Saturday, February 18, 2006

 

ESDC appeals decision, says loss of lawyer puts Atlantic Yards project on hold

Until the decision on February 14 disqualifying a lawyer for the Empire State Development Corporation (ESDC) because he previously worked on the Atlantic Yards project for developer Forest City Ratner, ESDC had planned to issue the Final Scoping Document--a prelude to a Draft Environmental Impact Statement--within 30 days.

Now, with the potential loss of attorney David Paget, "the order of the court below has brought the environmental review process respecting the Atlantic Yards project--and thus the project itself--to a screeching halt, since experienced outside counsel is required for a project of this nature," said ESDC attorney Douglas Kraus in a statement filed with the appeal of Justice Carol Edmead's decision.

What about finding a new lawyer? Well, said Kraus, relatively few such qualified counsel exist, and three are already working for other parties in this case: two for Forest City Ratner and one for the Metropolitan Transportation Authority. He asked for an expedited appeal "in the interest of fairness," and called for a schedule that would lead to an oral argument before the state appellate court during the week of March 6.

A factual twist in the legal case

As shown by Edmead's narrow decision upholding the ESDC's right to approve the demolitions proposed by Forest City Ratner, what's legal may remain questionable. While Edmead's disqualification of Paget may seem intuitively right to those objecting to the "collaborative" relationship between developer and state agency, it may not rest on solid legal ground. The judge herself said from the bench, "I don't doubt that the court's determination may not stand."

While the case law undoubtedly will be argued in competing memoranda of law, the memorandum initially filed by the ESDC makes the case that Edmead misread the documents in asserting that Paget was retained by ESDC in February 2005 and thus was representing both parties at the same time. Rather, Kraus argues in the memorandum, there was no such formal retainer, just the signing of a cost reiumbursement agreement, which actually occurred in February 2004.

Rather, Paget worked for Forest City Ratner through September 2005, then went to work for the state agency the next month--but never for both parties simultaneously. The issue, though, is broader: whether there is an apparent conflict of interest as well.

Edmead wrote, "The Court does not question respondents' contention that it is normal procedure for the applicant to pay for ESDC specialists. However, that does not obviate the obligation to avoid any conflict of interest"--a conflict stemming also from the "oft bottom-line, profit-making pursuits of real estate development corporations" and the "valid environmental interests of the ESDC." Since that pattern may be typical for such large development project, the appellate court must decide is whether it's inappropriate.

Thursday, February 16, 2006

 

Collaborative, arm's length, or just cheerleading? ESDC's Gargano embraces Ratner plan

One URL for the Empire State Development Corporation (ESDC), the state's chief economic development agency, is nylovesbiz.com, and the homepage logo features a heart. That suggests that the relationship between the agency, known formally as the New York State Urban Development Corporation, and the businesses it works with is hardly adversarial and may not merely be collaborative--a description offered by an agency lawyer during the court hearing 2/14/06--but positively embracing.

But that rosy image is belied by Justice Carol Edmead's ruling that the lawyer advising ESDC on the proposed demolitions within the Atlantic Yards footprint should be disqualified because he recently worked for developer Forest City Ratner. She called it "a severe, crippling appearance of impropriety," and said that the relationship could not always be collaborative, because the agency and the developer differed at one point on whether the demolitions required agency approval.

Can the agency be expected to do a fair job in both promoting economic development and evaluating the environmental impact of the proposed Atlantic Yards development? ESDC Chairman Charles Gargano gives little cause for confidence. He recently said he knew nothing of any conflict of interest posed by the agency's lawyer, didn't know the agency rents space in a mall owned by Ratner, and endorsed the Atlantic Yards project without reservation, even before the environmental impact statement has been issued.

Other statements made on the Brian Lehrer Show, cited below, show Gargano unaware that the Atlantic Yards plan began via a developer rather than an open process, overestimating the number of public hearings associated with the review of the Atlantic Yards plan, and claiming--even though his agency's goal is job creation and economic growth--that the reason to support the project is because it would create housing.

Republican fundraiser

Though he had a successful business career, Gargano is better known for his job as a prodigious fundraiser for Republican candidates like President Ronald Reagan, Sen. Alfonse D'Amato, and Gov. George Pataki, who appointed him to his current post. Under the administration of President George H.W. Bush, he was named ambassador to Trinidad & Tobago; he sought the ambassadorship to Italy under the current president, going so far as to submit a letter from Manhattan D.A. Robert Morgenthau clearing him of any wrongdoing in charges of politically-motivated grantsmanship, according to a 3/17/01 article in the New York Times.

An 11/7/99 review by the Daily News showed that 40 of 201 companies that received ESDC loans or grants had given political contributions to Gov. Pataki or other Republican causes. In a 9/26/96 article in Newsday, state Sen. Franz Leichter, a Democrat from Manhattan, called the ESDC a "political slush fund" for Pataki, citing 11 procurement contracts to firms politically linked to Republicans. (Forest City Ratner head Bruce Ratner is a Democrat, but companies he controlled have historically made contributions to various politicians, including $7,500 to since 2000 to state groups affiliated with Governor Pataki, according to a 12/10/03 article in the New York Sun.)

On the radio

On 11/15/05, Gargano appeared on the Brian Lehrer show on WNYC, and was mostly asked about the Atlantic Yards project. Lehrer began by reading an article about a fundraising walk held two days earlier by opponents of the project, citing objections to the density of the plan, the lack of democracy, and to use of eminent domain. He then cited a commentary posted that day by Tom Angotti, a professor of urban studies at Hunter College, that said "the planning for Atlantic Yards is all backwards." Lehrer asked Gargano, "Is this a through-the-looking-glass version of how development should work? (Photo from Brian Lehrer show.)

CG: If you understand development and how it does work, we have a process in government, state government and I’m sure other government bodies have the same, whereby we put out first of all, on any area we’re trying to develop, we put out what we call an RF-- I, request for-- EI, expressions of interest. The reason why we do that is we want to pick the brains of the private sector, and see what kind of ideas they have, and after all, they’re the ones with the resources who are going to build these projects, so we want their ideas. We put out this RFEI, that’s the initial—that’s the first part of the process, and it has worked very well for many, many decades. So it’s not necessarily so that the governments put out a plan of how they want to see something done. An example of that is 42nd Street. Now 42nd Street--the finished product is a very good project, however, that plan, over more than a dozen years, was changed three or four times, until the government came up with a plan that was acceptable to all. So I believe bringing in the private sector, and their ideas, with their engineers and architects, and their resources, is the proper way of going about it.

There was no such RFEI issued for the Atlantic Yards project, though there have been for other projects. As Brooklyn Borough President Marty Markowitz said in affidavit, he urged Bruce Ratner to buy the Nets basketball team, and Ratner concluded that a standalone arena made little economic sense.

The agency had a previous relationship with Ratner, on several projects. For example, as the Village Voice reported in a 6/17/02 article headlined Paper of Wreckage, Gargano met with Ratner in 2000 to discuss the state agency's role in condemning properties on Eighth Avenue in Manhattan for the Times Tower that Forest City Ratner would build in partnership with the New York Times Company.

Avoiding democracy, or just red tape?

Lehrer continued to quote Angotti's essay, pointing out that, because the ESDC is in charge, Forest City Ratner can avoid the city's Uniform Land Use Review Process (ULURP), which would require votes by the local community board, borough president, city planning commission, and city council. Lehrer asked, "So, are you helping Forest City Ratner do an end run around the usual land use democracy?

CG: That’s one way of categorizing it, but we don’t believe that’s the case at all. More than 40 years ago, the Urban Development Corporation [the ESDC’s predecessor name] was created with the powers of getting projects done. That doesn’t mean that we abuse any kind of process or circumvent any process. But what we’re trying to do is get projects built that are in dire need of being developed, such as 42nd Street as I mentioned before, and there’s a whole host of projects. And it’s not a question of circumventing or trying to avoid a process. It’s a way of going about it, with the scoping process that we have, and then environmental impact review. So we go through a lot of process. What we try to eliminate is a lot of red tape that doesn’t necessarily make for a better project

The difference between process and red tape is unclear, but unmentioned was how, by going through the ESDC, the project can override city zoning and be built at a higher density than otherwise allowed.

Lehrer followed up by asking, "Why shouldn’t a big project like this that affects several city neighborhoods go through the ULURP land review process.... Why isn’t that just better democracy?"

CG: Well, you’re going through many, many layers of government, and we don’t think it really is always necessary. As I said before, we do go through a process here, we do go through a scoping process, and we have public hearings to allow the public to comment while we’re going through the scoping process. And then when we develop a draft EIS, we have public hearings once again. In the meanwhile, we have a lot of public hearings, with the community and other members, interested parties. So, it’s a lengthy process in itself, but that doesn’t mean we have to go through many layers of government when sometimes it’s not necessary.

Public hearings? There was only one public hearing so far, on 10/18/05, after the draft scope of analysis was issued, and there may be only one more, after the Draft Environmental Impact Statement is released, likely in the next few months. There are no public hearings "in the meanwhile."

Opponents NIMBYs?

Lehrer pointed out that project opponents were unhappy that there was no public hearing until the one held in the previous month. Gargano responded by raising the spurious NIMBY claim.

CG: Well, one of the things I think we have all learned in our lifetime is the fact that when we are in a particular area, we want nothing else to happen in that area, we don’t want any future development, we don’t want any cleanup, even blighted areas. Look, I received a lot of criticism when we started working on 42nds Street, and we had all these peep shows, sex shops, prostitution, drug sales. And there were objections there, that we were getting a lot of these-- cleaning up a blighted area and getting a lot of these undesirable establishments moved from there. So everyone has their own opinion and that’s fine--

Lehrer interjected, "So it sounds like what you’re saying is the way to keep things moving that the direction that the leaders of the state want is to lock out public input?" Gargano repeated his "process" mantra.

CG: That’s not so. We do have enough public process in everything we do. As I said before, we have a number of public hearings and we do have a process where the public is involved. I don’t think it’s trying to exclude the public. I think what we have to do, when there is a need to accomplish something where it's for the public good, we have to find a way of doing it, and not getting blocked in red tape for long periods of time.

Competing plans

Lehrer read another section from this article, citing the community-developed UNITY plan for the Vanderbilt Yard, as well as the plan for the railyards submitted by the Extell Development Co. that was rejected by the Metropolitan Transportation Authority (MTA). Lehrer asked if it was "right or fair for the MTA to reject the alternative proposals without a public hearing"? Gargano said it wasn't his business.

CG: Well, first of all, the MTA owns the property, you’d have to speak to the MTA on what the process is. But I know that the MTA does own that property, and they have their own processes they have to go through, when they sell their property. So I’m not going to question them, but obviously that question has to go to the MTA.

Lehrer asked, "Do you have your own opinion that the Ratner plan is better on the merits than the Extell plan?"

CG: What I do know is we have a lot more detail on the Ratner plan. We know--again, this is a question of what the MTA has decided, who to sell the property to, we’re not a part of that, Empire State Development. I can tell you what I do know. The Ratner plan is a very detailed extensive plan to clean up the blighted area within that area, finally develop railyards. Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them, just accepted them in their community, throughout Brooklyn. I remember these yards, I grew up in Park Slope, Brooklyn. These railyards have been sitting there for 40 or 50 years, or longer, obviously, that I remember. The reality is, when someone comes in to develop, all of a sudden everybody is up in arms about how valuable they are. We just had that on the West Side of Manhattan, with the Jets. Now all of a sudden, now that the Jets have decided to stay in New Jersey, which was a big loss in my opinion to us here in New York, now all of a sudden, where’s the interest for those railyards at this point? Very little.

But wasn't it ESDC's job to send out an RFP to develop the railyards, or to work with the MTA to do so? And Gargano failed to acknowledge that the MTA accepted a bid for less than half the appraisal, and for $50 million less than that bid by rival developer Extell.

Nor has the ESDC apparently made any effort to conduct an independent review of the fiscal impact of the Atlantic Yards project, instead relying, in a 3/4/05 press release, on a study conducted by developer Forest City Ratner's paid consultant. Does the ESDC accept fiscal impact studies in the same way it accepts an engineering report regarding emergency demolitions?

Atlantic Yards a "wonderful plan"

Lehrer pointed out that the main opposition group, Develop Don’t Destroy Brooklyn, has pointed out that they don't oppose development, just excessive development. "Why do you think there’s no interest for 40 or 50 years, and then, all of a sudden, there are competing ones?" he asked.

CG: Well, I think what happens, it brings interest to a particular site. As the Jets brought interest to the site on the West Side railyards, similarly here, Forest City Ratner, who has been doing a tremendous amount of good development work, in Brooklyn, downtown Brooklyn, MetroTech and others. They came up with a wonderful plan here, for not only bringing back the Nets, that’s also a plus, but the main reason here is the housing that’s going to be developed, and it’s going to be affordable housing, and it’s going to be set aside for minority workers to work on the particular project, the largest percentages I have ever seen in construction. So therefore it includes the entire community when it’s being developed. It includes the entire community, who want to still live in that area. I don’t know what the other plans are and again, based upon the decision by the MTA, that’s their decision, not ours.

Does MetroTech constitute good development work? Well, it has kept back-office jobs from moving to New Jersey, but only thanks to some significant subsidies, producing a decidedly mixed record, as WNYC has reported

The agency's goal is economic development, not housing, and Atlantic Yards is mostly a project to build luxury housing. Only 2,250 of 7,300 units would be affordable. As for including "the entire community," Gargano apparently hasn't noticed criticism of the Community Benefits Agreement.

Gargano said 2/14/05, commenting on an unrelated issue, "As New Yorkers know, the benefits, programs and services that we provide companies are in return for them creating and retaining jobs in New York State." Note that the number of permanent office jobs at the Atlantic Yards project, once estimated at 10,000, would be no more than 2,500.

Too dense? Not to Gargano

Lehrer asked if he was concerned by the project's density. "A lot of people who even support the idea of this development by Ratner, including the Nets arena, were kind of taken aback when they saw the blueprint," he said.

CG: Well, there’s going to be a lot of open space as well. You can build in many ways, Brian. You can spread it out with lower buildings, or you can concentrate taller buildings and have a lot of open space. The developer proposes to include approximately seven acres of public open space within the project site, with all kinds of amenities. So you have to take the square footage over the entire area. Plus the developing has become more popular, so that we leave open space.

While that last sentence makes no sense, Gargano was repeating Forest City Ratner's claims regarding open space. However, the amount of open space would be far less than recommended by the city, given the population.

Lehrer, citing the one public hearing, asked if there would be more. Gargano repeated his favorite word: process.

CG: Oh, absolutely. There’s a lot more that has to be done. First of all, October 18, we started hearings, during the scoping process. That ended October 28, and now we’re beginning the Draft Environmental Impact Statement, and that’ll take a long period of time. From that, there will be more comment periods, and we’ll have to evaluate those comments before we go into the Final Environmental Impact Statement. So there’s a lot of process yet to go.

Personal qualms?

Lehrer tried to get Gargano to acknowledge any "environmental questions or concerns, any spot that you’re looking at and saying, ‘Well, I’m not sure of this aspect, they’re really going to have to satisfy me on this’?"

CG: I think what we have to do is make sure that we have the proper infrastructure that is required for a development of this type, and we will make sure of that, and that’s part of the environmental impact statement, it takes traffic studies, air quality, and so forth, so--

Lehrer interjected, repeating his question, asking for a personal view, and Gargano repeated himself.

CG: As I said, the infrastructure has to be built in accordance to the needs of this particular development.

Lehrer gave up and turned to questions of Ground Zero.

A few weeks later, Gargano, apparently disregarding process, offered his personal view to the New York Observer: "There is no need to scale down the project."

Wednesday, February 15, 2006

 

From the case file: $4 million a month (FCR's costs), Roger Green freelances, and the $6 billion deception

For every month Forest City Ratner waits to commence construction on the Atlantic Yards project, it costs the company $4 million. State Assemblyman Roger Green has a novel theory for why the developer traded office space for housing in the Atlantic Yards plan. And 15 public officials, apparently unfazed by parroting the developer's paid consultant, have predicted that the project would bring $6 billion in new tax revenues to the city and state.

Those tidbits and more emerged from the legal papers filed in the case challenging Forest City Ratner's plans to demolish five properties and asserting that a lawyer for the Empire State Development Corporation has a conflict of interest because he previously represented the developer. Yesterday the judge refused to block the demolitions but ordered the attorney removed from the project.

FCR's bottom line

FCR VP Jim Stuckey, in his affidavit, argued against delaying the project, because it would cost the developer $4 million a month. He stated:
At this time, it costs FCRC about $2,500,000 per month to carry the real property that it has acquired for the Project and the overhead that is in place to work on the Project - a figure that does not include FCRC's legal fees and also does not include the operating losses that the Nets basketball team, which has been owned by an FCRC affiliate since early 2004, and continues to incur while it is based at its current venue in New Jersey. In addition, delay on a project such as this one probably would subject FCRC to escalation in its eventual construction costs of nearly $1,400,000 per month. Therefore, if a preliminary injunction were to stop the Project temporarily for even one month, the damages to which FCRC would be subjected would exceed $4,000,000 per month.
(Photo from Forest City Ratner web site.)

The model CBA

Why would a brake hurt the public? Stuckey cited jobs, housing, and the Community Benefits Agreement (CBA):
The Community Benefits Agreement is the first such agreement ever entered into by a development in a major development project in New York City. We believe that the Community Benefits Agreement may set the standard for all future major development projects in the City, and FCRC is the first developer to have - and the Project is the first development project- to have undertaken such far-reaching and extensive commitments to the community.

Set the standard? Remember, activists in West Harlem say they're avoiding the Brooklyn model.

Alternatively, it might be argued that the CBA was also promoted to garner political support for a project that would cost the public well over $1 billion.

Economic claims

In his affidavit, Stuckey asserted that the project would be an economic boon:
If approved and built, the Project also will serve as a powerful engine of economic growth in other respects as well. We estimate that the Project will create 15,000 construction jobs and, eventually, at least 2,500 permanent jobs. We also estimate that the Project will generate $6.1 billion in new tax revenues-and $5.0 billion in net tax revenues - for the City and the State over the next 30 years.

Once again, 15,000 construction jobs means 15,000 job-years, and the 2,500 permanent jobs is a cut of 75% from the 10,000 originally promised.

Attached to the affidavit of Borough President Marty Markowitz are numerous letters sent to the Metropolitan Transportation Authority from local elected officials, all written from the same template, apparently provided by Forest City Ratner, making the same economic claims. A typical sentence:
According to the estimates, the Arena will add another 400 jobs and - most importantly - serve as an economic engine generating over $6 billion in new tax revenues to the city and state over 30 years.

First, the arena jobs may be filled by current employees. And it's not the arena but the project that has been estimated to generate $6 billion in revenue. But the $6 billion in revenues must first be offset by the at least $1.1 billion in public costs that Stuckey acknowledges (though the politicians don't). More importantly, the costs and benefits are estimates by the developer's paid consultant, and its assumptions have been criticized not only by project critics but also by the New York City Economic Development Corporation and the Independent Budget Office, who point out significantly lower revenues and higher costs. In other words, the cost-benefit claim deserves a much closer look.

But the $6 billion claim was made in letters from the following: Senator Chuck Schumer; Representative Ed Towns; State Senators Martin Malave Dilan, Carl Andrews, Carl Kruger, and Kevin Parker; State Assemblymen Roger Green, Joseph Lentol, and Darryl Towns; City Council Members Erik Martin Dilan, Bill de Blasio, Lewis Fidler, Michael Nelson, and James Sanders; and Public Advocate Betsy Gotbaum.

State Senator Martin Golden and then-Manhattan Borough President C. Virginia Fields, perhaps wary of such figures, both wrote letters in support without mentioning revenue estimates. City Comptroller William Thompson, who works with numbers every day, more cautiously cited "the millions of dollars in revenue it will generate."

Delays kept Paget on FCR payroll

In the course of explaining FCR's relationship with Paget, Stuckey acknowledged that the project has been delayed:
In fact, in a letter agreement dated February 18, 2004 (the "Cost Letter"), between FCRC and ESDC, I confirmed to ESDC's Chairman and Chief Executive Officer, Charles A. Gargano, that FCRC would "pay certain costs incurred by [ESDC] with respect to the proposed Atlantic Yards-Brooklyn Arena Mixed Use Development Project (the `Project')."... The Cost Letter specifically confirmed that FCRC had "requested that [ESDC] authorize and/or oversee... services to be performed in connection with the Project," and it specified that these services included "[l]egal services to be provided by Sive, Paget & Riesel, P.C. in connection with the environmental analysis of the Project...."
At FCRC, we understood the Cost Letter to mean that Mr. Paget really was representing ESDC, although FCRC was obligated to pay his firm's fees. This is customary practice in virtually every public-private transaction we have been a party to and was customary when I worked in government as well. Furthermore, as shown in the accompanying affidavit of Jane Marshall, an FCRC Senior Vice President, when the Cost Letter was finalized in February 2004, we anticipated that the Project would move forward to the point where ESDC would formally retain Mr. Paget much more rapidly than turned out to be the case.


Message: keep web site updated

Paget said that he "provided advice to Forest City, from time to time, from the time of my initial retention in December 2003 until September 2005, with long periods of inactivity in between." However, "[f]rom and after October 1, 2005, I and my firm have at all times advised only ESDC concerning the Atlantic Yards project." The reference on his firm's web site that stated that he represented the developer "is outdated and has been amended."

On the conflict

Anita Laremont, senior VP and general counsel for the ESDC, said that hiring Paget was not a conflict of interest:
Indeed, we believe that such a characterization indicates a serious and fundamental misconception of ESDC's unique mission and the legislatively mandated role it plays in the development process.... When ESDC agrees to become involved in a proposed project, it does so because it perceives that the project has the potential to further ESDC's mission of fostering economic investment and development. In short, when we determine to sponsor a project, we want to see it completed for the benefit of New York State and its residents. The developer also wants the project to be completed, so our interests are not adverse.

That didn't convince the judge.

Paget also said that his firm had represented Forest City Ratner in two unrelated and much smaller cases since March 2004, with a total billing of $27,000.

Wonder what a top environmental lawyer bills? Paget bills $550 an hour to ESDC, while two of his colleagues bill $480 and $350 respectively.

Underberg worries

Regarding the Underberg Building, FCR Senior VP Andrew Zlotnick stated that company officials were worried about the building falling down:
This structure is so unstable that it has been supported by a sidewalk bridge for several years, and this condition is extremely dangerous due to the fact that there is a public bus stop on Atlantic Avenue immediately adjacent to the property. After demolition of this property, I and others at FCRC will sleep better at night, knowing that this structure is no longer a threat to the pedestrians who walk under that sidewalk bridge every day. (Photo from Forgotten NY.)

He didn't address why the developer hadn't posted warning signs elsewhere.

Roger Green, engineer?

Green said in his affidavit:
I have personally walked the streets in and around the Project's area and have visually examined the exteriors of the buildings that the developer intends to demolish. I also have reviewed the expert engineering report that recommends the demolition of these buildings. There is no doubt at all in my mind that these buildings are very dangerous and pose serious threats to the safety of my constituents who live along or use these streets. It horrifies me to think that a court is being asked to halt the demolition of these obviously hazardous structures.

Green might have better left the authoritative commentary to a real engineer, who had a different opinion. (Then again, Council Member Letitia James, a "This Old House" fan, could've done so too.)

Herbert Daughtry, amnesiac?

The Rev. Herbert Daughtry said in his affidavit:
I [have] always been impressed by Mr. Ratner's public-mindedness and always have found Forest City Ratner Companies to be an organization that cares about the communities in which its projects are built and goes out of its way to do right by those communities.

Well, Ratner has begun making contributions to local charities. But has the Rev. Daughtry taken a walk around the perimeter of the Atlantic Center mall?

Green, freelancing again

Green offered another explanation for Forest City Ratner's decision to trade office space for luxury housing in the Atlantic Yards plan: it was the developer's concern for the community. In a 6/28/05 letter to the Metropolitan Transportation Authority included in the case file, Green wrote:
In response to concerns that the developers [sic] proposal for 1.9 million square feet of commercial office space might be a burden on the infrastructure and the built environment of the local neighborhoods (Fort Greene, Prospect Heights, Park Slope), Forest City Ratner Companies is now offering up an alternative plan that would build 428,000 square feet of commercial space.

However, the market for office space was iffy at the start, and became even more questionable by the time Forest City Ratner made the switch. The New York Times reported 11/6/05 that it was a question of revenue:
Officials of Forest City Ratner said they eventually realized that they would have to reduce the amount of commercial space, to accommodate condominium units that would help pay for the project, including the below-market rental housing.

As I pointed out, the evidence suggests that Forest City Ratner had had the condo plan in the cards for a while, but wanted ACORN on board before announcing the switch a week later.

Marty: unqualified supporter

In his affidavit, Borough President Markowitz declared:
I am an unqualified supporter of the Atlantic Yards project. This project will be a huge growth engine and will benefit a wide swath of our public with thousands of units of affordable and market rate housing, thousands of good, well paying jobs, and billions in new net tax revenues for the Borough, the City and the State.

So much for Marty's concerns about privatized park space on the arena roof and even the scale of the project. Well, he did acknowledge: That is not to say that the Project does not present challenges for the Borough, including traffic and its scale, among others, and that the Project's opponents, many of whom have legitimate and fair-minded concerns about the Project, should have input in shaping the Project.

Final scope in a month?

The ESDC's legal filing stated that a Final Scoping Document, which precedes the Draft Environmental Impact Statement and then a public hearing, should be issued within 30 days. The Draft Scope generated much criticism and a raucous public hearing, so it'll be interested to learn if the agency is prepared to consider a broader range of public impacts than initially outlined.

Tuesday, February 14, 2006

 

Judge won't block demolitions, disqualifies ESDC lawyer who worked for Ratner

After a lively and contentious three-hour hearing today, state Supreme Court Justice Carol Edmead denied a lawsuit by Atlantic Yards plan opponents to stop developer Forest City Ratner from demolishing five properties within the project footprint. That gives the developer some momentum--despite assertions that the project is in its early stages--but Edmead also gave those opponents a partial victory, endorsing their claims that the process has been unfair. She ruled that David Paget, a lawyer reviewing the project for the Empire State Development Corporation (ESDC), should be removed from the case because he recently worked on the project for Forest City Ratner.

Lawyers did not immediately announce an appeal, though Edmead as much as invited one on the latter issue. The case drew a standing-room-only crowd of some 80 people--mostly project opponents--to a small courtroom. Several press accounts (see below) emphasized the conflict-of-interest ruling.

While advocates (including Council Member Letitia James, representing herself and two other local elected officials) raised larger issues, such as the respective opposition to and support for the project in Brooklyn, Edmead based her demolitions ruling on a fairly narrow issue of law. It didn't matter that that the properties may have deteriorated under the control of the developer, or that recent inspections by city agencies did not lead those agencies to recommend demolition, or that the developer first approved, then denied, an invitation for James to bring an independent engineer to inspect the properties.

Rather, such an "emergency action" is considered a Type II action under state environmental law (SEQRA), and must be allowed unless the decision was "arbitrary and capricious or an abuse of discretion." The ESDC, in approving the demolitions, relied on reports, written and oral, from the developer's engineering firm, and internal consultations and site visits by its own personnel, and the judge said that was within the bounds of the agency's discretion. Demolitions may begin in ten days.

(Note that there are five properties, since a sixth building initially announced for demolition was not yet approved by the ESDC. The petitioners consider the six initially announced properties 12 buildings since one of the properties has a building behind it, and the Underberg Building is six joined structures. Subtracting that one building not yet approved for demolition, five properties and 11 buildings were at issue today. Given Edmead's ruling, the ESDC can similarly approve the sixth demolition. Picture from Forgotten NY.)

Develop Don't Destroy Brooklyn spokesman Daniel Goldstein commented, "We disagree with the Court's decision on the demolitions. We believe that Ratner's public safety claims warranting demolition, for most of the buildings, are a sham. If the buildings are near collapse and a threat to the public why are there no warning signs posted on the buildings and no public protection measures like sidewalk sheds?" He added that the disqualification of Paget placed ESDC's previous approval under a cloud, and that there was a burden on ESDC Chairman Charles Gargano--who had previously claimed no knowledge of a conflict--to restore faith in the agency. (The DDDB press release emphasized the disqualification, not the demolitions.)

Conflict of interest?

Paget, a well-respected environmental lawyer, has represented ESDC for nearly 30 years on various projects. In December 2003, Forest City Ratner, after discussions with the agency, retained Paget on the Atlantic Yards project. He provided advice to the developer through September 2005, but in February 2005, ESDC formally retained Paget as outside counsel, according to the ruling. "In short, the ESDC essentially hired the sponsor's current lawyer, at the sponsor's expense, to assess the environmental ramifications of the sponsor's project," Edmead wrote. (Note that the ESDC appeal says Edmead's fact sequence is off.)

Lawyers for ESDC and Forest City Ratner said the process was not adversarial, but collaborative, since both the developer and agency are interested in having the project move forward. Jeffrey Baker, an attorney for petitioner Develop Don't Destroy Brooklyn, instead characterized it as "an arm's length transaction."

Edmead agreed. She wrote in her decision, "Potentially, the interests of Ratner Companies, as an applicant or project sponsor, are adverse to the interests of the ESDC, which is charged with the responsibility to protect the environment and regulate the activities of individuals and corporations so that 'due consideration is given to preventing environmental damage.' The oft bottom-line, profit-making pursuits of real estate development corporations may not necessarily align with the stated, valid environmental interests of the ESDC."

She enjoined the ESDC from taking further action that requires Paget's services until new counsel is engaged, within 45 days. However, she also said from the bench, "I don't doubt that the court's determination may not stand, but I believe the objective public interest standard has not been met." Paget, she added, should not be in a dual role: "It has such a severe, crippling appearance of impropriety." (Note that a commentator to this blog suggests that her statement was pro forma.) She said that she was "very much swayed" by the arguments of Council Member James, though that might have referred to the judge's oral rhetoric more than the legal decision; the ruling had been in preparation, since the judge's law secretaries were able to finish it and deliver it to litigants just after the hearing concluded.

The press coverage

The Daily News, in a 2/15/05 article headlined Ratner aide, key buildings get heave-ho, declared it a mixed result, but gave an edge to the critics: Opponents of Bruce Ratner's controversial Nets arena complex lost a battle yesterday - but not the war.

The New York Sun, in an article headlined Opponents of Atlantic Yards Plan Say Court Ruling Is Auspicious, emphasized the conflict, leading:
Opponents of the proposed Atlantic Yards development in Brooklyn said a Supreme Court ruling yesterday is a signal that in future legal battles the courts will look favorably on their contention that the approval process is tainted.

The New York Post, in a brief article headlined HOOP LAWYER IS BOUNCED, led with the conflict: A judge called a technical foul yesterday on Bruce Ratner's bid to build a $3.5 billion basketball arena in Brooklyn.

The New York Times, in an article headlined Demolition Can Proceed for Brooklyn Arena Project, had the most thorough coverage, but emphasized the demolitions issue. The shorthand headline compresses the issue, since, while the demolitions are within the project footprint and it does give the project momentum, the project has not yet been approved, and the developer may choose to build other structures if the project is blocked.

The Times reported on issues raised by the conflict:
"There's a built-in ambiguity or inconsistency to the law there," said Philip Weinberg, a professor at St. John's University and an expert on environmental review. "The whole principle behind review is to have the agency deciding whether to go ahead with the project review the project's impact themselves. But they are also supposed to play it down the middle."

Leading off

Baker began his case by assuring the judge that his clients do not oppose "jobs, housing, or responsibility development." Rather, he said, "This case is solely about the objectivity and validity of the environmental review process." He said that ESDC and Forest City Ratner had not made the case for demolitions, noting there were no affidavits "from any trained professionals attesting to the imminent threat." He added that, since the announcement of the demolition plans, "there has been no action taken by Forest City Ratner to secure or demolish these buildings." He said that, on Monday, he saw no warning signs or scaffolding outside 461 and 463 Dean Street.

"There is no imminent threat," he said. "This has been a planned demolition from Day 1 that has been shoehorned in SEQRA [the state environmental review] to make it an emergency." Baker noted that demolition plans were completed for 461 and 463 Dean Street on 3/7/05, for 585 Dean Street on 3/4/05, for the Underberg Building (608-620 Atlantic Avenue) on 2/15/05, and for 620 Pacific Street on 6/30/05--all long before the 11/7/05 report by LZA Technology that called the buildings "an immediate threat to the preservation of life, health, and property." (At left, 620 and 622 Pacific Street.)

Baker said that the developer recognized that it would be difficult to demolish the buildings while the project was pending before the ESDC, and Paget "advised them... that there's a loophole, that there's an emergency."

Edmead challenged Baker's language. "Don't give me a spin." Baker withdrew his characterization of the plan as a "loophole," but said it was an "exception."

Baker pointed out that, according to affidavits from Forest City Ratner employees, the developer was delayed because, in May, the Metropolitan Transportation Authority began an RFP process that led to an additional bid for the agency's Vanderbilt Yard. "I can't imagine how the bidding process affected making necessary inquiries about the underlying structural integrity" of the buildings, Baker said, adding that company president Bruce Ratner had met with MTA Chairman Peter Kalikow twice in August.

He pointed out that there was no technical review of LZA's report by inhouse staff at ESDC, and no evidence that they had inquired about lesser steps to stabilize the buildings. "Every agency has technical expertise," he said. "We don't take an applicant's word for it. That's the reason we have government." Asking for a "hard look" to be taken, he acknowledged, "Maybe they warrant demolition, but not all of them," citing "particularly 461-463 Dean Street, which are an important element of the streetscape." (See photo at right.)

Edmead proffered a photo of a dilapidated structure behind 463 Dean Street. "You'd be hard-pressed to say this is a building you can shore up." Baker pointed out that engineer Jay Butler, hired as an expert for the plaintiffs, had pointed out that such a backyard structure is valuable since, if demolished, it cannot be rebuilt.

A lawyer and a client

After Jennifer Levy, representing low-income residents of Dean Street, pointed out that neither the Department of Buildings nor the Department of Housing, Preservation, and Development had issued the most serious violations after visiting four of 12 buildings, Council Member James stepped to the podium.

James, who with the judge was one of four black women in the room, began her statement in a personal style unlike that of the other lawyers. "Judge, I'm not naturally a woman of courage," she said. "I'm here today because someone has to stand up."

She offered a nonlegal analogy. "This weekend on Channel 13 I watched 'This Old House.' They restored a house in much worse shape than any of these buildings." She recounted how, after she asked for permission to tour the buildings with an engineer, Forest City Ratner at first said yes, but then said she could tour them herself. "Judge, I am many things, but an engineer I am not." (The two-story building at 620 Pacific Street is scheduled for demolition, as is the single-story building at 622 Pacific.)

James noted that Forest City Ratner, in its legal papers, said it wanted to avoid a dangerous building collapse, like one in Fort Greene. "I was there. That building is less than 50 feet from the BQE. That building fell because of vibrations from the BQE, as well as age."

As for the buildings at issue, she said, "These buildings were allowed to deteriorate. They left windows open. The roof was open." She called it a case of "demolition by intentional design, with intentional neglect."

James tried a kitchen sink approach, contending that, because some of the buildings contain asbestos, the demolitions will aggravate the community's high asthma rate, "be visually disturbing and will render this beautiful community blighted."

Paget's dual representation, she argued, "undermines the public faith and trust in government and taints the integrity of the project. SEQRA is a means of doing an analysis, not a means to arrive at a certain conclusion."

James reiterated that she and her fellow elected officials, State Senator Velmanette Montgomery and Rep. Major Owens, are not against development, but oppose development that destroys the character of the community and disrespects elected officials.

The judge pointed out that affidavits submitted by Forest City Ratner included endorsements of the project by numerous elected officials, including Borough President Marty Markowitz. "You represent a voice, not the only voice," Edmead said.

James responded, "I was elected to represent the interest of Prospect Heights. The reality is, overwhelmingly in my district, the community is opposed to the project and the process. We know the community like the back of our hand. I daresay that none of those elected officials can say the same." (Arguably, State Assemblyman Roger Green, a project supporter not in the room, could contest that.)

ESDC's case

Douglas Kraus, representing ESDC, emphasized that the project was in the early stages of review. "ESDC has not approved this project," he said. "We're not here to debate whether it is a good project or a bad project." (Apparently, he was not channeling ESDC Chairman Charles Gargano's endorsement of the Atlantic Yards plan.)

Kraus pointed out that the buildings are "virtually certain" to be demolished, either if the Atlantic Yards plan is approved or if Forest City Ratner decides to build on the property. Referencing James's explanation for the collapse of the building in Fort Greene, he said, "It can't be worse than the vibrations from the railyard, which is literally across the street." (James broke into a grin, perhaps recognizing that vibrations are hard to feel all the way on Dean Street, and that the rail cars move rather slowly anyway.)

As for 461 Dean Street, he said the building has no window: "Anyone can walk in off the street into that building, as I did." Nobody followed up by pointing out that the building might be better secured.

He pointed out that there's no requirement for the agency to consider alternatives to demolition nor to take a "hard look" at the case. The project itself is a Type I action, requiring such a level of scrutiny, but the emergency declaration is a Type II action, he noted.

As for whether the demolitions indicated that the project is a 'done deal,' he said, "That's total speculation. I couldn't see how anybody could help but understand that this process has along way to go."

FCR's case

FCR attorney Jeffrey Braun said that those working for the developer "are very proud of the project. It's going to physically close an enormous gash that cuts through the heart of Downtown Brooklyn." (His location was a bit off.)

He called the lawsuit "an attempt to hijack the process" that allows the public to comment during Environmental Impact Statement process. He pointed out that the legal test "is whether [ESDC's decision] was rational, rather than arbitrary and capricious. Courts cannot second-guess the agency's decision." As for failing to submit an affidavit from an engineer from LZA, he said, "We think that's superfluous."

Braun pointed out that "there are ten vacant building that my client owns or is in contract to buy that it has no intention to demolish." Either FCR decided against demolition on its own, he said, or LZA advised against it. "We're going to wait and see if the project is approved before those buildings are demolished," he said.

He said that ESDC's Rachel Shatz, who approved the demolition, "is a professional urban planner. She is entitled to bring her own evidence to bear," including the 70-slide Power Point presentation made to ESDC by LZA on 11/2/05.

"Pure ugly money terms"

Braun reiterated that the damaged buildings posed a safety hazard. "If you want to put it in pure ugly money terms, can the petitioners post a bond to protect Forest City Ratner from the financial consequences if one collapses?"

As for contentions that residents would be displaced or harassed, "we really take umbrage at that," he said, adding, "We are partners to a pioneering Community Benefits Agreement."

Some in the crowd, critical of the CBA, murmured contentiously. The judge quickly quieted them.

Braun offered his own take on 461 and 463 Dean Street, saying that a photo in the record didn't show cracking in the sidewalk and where concrete had been poured to stabilize the building.

Then he went off on a dangerous tangent. "In our view, even if there was something defective about [ESDC's approval of the demolitions], we'd be entitled" to proceed.

Judge Edmead pressed him: "You would need the approval of ESDC. Is that not right?"

Braun said no.

Edmead: "How can you ignore co-respondent ESDC?"

Braun: "I'm not saying it's a smart move."

Edmead: "It is bonehead stupid. Why are you arguing it?"

Braun said that, under another theory, demolition is not subject to SEQRA "because prudent ownership implies that they should be demolished separately and apart from the project."

Edmead said cuttingly, "I would not rest my partner bonus on that."

A bit later, Braun explained that the company received two interpretations, and that Paget had offered the more "expansive" one. "So as a practical matter, Forest City Ratner agreed to go through with it."

Another road?

The judge suggested that the petitioners might have gotten farther had they argued that the demolitions were a central part of the project, a Type I action that deserved a more rigorous level of review.

Baker said that both Type I and Type II actions deserved the same level of review.

Edmead said, "This all stems from the road you chose to take.... You unfortunately have limitations on the argument you're capable of making." The "hard look" standard does not apply to Type II actions.

She asked what the legal basis was to request a review by an independent engineer. Baker cited a case involving historic buildings in Albany, "but the case did not turn on that. It was an action by the county. The court said there's a question of fact: the independence of the analysis."

Baker said that the 90-minute discussion at ESDC proceeded without an engineer or an architect, and that nobody asked about specific details of the damage.

Edmead said, "To say they didn't do the review the way you think it should be done is not the standard."

Baker responded, "They're making you superfluous."'

Edmead asked where in the law there was a right to demand an independent review. Baker offered a case, and the judge was unimpressed, saying, "It would be more credible if you didn't put ridiculous spins that are not in the record."

Baker said that Shatz "parrots the report of LZA."

Edmead offered her own interpretation: "She indicates other people she consulted... Nothing in the law requires that she consult an engineer."

Conflict of interest

Baker said that "It's beyond question that Mr. Paget had a prior relationship with Forest City Ratner." He noted that an affidavit from FCR VP Jim Stuckey mentioned that Paget or other lawyers at his firm had worked with the developer on several occasions, but "curiously enough, Mr. Paget's affidavit doesn't mention it."

"ESDC has the final determination" on the project, Baker said. "ESDC has tremendous power, and should this project go forward, they will usurp and overrule the city zoning codes, something that's ten times in excess of what zoning would provide. It's an extraordinary power, and the people have a right to expect that the lawyer is doing that in an objective manner." (The ratio may be ten times for part of the project footprint, but not for all of it.)

Private parties, he said, have the right to waive a conflict of interest if they agree on the lawyer, "but does ESDC have the right? I submit: this is more than just an appearance of a conflict, it's a true conflict."

Extell alternative?

One reason that impartial legal counsel is important, he said, is that the ESDC scoping process should contain references to alternatives to the Atlantic Yards plan, including Extell Development Company's proposal to develop just the railyard.

Referencing the developer's lawyer, he said, "Mr. Braun points out that of course Extell's plan will be considered. But the draft scope didn't have any reference to the Extell plan."

At a meeting of the Borough Board Atlantic Yards Committee, Baker said, "people asked, 'How come the Extell plan was not included?' The response from Mr. Paget was, 'We are not privy to it.'" (The summary of that meeting does not include this, but the summaries are cursory.)

"To me, that exemplifies the conflict," Baker said, "to massage the process to get an outcome that favors the developer." He noted that ESDC and FCR "claim it's not an adversarial process, it's collaboration."

Where does that theory come from, the judge asked.

Collaboration or not?

ESDC lawyer Kraus acknowledged that it's not in SEQRA, but in the underlying statute that establishes the state agency, "to undertake projects that promote economic development... There's nothing in the statute that says it's collaborative, but it's the way the process works."

Edmead pointed out that there was already evidence that the developer and agency had differed: on whether Forest City Ratner could demolish the buildings without applying to the agency. "You could not possibly be collaborative," she said.

Kraus contended that the judge was misreading the law, that a state agency can waive a conflict, and that you can't object to a conflict unless you're in an attorney-client relationship.

Baker disagreed. "It's bizarre," he said. "It removes any challenge to a corrupt determination.... The people who live in and adjacent to the project have a right to say, 'This is a stacked deck.'"

Kraus pressed on, saying that community members could always later challenge a decision made by the ESDC. Edmead, as if hearkening back to the earlier issues, noted, "But the review of the determination is very limited."

Kraus said, "If you felt there was a conflict, the conflict has clearly been waived. It was also clearly contemplated that Mr. Paget would be involved representing ESDC when the environmental review got started."

Baker, however, said that Kraus was misreading the case law. "The public is not an adversary in this proceeding," he said. "We expect an objective look.... If they want to issue a final scope that may be tainted by Mr. Paget, go ahead."

He acknowledged that it was typical for developers to pay the cost of counsel hired by ESDC to evaluate their projects. "My question is, would they agree to do it if it weren't Mr. Paget."

FCR attorney Braun said, "Of course... There's been talk about a taint, but there's been nothing demonstrated. The final scope is going to look a lot different." He pointed out that Paget is the state's preeminent environmental lawyer, and that two lawyers at the table, including his own colleague and Baker, had worked for Paget's firm.

Edmead asked Braun why the developer didn't simply leave Paget "where he was, knowing ESDC would pick him up."

Braun said Paget's responsibility was to start the process of an environmental review. Edmead pointed out that Paget was still working for FCR. Braun responded, "He was working for the project."

That led the judge to comment about the "severe crippling appearance of impropriety," to order Paget's removal from his role as counsel to ESDC.

Sunday, February 12, 2006

 

Atlantic Center mall: promise, reality, & NYTimes amnesia

The Atlantic Yards plan has changed significantly, trading office space for luxury housing, and the explanation from Forest City Ratner VP Jim Stuckey, in the 11/6/05 New York Times, was that "Projects change, markets change." Is that the same explanation for why the developer's nearby Atlantic Center mall, once billed as "sympathetic to its urban environment," turned out to be precisely the opposite, offering blank walls to the subsidized housing across the street?

A Real Estate section article in the 6/27/93 New York Times headlined "Perspectives: Bradlees at Atlantic Center; Retailing Opens a New Front in Brooklyn" focused on the emerging plans for the Atlantic Center mall, which ultimately opened in November 1996. It stated:
Mr. [Stanton] Eckstut, the architect, noted that all the stores would be entered from the street rather than from an interior mall and would use building materials compatible with their Brooklyn surroundings.
"We're determined to build a store that is sympathetic to its urban environment, not just a suburban store plopped down on a city street," said Paul A. Travis, executive vice president of Forest City Ratner.


Now the plans did evolve--at the time Forest City Ratner was talking about a 150,000 square foot Bradlees store on two levels, and was also planning another two-level retail facility, with 120,000 square feet. The Atlantic Center mall contains 393,713 square feet. But the design may be an even more dramatic change. The L-shaped mall, just to the right of the Atlantic Terminal mall at the top left of the map showing the Atlantic Yards site, is open to the public only along its southern and western flanks. The two tilted rectangles above the bottom half of the mall outline are the subsidized Atlantic Terminal I buildings.

Ratner's explanation

As noted in Chapter 4 of my report, an article about the developer’s much-derided Atlantic Center mall (Rethinking Atlantic Center With the Customer in Mind; 5/26/04) quoted only FCR's Bruce Ratner to explain away the mall’s design:
Although critics have long called the mall an eyesore and complained about its seemingly incoherent design, there are reasons for its structure and layout, reasons embedded in both the perception and the reality of race, class, economics and crime in late 20th-century Brooklyn.
Planned and built in the early 1990’s, when the area there -- at the crossroads of Fort Greene, Prospect Heights and Downtown Brooklyn -- was just beginning to emerge from a cocoon of high crime and bleak prospects, the center was intended not as an oasis but as the target of a kind of consumer dive-bombing: customers would dart into one place, grab what they needed and quickly leave.
The isolation of stores and lack of gathering locations inside the building was intentional, said its developer, Bruce Ratner of Forest City Ratner, driven by the needs of skittish national retailers and the notion that urban malls had failed because they became magnets for loitering teenagers who frightened the shoppers away.
“It’s a problem of malls in dense urban areas that kids hang out there, and it’s not too positive for shopping,” Mr. Ratner said. “Look, here you’re in an urban area, you’re next to projects, you’ve got tough kids.”
Adding that it was not an issue of class or ethnicity, he said: “You know it’s kids that cut school. In the burbs, a 15-year-old can’t get to the mall without his parents. Here, it’s a little different.”


Forgetting the past?

The Times did not quote any critic who might have argued, contradicting Ratner, that the mall’s design did in fact involve issues of class and ethnicity. Nor did the article quote the 1993 reportage from the Times that promised a very different retail design. At the time of my report, I hadn't seen that 1993 article either but, then again, I don't work at the Times nor have an inhouse library to help with research.

In fact, a look back at the 5/26/04 Times article shows that it exclusively concerned the mall's much-criticized interior design:
Instead of open, multilevel atriums where dozens of storefronts are easily captured by the naked consumerist eye, there are vast expanses of nothingness and dead corridors leading, it seems, to nowhere. In place of furnished common areas offering respite between purchasing bouts, there are broad stretches of shiny institutional floor tile and walls left bare save a hodgepodge of clown-colored signs advertising stores that no longer exist, or that cannot be reached without wending a route of circuitous switchbacks, or leaving the structure entirely.

Forest City Ratner has since renovated the interior, and modified the exterior sections where shoppers enter. But the blank walls remain, a contrast to the Atlantic Terminal mall, pictured above. The north wall of the Atlantic Center mall is in the background; there's a retail store at the corner, beneath the blue vertical signage, but that's it.

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