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BrooklynSpeaks: relaxed deadlines and housing minimums for AY could mean vastly diminished benefits

Few have paid attention to the news, contained in a Development Agreement made available only in late January, that developer Forest City Ratner has 12 years to build Phase 1 of the Atlantic Yards project and 25 years to build the project--both with generous options for extensions.

However, with a press briefing yesterday and a PowerPoint presentation titled "From political theater to public loss," BrooklynSpeaks packaged some of the relevant information, providing new estimates of the loss to the public caused by the delayed provision of affordable housing.

(The PowerPoint presentation is also below; note that it requires PowerPoint 2007 or compatible viewer. Click on graphics to enlarge.)

I think the calculations exaggerate the losses, but even the use of more conservative assumptions would generate a significant loss.

"This is definitely a classic bait and switch situation," said Michelle de la Uz, executive director of the Fifth Avenue, a constituent group of BrooklynSpeaks, "When it comes to used cars, we have a lemon law. When it comes to hundreds of millions of dollars in lost benefit to the public, we have no protections."

"There's a tremendous amount of time value to the benefits this project was going to deliver," added Gib Veconi of the Prospect Heights Neighborhood Development Council (PHNDC).

While not directed specifically at Justice Abraham Gerges's decision Monday approving condemnation, Veconi's statement rebuts the judge's questionable conclusion failure to reject the state's assertion, "Whatever the pace may be for the delivery of the many public benefits of the Project, the nature of those benefits remains the same. "

(Here's coverage in the Brooklyn Daily Eagle.)

Governance issues

While the costs and risks of the project "have increasingly shifted to the public," de la Uz added, "and the benefits are almost exclusively accruing to developer… only way to change that is for government to assert itself."

Groups in BrooklynSpeaks, which long practiced a "mend-it-don't-end-it" policy and avoided going to court, last year filed suit challenging the Empire State Development Corporation's (ESDC) 2009 Modified General Project Plan (MGPP).

That case, combined with a similar case brought by Develop Don't Destroy Brooklyn and allies, was heard in January by Supreme Court Justice Marcy Friedman, whose ruling is expected soon.

It was curious, noted Jo Anne Simon of the Boerum Hill Association, that the master closing documents, though signed 12/23/09, were not released until a month later, a week after the hearing before Friedman, thus keeping the revelations under wraps.

Also, BrooklynSpeaks has proposed a new governance structure to oversee the project--a proposal that has been resisted by the ESDC and is still pending in the legislature.


Veconi suggested that project approved by the ESDC in September 2009 was very different from the one approved in December 2006. That contention, also made by others, did not get anywhere with Gerges or a judge considering the Vanderbilt Yard deal, but is pending before Friedman.

In the original project, he noted, one of the main benefits was that 2250 affordable housing units (of 6430) would be delivered by 2016.

Now, there's a requirement to build, at minimum, 300 affordable units in Phase 1, for which the developer has 12 years.

He noted that Forest City Ratner must only pay $20 million for the portion of the Vanderbilt Yard it needs, with an option to buy the rest. "That's significant, because existence of railyard and condition of that yard was one of the justifications for the blight finding," he said. "There's no responsibility to actually cure the blight."

BrooklynSpeaks said that the city direct subsidy went from $100 million to $236 million, following increments of $105 million and $31 million. The city surely would question that calculation, since it claims that the $31 million for land would come out of the $105 million for infrastructure and Forest City Ratner would later pay more for infrastructure. (I think there's likely opportunity for the developer to gain more public funds.)

The jobs figure is also somewhat off, since the current estimates don't include construction jobs and the estimate of 3600 permanent jobs is likely overstated, because of the absence of plans for an office tower.

When the project was reapproved, state officials continued to claim it would take ten years, but the Development Agreement, Veconi noted, allows 25 years, plus potential extensions.

"That's a significant difference," he said, citing both construction impacts and economics.

Public loss on affordable housing

I previously estimated the diminished tax revenues associated with a smaller, delayed project: a project that is 25% smaller than projected and takes 25 years would generate, perhaps, only about half the revenue.

BrooklynSpeaks calculated the savings to the public of 2250 units of affordable housing, estimating a benefit of $34 million. Thus, if only the minimum is built, the value would be only 6% of the amount promised.

In making a comparison between AY rent and market rent, BrooklynSpeaks used $2500 as the market rent for a one-bedroom apartment.
That's likely an overestimate. I recalculated the numbers, using $1800 as the rent for a one-bedroom apartment and estimated an annual benefit of about $17 million.

Still, if that $1800 rent holds, there's little if no market for the "affordable" housing geared to the highest income tiers--which could throw a serious wrench in the stated affordable housing plan.

If only the minimums are built, Veconi said, "we've basically removed all of the benefit to the public of the affordable housing. It's a tremendous amount of loss that was negotiated away by the state of New York."

Who's in charge

"Every single public hearing... has been a theatrical event, of sorts. It's been all for show," Simon said. "The financial crisis and litigation has been used as an excuse... but this was a proposal fundamentally flawed from the beginning, because it was never achievable."

The animated presentation shows developer Bruce Ratner at the center while a changing cast of governors and ESDC heads move in and out. (An updated viewer is needed to see the animation.)

"This is a project with significant public investment, and the only person that's in charge all along has been Bruce Ratner," she said. "That's the way this has been planned... and all the public involvement has been illusory in many ways."

"The people to whom the accountability is owed... are the ones who are going to be living with the risks and the negative impacts," she said.

New accountability

In arguing for an oversight entity, Veconi said, "This is a proven model in every other large ESDC project. Atlantic Yards is unique in being a project that's completely run at the behest of the developer." (I wrote last month about the anomalous position of AY at ESDC.)

Even the Columbia University expansion went through the city's Uniform Land Use Review Procedure and was voted on by City Council, he said.

Meanwhile, increasing concerns are raised about public authorities, necessitating a reform bill; development projects, as with the recent indictments in Yonkers; and Community Benefits Agreements (CBAs), which, in the case of AY, are enforceable by the parties, not the government.

It's unlikely that the Atlantic Yards CBA will be challenged, Veconi noted, because "the parties have basically vested interests in providing services."

New commitments?

"We have to realign developer's commitments with promised public benefits," Simon said. "That's what the MGPP doesn't do."

BrooklynSpeaks said the state should require that a minimum of two-thirds of the promised 2250 affordable units be completed within a decade.

The Development Agreement, however, allows for delays in funding for affordable housing, and the courts so far have not found a problem with the reliance on future subsidies.

Should Atlantic Yards affordable housing get a priority over competing projects?

No, suggested de la Uz, who asserted that, when the project was first approved, the developer had committed to building affordable housing regardless of whether subsidy dollars were available.

That's a debatable posture, given that the commitment was, at best, implicit. Still, only in September 2009 did the ESDC say explicitly that affordable housing was contingent on subsidies--a change that hasn't made a difference yet to judges.

Rather than add subsidies, said de la Uz, "we're saying developer needs to use his resources, his equity." She contended the significant subsidies from the public, along with eminent domain and access to public land.


Is it realistic to think the project can be modified?

Veconi noted how much remains up in the air, given the absence of plans even for the first residential building. Given the likelihood of an extended project--after all, former ESDC head Marisa Lago said it could take decades--it's "not realistic to think this is last plan," Veconi said, arguing for local representation.

Simon noted that BrooklynSpeaks had long offered proposals to improve the plan. She added that the group believes that an additional environmental review was necessary to evaluate a 25-year buildout.

That issue--the need for a Supplementary Environmental Impact Statement--was dismissed by the ESDC, and is part of the lawsuit considered by Friedman.

More suits?

Will BrooklynSpeaks, which is funded by member groups and getting low-cost legal help on the MGPP suit, bring any more lawsuits?

Simon demurred, saying that "lawsuits are borne of the facts. We'll see how the facts occur."

BrooklynSpeaks Atlantic Yards Presentation March 2010