (nah)

The only coverage I've seen comes from the Real Deal, which reported yesterday, Forest City takes city funds but doesn’t deliver on jobs: report:
Forest City Enterprises gave slightly less than $9 million to political candidates and lobbyists to push through two of its developments —Brooklyn’s $4.9 billion Atlantic Yards and a mixed-use project in Albuquerque, N.M. – but failed to make good on its promises to create jobs and affordable housing, according to a new report by a conservative watchdog group.
Forest City denied the accusations and told The Real Deal that it will fulfill its commitments to the community. The developer’s spokesperson Joe DePlasco criticized the report, authored by Cause of Action, as a “political manifesto” and noted that “unionized workers built the [Barclays Center] arena – hundreds on average each week for two-and-a-half years – and unionized workers are now building B2, the 32-story residential building that will be 50 percent affordable.”
...More so than any other developer, “Forest City’s business model seems to be the government,” the group’s executive director, Daniel Epstein, told TRD.
Epstein is a former staff member of the House Oversight and Government Reform Committee, led by Rep. Darrell Issa, R-Calif., and was a legal associate at the Koch Foundation, which promotes free-market and limited- government groups.
...But DePlasco said that “the delays in this [Atlantic Yards]  project were caused primarily by lawsuits” brought by its opponents. “Despite these obstacles and the worst economic crisis in a generation, FCRC continued to build the project and fulfill its commitments,” he said. “We anticipate a steady schedule on the housing going forward.” He added that the sale of a large stake in Atlantic Yards to Chinese developer Greenland Holdings Group would “help tremendously with the ongoing build out of the project, including the housing.”
Jonathan Furlong, of the Pratt Area Community Council, a Brooklyn-based community group, said the delays were “par for the course in terms of this project,” “The community and the surrounding neighborhoods are really losing out.”
My comment:
Whatever Cause of Action's claims, De Plasco shouldn't be allowed to get away with saying that delays in Atlantic Yards were primarily due to lawsuits.
After all, the CEO of Forest City Enterprises said in September that the recession was "obviously the largest" reason.
Beyond the recession, we should also consider the impact of Forest City Ratner's unrealistic plans for Atlantic Yards, along with the lawsuits.
The summary

From the executive summary:
FCE’s pattern promises local governments that its development projects will generate plentiful jobs, housing, economic development, and tax revenues. Concomitantly, FCE employs a well-funded public relations campaign, a team of politically-connected lobbyists, and campaign contributions to local politicians in order to acquire subsidies, tax breaks, and property through eminent domain. However, once FCE receives public financial support, it often renegotiates or delays implementation of the benefits that it had previously promised. In short, it lobbies, profits, and then bilks the taxpayers by breaching its promise to the community.
CoA’s investigation revealed that FCE promised to create more than 70,000 permanent jobs and 3,750 affordable housing units in Brooklyn and Albuquerque, but that it has actually produced only 3,000 permanent jobs and built no affordable housing units. Meanwhile, FCE pocketed $277.2 million in subsidies from those communities after contributing $310,450 to local political candidates and spending over $8.6 million on lobbyists. Sadly, these are not isolated incidents, but endemic of an intentional method by which FCE does business. This pattern is poised to continue in the proposed project in New Rochelle.
What's next:
What follows in this report is a portrait of FCE’s pattern of exploitation and broken
promises, documented through news reports, campaign contribution reports, lobbyist filings, litigation, and government documents obtained through Freedom of Information Act (FOIA) requests. CoA filed seven FOIA requests to attempt to uncover how FCE works with government agencies and city councils behind the scenes, but found a lack of adequate record keeping and uncooperative responses. CoA’s first report exposed how FCE used $23 million in political spending over the past ten years to obtain $2.6 billion in government subsidies and financial benefits. In its final report, CoA will show how FCE has enriched itself through bribery and political graft, colluded with the government to take advantage of the EB-5 investor program, and benefited from eminent domain abuse.
Atlantic Yards

The report states:
Cause of Action’s interest in FCE stems from its Atlantic Yards project in Brooklyn,
which exemplifies the company’s cronyism and unfulfilled promises of public benefits. As part of our nearly two-year investigation, CoA analyzed news reports, campaign contribution reports, lobbyist filings, legal cases, and government documents obtained through Freedom of Information Act requests. We found that the Atlantic Yards project was not an isolated incident, but just one example of a wider pattern of abuse: FCE promises to improve communities in order to attract taxpayer support, but it then reneges on those promises after it receives public money. While this report focuses on FCE’s largest and most controversial projects in the past ten years, there are other projects that fit FCE’s business model of political profiteering. The first report examined FCE’s projects in the District of Columbia and the subsequent report will discuss projects in Yonkers, New York and the abuse of eminent domain for projects in New York City and California.
And Fresno
One failed FCE project on the West Coast shows the negative effect that FCE can have
on communities. In 2004, FCE entered into an agreement with Fresno, California to acquire and develop a six-block area that the city considered “blighted” despite the presence of thriving small businesses. ABC 30 in Fresno described the much-delayed project in 2008: 
Forest City Enterprises burst onto the Fresno scene with grand promises of revitalizing the city’s lackluster downtown with retail stores and housing. That was four years ago and there has yet to be a single shovel break ground. Tuesday Forest City asked the Fresno City Council for a six month extension to work out its plan. It would be their third extension, which prevents the city from talking with other developers.2
Atlantic Yards details

Among the issues raised regarding Atlantic Yards:
  • promises of jobs and housing unmet
  • IBO analysis that the arena's a loss
  • lawsuit over pre-apprenticeship training program
  • Community Benefits Agreement "essentially an act of self-dealing"
  • no Independent Compliance Monitor for the CBA
The general conclusion

The report concludes:
Businesses leveraging politics to profit is not limited to FCE. As CoA has uncovered with our investigations into the cronyism of GreenTech Automotive and the Department of Energy’s loan guarantee program, political decision-making can cost taxpayers millions while failing to create value in return for taxpayer dollars. This lack of accountability for crony companies also negatively affects American companies that lack political connections. How can a competitive market operate when politically-favored businesses are given special treatment and taxpayer money? It is fundamentally unfair to the American people that cronyism is pervasive at all levels of government. Federal, state, and local governments should be working for all Americans, not just the politically powerful.

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