Thursday, February 12, 2015

Atlantic Yards CDC "clearly not independent": two members overseeing themselves (so how can they criticize failure to review developer's monitor?)

Update 5 pm Feb. 13: Empire State Development tells me that the agency did review the scope of work for the monitor, and Marion Phillips misspoke. Thus there's no lapse, as the evidence suggested.

There may be more than two apparent conflicts of interest on the board of the Atlantic Yards Community Development Corporation (AY CDC), the subsidiary set up to monitor the project as part of an agreement to move up construction of affordable housing to 2025.

I already pointed to the red flag regarding the appointment of two signatories of the Atlantic Yards Community Benefits Agreement, but there's another concern: the 14-member board includes two Empire State Development (ESD) executives, who essentially would be advising and overseeing themselves.

That matters as a basic principle of good government.

It also matters because evidence already emerged that ESD did not review the scope of work for the developer's environmental monitor, though the agency's own document says they should do so.

In other words, the state authority is backing off its role in overseeing the project's environmental impact. Marion Phillips III, the state official who said ESD did not review the scope of work--the outline of tasks aimed to ensure the project does not impinge on neighbors--not only works for ESD but also is president of the new AY CDC. (He's an officer, not a board member.)

The ESD's lapse in looking at the scope of work makes it ever more important that the volunteer AY CDC perform its monitoring role thoroughly. But the presence of ESD staffers on the board make it less likely they would criticize their own agency.

The issue came up at the Atlantic Yards Quality of Life meeting Tuesday, after Sam Filler, Atlantic Yards project director for ESD, thanked residents for attending the first meeting of the AY CDC last Friday.

Filler noted that the ninth and final gubernatorial appointee should be in place by the next meeting, on March 23.

The meeting "will continue to be an orientation for the new board,” Filler said, citing review of the Memorandum of Environmental Commitments and the role of state consultants STV, which serves as owner’s rep, ensuring that the project gets built as planned, and HDR, the state’s environmental monitor.

(Greenland Forest City Partners, the developer, hired their own on-site environmental monitor, or OEM, a company called Remedial.)

Amending the rules

At the next full ESD board meeting on February 19, Filler said at the meeting Tuesday, “we’re going to request our board make a small change” to the AY CDC’s authorizing language, which says every member must be a New York City resident.

Because ESD CEO Kenneth Adams, a Brooklyn resident, is moving to Governor Andrew Cuomo’s tax and finance office, and will be replaced by Buffalo developer Howard Zemsky, the language will be changed to say the residency requirement is lifted in the case of the agency CEO.

“When we put this board together,” said Phillips, “we never contemplated” that the ESD president/CEO would not be from New York City. (A non-New York resident has headed ESD only a fraction of the time.)

Why are ESD decision-makers on the board?

"That seems like an issue," commented Peter Krashes of the Dean Street Block Association. The board is designed to create accountability to the public, and the community, he said, suggesting it “was about having people here who have knowledge of the project... a developer from Buffalo is not going to have knowledge of the project.”

The ESD CEO, Krashes observed, is “still the ultimate decision maker…. to be blunt, he’s not necessary on the [CDC] board.”

Others pushed further. “It's a conflict of interest, frankly, somebody who's a decision maker on the oversight board,” commented Fort Greene resident Susan Lerner, who was speaking personally but is a governmental ethics expert in her role heading Common Cause/NY.

“It would be a mistake on the part of the governor to appoint him, and it would definitely be a mistake to have that kind of waiver," Lerner continued. "The community is not going to support that.”

“We don’t have a choice when we look at our subsidiaries,” Phillips responded.

“That's why we have a problem with ESD,” muttered Lerner.

The same concern should attach to the presence on the AY CDC board of ESD Vice President Joe Chan, who also oversees Atlantic Yards/Pacific Park for ESD.

The CBA signatories

Later at the meeting, resident Steve Ettlinger articulated concern about the AY CDC that I had previously raised, given that two members of the board of directors—Bertha Lewis of ACORN (and now The Black Institute) and Sharon Daughtry of the Downtown Brooklyn Neighborhood Alliance—in their present or previous positions worked for organizations that received money from developer Forest City Ratner and other benefits from the Barclays Center.

(ACORN got a $1.5 million grant/loan from Forest City and Daughtry’s DBNA distributes free tickets to arena events and is also supported by Forest City. Both were signatories to the Atlantic Yards CBA. Successor organizations to ACORN are expected to be involved in marketing or screening for the affordable housing.)

“Is that a problem, in your eyes?” Ettlinger asked. “If I think it's a problem, to whom should I address my concerns?”

“Feel free to write ESDC general counsel, Liz Fine,” Phillips responded, providing her email address:

“We're not going to opine,” Phillips said, responding to Ettlinger's question. “We’re not attorneys… all the people who serve on the board are very qualified.”

“I don’t doubt that,” Ettlinger responded, but noted that the receipt of money, as well as the obligation on Lewis to speak in favor of the project—language on page 2 of the Affordable Housing Memorandum of Understanding signed with Forest City—raised concerns.

I'd add that Forest City Ratner never hired the Independent Compliance Monitor required by the CBA, nor did the CBA members--some of the eight, perhaps, wary of scrutiny given the inactivity of their organizations--took action to require that.

Lerner's concerns

I queried to Lerner after the meeting. "I am concerned about the make-up of this so-called oversight body. It's clearly not independent," said Lerner. "Because you have people from the board who are responsible for the management of the project. They're not going to criticize themselves. And you also have people on the board who are beneficiaries of certain agreements."

"I think the community needs to memorialize its concerns in a letter," she said. "I think this is very typical of the sort of oversight bodies that are set up in New York State."

As an example, she pointed to flaws in the oversight of ethics; Common Cause stated it was "deeply troubled by the failure to appoint an independent panel that will oversee the work of the Joint Commission on Public Ethics (JCOPE) and the Legislative Ethics Commission (LEC), as required."

(The Brooklyn Paper, in Many familiar faces in Yards watchdog group, nudged toward the conflict-of-interest issue, but didn't address it.)

Another structural question

The new AY CDC not only has a 14-member board appointed by elected officials, with nine from the governor, as indicated in the letter establishing the AY CDC. But there was no explanation that the AY CDC would also have several officers, all of them ESD staffers.

I've asked for the guidelines regarding the selection/appointment of officers for an ESD subsidiary.

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