Friday, July 08, 2016

State report says (developers') spending on state lawyers and consultants nears $46 million

So how much money is being spent on layers and consultants for Atlantic Yards/Pacific Park by Empire State Development, the state authority overseeing/shepherding the project? A lot. And it's all paid for by the developer.

According to 6/23/16 ESD Board Materials, which include Consolidated Financial Statements and Independent Auditors' Report for the years ended March 31, 2016 and 2015, the total spending on Atlantic Yards neared $46 million, with the consultant AKRF, which produced environmental review documents, at $7.4 million, environmental monitor HDR at $3.2 million, and owner's rep STV at $3.5 million.

Among law firms, Skadden Arps, which hasn't been involved for a while but defended the early stage of the eminent domain cases, earned $9.5 million; Bryan Cave, which defended eminent domain and environmental litigation; earned $9.3 million, and Berger and Webb, which pursued condemnation and also defended challenges to project approvals, earned $13.3 million.

The latter is surprising, but  perhaps the compensation package has to do with work outside of the court (subcontractors for appraisal, relocation, etc.) as well as (I speculate) some bounty for hitting certain numbers regarding the overall payment to a condemnee.


A summary, from the document:
ESD continues to be actively involved in the Atlantic Yards Project which consists of plans to redevelop twenty-two acres of underutilized land in downtown Brooklyn. The general project plan adopted in July 2006, and modified in June 2009, includes an arena for the Brooklyn Nets, a reconfigured Vanderbilt yard and subway facility, and sixteen buildings for residential, office, retail uses and potential for a hotel. The residential development will include an affordable component and eight acres of the site are planned for publicly-accessible open space. The developer, Forest City Ratner Companies ("FCR") has completed the arena and in December 2012, broke ground on the first residential tower. In October 2013, FCR entered into an agreement with Shanghai-based Greenland Group Co. to create a joint venture, Greenland Forest City Partners, to acquire and develop the Atlantic Yards Project. At its June 27, 2014 meeting, the ESD Board of Directors affirmed the 2014 Modified General Project Plan ("MGPP") and authorized the creation of the Atlantic Yards Community Development Corporation ("AYCDC"), a subsidiary of ESD. The MGPP accelerates development and ensures the timely arrival of key project deliverables for the community and the creation of AYCDC is expected to facilitate continued progress of the project, which the joint venture rebranded as Pacific Park Brooklyn. In August 2015, the ESD Board of Directors approved proposed changes to the design for the Project's eight acres of open space.
• In April 2016, the Developer of the Atlantic Yard's project, Greenland Forest City Partners, released the housing lottery application for the 181 affordable units on the first residential tower, B2. The building, which will include fifty percent (50%) affordable housing, is expected to open during the fourth quarter of 2016. There are currently four buildings under construction at the site (B2, B3, B11, B14) with two more (B12, B15) anticipated to start construction by the end of the 2016 calendar year.
(Emphases added)

First, Prospect Heights does not mean Downtown Brooklyn.

Second, the creation of the AY CDC was supposed to channel public input and advise, rather than "facilitate progress."

Third, it's not at all clear that B12 (615 Dean) or B15 (664 Pacific) will start this year.

Legal snags

From the document:
Note 21- Commitments and Contingencies, Continued (a) Legal Actions, Continued
Atlantic Yards Land Use Improvement and Civic Project With respect to the Atlantic Yards Land Use Improvement and Civic Project (the "Project"), located in Brooklyn, New York, ESD has exercised its powers under the New York State Eminent Domain (condemnation) Procedure Law in two proceedings. ESD filed its first condemnation petition in December 2009 to obtain title to certain private Phase I properties needed for the Project;· ESD took title to such properties pursuant to Court order in March 2010; and ESD obtained vacant possession of such properties in May 2010. There are two remaining issues in this proceeding: (a) the pending appeal of a fee award and; (b) valuation of the last of the condemned properties. The pending appeal relates to a 2014 decision wherein the Court held that there was a reasonable probability that the property, vacant land on Atlantic Avenue, would be upzoned and redeveloped with a hotel. The Court valued the property using the sales comparison approach and adjusted four of the claimant's land sales to arrive at a value. The Court's decision on this matter was appealed and that appeal is pending. The trial of a former four-story building, the last of the condemned properties referred to in (b) above, will commence subsequent to March 31, 2016.
ESD filed its second condemnation petition in August 2014 to obtain title to seven private Phase II properties needed for the Project; ESD took title to such properties pursuant to Court order in September 2014; and ESD obtained vacant possession of such properties in May 2015. The remaining issue before the Court in this proceeding is valuation of the condemned properties. ESD is in the process of exchanging Vesting Date 9/19/14) appraisals for the properties taken. Two of the fee claims have been settled. Pursuant to the Project contract, all condemnation awards are to be paid by the Project developer, not ESD, and therefore these litigations are not expected to have a material adverse effect on ESD's financial position. There are currently no pending litigations challenging Project approvals.
It's understandable that the upzoning decision might be appealed--there's some $7 million at stake, given what the state wanted to pay.

The valuation of the condemned properties includes that owned by condemnee--and evictee--Jerry Campbell.

While there is no pending litigation challenging project approval, there is pending litigation delaying the progress of the B15 site, as well as the final round (unmentioned) of condemnation, involving P.C. Richard, which owns a store at Site 5.

A contract renewal

The one Atlantic Yards-related Annual Procurement Contract Amendment Executed During Fiscal Year 2016 (04/01/2015-03/31/2016) was for HDR. Click to enlarge, and note that the zero at the end means the total number of bids; the contract was renewed because ESD prefers continuity.



The AY CDC budget

Finally, the chart below covers the budget of the Atlantic Yards Community Development Corporation, set up in 2014.

As I wrote in March 2015, the AY CDC’s budget, it was disclosed at the board's second meeting, is funded 90% by a periodically replenished imprest account, maintained by ESD and funded by the project developer—not unlike the way costs are shifted for the ESD’s hiring of environmental consultants and outside lawyers.

“I can't think…of too many other situations where the developer is covering the expenses of the subsidiary,” then AY CDC Chair Kenneth Adams observed, because in most other cases the state subsidiary is set up to act like a developer.

That sounds responsible, but it also leads to potential complication. Consider: the Executive Director of the AY CDC, Tobi Jaiyesimi, as of April 2016 took on many responsibilities of ESD's former Atlantic Yards Project Director, Sam Filler (who succeeded Paula Roy, who succeeded Arana Hankin).

No, developer Greenland Forest City Partners doesn't control the state spending. And in some ways it seems responsible to have the developer pay the cost of managing a project. 

Still, taxpayers were previously paying for a governmental staffer to manage and oversee the project and, presumably, the overall public benefits were such that the public could and should pay.

Now, at least temporarily, that job has been offloaded to a new entity that was supposed to advise on the state's performance, with the budget mostly paid by the developer. If the AY CDC's job really is to "facilitate continued progress of the project," well, maybe this rather closed loop now makes sense. 

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