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Breaking: Judge rules for community groups, says state failed to study impact of 25-year buildout, requires ESDC to prepare a Supplemental EIS, but refuses to stay current construction

In the second in a series of decisions finding for community petitioners who challenged the Empire State Development Corporation (ESDC), state Supreme Court Justice Marcy Friedman today criticized the agency for failing to study the impacts of an extended Atlantic Yards buildout that could last decades, and ordered the ESDC to conduct a new phase of environmental review, including a Supplemental Environmental Impact Statement (SEIS).

While it is typical for judges to defer to agencies, as long as they have a "rational basis" for their decisions, Friedman, who slammed the agency last November for "what appears to be another failure of transparency," today found the "ESDC’s use of the 10 year build date in approving the 2009 MGPP [Modified General Project Plan] lacked a rational basis and was arbitrary and capricious."

However, Friedman gave the ESDC and developer Forest City Ratner (FCR) significant breathing room. She refused to issue a stay on Phase I construction or other work on the project, and said it was premature to issue a stay regarding Phase II.

No stay, but perhaps a hearing

It's a victory for community petitioners, but not nearly as meaningful as it could have been a year ago. Had Friedman initially considered the contradiction between the Development Agreement (which allows 25 years), kept under wraps until after the first oral argument in January 2010, and the ten-year buildout, she might have ruled differently in March 2010 and delayed construction.

Her decision today--if not overturned on appeal--will require additional bureaucratic hurdles and may require additional mitigation measures regarding an extended interim surface parking lot, or construction procedures. And it should help shape public perception that the ESDC has been too gentle with FCR, including easing the process so the developer could get bond financing closed by an end-of-2009 deadline. And it may bolster the argument for a new subsidiary to oversee the project.

The judge remanded the issue to ESDC for further environmental review, including an SEIS assessing the environmental impacts of delay in Phase II construction; the conduct of further environmental review proceedings, including a public hearing if required by SEQRA; and further findings on whether to approve the Modified General Project Plan for Phase II of the Project.

She heard oral arguments in the latest phase of the case on 3/15/11. The petitioners included civic groups organized by BrooklynSpeaks and Develop Don't Destroy Brooklyn, as well as several individuals and local elected officials.

The case, however, began more than a year earlier, as described further below.

Appeal? ESDC not ready to say so

ESDC representatives have said in court that they produced a Technical Analysis in response to Friedman's November 2010 ruling, but also were preserving the right to appeal that ruling.

So it's possible that, before any SEIS is prepared, the agency will try to overturn Friedman's decisions.

ESDC spokeswoman Elizabeth Mitchell said in a statement:
Today’s decision on Atlantic Yards did not enjoin construction of the Barclays Center and all components of this important project will continue.

The court ordered ESD to prepare a Supplemental Environmental Impact Statement focused principally on Phase II of the Project (the buildings east of 6th Avenue).

ESD believes that it complied with all laws applicable to the Project, and is reviewing today’s decision to decide on the best course of action for continuing to move the Project forward.
Reaction: Forest City

“While we disagree with the decision, “ said Joe DePlasco, a spokesperson for the developer, “it does not stop us from continuing work on the project and will not impact our current construction schedule. As of this week, we’ve erected 50%of the steel for the arena and we will start installing the fa├žade along the Atlantic Avenue side next week. The arena is scheduled to open, as planned, in September, 2012 and we are working aggressively to start the residential portion of the project.”

The latter has been delayed numerous times, so it's hardly clear it's aggressive.

Reaction: DDDB

DDDB said in a statement:
"While the Court felt it could only reverse the approvals for Phase II and require a new environmental review, it is time for Governor Cuomo to assert control over the ESDC and the project site and require a complete reassessment of the Atlantic Yards project," said DDDB attorney Jeffrey S. Baker. "We regret that the Arena is going forward. However, the project was never justified in phases. All of the purported benefits would have come from full development, not a stand-alone arena and a couple of high-rises.”

"DDDB has always argued that the claimed benefits were illusory and would never occur and the community would be burdened by a poorly conceived project. It is now clear that the timeframes and benefits of the original project were never even remotely feasible,” said DDDB Legal Director Candace Carponter. "We call on Governor Cuomo to ensure that the ESDC do an honest, unbiased analysis of the redevelopment of Atlantic Yards and consider a project that truly provides affordable housing, public opens space and meaningful benefits in a timely and financially feasible manner. ESDC should look at all aspects of the project, except the arena, and utilize the Unity Plan or other similar community inspired approaches to redevelop the area."

...Candace Carponter said, "One must wonder if things might have been substantially different if ESDC and FCRC were honest in 2009 and had not mislead the Court about the schedule for the project. In that case construction of the arena would not have progressed and the Court could have required a full review of the entire project. Because of ESDC’s actions, we may never know."
Reaction: BrooklynSpeaks

BrooklynSpeaks issued a statement:
The BrooklynSpeaks groups were elated and called on Governor Cuomo to investigate the Project. “This decision sends a clear message that no State authority or politically-connected real estate developer can be above the law when the future of our neighborhoods hangs in the balance,” said Jo Anne Simon, Democratic Leader of the 52nd District. “We expect an investigation into how this was allowed and call on Governor Cuomo to now take decisive action in reforming oversight of Atlantic Yards, ESDC’s largest project.”

....Said Al Butzel of the Urban Environmental Law Center which represented the BrooklynSpeaks sponsors, “After reviewing ESDC’s justification for not preparing a supplemental environmental impact statement, the Court correctly concluded the agency lacked a rational basis for approving the developer’s proposed changes to the project. It was clear to us that the approval of the plan was rushed through illegally in order to enable FCRC to meet a deadline necessary for its arena bond financing.”

...“Although this decision marks a major victory for the community, litigation against the ESDC and FCRC was never our first choice,” said Danae Oratowski, Chair of the Prospect Heights Neighborhood Development Council. “With no local elected officials having a vote in the approval process, and faced with decades of construction blight, we were ultimately left no other options. We now look forward to reforms at ESDC that will allow us to move forward constructively,” she added.
Built in a decade?

Can the project be built in a decade, as the ESDC insists (even though its former CEO once candidly said it would take "decades")?

Friedman pointed to the contrast between a requirement that the developer use "commercially reasonable" efforts and a Development Agreement that allows 25 years:
In short, ESDC’s invocation of the commercially reasonable effort provision rings hollow in the face of the specific deadlines in the Development Agreement – discussed at length in the November 9, 2010 decision and not disputed by ESDC on the remand – which clearly contemplate a schedule for construction of the post-arena phase of the Project that may not see even one Phase II building “initiated” until 2020, that does not require commencement of the construction of the platform on which 6 of the 11 Phase II buildings will be built until 2025, and that may extend beyond the purported 2019 build date for 16 years, until 2035.

The court accordingly finds that ESDC’s use of the 10 year build date in approving the 2009 MGPP lacked a rational basis and was arbitrary and capricious. In so holding, the court recognizes, as the Appellate Division held in a prior litigation involving the Atlantic Yards Project, that a mere inaccuracy in the build date will not invalidate the basic data used in the agency’s environmental assessment... However, as the Court also held, ESDC’s choice of the build year is not immune to judicial review but, rather, is subject to review under the rational basis or arbitrary and capricious standard that is applicable to judicial scrutiny of any agency action in an Article 78 proceeding. In the instant case, ESDC’s continuing use of the 10 year build date was not merely inaccurate; it lacked a rational basis, given the major change in deadlines reflected in the MTA and Development Agreements.
ESDC's hasty review

After Friedman's November 2010 decision, the ESDC quickly issued a Technical Analysis that concluded that even a delayed buildout would not make things worse for residents.

Friedman, however, found that the Technical Analysis "does not undertake a meaningful assessment of the impacts of the potentially vastly extended period of construction on the various areas of environmental concern," such as traffic, noise, and safety.

She wrote:
The conclusion in the Technical Analysis that an extended delay to 2035 would not have significant adverse environmental impacts that were not addressed in the FEIS is, in turn, based on the repeated assertions that the delay in the build-out would result in prolonged but less “intense” construction, and that most environmental impacts are driven by intensity rather than duration.

The Technical Analysis, which was prepared with marked speed in the month after the remand, does not support these findings with any technical studies on the effects of significantly prolonged construction on various areas of environmental concern. Rather, it appears to take the position that it is a matter of common sense that less intense construction will result in lower impacts for conditions such as traffic, noise, and air quality.

Even assuming arguendo that ESDC’s common sense assumption is correct, under established standards for environmental impact analysis, the duration of construction activities is a factor that is required to be taken into account in assessing the impacts on both environmental conditions such as traffic, noise, and air quality, which are amenable to quantitative analysis, and conditions such as neighborhood character, open space, and socioeconomic conditions, which are largely subject to qualitative analysis.
A "hard look"

Friedman noted that judges face a high bar in overturning an agency decision:
As discussed in the prior decisions, the court’s review of a SEQRA determination “is limited to whether the agency identified the relevant areas of environmental concern, took a ‘hard look’ at them, and made a ‘reasoned elaboration’ of the basis for its determination.”
However, the ESDC didn't provide any backing data for its conclusions, she wrote:
Here, ESDC’s hastily prepared Technical Analysis performs a perfunctory analysis of the impacts of the extended delay in constructing the Project. As discussed above, the Technical Analysis assumes, without any corroborating studies, that the environmental impacts will largely be independent of the duration of construction. It thus fails to undertake a meaningful analysis of the effects, on such important areas of environmental concern as neighborhood character, of the potentially protracted delays, identified in the Development Agreement, of 8 or more years after completion of the arena in commencing Phase II construction, and of more than 15 years, or until 2035, in completing Phase II construction. The court accordingly holds that ESDC failed to comply with its obligation under SEQRA to take a hard look at the environmental impacts of the 2009 MGPP...
The need for an SEIS

She explained why an SEIS is needed, noting that courts can't opine on the desirability of the project, just the agency's procedures:
An SEIS is required here because the phased acquisition authorized by the MTA Agreement, and the extended deadlines contemplated by the Development Agreement, made a major change to the construction schedule for Phase II of the Project, but ESDC has failed to give adequate consideration to the environmental impacts resulting from this change. Under the established standards for SEQRA [State Environmental Quality Review Act] review, the court must not, and does not, take a position on the desirability of the Project or the environmental impacts of the extension of the construction schedule. It is for ESDC to determine, after performing an adequate environmental review, whether the extension has significant adverse environmental effects not identified in the FEIS, or requires further mitigation measures. It is, however, the court’s responsibility to ensure that ESDC performs its responsibility to comply with the statutory mandate that it take a hard look at the impacts and provide a reasoned elaboration of the basis for its decision. In approving the 2009 MGPP, ESDC failed to do so.
No stay

She explained why she would not issue a stay; essentially, the horse has left the barn:
Although the court has determined that ESDC must prepare an SEIS, the court is unpersuaded that the Project should be invalidated and construction of the arena and other Phase I construction halted, as petitioners request, pending ESDC’s further environmental review. Phase I construction is already well under way, with completion of the arena anticipated in 2012. It is undisputed that infrastructure for the Project commenced in 2007 and is nearly complete, extensive excavation and foundation work on the arena has already been performed, work on a new subway entrance is in progress, and a temporary rail yard for the MTA has been completed, with remediation work in progress on the site of the permanent rail yard that FCRC is required to construct. Extensive public and private funds have already been committed to Phase I construction. Significantly, this is not a case in which the Project has been implemented without any prior “valid environmental review.”
The back story

Unmentioned is that, had Friedman, when she considered an earlier version of the case but had not admitted the Development Agreement into the record, could have ruled before construction started in  March 2010.

The case was initially argued 1/19/10 and decided 3/10/10 (a day before the groundbreaking). In that decision, Friedman criticized the ESDC’s “deplorable lack of transparency” and acknowledged that the ESDC’s use of a ten-year timeframe for the project buildout in the Modified General Project Plan (MGPP) was supported “only minimally.”

In that case, the main ammunition against the decade-long promise was an agreement with the MTA that allows 22 years to pay for Vanderbilt Yard development rights.

However, there was much more reason for skepticism. The Development Agreement, signed in late December 2009, was not released until January 25, about three weeks after ESDC spokeswoman Elizabeth Mitchell told me the documents would be made available.

Friedman did not allow it to be entered into the record for the case. It showed a clear contradiction with the professed time frame.

So, both sets of petitioners asked Friedman to reopen the case, which she did, acknowledging a misapprehension--though not quite a mistake on her part--about the Development Agreement.

In November, Friedman remanded the proceedings "to ESDC for findings on the impact of the Development Agreement and of the renegotiated MTA agreement on its continued use of a 10 year build-out for the Project, and on whether a Supplemental Environmental Impact Statement is required or warranted."

The ESDC, which still can appeal that ruling, responded by issuing findings that said no such SEIS was needed.

Friedman wrote:
In its findings on the remand, ESDC claims that it disclosed, at the time of its approval of
the 2009 MGPP, that the outside dates for construction would extend “well beyond 10 years.” As discussed at length in the court’s November 9, 2010 decision, that claim is patently incorrect. In what the court termed a failure of transparency, ESDC made no mention of the provision in the Development Agreement for a 25 year substantial completion date for Phase II and, instead, repeatedly cited the provision requiring FCRC to use commercially reasonable effort to complete the Project in 10 years. 
Phase I timing

In today's decision, Friedman added:
Nor is environmental review required due to changes to the timing of Phase I of the Project. Although, as held above, the 2009 MGPP made a major change to the construction schedule of Phase II, petitioners do not claim that the MGPP effected a material change to the build-out of the arena or other Phase I construction.
Petitioners could have done so, given that the developer has 12 years to finish Phase 1, which is officially supposed to take four years.

Surface parking

Friedman added that the review should address the issue of the surface parking lot, writing:
It is noted that Phase I use of Block 1129 for a temporary above-ground parking lot for the arena is a use that was specifically contemplated in the FEIS  and that ESDC has required certain mitigation measures for the parking lot, such as fencing and landscaping. As this parking lot is part of the plan that was approved for Phase I, a stay would not be appropriate at this time. However, given the potential delays in Phase II construction, including construction of underground parking that would replace the above-ground lot, further environmental review must be undertaken, in the SEIS that the court has directed, of the impacts of such delays and of whether additional mitigating measures or alternatives are needed for the Block 1129 lot.
Phase II premature

She concluded:
Finally, a stay of Phase II construction would be premature, as it is undisputed that Phase II work will not commence for many years. ESDC will have an ample opportunity, before commencement of Phase II construction, to review the environmental impacts of the delay in the Phase II build-out. In the unlikely event that FCRC is ready to proceed with Phase II before the environmental review has been completed, petitioners may renew their request for a stay
DDDB noted:
In her ruling Judge Friedman makes it clear that she cannot enjoin the arena Phase 1 part of the project and that there is no need to enjoin work on Phase 2 as even Forest City Ratner admits that no work will be done there any time soon. If there is any movement on Phase II part of the site, the ruling allows the petitioners to move for an injunction.
The housing issue

In a footnote, Friedman wrote:
In continuing to rely on the 10 year build date, ESDC also cites the feasibility of physically building the Project in 10 years, and the ability of the market to absorb the housing, especially in light of the strong demand for affordable housing units. Petitioners have never disputed the unexceptional propositions that a 10 year construction schedule is physically possible or that the market can readily absorb affordable housing.
Friedman could have been even more skeptical, given that the petitioners also pointed out that the report on which ESDC relied, prepared by KPMG, contained untenable claims about the market for luxury housing.

Friedman Decision 71311 Atlantic Yards
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