In decision by Gerges allowing condemnation, unwillingness to evaluate significance of changes in Atlantic Yards benefits over time

It may be that no court agrees to evaluate whether the changes in the benefits to the Atlantic Yards project are significant.

That's the import of Supreme Court Justice Abraham Gerges's decision (bottom) upholding condemnation for the Atlantic Yards project. Gerges claimed that the claims should have been filed by October--an analysis that attorney Matthew Brinckerhoff, representing those resisting condemnation, said was wrong, as described below.

And Gerges's decision portends a similar outcome in a parallel case still pending, aiming to compel the Empire State Development Corporation (ESDC) to issue new Determinations and Findings (D&F) as a precursor to the use of eminent domain.

That case is being considered by Manhattan Supreme Court Justice Marcy Friedman, who also heard an oral argument in January on a case challenging the ESDC's approval of the 2009 Modified General Project Plan (MGPP). A decision in the latter is expected soon.

FCR announces groundbreaking March 11

Forest City Ratner announced a March 11 groundbreaking and claimed the decision marked "the transition from the obstruction to the construction phase."

New D&F?

In Kings County Supreme Court before Gerges January 29, those resisting the condemnation of property argued that changes in the project after the ESDC's 2006 approval of the D&F were so significant that a new D&F was required.

Gerges was not unskeptical about such claims, suggesting they should be dealt with in other cases.

Matthew Brinckerhoff, the attorney for the property owners, pointed out in court that other courts considering AY-related cases had relied solely on the record as of December 2006. "The fact that they changed the project so much has to be considered by someone," he said.

Not Gerges.

(Here's coverage by the Times, Daily News, Post, Observer, the Record, the Brooklyn Daily Eagle, and Brooklyn Paper. Only the latter two touched on the core legal argument.)

Wrong court

Much of Gerges' decision regarded technical challenges to the condemnation, but on p. 35, he addressed the contention that the public use, benefit, or purposes changed materially from what was described in the 2006 D&F.

The ESDC countered that the issues were inappropriate for a condemnation proceeding, but, even if the modifications were subject to judicial review, the 2006 Modified General Project Plan (MGPP) and the 2009 MGPP are virtually identical, since they involve the same site, buildings, uses, a new railyard, a new subway entrance, etc.

What about the revised MTA deal that allows for a far longer time to acquire the site? The ESDC noted that a challenge to the deal had already been rejected in December. Gerges wrote:

Moreover, petitioner asserts that the MTA business arrangement has no relevance to the validity of the 2006 D&F because those findings relate to the public purposes of the Project, which have not changed. They also note FCRC's obligations to ESDC are dictated not by a transaction with the MTA, but by the 2009 MGPP and the implementing agreements between FCRC and ESDC. The essential terms of the Development Agreement obligated FCRC to construct the Project as described in the 2009 MGPP and to use commercially reasonable efforts to do so by 2019.

Gerges wrote that challenges to condemnation on grounds of bad faith and/or lack of public purposes should be raised--as they had been--in a challenging to the finding of eminent domain, rather than the condemnation action.

Changes are OK

Also, he agreed that the case known as Leichter, involving changes to the Times Square plan, disallowed challenges to a revised AY plan.

Gerges wrote:

It has already been determined that the petition adequately sets forth the public uses for which the subject property is needed. The court also finds, as argued by petitioner, that the public purpose to be served by the Project was not changed by the 2009 MGPP. Moreover, to the extent that the Project has changed, the above discussed holdings in Leichter and Toh Realty clearly establish that petitioner is not obligated to begin a de novo review proceeding... In this regard, it must also be noted that the numerous judicial challenges to the Project resulted in extensive delay, as was the case in Leichter. More significantly, it cannot be disputed that the economic conditions in which the Project was proposed in 2002 have changed drastically in that the world-wide economy is now in one of the worst downturns in history.

New case should've been filed?

While this case was filed in regard to Eminent Domain Procedure Law (EDPL) Section 204, Gerges wrote that a different case, relating to another section of the law, should've been filed by October--and before the Appellate Division--not a trial court judge in condemnation court. He wrote:

Further, to the extent that respondents' argument can be construed as challenging the public use, benefit or purpose of the Project, this challenge is time barred in that the claims were not interposed in an EDPL 207 proceeding commenced in the Appellate Division with 30 days of September 17, 2009, the date the 2009 MGPP was affirmed...

In other words, even though an appeal in the previously-filed state eminent domain case was pending before the Court of Appeals, a separate proceeding should have been filed before the Appellate Division, the intermediate court that is the first stop for challenges to eminent domain findings.

Brinckerhoff commented that Gerges's statement "is based on the faulty premise that we could file a brand new Section 207 challenge based on the Modified GPP even though there were no new Section 204 findings, which is the trigger for the 30-day challenge period, and even though our 207 challenge was still pending before the Court of Appeals, and even though we raised these issues in that proceeding. With all respect to Justice Gerges, his analysis is erroneous."

Public purposes still hold

He continued:

As an alternative grounds for dismissing this affirmative defense as being without merit, it must also be recognized that the Second Circuit dismissed respondents' constitutional challenges to the 2006 D&F, as premised upon the 2006 MGPPP, and that the Court of Appeals dismissed their challenge as predicated upon state law. Inasmuch as the public purposes to be served by the Project have not changed, the holdings of the Second Circuit and the Court of Appeals preclude another challenge of the public use, purpose or benefit of the Project pursuant to the doctrines of res judicata [a matter already judged] and/or collateral estoppel [an issue already judged].

Project guaranteed?

What about the pending financial commitments to build the arena and railyard, which contain a gap?

The ESDC pointed to the master closing documents, which, as Gerges summarized, "contain firm commitments that FCRC will promptly commence construction of the Arena and will complete such construction within agreed upon time periods, and will commence and complete construction of a new rail yard for the MTA... Petitioner also explains that construction documents and significant security for the completion of the new rail yard for the MTA were provided at the Master Closing."

Gerges wrote that there's no requirement for a condemnor to include any statements guaranteeing financing and/or completion of a proposed project in its vesting petition.

Not the role for courts

Moreover, he noted that other courts considering challenges to eminent domain for AY disregarded similar contentions. He pointed to a federal appellate court's decision noting that, whether AY will accomplish its objectives is not the question, but rather the constitution requires that the state "rationally could have believed that the [taking] would promote its objective" (emphasis in Supreme Court's Hawaii Housing Authority v. Midkiff eminent domain case).

And he pointed the decision by U.S. District Judge Nicholas Garaufis, who said that it wasn’t the court’s role to examine whether the project will achieve the objectives stated, citing language in the Kelo case that notes that such a requirement “would unquestionably impose a significant impediment to the successful consummation of many such plans.”

Concerns discounted

Those resisting the condemnation pointed to the Independent Budget Office's finding that the arena would be a net loss to the city. And they noted changes in favor of the developer, such as faster payments of city and state cash, the changed MTA deal, a smaller project, and a deal contingent upon housing subsidies?

Beyond that, they pointed out, the master closing documents, not revealed until January 2010, give the developer six years to build the arena, 12 years to build Phase 1, 15 years to start construction of the platform, and 25 years to finish the project.

But to Gerges, the issue was moot, since the question of public use had already been declared to be off-limits.

In other words, Brinckerhoff got a "no" to his statement that "[t]he fact that they changed the project so much has to be considered by someone."

Pace of benefits and blight removal

Gerges summarized the ESDC's argument in response to concerns that the MTA agreement could mean a 22-year timetable to pay for the railyard:

Petitioner further argues that respondents' claim that the MTA agreement could allow FCRC to delay completion of the Project does nothing to diminish the validity of the D&F regarding the Project's public uses, since the benefits of the Project will be realized as the Project proceeds, i.e., blighted conditions in the area will be eliminated step-by-step, as substandard buildings are taken down and Project-related improvements are constructed in their place. It also notes that the many significant benefits afforded by the Arena, the LIRR yard and subway entrance will be provided at the earliest stages of Project construction and all the Project benefits will come to fruition at the point of Project completion. Whatever the pace may be for the delivery of the many public benefits of the Project, the nature of those benefits remains the same. Similarly, respondents' allegation that the MTA Agreement may induce FCRC to abandon the portion of the Project over the rail yard does not undermine the 2006 D&F, since the 2009 MGPP, like the 2006 MGPP, calls for the completion of the Project in its entirety. Moreover, the first-phase properties sought in the instant proceeding are to be developed in accordance with the 2009 MGPP, thus eliminating the substandard and insanitary conditions on the first-phase properties and providing significant civic facilities, irrespective of any hypothetical risk that future phases of the Project might not be completed.

(Emphases added)

As noted, Gerges didn't attempt to measure the benefits, since the issue was moot.

But the ESDC's contentions, accepted by Gerges, deserve some pause.

Blighted conditions may not be eliminated as "substandard buildings" are demolished, since vacant lots still constitute blight, as does the railyard.

And can't the pace for the delivery of public benefits ultimately change their nature? In other words, affordable housing delivered over a decade is far different than housing delivered over 30 years. Ditto for tax revenues.