Atlantic Yards Twist: Judge Agrees State Agency Catered To Developer Forest City Ratner

The new decision, if no slam dunk, is more than a "minor victory." As previous Atlantic Yards litigation has shown, state judges rarely second-guess state agencies.
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The local press recently applied team coverage to the slaying of an eight-year-old Hasidic boy in Brooklyn and the perjury trial of pitcher Roger Clemens, but an important court ruling regarding the controversial Atlantic Yards project in Brooklyn received either minor mention or -- in the case of the New York Times and the New York Daily News -- a complete blackout.

That's a shame, because the decision confirms what many Atlantic Yards opponents, and even some more neutral observers, have long believed: the New York State agency in charge of the arena-cum-skyscrapers project has bent over backwards to accommodate developer Forest City Ratner.

And that message, also contained in the new documentary Battle for Brooklyn, suggests the much-touted move of the New Jersey Nets to Brooklyn will be forever tainted.

On July 13, in a long-awaited decision, New York Supreme Court Justice Marcy Friedman ruled that the Empire State Development Corporation (ESDC) was not credible in its assumption that the project could be built in the official ten-year timetable.

Thus she ordered the ESDC to conduct a Supplementary Environmental Impact Statement (SEIS) to address -- and potentially mitigate -- the neighborhood impacts of the second phase of a buildout that could last 25 years.

After all, neighbors of the massive construction project in Prospect Heights are already complaining about a plague of rats, illegal parking, construction noise, and trucks idling on residential streets. And an 1100-space interim surface parking lot -- directly adjacent to a historic district -- has yet to open.

"Minor victory"?

Friedman declined to stay construction of the arena, nor the towers surrounding it -- thus providing significant breathing room, as Forest City Ratner and state officials have stressed. And some in the press, like the Brooklyn Paper, dismissed the decision as a "minor victory."

Yes, had Friedman ruled similarly in early 2010, it would have had a much greater impact. And, as I describe below, the judge's failure to admit a key piece of evidence -- dubiously withheld by the state -- allowed the arena groundbreaking to proceed in March 2010 without a huge question mark.

Nor, as I wrote last November regarding a previous iteration of the case, could Friedman turn the clock back to the summer of 2009. Had the ESDC conducted an SEIS, that could have delayed the project past the deadline Forest City Ratner faced to get tax-exempt bonds issued, thus jeopardizing the developer's bottom line.

Still, the new decision, if no slam dunk, is more than a "minor victory." As previous Atlantic Yards litigation has shown, state judges rarely second-guess state agencies, given that the latter must merely show a "rational" basis for their decision.

That's a very low bar. In this case, Friedman said "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."

Why did it lack a "rational" basis? For anyone following Atlantic Yards closely, this should've been a gimme. The ESDC's own CEO, in April 2009, publicly admitted that Atlantic Yards -- with 16 towers and some eight million square feet -- would take "decades."

The judge, however, wasn't canvassing such lapses, but looking at the official documents. And those documents, ultimately, were damning.

Moreover, this decision serves as another rebuke to the regular claim by developer Forest City Ratner that the project has been continuously victorious in court.

A tangled history

It's important to remember that, ever since Atlantic Yards was announced in December 2003, the project was supposed to take ten years to complete.

Back then, the arena was supposed to open in 2006. Now the Barclays Center arena, the only building under construction, is supposed to open in September 2012.

Atlantic Yards did not receive official ESDC approval until December 2006. After a tanking economy and lawsuits delayed the project, Forest City Ratner recognized that architect Frank Gehry's elaborate arena block -- with four towers tethered to the arena -- was financially untenable.

So, by 2009, the developer ditched Gehry's design, commissioned a smaller arena, and, thanks to its political clout, managed to reopen deals with state agencies to save money.

(Nets' principal owner Bruce Ratner also unloaded 80% of the money-losing basketball team, purchase to leverage the real estate deal, to Russian billionaire Mikhail Prokhorov, who promptly leveraged his new possession into a much higher public profile.)

With the Metropolitan Transportation Authority, to which Forest City had pledged $100 million for development rights to the Vanderbilt Yard -- nearly 40% of the Atlantic Yards site -- the developer managed to pay only $20 million for the piece of the Yard it needed for the arena block, with 22 years to pay for the rest, at a gentle 6.5% interest rate.

With the ESDC, Forest City also found a way to save its cash: rather than having the agency condemn all the private property within the project footprint, it would instead use eminent domain in stages, thus limiting the developer's payouts.

That change triggered the release by the ESDC in 2009 of a new Modified General Project Plan. And to avoid delaying the project past Forest City's end-of-year deadline for those construction bonds, the ESDC had to explain why no new SEIS would be needed.

Finessing the timetable

An ESDC consultant, KPMG, produced a report that indicated that the significant demand for housing in Brooklyn made the project schedule achievable.

That report, however, was riddled with errors, such as the claim that one prominent condo development in Brooklyn had sold 75% of its units, even though it emerged more than six months later that sales had finally reached the halfway mark.

However, because the economy could delay construction, the ESDC's 2009 Technical Memorandum briefly analyzed whether further delay would result in new impacts -- and the answer was no.

Also, the ESDC noted that Forest City Ratner would have to make "commercially reasonable" efforts to get the project done on time. The state's leverage was contained in a Development Agreement signed Dec. 23, 2009, which gave the developer 25 years, not ten, to complete the project.

But that document, despite the state's pledge to release it promptly, was not released until a week after Friedman heard the first stage of this case, in January 2009.

The petitioners in this case, including groups associated with Develop Don't Destroy Brooklyn and BrooklynSpeaks, soon asked Friedman to amend the record to include the Development Agreement. She refused.

So, in her March 10, 2010 ruling, the judge criticized the ESDC for a "deplorable lack of transparency" but was "constrained to hold that ESDC's elaboration of its reasons for using the 10 year build-out and for not requiring an SEIS was not irrational as a matter of law."

A day later, the ceremonial arena groundbreaking was held.

Reopening the case

The petitioners, however, tried again to bring the Development Agreement to Friedman's attention. She took the unusual step of reopening the case, acknowledging, gingerly, a "misapprehension" on her part about that significant document.

Last November, she ordered the ESDC to "provide a detailed, reasoned basis" for its findings that a 25-year buildout wouldn't be burdensome.

The agency within a month produced a new Technical Analysis saying just that, but the document contained no new data.

After volleys of legal papers, the parties went to court this past March 15. As for the ESDC's contention that a 10-year buildout is actually worse than 25 years, given attenuated impacts, BrooklynSpeaks attorney Al Butzel asked, "Where do they get that from? They pluck it out of the air."

Friedman, ultimately, agreed. Last week she ruled:

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.

Thus, she concluded, using the magic words of legalese:

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.

What's next?

It's not clear whether Friedman's decision will be appealed. If not, it will require the ESDC to issue an SEIS assessing the environmental impacts of delay in Phase II construction; hold further environmental review proceedings, including a possible public hearing; and further findings on whether to approve the Modified General Project Plan for Phase II of the Project.

How might that make things better for neighbors? The review may lead to additional mitigation measures regarding an extended interim surface parking lot, or construction procedures. (The developer late last week agreed to give out free garbage cans to help fight the rats.)

Develop Don't Destroy Brooklyn even argues that the ruling should provoke consideration of the UNITY plan, which would take the Phase II site from Forest City Ratner and bid it out to multiple developers, with a more sensitive approach to the neighborhood.

That's unlikely, given the political momentum behind the project and the very limited political response to Friedman's ruling. After all, Gov. Andrew Cuomo got a nice campaign contribution from Bruce Ratner -- who, despite being a self-described liberal, also gave $12,500 to state senate Republicans.

But the decision, at the very least, should bolster the argument for legislation -- which passed the Assembly and is pending in the Senate -- to require the ESDC to establish a new subsidiary to oversee the project.

And it should remind people, including the dilatory press, that Atlantic Yards is a project that should provoke ongoing skepticism.

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