Wednesday, June 18, 2008

As groups lobby against tax-exempt bonds for sports facilities, is WFP hamstrung by ACORN's AY deal?

There seems to be a consensus among good-government and neighborhood activist groups that tax-exempt bonding for sports facilities, as keyed to the PILOT (payment in lieu of taxes) deals crafted for the new Yankees and Mets stadiums, and planned for the Atlantic Yards arena, is bad public policy. The loss to the federal treasury often benefits sports team owners more than the public at large.

That's why two letters issued yesterday said very much the same thing--but with a curious discrepancy that suggests that the housing group ACORN's role in the Atlantic Yards project may have hamstrung the Working Families Party from explicitly criticizing tax-exempt bonds for the AY arena.

Coalition letter

Yesterday, a coalition of groups, notably Good Jobs New York, the New York Public Research Interest Group, the anti-AY group Develop Don't Destroy Brooklyn and the Yankees resisters at Save Our Parks, sent a letter to New York State's Congressional delegation, asking them to "clearly communicate to the Treasury Department and the IRS that its regulations should be clarified to ensure that in the future no sports facilities will be eligible to receive federal tax exempt financing." (Click on graphics to enlarge.)

In other words, even though the Yankees and Mets were able to use a "loophole," in the words of the chief counsel of the IRS, to use PILOTs to pay off stadium construction, they shouldn't be allowed to gain any more tax-exempt bonds. Nor should Atlantic Yards developer Forest City Ratner, even though city and state officials are lobbying Washington to make sure that these projects escape a proposed new regulation tightening the availability of such bonds.

The WFP effort

Yesterday the New York Working Families Party asked supporters to send a message urging Mayor Mike Bloomberg to stop lobbying to help the Yankees get more tax-free bonds. The message, which mentioned neither the Mets stadium nor the Nets arena, pointed out, as did testimony by Good Jobs New York and others at a Congressional hearing last October, that subsidies for sports facilities can divert funds from critical infrastructure.

Yesterday, Develop Don't Destroy Brooklyn posted an email sent out by the WFP, signed by several officials, including WFP Co-Chair Bertha Lewis, executive director NY ACORN, and a signatory of the Atlantic Yards Housing Memorandum of Understanding (MOU) and a staunch supporter of the project.

The letter also cited only the Yankees Stadium but laid out the broad policy argument, calling it "very sensible" for "private sports teams [to] not have access to tax-free bond money meant for public development projects."

The letter added, "If they succeed, other sports teams in NYC, and around the country, could see billions more in public money heading their way."

The policy argument applies, obviously, to the Atlantic Yards arena. Indeed, as DDDB points out, Forest City Ratner could proceed with taxable bonds. But that could cost an estimated $165 million in revenue, reason enough to doubt Bruce Ratner's nonchalance in claiming the project would be funded no matter what.

WFP neutral?

As a Working Families Party representative commented on this blog in September 2006, the WFP is neutral on Atlantic Yards. Indeed, City Council Member Letitia James, the most prominent political opponent of AY, is an WFP member.

Then again, given that ACORN is a founder of the WFP, the party can't ignore ACORN's position. So, even though the WFP could legitimately mention all three sports facility projects, it chose to mention only the Yankees deal.

ACORN hamstrung WFP on this issue?

Why? I'll speculate that the WFP faced some internal pressure from ACORN, which is required, according to the Housing MOU (above) to "take reasonable steps to publicly support the Project by, among other things, appearing with the Developer before the Public Parties, community organizations and the media as part of a coordinated effort to realize and advance the Project and the contemplated creation of affordable housing."

Though that clause strikes me as difficult to enforce, I can't imagine that Forest City Ratner is happy with anyone lobbying public officials to tighten regulations on tax-exempt bonds. So if Lewis and ACORN were going to criticize "corporate welfare," the least they could do was not mention by name one of the chief recipients of such tax breaks.

3 comments:

  1. *************
    SELLING OUT THE COMMUNITY FOR BEANS (A GIANT WRONG)
    ____________________________________

    MAY 17, 2005: WHAT HAS BEEN SINCE THAT DAY

    Bertha Lewis and her ACORN organization signed themselves out as responsible or credible community participants on May 17, 2005 when they signed the Memorandum of Understanding (“MOU”) with Bruce Ratner. That was early on in the whole Atlantic Yards saga and I am surprised that since then it hasn’t been routinely pointed out in all coverage of Ms. Lewis’s “support” for the project. “Staunch” support? Replace that adjective with “contractual” support. That contractual support was given away by Ms. Lewis and ACORN for virtually nothing. When Ms. Lewis speaks in favor of the project it means virtually nothing- it might as well be Bruce Ratner himself speaking.

    Since May 17, 2005 Ms. Lewis and ACORN have not been free to criticize the project in any respect. No matter that Lewis/ACORN might have a criticism of the project, they must instead support the project. If they think the project is getting too much subsidy they must instead support the project no matter how bloated the proposed subsidy is. If they think that ACORN has better projects in its own pipeline that can make better use of substantial subsidies that are being diverted into Atlantic Yards, Lewis/ACORN have contractually precluded themselves from saying so. If they think the developer has prioritized his arena over "affordable" housing, they must remain silent and support the project. They must support the megaproject no matter what. And, since May 17, 2005, if Ms. Lewis or ACORN possess negative information about the project that none of the rest of us have or information about the project that would be valuable for the community, Ms. Lewis and ACORN must keep that information to themselves. They must not share it because the agreement that they signed contains a confidentiality provision to prevent such sharing. It looks like Ratner’s lawyers took pains to make that confidentially provision the singular most enforceable provision of the agreement drafting it so that a mute Ms. Lewis/ACORN is the only thing “specifically enforceable” under the MOU terms.

    And yet, how often Ms. Lewis’ lack of freedom goes by without mention. When Ms. Lewis speaks and her remarks are reported upon there is the inference of an informed individual who would be forthcoming with information beneficial to the community and who should be ready to offer a balanced perspective in assessing all the mutiplistic evolving issues and iterations of this megadevelopment we have seen since May 17, 2005. Maybe we infer that she could likewise be of service in interpreting the community input, expert reviews and technical data with respect to the project (nearly all which is of value- environmental analysis- superior better leveraged alternatives including Extel’s- has only been available since May 17, 2005). But no one mentions that Ms. Lewis and ACORN when they speak and interact with us are contractually precluded from being an aid to the community as they might be inferred to be. They cannot criticize the project. They must obey Ratner’s dictates and hew to his contractually imposed secrecy. Ratner issues bullying threats to the community saying that the neighborhood scorched by his unnecessary demolitions (buildings like the Ward Bakery) will have decades of parking lots unless the public opens its checkbook for more and more subsidy demands- - And when he demands subsidy, how much might that subsidy be?- - Is there a ceiling to it?- - Do Lewis and ACORN know?- - If they do, they are precluded from telling us. They are contractually obligated to support all of this whether it is reasonable or not.

    The MOU is incorporated into the Community Benefits Agreements (“CBA”) which includes and extends essentially the same objectionable provisions, structure and concepts. Among other things, the CBA sets up a “Governing Council” with respect to which ACORN has responsibilities associated with the seeming exercise of some influence. But how can ACORN or Lewis have influence if they have relinquished the most effective potential tool for influence? How can one exercise influence without being able to freely and publicly criticize and speak one’s mind while marshaling available facts to make a cogent argument? Long ago, on May 17, 2005 Lewis and ACORN relinquished these things. As per the MOU, they are conscripted: “ACORN will . . . appear with the Project Developer before government agencies, community organizations and the media as part of a coordinated effort to realize and advance the Project.”

    I suggest again that the press should routinely mention that they are so conscripted. - In essence this form of indentured servitude- this contractual silencing and total lack of freedom to act conscientiously is indefensible and it is interesting that Crains’ could have concluded that Ms. Lewis, so locked in as she is, is one the 100 most influential women in NYC business because, as stated in their analysis she ‘assisted’ Atlantic Yards while conscripted by that agreement to do so. Perhaps this schizoid exercise where Ms. Lewis is now opposing inflated IRS-loophole subsidies for Yankee Stadium while obviously constrained from making parallels about the use of the same subsidies for Ratner’s sports arena will now call attention to Ms. Lewis’ constricted and limited status for all future occasions.

    NOTHING BEEN ASKED FOR, NOTHING BEEN GAINED- THE LEWIS/ACORN MOU WITH RATNER

    Perhaps Ms. Lewis’ contractual obligation would make sense if back in May of 2005 she had contracted for something actual from Ratner or defined true and ascertainable benefits the community was to receive. The Bertha Lewis/ACORN agreement with Ratner contractually obligates Lewis and ACORN to support Ratner as the monopoly developer of Atlantic Yards. It obligates them to support the specific humongous density of 7.799 million square zoning feet for the project- (what business is it of Lewis’ or ACORN’s to circumvent the community and contract for the city’s density to be set without the standard procedures and public participation of ULURP?)- That MOU mentions that Ratner is to receive an unspecified amount of subsidy with the clear implication that Lewis/ACORN are obligated to support it! Was there any ceiling to the amount of subsidy for the project they would have to support? No! Could they object if the massive misdirection of subsidy was depriving ACORN’s own projects of subsidy? As noted above, “No!” The MOU was virtually a blank check for Ratner and the fealty Lewis and ACORN must keep paying him.

    By contrast, Ratner committed to give the community virtually nothing under the ACORN MOU Lewis signed with Ratner.

    ∙ The agreement has some very silly provisions- For instance, there are programs in New York City like the New York City Housing Partnership program for the production of owner-occupied housing in which all sorts of developers happily participate because they make a profit. (City and State subsidies are involved.) In the so-called community benefits agreement the Forest City Ratner organizations represent that they might join all the other firms electively participating in this program if they get subsidy (unspecified) to deliver the kind of profit they want to get. That is not a commitment but is an excuse to try to get first in line for subsidized profit. Would they jump the line ahead of other firms with a more legitimate interest in the program?

    ∙ How about the affordable low income rental units themselves which are the crux of the agreement? There are State and City programs for 80/20 housing under which Ratner is surely going to proceed to provide any housing that might eventually happen. The MOU negotiated by Lewis and ACORN doesn’t obligate Ratner to provide any more than would conventionally be provided under such programs. In fact, it apparently obligates far less.

    ∙ Does the agreement obligate Ratner to devote a minium amount of square footage to the low income units? Nope, not at all. In fact, the information available is that the size of the affordable units will be rather small, with 400 square feet as the minimum size for studios. (See: “AY snug or stingy? 575 sf for 1BR, 775 sf for 2BR” http://atlanticyardsreport.blogspot.com/2006/07/ay-snug-or-stingy-575-sf-for-1br-775.html.) There isn’t anything in the agreement that prevents these units from being this small and there isn’t even anything in the agreement that prevents them from being smaller.

    ∙ Is there anything in the MOU that requires proportional distribution of the units or otherwise ensures that the obligation to provide low income units won’t be satisfied by only the very smallest units aggregating a small overall percentage of the megadevelopment? Nope, not at all! (See: Would half of the affordable apartments be 2br & 3br? No way (read the fine print) http://atlanticyardsreport.blogspot.com/2006/08/would-half-of-affordable-apartments-be.html) By my calculations, Ratner can meet the terms of what Lewis/ACORN obligated him to under the MOU by providing the 900 units he is obligated to provide for conventional low income units by providing 900 400 square foot studios. The square footage associated with that (900x400=360,000) is 5.66% of the approximately 6.36 square million feet of residential space in the project. Those government agencies paying out subsidies might insist on something more but the ACORN agreement doesn’t require anything more and might be used as a basis for Ratner to try to deliver less than he would otherwise have to.

    ∙ The residential space in the project includes condominium units (which would not receive 80/20 tax exempt financing). Excluding all the square footage going to the condominium units would make the square footage associated with the low income units greater than 5.66%, but since the MOU fails to limit how much space can be siphoned off for luxury condominium space, it doesn’t allow calculations of the projects’s rental space or any percentages in favor of ACORN.

    ∙ Likewise, a requirement (separate and apart from which units should be low income) that half the units provided as ACORN identified benefit be studios and one-bedrooms and half of the units be two and three bedrooms - not all of which need be such low income units- can be met by Ratner’s provision of 1483 studios, 1 one bedroom, 765 two bedrooms and 1 three bedroom. Of course, if Ratner wanted to deliver smaller units than have currently surfaced as probabilities, the ACORN agreement doesn’t prevent him from doing so and the numbers could be more abysmal than this.

    ∙ What about rents? Does the ACORN MOU serve to limit the rents to a reasonable amount per square foot? No, it doesn’t do this either. In fact, it appears that Ratner may proceed to rent the “affordable apartments” at higher per square foot rents than the market rate apartments. (See: “Affordable” studio would cost more (per square foot) than market-rate studio http://atlanticyardsreport.blogspot.com/2007/09/affordable-studio-would-cost-more-per.html)

    ∙ In fact, the Lewis/ACORN agreement seems to have gone out of its way to accommodate Ratner’s unwillingness to make any commitment to public benefit that would actually exact from him a commitment to charge lower rents. ACORN negotiated for only 900 units of what are classically considered low income units for those with incomes at or below 50% AMI. Most of these will be occupied by people within a thin $7,680 range income band which is generally what developers prefer when they comply with the basic requirements of the Federal Tax Code for subsidy ($30,725.80 to $38,406.00 for a family of 4)- There may be nothing to prevent Ratner from taking most of his applicants from near the top of this $7,680 range (It’s not prevented by the agreement.) After that, there is a telltale jump or skip of income bands which the ACORN MOU specifies shall be served. One would think that the next group of home renters most deserving of subsidy would be in the immediately adjacent 51-59% AMI income range, but they are skipped. Why? Because by jumping up to 60% AMI as the next qualifying band of incomes (with a ceiling income for the band of $76,812.00) Ratner jumps up to a group where the rents he can procure will be much closer to market. In fact, one thing that has yet to be determined is whether, given the size of units and the incomes and rents permitted under the agreement these units will not be veritable market rate units. In today’s terms families of 4 will qualify if they earn annual incomes at or below $76,812.00, $107,536.80 or $122,899.20 and their monthly rents may respectively be $1,536.24, $2,304.36 and $2,880.45. There is nothing in the MOU to prevent Ratner from taking only the highest income families in these higher income bands (and there may also be some self-selection to this end). Those monthly rents may not do badly in the neighborhood toward procuring market rate one bedroom, two bedroom or three bedroom apartments. Don’t know about this? Go ahead and check with a broker or the New York Times, ( http://realestate.nytimes.com/rentals/NY/Brooklyn_County/Carroll_Gardens_Red_Hook-Clinton_Hill_Navy_Yard-Crown_Heights_Lefferts_Gardens-Fort_Greene_Boerum_Hill )

    ∙ Did ACORN negotiate any terms by which Ratner and his companies must put aside or segregate any funds anywhere so that it is assured that somehow, someway there are extra moneys undeniably committed to public benefit? The Columbia University West Harlem community benefits agreement is not very good, but it does have such a provision that millions of dollars will be so set aside. Not so, the Lewis/ACORN agreement.

    ∙ Does the ACORN/Lewis MOU say that if Ratner’s project grows or if Ratner produces more residential units than what the agreement defines as the “Residential Project”(4,500 units) that Ratner must provide more “public benefit?” No, not at all, even though it actually happened just days after ACORN/Lewis MOU was signed. But the agreement is being interpreted to say that if the project is ever down-sized then Ratner owes nothing to Lewis, ACORN or the community. It is being interpreted to say he owes nothing but the scorched earth he has threatened to leave. But until that day of reckoning, he will have bought the contractual support (and enforced secret-keeping) of Ms. Lewis and ACORN. He will have had it from May 17, 2005, through today (June 20, 2008) until that day of reckoning.

    What does this all add up to? Nothing. Nothing in the middle and nothing on either side of it. In the middle there is the telltale missing income eligibility band. On one side of the telltale missing income eligibility band are the classic low income units, a thin band representing just the minimum of what would otherwise be required from Ratner by the federal tax code requirements of the 80/20 programs. These are “ice-in-the-winter” units which would be required without any ACORN MOU. On the other side of the telltale disappeared band are the “middle income” qua veritable market rate units, with rents and qualifying incomes so high the market could provide them anyway. (It is possible Ratner may apply for additional subsidy in connection with them- Would he ask for an additional hundred million?) So on each side of the nothingness of the telltale spectrally missing band, there is essentially nothing!

    It is astonishing that Assembly Speaker Sheldon Silver, Mayor Michael Bloomberg, Governor George Pataki, Borough President Marty Markowitz, and Speaker of the City Council Christine Quinn all used Lewis’ and ACORN’s sloppy and abject capitulations to Ratner’s pursuit of profit as political cover to give Ratner’s megadevelopment approvals.

    Not only is the Lewis/ACORN agreement the most scant nothing possible while obligating Lewis and ACORN to support that nothing or anything that is a scintilla more, we must also now be on guard that Ratner and his contractually conscripted Lewis will follow provisions of the MOU/CBA to override even the basic requirements of the existing available housing programs by pursuing “necessary modifications”to them- (To wit: “Project Developer and ACORN will work together to secure NECESSARY MODIFICATIONS TO EXISTING AFFORDABLE HOUSING PROGRAMS AND POLICIES in order to accomplish the” Ratner/ACORN program and “ACORN (with the participation of other Coalition members as appropriate) will appear with the Project Developer before government agencies, community organizations and the media as part of a coordinated effort to realize and advance” . . the Ratner/ACORN program.) For instance, we must be on guard that subsidizing housing agencies will not be gravely misguided by the cover of the MOU’s minimized standards or the eyewash of the higher income, higher rent “middle income units” to excuse the future Ratner-built housing from even the typical minimum requirements for 80/20 housing programs in New York.

    REALLY BEAN COUNTING?

    In the documentary about Atlantic Yards, “Brooklyn Matters,” Bertha Lewis extols her acumen in negotiating the community benefits agreement, saying, “They had their bean counters and we had our bean counters”- but Bertha Lewis obviously doesn’t know beans about counting beans. She negotiated nothing. There is virtually no standard by which the developer is obligated to give the public anything. Conversely, there are no checks on what he is entitled to under the agreement.

    The Bible tells the story of the selling of a birthright (for lentil bean soup) in a moment of weakness and selling with it the right to lead. Should the right to responsibly and credibly participate in community affairs be sold for so little? It is vital and important, as many are pointing out, that New York City prioritize its resources by investing in crucial infrastructure. Too bad that Ms. Lewis isn’t at liberty to impart this wisdom and argue with full and convincing logic that resources should not be diverted to unproductively bloat Ratner’s clearly undeserved subsidies.

    Michael D. D. White
    Noticing New York

    ReplyDelete
  2. Projections by the developer released in response to a lawsuit filed by Assemblyman Jim Brennan and State Senator Velmanette Montgomery suggested that the distribution of the number of apartments is not skewed toward studios.

    ReplyDelete
  3. Norman Oder’s comment on my comment noting that there is information suggesting that ultimately, distribution of unit types in the megadevelopment may not be skewed toward studios provides useful background when considering the extent of unknowns with respect to what unit distributions might ultimately materialize. Among other things, to the best of my knowledge, nothing has surfaced amounting to a legal or political commitment ensuring minimum public benefit from Forest City Ratner (including any particular apartment distribution). I believe that the information Norman refers to pertains only to a possible fraction of the megadevelopment. Some “projections” about possibilities may have surfaced but projections are usually done in the form of various sets of alternatives and this does not mean that there aren’t alternatives that haven’t surfaced. We are not dealing with a commitment. Among other things “projections” would be dependant on whether demands for subsidy are met. The amount of the demanded subsidy if it is known is not publicly available.

    Within my comment, speculating what the unit distribution might be, I noted “government agencies paying out subsidies might insist on something more but the ACORN agreement doesn’t require anything more and might be used as a basis for Ratner to try to deliver less than he would otherwise have to.” But my comment was not really concerned with trying to actually “predict” what the unit distribution might be (which could be an exercise of extreme futility right now given the limited amount of information available)- Its real concern was to make these points:

    1. That ACORN and Ms. Lewis are not credible advocates for community benefit in that they have contractually committed themselves to support a project that is startlingly below what anyone might conceive as the lowest possible standards of public benefit- Among other things they are contractually committed to support a project where the units distribution is “skewed toward studios” and/or the very smallest units possible.

    2. That the standards of the ACORN/Lewis MOU are so low as to illegitimatize anything in the nature of “approvals” that took political cover from ACORN and Lewis’ actions. (Actions of Sheldon Silver, Michael Bloomberg, George Pataki, Marty Markowitz, and Christine Quinn all included.- This is a call for them to start acting responsibly since they cannot go back and say that their past actions based on the MOU responsibly addressed matters.)

    3. That the low standards of the ACORN/Lewis MOU stand in danger of undermining negotiation for more appropriate public benefit, even the standard amount of public benefit which other developers are typically obligated to provide.

    4. That the MOU has improperly been used as the pretext for monopoly, inappropriate density and eminent domain abuse by virtue of which Ratner is issuing threats to the public and that since the MOU is illegitimate the bullying (including right now for the IRS loophole R-TICF bonds) should also be rejected as illegitimate.

    It would be good for those who wish to take an upper hand with the developer, Assemblyman James Brennan, Assemblyman Hakeem Jeffries, Councilman David Yassky, and perhaps Councilman Bill DeBlassio to keep repeating as a mantra that this project (which among other things must go back to the PACB) is NOT an “approved” project. It is NOT an approved project not only because of the unknown amount of subsidy being “demanded” by Ratner but also because if you make a round of all the politicians there is not yet one of them who can specify what the public housing benefit, unit distribution, etc is that Ratner is required to provide.

    Michael D. D. White
    Noticing New York

    ReplyDelete