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Forest City Ratner's deceptive memo opposing new ESDC subsidiary to oversee Atlantic Yards inadvertently makes strong argument for more transparency, passage of governance bill

Forest City Ratner has issued a self-serving and misleading Memorandum in Opposition to a pending bill that would allow a state subsidiary to oversee Atlantic Yards.

A subsidiary, argues Forest City, would delay public benefits. Rather, the document suggests it would do more to delay private profits. 

The memo, with numerous half-truths and deceptions, ultimately makes a huge argument for such a subsidiary. However weak a subsidiary, it at least could create more oversight and transparency regarding the project, and help right a balance of power that tilts toward the developer.

The memorandum, embedded below, was made available on the BrooklynSpeaks web site this weekend. As BrooklynSpeaks explains, FCR's praise for current oversight is rather myopic:
FCRC extolls the existing project oversight being provided by the ESDC, ignoring a New York Supreme Court Justice’s characterization of the agency’s review of the 2009 plan as having “lacked the candor that the public was entitled to expect, particularly in light of the scale of the Project and its impact on the community.”
The bill, which has passed the Assembly, died at the end of the legislative session in June, but should get another look in the state Senate this summer. At that time, not just the developer but the ESDC itself should be asked to defend the memo's claims.

Let's go through the memo paragraph by paragraph.

Claims of jobs and housing

After six years of public review, delays caused by numerous lawsuits from project opponents (all of which have been adjudicated in the projects [sic] favor) and an economic recession, the Atlantic Yards project--with its much needed jobs and affordable housing -- is finally underway. An additional layer of bureaucracy is not only duplicative and unnecessary, but it can only only serve to further delay this long awaited project and its benefits.

How do they calculate six years of public review? The project began under the Empire State Development Corporation (ESDC) in 2005, but the ESDC's last major vote was in September 2009. Perhaps Forest City considers any ongoing oversight "public review."

Unmentioned as contributions to delays: in 2009, Forest City went back to both the MTA and ESDC to revise the business arrangements for the project, saving tens of millions of dollars in cash.

Nor have all lawsuits been adjudicated in the project's favor; last November, Supreme Court Justice Marcy Friedman slammed the ESDC for "what appears to be yet another failure of transparency"--a case that remains pending.

The "much needed jobs and affordable housing" are very much in question. Jobs on the project are way behind estimates, and the job numbers (and compensation) decline if Forest City, as has been rumored, manages to build the apartments via modular construction. The developer has asked for, but not received, additional housing subsidies.

Comments BrooklynSpeaks:
Perhaps most interesting is the memo’s repeated references to an “additional layer of bureaucracy.” FCRC has shown itself to be nothing if not a skillful navigator of government bureaucracy in the seven years since it announced Atlantic Yards. After all, this is the developer who was able to acquire property for the project through eminent domain, and whose own executive in charge of government relations, when asked to choose where to channel member item funds, told a New York State Senator, “I don’t mind f-cking the Carlton Avenue Bridge.”
Basic facts

Atlantic Yards is the redevelopment of 22 acres in downtown Brooklyn by Forest City Ratner Companies (FCRC) that will include approximately six million square feet of residential space (including 2,250 units of affordable and middle-income housing), the Barclays Center--a state of the art sports and entertainment arena, retail use, office space and eight acres of publicly accessible open space. The project also includes major transportation improvements, including a new storage and maintenance facility for the LIRR and a new subway entrance to the Atlantic Terminal Transit Hub, the third largest hub in the City.

Forest City spins basic facts to support its argument. The project would be located in Prospect Heights, not Downtown Brooklyn, though, arguably, at its western tip it might extend Downtown Brooklyn. The developer makes no attempt to predict when the housing and open space would arrive, though the fiscal benefits are premised on a ten-year buildout.

The new storage yard was part of the deal to acquire development rights--a deal FCR renegotiated so it would cost them less. The new subway entrance would primarily serve the arena.

In one phrasing that was not self-serving, Forest City divided the subsidized housing into "affordable" and "middle-income," thus implying that the latter, while requiring city subsidies, isn't that affordable. True--such numbers alarmed those attending a 2006 information session on AY housing.

Economic engine?

An economic engine for Brooklyn, New York City and the State, the project will generate more than $5 billion in new tax revenues over the next 30 years. In addition to tax benefits, the project will also create thousands of new jobs.

$5 billion? That's Forest City's fantasy number. At the March 2010 groundbreaking for the arena, Gov. David Paterson and Mayor Mike Bloomberg used figures of $1.5 billion, which are themselves based on untenable best-case scenarios.

This "economic engine" talk was always questionable, but is now ridiculous. Remember, any talk about tax revenues and jobs depends on several variables: a full buildout of the project over the official timetable of a decade, including a new office tower.

None of those goals will be met over a decade. Remember, Ratner told Crain's New York Business in November 2009, "Can you tell me when we are going to need a new office tower?”

Comprehensive oversight?

ESDC has developed a comprehensive operational and oversight structure for Atlantic Yards that is codified in contractual agreements and other documents with the developer and is managed by ESDC professionals and specialty consultants for ensuring compliance with those documents. There are ongoing and robust reporting procedures to oversee environmental, design, and construction compliance, and there is daily interaction and dialog, regular meetings and reports documenting such compliance and flagging any issues that need to be addressed. There is no need to establish yet another layer of bureaucratic oversight where a comprehensive system is already in place and is working.

This might be better for ESDC, not FCR, to defend, but clearly this structure isn't working that well. It has not been able to solve problems regarding rats and parking, and did not, until very recently, lead to Forest City fulfilling its responsibility to have an on-site construction coordinator.

The "comprehensive system" redounds to the developer's benefit.

Transparent review?

The project underwent an exhaustive and transparent state public review process, under the auspices of ESDC, with numerous public hearings and meetings over the last six years. In addition to this process the developer has appeared twice before City Council hearings and has held hundreds of meetings with community groups, community boards, city agencies and elected officials in an effort to continually update interested parties and seek input regarding the project. As a result of these efforts the project has undergone modifications to address a number of concerns.

Not quite. There's been a lot of process, but more for show than anything else. No ESDC board members attended the public hearings and those. The City Council meetings were held in 2004 and 2005, and the project has since changed significantly.

A look at the film Battle for Brooklyn shows that City Council members left after the developer's presentation in 2004, and that an ESDC board member, at a board meeting in 2006 to approve the project, didn't understand where the project was located. Forest City Ratner has attended numerous meetings, but only occasionally takes written questions, and rarely spoken ones.

Changes based on community input?

Changes in the project based on community input have included: a reduction in project density without a reduction in affordable housing; a reduction in height of buildings to ensure no building within the project is taller than the Williamsburg Savings Bank; a requirement that at least 30 percent of the housing on the arena block be affordable; additional commitments on affordable home ownership; commitments on parks, open space, schools, day care and health clinics; a commitment on LEED certification; a storm-water detention system to reduce CSOs in the Gowanus Canal; the establishment of an on-site Community Liaison office; and a comprehensive ten point traffic management plan.

It's hard to identify most, if not all, of these as being "based on community input." After all, Forest City Ratner increased the size of the project only to decrease it. While the tallest building was reduced in height, it would, contrary to the developer's initial promise, block the bank's clock tower.

As for the commitment on affordable home ownership, the documentation in the State Funding Agreement had no teeth.

It's somewhat amusing that they cited the traffic management plan, because, while described in the 2006 environmental review and subsequent documents, it's still being refined, and will be unveiled in about six months, according to FCR.

Process working well?

There remain numerous vehicles for the dissemination of project related information and to resolve any community concerns with ongoing construction. ESDC and FCRC continue to issue written project updates every two weeks as well as hold Atlantic Yards Construction Cabinet Meetings with elected officials, community boards and city and state agencies to provide construction updates and address any community issues and concerns. These meetings are held quarterly at Brooklyn Borough Hall and are open to the public and media. ESDC and FCRC also hold public forums within the community throughout the year to ensure the community is up to date on project milestones. Both FCRC and ESDC have community liaisons that are available via [sic] in person , email or telephone who are able to respond to inquiries on a daily basis. And FCRC recently re-launched a project website to ensure the most up to date information is easily available to the public.

Those written project updates, as I wrote in May 2009, are issued by Forest City Ratner and then circulated on ESDC letterhead.
While the cabinet meetings are open to the media--the next one is at Borough Hall on July 14 at 9:30 a.m.--they are not publicly announced, nor is videotaping permitted.

Last month we learned that, at least according to one ESDC staffer, the developer was "in violation" of a requirement to have a representative on-site daily.

As for Forest City's project web site, the "most up to date information" is not easily available. For example, a screenshot taken on the morning of July 10 (excerpted here and embedded below) suggest that the developer prioritizes self-promotion.

The latest "News," dated 6/30/11 (and excerpted above), involves a partnership between the Barclays Center and the Brooklyn Academic of Music. The latest "Construction" update was dated 6/20/11 (and excerpted at right), though a Construction Update, dated 7/4/11, was distributed 7/5/11.

Problems with subsidiaries?

History has shown that similar subsidiary structures to what this legislation calls for (such as the World Trade Center redevelopment and Governors Island) have only served to paralyze decision making and delay development.

Or, as Assemblyman Hakeem Jeffries has pointed out, subsidiary structures for projects like Battery Park City has provided valuable continuity.

Legislative policy

It should be noted that this bill clearly contradicts legislative policy as established by the Public Authorities Reform Act of 2009 which limits the powers of public authorities and their ability to form subsidiaries. This Act specifically prohibited public authorities from creating such new subsidiaries. No clear case has been made by the bill's sponsor as to why the legislature would need to make a precedent setting exception in this case.

The act prohibits public authorities from creating subsidiaries unless a law authorizes them. It states:
2827-a. Subsidiaries of public authorities.
1. Notwithstanding any law to the contrary, no state authority shall hereafter have the power to organize any subsidiary corporation unless the legislature shall have enacted a law granting such state authority such power for the organization of a specific corporation, provided, however, that a state authority may organize a subsidiary corporation pursuant to the following requirements:
a. the purpose for which the subsidiary corporation shall be organized shall be for a project or projects which the state authority has the power to pursue pursuant to its corporate purposes;
b. the primary reason for which the subsidiary corporation shall be organized shall be to limit the potential liability impact of the subsidiary's project or projects on the authority or because state or federal law requires that the purpose of a subsidiary be undertaken through a specific corporate structure
(Emphasis added)

In other words, public policy discourages such subsidiaries unless the state legislature agrees they're necessary. In this case, there's a good argument that it would be necessary.

That said, legislators supporting the vaguely-worded bill could make additional arguments explaining why, in this case, it's necessary.

For example, they could cite examples, such as with Queens West and Battery Park City, where such a subsidiary has been helpful. The ESDC has numerous such subsidiaries.

Current structure sufficient?

ESDC's current oversight structure is more than sufficient and the establishment of a subsidiary is unnecessary and will only serve to further delay the project's implementation [sic] which will bring to Brooklyn, the City and the State the many public benefits associated with the Atlantic Yards General Project Plan.

Therefore, for the reasons stated above, Forest City Ratner Companies strongly opposes this legislation.

As has been shown, there's little reason to expect that project's implementation will bring the promised public benefits. Nor is the current oversight structure sufficient.

FCR Memo in Opposition to Public Authority to Oversee Atlantic Yards

Atlantic Yards Website 71011


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