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Appellate court, despite some misgivings, dismisses EIS case; one judge concurs but slams blight study, says his hands were tied

In a decision that constitutes a crucial advance for the Atlantic Yards project (even if only an arena is planned as of now), an appeals court has rejected an appeal in which 26 community groups challenged a trial judge's dismissal of a wide-ranging challenge to the project's environmental review.

In the opinion (Develop Don't Destroy Brooklyn, et al., v. Urban Development Corporation dba Empire State Development Corporation, et al.), the judges in the Appellate Division, First Department, took pains to express some skepticism about the project, calling it “purportedly transformational” and noting that the ESDC, rather than being a neutral agency, had “promoted” Atlantic Yards.

And one judge, in a concurrence that had the tone of a dissent, slammed the ESDC for a "ludicrous" claim regarding the blight study.

However, the main opinion ignored a contract signed by the ESDC that gives the developer vastly more time than established in project approval documents.

Ultimately, the judges acknowledged that “our power to review the substantive adequacy of an EIS [Environmental Impact Statement] is extremely limited,” thus dismissing challenges regarding issues of terrorism, the project’s build timeline, and the findings of blight.

An appeal is planned, though the Court of Appeals, the state's highest court, is not obligated to hear the case. One more case, on eminent domain, is pending, after oral arguments Monday; it is even more of a long shot, given constraints on courts interfering with agency decisions.

A political issue

The court concluded:
While we do not agree with petitioners' legal arguments, we understand those arguments to be made largely as proxies for very legitimate concerns as to the effect of a project of such scale upon the face and social fabric of the area in which it is to be put. Those concerns, however, have relatively little to do with the project's legality and nearly everything to do with its socio-economic and aesthetic desirability, matters upon which we may not pass. To the extent that the fate of this multi-billion dollar project remains, in an increasingly forbidding economy, a matter of social and political volition, the controlling judgments as to its merits are the province of the policy-making branches of government, not the courts.

Of course the policy-making branches of government gave no Brooklyn residents or elected officials any voice in the project approval.

A fiery concurrence

Justice James Catterson, who was most skeptical during the oral arguments last September, slammed the ESDC in his concurrence “for being used as a tool of the developer to displace and destroy neighborhoods that are ‘underutilized,’” agreeing that consultant AKRF had failed to fulfill its Blight Study contract by ignoring market conditions, and criticizing the Blight Study for looking at contemporaneous conditions rather than those that existed when the project was announced in 2003.

While Catterson rejected the main opinion's core reasoning about the “perfunctory ‘blight study,” he wrote that his hands were tied: “Reluctantly, therefore I am compelled to accept the majority's conclusion that there is sufficient evidence of "blight" in the record under this standard of review.

Reaction from petitioners

"We are going to request that the Court of Appeals review this case because it is the only court that is able to require a harder look at the facts, rather than blind obeisance given by the Empire State Development Corporation to the dictates of Forest City Ratner," said lead attorney Jeffrey S. Baker, who represents the 26 petitioners, including Develop Don't Destroy Brooklyn, which organized and funded the case.

"Judge Catterson’s concurrence that the ESDC 'is ultimately being used as a tool of the developer' is the reason why extreme deference is not warranted in this case," he said in a statement issued by DDDB. "The Court of Appeals is the only court that can break the chain of previous cases, and we eagerly await our opportunity to argue before it."

Baker added, "The appellate court is constrained by previous decisions regarding the issue of blight, decisions which have shown a high level of deference to government agency decisions. While we recognize the limitations this court is under, we do not think this is a similar type of case, particularly with the severe condemnation of the ESDC’s actions and decisions as put forth in Judge Catterson’s concurrence. This case will provide the Court of Appeals an opportunity to make it clear that judicial review is not a meaningless exercise and require agencies making blight determinations to do so for legitimate reasons and not simply to facilitate the goals of a developer with political connections."

To do so, however, the Court of Appeals would have to agree to hear the appeal; it is not obligated to do so, given that two judges did not dissent. (One member of the original five-person panel, Jonathan Lippman, did not participate in the decision; he's now Chief Judge of the Court of Appeals.)

The petitioners have 30 days to file the appeal. Besides DDDB, they include, among others, the Council of Brooklyn Neighborhoods, NY Public Interest Research Group/Straphangers, the Sierra Club, and the Fort Greene Association.

Reaction from FCR

In a press release headlined (and misspelled) “APPELATE DIVISION RULES IN FAVOR OF ATLANTIC YARDS,” Bruce Ratner, CEO and Chairman of Forest City Ratner Companies, stated, “Once again the courts have decided in favor of Atlantic Yards.” (Full statement here.)

(Actually, the courts ruled in favor of the defendant agencies--ESDC, PACB, MTA--along with the developer.)

“This project has been reviewed as thoroughly as any in the City and now it is time to put these cases behind us and get to work,” he continued. “Today’s decision speaks comprehensively about the review and approval steps followed for this project and unanimously validates the process.”

“The courts have consistently ruled in favor of this project because it is good for the City, the State and the borough,” Ratner said, alleging that this was “the 22nd consecutive ruling in favor of Atlantic Yards.” (Um, no.)

Skepticism at the start

The main opinion begins with some skeptical language:
Respondent Forest City Ratner Companies (FCRC) has proposed to construct a vast and purportedly transformational mixed-use development on a 22-acre swath of real estate in Brooklyn…

...The project has been shepherded through its preconstruction phases and otherwise promoted by respondent New York State Urban Development Corporation, doing business as the Empire State Development Corporation (ESDC).

Areas of dispute

The judges stated:
While the principal focus of this appeal would appear to be upon the propriety of the ESDC's UDCA findings that the non-ATURA project blocks are blighted and that the proposed arena qualifies as a "civic project," petitioners in this hybrid article 78/declaratory judgment action have also raised numerous challenges to the adequacy of respondents' compliance with the State Environmental Quality Review Act (SEQRA), several of which survive for our review.

Again, the court has limited scope:
However, our power to review the substantive adequacy of an EIS is extremely limited. It is by now a familiar refrain that we may not disturb an agency determination as substantively flawed unless it is affected by an error of law, arbitrary and capricious, or constitutes an abuse of discretion…

Irrational timeline?

Were the "build years" used in the EIS irrational and thus skewed the ensuing analysis of the project's environmental effects?

The court made no attempt to distinguish between a construction timeline that addressed the length of time it might take contractors and the likelihood that the timeline would be adhered to, and ignored a contract signed by the ESDC that gives the developer vastly more time to build the arena and Phase 1, and no deadline to build Phase 2.

The court stated:
The record, however, discloses that in selecting the build years to be used in the EIS, the lead agency did not arbitrarily select a build year it found favorable but relied upon the detailed construction schedules of the project's highly experienced general contractor and upon the opinions of its own consultants and an independent contractor. It is, of course, possible that the lengths of the projected build-out periods (4 years for the first phase of the project, including the arena, and 10 years for the remaining elements) were underestimated, but the ultimate accuracy of the estimates is neither within our competence to judge nor dispositive of the issue properly before us, which is simply whether the lead agency's selection of build dates based on its independent review of the extensive construction scheduling data obtained from the project contractor may be deemed irrational or arbitrary and capricious, and it may not. The build dates having been rationally selected, there can be no viable legal claim that the EIS was vitiated simply by their use.

Real estate trends addressed?

Did the ESDC fail to study and give due consideration to real estate market trends in the non-ATURA project area-- the blocks in the footprint on Pacific and Dean streets--and thus not appropriately consider alternatives to the proposed project?

The court concluded:
Petitioners' contention is rather that the lead agency did not take into account in the EIS prevailing real estate trends, particularly as they affected and had become manifest in the non-ATURA project area at the time of the project's announcement, and thus could not have reasonably concluded that the proposed project was to be preferred to its alternatives for its purportedly unique capacity to alleviate blight in the non-ATURA blocks. This argument, however, necessarily supposes that the lead agency's judgment as to the relative desirability of the proposed project must have turned upon the project's purported efficacy as a means of improving the non-ATURA blocks. It is, however, clear from the EIS that the lead agency's rationale for preferring the proposed project was not so singularly grounded. The proposed project, in distinction to the alternatives preferred by petitioners, included an architecturally distinguished arena that would house a major professional sports franchise, an elaborate new subway entrance, a new and improved LIRR rail yard, improved pedestrian and bicycle linkages connecting the project and the surrounding neighborhoods on the north-south axis, an on-site stormwater drainage system, and eight acres of open space landscaped by Laurie Olin. It also made provision for significantly more affordable housing than would have been developed under alternative scenarios, and, by reason of its scale and range of uses, promised economic and fiscal benefits exceeding those expected to be generated under the other plans.

To be sure, as the EIS discloses, there were more adverse impacts associated with the proposed project than with its less ambitious alternatives, but, on balance, there is no tenable argument that the lead agency's preference for the FCRC project, arrived at after an evidently conscientious weighing of alternatives, was not rationally and sufficiently based on the project's distinctive constellation of otherwise unattainable benefits.

Whether the weighing of alternatives was “evidently conscientious” remains in dispute.


Was the ESDC's environmental review deficient due to its failure to address the risk of a terrorist attack?

SEQRA contains no provision expressly requiring an EIS to address the risk of terrorism and, indeed, it would not appear that terrorism may ordinarily be viewed as an "environmental impact of [a] proposed action" within the statute's purview.

The court left open the question of whether consideration of the prospect of terrorism might lie within the scope of the environmental review, but observed “that the project at issue does not pose extraordinary inherent risks,” unlike, for example, the siting of a nuclear storage facility or a biological weapons laboratory.

The creation of an project “dedicated to routine residential, commercial and recreational purposes,” even “in the form of a major urban development situated at a pre-existing transit hub,” does not clearly increase the risk of terrorism, the opinion states, though acknowledging that security must be part of the planning of any public project, particularly one concentrating large numbers of people.

Unmentioned is whether security concerns, as the petitioners contended, could lead to road closures, as at the new arena in Newark.

PACB approval

Was the Public Authorities Control Board’s (PACB) determination approving the ESDC's financial participation in the project improper in the absence of environmental findings?

Under SEQRA, the requirement to make certain environmental findings is premised upon the relevance of the EIS to the agency's decision. However, the court said, the PACB's approval of the ESDC's financial participation in the project was governed by closely drawn statutory criteria specifically relevant to a distinct, statutorily prescribed inquiry—in other words, whether there were funds committed by the state.

Effect of eminent domain case

While the petitioners also challenged the designation of the non-ATURA project area as blighted ("substandard and insanitary") and thus not a legitimate “land use improvement project,” the court noted that federal courts had held that the ESDC's exercise of its eminent domain power, including within the non-ATURA project blocks, was supported by the project's rational relation to "several classic public uses whose objective basis is not in doubt," among them the alleviation of blight.

Only in “the most extraordinary cases - those in which there is no conceivable public purpose to be served” should courts not defer “to the public purpose findings of the legislature and its agencies,” the court said.

The court stated:
The essential purpose of the blight finding in connection with condemnation, i.e., to qualify property for urban renewal, is not different under the ESDC's enabling statute, and, accordingly, the adequacy of blight findings in the two contexts should not be judged by different standards. What is fundamentally at issue in both contexts is the extent of the government's unitary power to define, and act in pursuance of a public purpose. It makes no difference that the agency through which the government has here acted, the ESDC, is organized as a public benefit corporation.

In other words, the fact that the ESDC is unelected has no bearing.

Blight study

The court found no reason to challenge the Blight Study, given the legal standard:
While it is possible to disagree with the agency's conclusion that the area at issue is blighted, and to argue that the blight designation is not warranted by the area's character and potential, on this record, all that is involved is a difference of opinion. In such a case, it does not matter whether we would be inclined to agree with petitioners; we are bound to defer to the agency to which the determination has been legislatively committed.

… The issue posed is not which of the parties has more persuasively characterized the area in question, but whether there was any basis at all for the exercise by the agency of the legislatively conferred power to make a blight finding, and plainly there was.

Unmentioned is the failure to conduct a market study, which was part of the original contract with AKRF.

The court noted that it’s nigh impossible to challenge such blight studies:
In the many years since Kaskel, agency blight findings have been found deficient in this State only where they were utterly unsupported (see e.g. Yonkers Community Dev. Agency, 37 NY2d at 484), and there has been no case in which the condition of an area has been deemed sufficiently at odds with an agency blight finding to raise a factual issue as to whether the agency exceeded its authority in making the finding.

The opinion, in a way, contained a defense of ARKF:
The point to be made is that "blight" has proved over time to be a highly malleable and elastic concept capable of enormously diverse application. This is not in the main attributable to the ingenuity of consultants eager to please the developers who pay their bills, but because the concept, within the field of its likely use, is more facilitative than limiting.

Not a civic project?

Is a professional arena a "civic project" under state law, because it “will be leased on a long-term basis, and provide financial benefit to private parties, the court asked?

In response, the court cited precedent that “a sports arena, even one privately operated for profit, may serve a public purpose.”

Unmentioned is the $1 annual lease and the granting of highly lucrative naming rights to the developer.

A critical concurrence

Catterson’s concurrence began critically:
Because I believe that the New York Urban Development Corporation Act… is ultimately being used as a tool of the developer to displace and destroy neighborhoods that are "underutilized," I write separately. I recognize that long-standing and substantial precedent requires a high level of deference to the Empire State Development Corporation's finding of blight. Reluctantly, therefore I am compelled to accept the majority's conclusion that there is sufficient evidence of "blight" in the record under this standard of review. However, I reject the majority's core reasoning, that a perfunctory "blight study" performed years after the conception of a vast development project should serve as the rational basis for a determination that a neighborhood is indeed blighted.

Unlike the main opinion, Catterson noted that, in February 2005, shortly after a memorandum of Understanding (MOU) was signed by the city, state, and developer, the Metropolitan Transportation Authority agreed to give the developer rights to develop above the Vanderbilt Yard—three months before a belated Request for Proposals was issued.

Who’s responsible for blight?

Catterson wrote:
There is no dispute that the MTA allowed the portion of the Project footprint which it owns, the Vanderbilt Yards, to deteriorate into a substandard, unsanitary, and blighted condition.

Though he didn’t say so, that constitutes an explicit contradiction of the ESDC, which punted on who’s responsible.

Wrong timing re non-ATURA blocks

While Catterson didn’t question blight in ATURA, he stated that the 2006 Blight Study made a crucial error in examining the non-ATURA blocks:
In my view, any determination that these blocks were substandard or insanitary should properly be based on a snapshot of the conditions that prevailed at the time that the Project was announced by FCRC in 2003. Any blight study that does not reflect this temporal limitation would necessarily allow the mere announcement of the massive project to predetermine the outcome of the study. On this point, I believe that the petitioners argue persuasively that any proposed or intended development in these blocks such as the Project would curtail any other private development; and that no new development would occur on property that might be subject to the broad powers of condemnation as wielded by a coalition of the ESDC and FCRC.

Scope of contract and timing

Catterson noted that the contract with AKRF required it to analyze residential and commercial rents on the project site and within the study areas; analyze assessed value trends on the project site, and compare to sample blocks with comparable uses in the study area, such as the Atlantic Center; and describe residential and commercial vacancy trends, among other things.

(That contract was not released by the ESDC but obtained by AYR via a Freedom of Information Law request.)

Catterson wrote blisteringly:
In my view, the petitioners are correct in asserting that the blight study failed to comport with the majority of the specific criteria set out in AKRF's contract. Furthermore, ESDC's contention that "as a matter of law," ESDC could only look at conditions contemporaneous with the study, which was conducted years after the announcment, is ludicrous on several levels.

He continued:
Initially, it should be noted that ESDC offers no legal support for that claim other than the obvious point that ESDC is permitted by statute to revitalize blighted areas. Second, ESDC's contract with AKRF as described above, clearly contemplated that AKRF would analyze both assessed value trends and current economic activity at the site and surrounding area. Finally, the obvious point raised by petitioners and dismissed by ESDC is that if the non-ATURA properties were in the midst of an economic revival, it would be counter to ESDC's mandate to step in, stop all productive development, and, in partnership with a private enterprise, develop the neighborhood according to its own vision of urban utopia, complete with professional basketball for the masses.

He noted in a footnote “that AKRF and the ESDC were recently criticized by this Court for their failure to maintain a relationship separate and distinct from the developer in another gargantuan project,” that involving Columbia University.

Effect of developer’s purchases

Citing several examples of recent condo conversions, he noted that “this rapid, private residential redevelopment of the area was commonly known and publicly reported in newspapers and periodicals.”

However he cited a contradiction:
Were this redevelopment more expansive and pervasive in the non-ATURA area, the petitioners would carry the day. Unfortunately for that position, FCRC's purchase of a significant portion of the non-ATURA area as well as many other dilapidated properties still held in private ownership and set out in the record supports, by the barest minimum, the agency's determination of blight. It is clearly within the agency's expertise to consider the effect of FCRC's conscious decision to allow its properties located within the non-ATURA area to lay fallow.

"Destruction of the neighborhood"

He concluded:
While I deplore the destruction of the neighborhood in this fashion, I cannot say, as a matter of law, that the ESDC did not have sufficient evidence of record to find "blight."