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ESDC, FCR fire back, saying Court of Appeals shouldn't accept appeal in EIS case; in turn, plaintiffs slam mischaracterizations

We should know within a month whether the case challenging the Atlantic Yards environmental review will, like the case challenging eminent domain, get a hearing before the state's highest court, the Court of Appeals.

The Empire State Development Corporation (ESDC) and Forest City Ratner have responded forcefully to the request by Develop Don’t Destroy Brooklyn (DDDB) and 25 co-petitioners, who asked the Court of Appeals to review the case, questioning whether the "bias and corruption" demonstrated by the ESDC renders the agency's blight findings invalid.

The ESDC and FCR say the case is cut and dried, given that courts give agencies much deference. In turn, the petitioners fire back in a final legal memo, charging that the ESDC and the developer mischaracterize their arguments.

The Court of Appeals is not required to accept this case. 

If it doesn't, however, that would mean that one crucial element in the ESDC's much-criticized Blight Study, the questionable use of crime statistics, would never have been subject to judicial scrutiny, since the trial court punted on the issue and the Appellate Division ignored it.

Should the case be accepted, a victory for the petitioners would, at the least, require a do-over of the Blight Study. While it might undermine Atlantic Yards as a whole, the eminent domain case represents more of a fundamental challenge to the progress of the project.

No conflict?

"Appellants do not identify any decision of this Court that is in conflict with the Appellate Division's decision and do not identify any conflict among the Appellate Divisions," writes (PDF) ESDC attorney Philip Karmel. "Appellants simply disagree with the Appellate Division's application of well established law to the record."

Well, the petitioners note that Justice James Catterson filed a concurrence that read like a dissent, highly critical of the ESDC, but felt compelled to join the majority "based on a perceived standard of review under which courts are compelled to defer to ESDC’s findings and determinations as long as ESDC can provide any arguably plausible justification for them, regardless of how contrary they may be to the clearly stated purposes and plain language of ESDC’s enabling statutes and the environmental laws which ESDC is obliged to follow."

Thus they argue for the Court of Appeals to "determine the boundaries of judicial review." They "ask this Court to review whether the courts below correctly interpreted the law so as to permit the 'destruction of a neighborhood in this fashion' which Justice Catterson found deplorable," writes attorney Jeff Baker in the latest legal memo (PDF).

Questions in dispute

Karmel writes, "Appellants' submission is replete with inaccuracies and distortions. Typical of their tactics are statements such as '[i]t is indisputed that ESDC purposely misrepresented conditions in the Project area,'" arguing that "inflammatory allegations of 'bias' and 'corruption'... are not only disputed and controverted but flatly contradicted by the record."

Moreover, he writes that newspaper articles, Internet postings not part of the judicial or administrative record and, in some cases, which cover events after the ESDC determinations, are "devoid of evidentiary value and cannot properly be cited in appellate litigation." 

That charge did not get a response in the final volley, though, as noted below, Baker argues that there "is no genuine dispute" regarding misrepresentations by the ESDC.

Questions of blight

"No fewer than 13 State and federal court judges have reviewed--and rejected--litigation challenges to the Blight Study and determined that its thorough documentation of the conditions of the project site provides a sound basis for ESDC's blight determination," Karmel asserts. 

The Court of Appeals shouldn't duplicate others' work, Karmel continues, noting that the Appellate Division "carefully evaluated Applicants' allegations and concluded that 'the facts are very much against them.'"

Actually, the Appellate Division was a lot less emphatic, writing, "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."

Baker responds,"There is no genuine dispute that ESDC purposefully denied and misrepresented the economic and development revival in and around the Project area and knowingly skewed crime data in the Non-ATURA Blocks in order to reach a predetermined conclusion, and ESDC’s assertion that petitioners’ contentions in that regard 'have been rejected by every court that has heard them' is false. In fact, no court has rejected those factual contentions by petitioners; rather, the courts that have previously reviewed ESDC’s determinations disregarded those factual contentions upon finding that ESDC stated other arguably 'rational' bases to support its determinations."

Residential boom?

"Appellants assert that the project site was on the cusp of becoming a 'luxury condominium' neighborhood,'" Karmel writes. "The Blight Study acknowledged that two of the dozens of buildings on the project site had been converted to residential condominiums; the handful of other condominium conversions they cite are not on the project site. At the same time, the Blight Study documented the very poor physical condition of many of the other buildings, the presence of the open railroad cut on the project site, the industrial zoning of much of the site, the diversity of ownership by multiple parties and the longevity of the blighted conditions, and properly concluded that these conditions make it 'highly unlikely that the blighted conditions currently present will be removed without public action.'"

Remember, the ESDC said that even a rezoning wouldn't work--even as spot rezoning was being requested for specific buildings.

"Appellants point to a handful of press clippings to assert that the area is experiencing a 'housing boom,' but the Blight Study documents the significant impediments that stand in the way of the site's redevelopment," Karmel asserts.

That's quite debatable. The Blight Study documents the significant impediments to a 22-acre redevelopment by one company for this project. As for building up the area, a simple rezoning would've catalyzed progress, and an undisputedly fair RFP for the railyard surely would've drawn more than the one rival that emerged after a belated RFP was issued.

The appellants' brief cites two articles that appeared before the project was announced in 2003:
See, e.g., Rachelle Garbarine, “Residential Real Estate: 2 Brooklyn Business Sites Converting,” NEW YORK TIMES, August 30, 2002, (“In the onetime manufacturing neighborhood around Dean and Pacific Streets in Prospect Heights, Brooklyn, the conversion of old warehouses and factories to housing marches on”.); Eric Neutusch, Here Comes the Neighborhood: Prospect Heights, BROOKLYN RAIL, Autumn 2002, (“The empty industrial lots along Dean and Pacific Streets are being rejuvenated by a residential housing boom.”)

The issue, writes Baker, is not factual: "the legal issue presented is whether the courts below should have considered that undisputable fact in determining whether ESDC actually took a 'hard look' at Project alternatives and presented a 'reasoned elaboration' of its basis for rejecting those alternatives–regardless of whether or not ESDC lawfully determined the area was blighted."

Trend study

Karmel calls a "straw man" the appellants' contention that the ESDC should have considered economic conditions and development trends in the project area, saying that by documenting blight the ESDC did just that. He adds that there's no authority for their contention that the Blight Study should have examined value trends and rents and that no market study-- to predict the future was needed

"By contrast, when ESDC is engaged in a project at a site that is not presently blighted but which is predicted to deteriorate, such a market study could be appropriate," he writes.

But the contract with AKRF did require a market study. The contract required AKRF to, in part:
-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
--Describe residential and commercial vacancy trends

While Karmel writes that "no study of future trends" is required, the language of the contract does not imply the study should should be only forward-looking.

The scope of work for the Blight Study, Karmel writes, preceded its preparation "and does not reflect its analysis or conclusion that the project site is characterized by long-standing substandard and insanitary conditions."

That doesn't address whether ongoing trends would suggest such conditions could be easily removed. As noted, Baker argues that the legal issue not considered by the courts was whether the failure to look at trends represented a "hard look."


Karmel stretches when it comes to crime, writing, "Appellants' crime statistic contentions and other criticisms of the Blight Study were refuted by ESDC... and have been rejected by every court that has heard them."

Actually, no court has evaluated the crime statistics. Trial court Justice Joan Madden punted, and the appellate court simply ignored the issue. As noted above, Baker points out that "no court has rejected these factual contentions." 

One-dollar rent

Karmel takes issue with appellants' characterization that the arena would be leased for a dollar a year. "The Arena will not be leased for 'one dollar per year,'" he responds. "The tenant will be required to pay tens of millions of dollars to pay off the tax-exempt bonds to be sold by ESDC's Local Development Corporation to finance the Arena's construction."

Though Baker does not respond directly to that, the sum does not represent rent but instead construction. And the tens of millions of dollars would be PILOTs (payments in lieu of taxes), which, as author Neil deMause explains, are a good deal for the developer.

More contentions

Karmel also points out that the arena would be much more than the "professional sports facility" appellants designate, because only 41 of a projected 225 events a year would be Nets basketball games. 

Also, though appellants "falsely imply that Justice Madden found the Arena's civic benefits to be de minimis," he writes that she referred only to the commitment to make the Arena available to community groups for ten events a year, not the civic benefits of the arena as a whole.

Moreover, ESDC's "reasonable and long-standing interpretation" that civic facilities can be leased to private companies deserves deference, he writes.

Baker responds that the question is whether a "civic project" can be leased to "a private, for-profit entity with no obligation or commitment" to carry out civic purposes, especially since it would be made available to community organizations only ten times per year, and only if the group covers the arena operating expenses--more than $100,000 per event. (Forest City Ratner has said it would cost less, though that number did appear in a KPMG study.)

FCR brief

Forest City Ratner's more brief legal memo (PDF) aims to add a "a few pertinent points." The affirmation by attorney Jeffrey Braun repeats boilerplate claims for the project, such as the intention to eliminate blight and construct 2250 affordable units, with no reference to how and whether that might be accomplished in the official time frame of ten years.

It cites the "contractually bound" obligations to the Community Benefits Agreement without acknowledging that they do not bind Forest City Ratner's potential successors.

FCR on blight

Braun also points out that more than 60% of the project site--Pacific Street and above--is within the Atlantic Terminal Urban Renewal Area (ATURA), which has been repeatedly designated as blighted by the city.

Also, he says the non-ATURA parcel includes significant blight, such as the buildings that the ESDC authorized FCR to demolish in December 2005 on an emergency basis because they posed "an immediate danger to public safety."

Whether they posed an immediate danger is an interesting question--after all, Forest City Ratner argued that letting an independent engineer inspect the properties would cause undue delay, but took five weeks after receiving the initial engineering report to publicly announce demolition plans.

Questions of legitimacy

In the earlier legal memo, the petititoners argue that the ESDC's actions were illegitimate:
The courts below... limited their review to whether ESDC has stated any plausible rationale at all for its findings. Thus, the Appellate Division upheld ESDC’s designation of the entire Project area as blighted, despite ESDC’s purposeful omission of contrary economic, real estate and development data from the Blight Study, and its knowing misrepresentation of relevant crime data, on the ground that ESDC also cited other factors which courts in this State have previously found indicative of “substandard and insanitary” conditions.

New York law should and does require ESDC to do more than simply throw out a number of purported justifications for its findings without regard to truth, accuracy, or logic, secure in the knowledge that as long as at least some of its proffered justifications can be called “rational”, its findings will not be disturbed by judicial review. To the contrary, where, as here, an agency blatantly misrepresents the facts and disregards contrary evidence, courts should find the agency’s ultimate determination irremediably tainted, regardless of whether a few of its proffered justifications might arguably be valid.

Courts need not substitute their judgment for that of a governmental agency, but they can and must require an agency to be truthful and unbiased in making its judgment.

Baker concludes the last volley by writing that "Petitioners have presented important questions of law regarding Respondent ESDC’s obligations under SEQRA, the standard of review of a blight determination and legal ability of ESDC to lease a civic project to a for-profit entity under the UDCA. The Court should grant the motion for leave to appeal."