Noticing New York on the Goldstein settlement: the bargain the state enabled Ratner, bad public policy on free speech, and the ongoing battle

Michael D.D. White has written a must-read on his Noticing New York blog, arguing that Forest City Ratner received a huge bargain (given the enormous development rights enabled by the state) when it settled with Daniel Goldstein for $3 million, that the developer will seek continuing advantage in the Atlantic Yards fight, that the state inappropriately assited Forest City Ratner in trying to muzzle Goldstein, and that the reporting on the settlement disserved the public.

I mostly agree, with a few amendments. As I wrote 4/30/08, regarding Ratner's purchases of other apartments in Goldstein's building:

While it looks like the developer was being generous, the enormous increase in development rights made it worthwhile--even if he had to pay, which he doesn’t.

In that case, Ratner was directly reimbursed by city taxpayers for the land purchases. In Goldstein's case, there's no more money in that specific kitty--but the developer has since found new ways to gain public concessions, and surely will continue to do so.

White's piece is headlined “$hhh!” A Thieving Developer Wants Daniel Goldstein Quiet About Its Misdeeds, Meaning the Atlantic Yards Fight Ain’t Over.

Quieting Goldstein

White writes:

The thing that was so odd in this process and about which the media yet failed to report is how important it was to Forest City Ratner to attempt to deprive Daniel Goldstein of his right to speak out against the project. Because of the way it was negotiated, with Daniel Goldstein stoutly refusing to give up his free speech rights, we will never know the exact dollar value Forest City Ratner put on his unrelinquished rights. We would have been thrilled if Mr. Goldstein had played the negotiations in a way that teased out that precise figure before he rejected it but had he been so clever he could have run the risk of appearing unprincipled and insincere to the judge.* Nevertheless, the fact that Forest City Ratner pressed hard to deprive him of his rights, enlisting the weight of the state and Judge Gerges in the negotiations to do so, has to be viewed as highly significant and startling.

Forest City Ratner wanted to muzzle Goldstein, but instead extracted an agreement to leave one lawsuit and desist from others, an agreement to avoid "active" opposition (an empty phrase), and an agreement to give up the title of Develop Don't Destroy Brooklyn spokesman (which he was likely to do so as well).

In my book, the first was the most significant concession; Goldstein told Crain's “there was nothing more I could possibly do to fight this project.” Given that he did more than anyone, it's hard to fault his decision, but the settlement, as noted, likely weakens pending litigation that already faced an uphill battle.

Groundbreaking vs. Goldstein

White contrasts the ceremonial March 11 groundbreaking with the attendant protest:

The recent ‘groundbreaking’ for the proposed Prokhorov/Ratner basketball arena involved an event with a stage, microphones, an amplified public address and sound system, elaborately produced videos projected on a screen, in addition to having Mayor Bloomberg, Governor Paterson and Borough President Marty Markowitz speak. Ratner also featured rapper-entrepreneur-Atlantic Yards-investor Jay-Z and his multi-Grammy Award-winning wife Beyoncé, who in another venue was brought in to spiff up Hugh Jackman’s performance at the academy awards. It is worth contemplating, in connection with this Brooklyn-destroying appearance of Beyoncé, that Forbes listed her fourth on its list of the 100 Most Powerful and Influential Celebrities in the world.

(I'd add that Jay-Z was number 32 on the list.)

While the speakers were all salaried or compensated in one way or another, the outside crowd--larger than the corps of speakers but not the audience--was admonished by the large groups of cops to avoid mechanical assistance to amplify their voices. White counted more than 100 cops and observed:

By comparison, a public town forum held by Governor Paterson the preceding Monday had virtually no police presence.

Why did Ratner care?

White writes:

So why is Ratner so afraid of the exercise of Daniel Goldstein’s comparatively small dachshund-size free speech? One answer can be found in who was not there at the groundbreaking: None of the local politicians representing the community were there. Ratner may have pocketed Bloomberg and the pathetically weak Paterson, he may have Markowitz on his payroll with contributions to his pet charities-used-for-politics, but the crowd outside protesting reflected the local community. The image we used of Daniel Goldstein-dachshund vs. Ratner’s Great Dane-sized PR machine may make Daniel appear rather outmatched but when it comes to bark and bite Daniel’s bark has the bite of truth. By contrast, the Ratner PR machine has the job of selling fictions. To see an assembled list of the pack....

The CNG papers and the money

White points to the Brooklyn Paper/Courier-Life, which published stories quoting Forest City Ratner executive MaryAnne Gilmartin as claiming the sticking point for Goldstein was the money. While White calls it a "self-confessed he-said/she-said fashion," I'd go farther.

Goldstein and his lawyer specifically denied Gilmartin's claim, on the record, and she made no attempt to call them liars. Similarly, several news outlets published a claim based on an anonymous source, which was denied by a non-anonymous source.

The Times:

According to an executive who was briefed on the negotiations but was not authorized to discuss it publicly, Mr. Goldstein initially sought $5 million. Mr. Goldstein denied that.

The Daily News:

The Ratner camp said Goldstein asked for $5 million. Goldstein denied it, but he wouldn't say how much he wanted.

The end of the fight?

White criticizes the Brooklyn Paper:

Nevertheless, the fact that Daniel was at the end of his personal options in this regard was not grounds for the editor to slap a headline on the story that said: “The Yards Fight - - It’s Over,” discouraging important further reading.

Well, it's certainly the end (more or less) of a crucial phase of the fight. Goldstein said:

At that time, with that action on Ratner's behalf, there was nothing I could any longer personally do with my home that would stop or impact the project.

And it's not clear whether DDDB will play a role going forward, joining other groups that will persist.

Political battle

White delineates the ongoing battle:

Why? Ratner doesn’t want to see the project broken up. Ratner is going to try and hold on to the development rights for this project for perhaps forty years. Support matters. Ratner can't move one foot forward without huge amounts of subsidy (which other developers will want and need for other projects elsewhere in the city). Support matters. Ratner wants to resist investigations of his actions and possible indictment both with respect to his Yonkers Ridge Hill project and with respect to Atlantic Yards. Support matters. Prokhorov is under attack in the U.S. Congress. Failing some surprises he will probably still be approved. . . But support matters. Support matters a lot and will for decades. And remember that the groundbreaking event was pretty empty of supportive politicians. Ratner’s support has been continually waning.

White thinks Sen. Chuck Schumer, who admitted under questioning the AY site wasn't blighted, might be "possibly wavering." We'll see, but I think it's more likely Schumer answered a question more or less honestly before checking the political implications--which he would check, if it really mattered. After all, just last week Politico reported:

Sen. Chuck Schumer invited Harry Reid to spend Monday morning with him in Brooklyn, where some of Schumer’s well-heeled friends opened their checkbooks to help the Senate majority leader’s struggling reelection bid.

...So, there Schumer was Monday morning, introducing Reid to the big-money developers of the New Jersey Nets’ new $4.9 billion facility in Brooklyn.

Um, it's the project--not the arena--that would be nearly $5 billion.

Bad public policy

White points to the "insultingly low figure" Goldstein was originally offered and points to his opposition to the gag order deals about which we might have never learned had he not stood firm.

He rightly points out that it was bad public policy to enforce any kind of gag order:

By the time it got to Supreme Court Justice Abraham Gerges’ court the only way Forest City Ratner was going to get its gag order agreement silencing Goldstein was if the agreement was obtained, signed and enforced by New York State as its agent. Absolutely outrageously, New York State officials assisted Ratner in the negotiations to pursue this aim. Even worse, the judge participating in the settlement negotiations pressured Mr. Goldstein to accept such a deal. Were we the judge in this case we would have done no more than perhaps stand by as such an odious provision was negotiated, see what higher price for the property was going to be paid by Ratner as a result, and then announce that the settlement deal would be enforced in terms of the amount to be paid but that the gag order part of the agreement would be voided and stripped out of the agreement as against public policy.

But apparently Gerges pressed the agreement, acting as if he didn’t understand why it should be objectionable for Goldstein to agree “not to oppose the project in any way.” Do we want a country where citizens need to be looking over their contractual shoulder when it comes to speaking honestly about how our cities are shaped and the government run?

Goldstein's deal

White points out Goldstein's difficult position:

The only way that Goldstein could avoided the above estimated $622,500 or $821,700 in attorney fees is if he had litigated the compensation issue to a final conclusion taking it through a judgement and appeal that could likely have lasted ten years. In that case he would have been allowed the attorney fees he is statutorily entitled to, but only if he had gotten sufficiently more than the last high offer from Ratner. (Again, we note we have written about how the process is weighted against those who have their property seized.)

He suggests that Goldstein’s apartment escalated in value to about $1,543,469 by early 2008 and then went down to some $900,000.

But White gives Goldstein the benefit of the doubt, because, under "the pending threat of condemnation, for almost seven years Goldstein couldn't sell his apartment." Beyond that, White cites the additional costs (e.g., mortgage, schools) that factor into a home-buying decision.

The ESDC “Upzoning”

His most important point is that the money above market value (White estimates $636,500, though that can be debated) represents far less than the value of the zoning increase:

Assuming, conservatively, that Goldstein’s apartment will be replaced by development that is four times the current density, and assuming conservatively that we should use the $850 p/s/f condo figure, this increase in density transmutes the square foot value of Goldstein’s apartments in development terms to $3,400 p/s/f ($850 p/s/f times 4). Then the gap between what Ratner is offering Goldstein and what the unit is really worth is $450 vs. $3,400 p/s/f.

White argues that all the value of upzoning should go to the owners originally in place. I'd point out that, in her book Times Square Roulette, urban development expert Lynne Sagalyn suggested owners should get a share:

What realistic and workable alternatives might offer potentially greater efficiencies and expanded equity under a standard that gives existing property owners potential long-term economic rights beyond those of ‘sure and certain compensation’?

Consider a system in which the public sector creates a legal-entity to redevelop land within a defined project area, some kind of joint-stock corporation whose shareholders include cash investors... and existing property rights interests... who are issued shares in property to the value of their property rights as determined by a fair and just system of valuation...

Such a broader sharing of benefits has been suggested, as has "supercompensation."

And what about Bertha Lewis?

White closes with this:

It is ironic and probably extremely telling that the most venomous criticism of Daniel Goldstein settlement comes from someone who sold Ratner the rights to her free speech years ago: Bertha Lewis, the head of ACORN, (now rechristened New York Communities for Change in a tactical evasion of PR shame). Ms. Lewis, theoretically a booster of Atlantic Yards, sold her rights at the very outset of the Atlantic Yards and so has been unable to criticize the project even as it became clear what it really was and even as it has degenerated with subsequent revelations into something far worse.